EXPLANATORY STATEMENT

 

Select Legislative Instrument 2008 No. 118

 

Therapeutic Goods (Charges) Act 1989

 

Therapeutic Goods (Charges) Amendment Regulations 2008 (No. 1)

 

The Therapeutic Goods Administration (the TGA) carries out a range of assessment and monitoring activities to ensure therapeutic goods available in Australia are of an acceptable standard. It is required to fully recover its operating costs and achieves this in several ways including: by charging fees for the evaluation of applications to include medicines and medical devices in the Australian Register of Therapeutic Goods (the Register) or to amend details of products currently in the Register under the Therapeutic Goods Act 1989 (the TG Act); and by levying annual charges for products which are included in the Register under the Therapeutic Goods (Charges) Act 1989 (the Charges Act).

Subsection 5(1) of the Charges Act provides that the Governor-General may make regulations, not inconsistent with the Charges Act, prescribing the amounts of charges. Subsection 5(2) of the Charges Act enables the Governor-General to prescribe different levels of charges for different classes of goods or, in the case of annual licensing charges, for different steps in the manufacture of therapeutic goods.

The purpose of the Regulations is to amend the Therapeutic Goods (Charges) Regulations 1990 (the Principal Regulations) to increase most charges for medicines and medical devices which are included in the Register, by 3.6 per cent, while some charges will increase by 10 per cent.

 

Except for medical devices, therapeutic goods are generally required to be either registered or listed on the Register before being imported into, exported from, supplied or manufactured in Australia. Therapeutic goods assessed as having a higher level of risk (such as prescription medicines, and some non-prescription medicines) are evaluated by the TGA for quality, safety and efficacy and are registered on the Register. Therapeutic goods having a lower risk (generally, consumer medicines purchased over the counter such as complementary medicines, including vitamins) are assessed by the TGA for quality and safety but not efficacy (meaning the TGA has not evaluated such products individually) and are listed on the Register. Medical devices are not categorised as “registered” or “listed” based on level of risk, as medicines. Medical devices are graded into several classes (for example, Classes I, IIa, IIb, III and AIMD (active implantable medical devices)) to reflect level of risk, and generally all classes are still required to be “included” in the Register before being imported into, exported from, supplied or manufactured in Australia.

 

Section 4 of the Charges Act provides that annual charges of such amounts as are prescribed are payable in respect of entries of therapeutic goods (including medical devices) in the Register, as well as in respect of licences that are in force at any time within a financial year. Subsection 4(1A) of the TG Act provides that where one or more therapeutic goods are “grouped” and each of the “grouped” therapeutic goods is covered by a single registration or listing number, then an annual charge as prescribed will apply for maintaining all the registered or listed goods covered under the same grouping. A single charge has been prescribed for this purpose.

 

The 3.6 per cent increase applies to annual charges in respect of all therapeutic goods except for certain (specified) medicines which increase by 10 per cent to curtail continuing under recovery of costs from industry fees over recent years. The 3.6 per cent increase also applies to all types of manufacturing licences that are in force at any time during the financial year.

The Regulations, when taken together with the changes to the Therapeutic Goods Regulations 1990, and the Therapeutic Goods (Medical Devices) Regulations 2002 (which are the subject of separate Executive Council Minutes), are expected to increase the fees and charges collected by the TGA by $7.3 million over the 2008-09 financial year.

In administering the TG Act and the Charges Act, the TGA collects fees and charges prescribed in these Acts from persons and companies involved in the supply, import, export and manufacture of therapeutic goods in Australia.

 

The increases in charges enable the TGA to recover its costs in administering the TG Act and continue to meet the Government’s requirement that the TGA operate on a full cost-recovery basis.

 

The TGA consulted with industry associations, including Medicines Australia, the Generic Medicines Industry of Australia, the Australian Self-Medication Industry, the Complementary Healthcare Council of Australia, the Medical Technology Association of Australia, the Australian Dental Industry Association and AusBiotech on the proposed increases to charges. The consultations, convened between 12 and 29 February 2008, consisted of bilateral engagement with industry sectors and provided an opportunity for industry associations to examine and comment on the TGA Budget, including new initiatives and other budget measures, and on the proposed annual charges. The outcome of the consultations was that industry was generally supportive of the TGA proposals for 2008-09 fees.

 

An overview of the Regulations is at Attachment A, and details are set out in Attachment B.

 

The Charges Act specifies no conditions that need to be met before the power to make the Regulations may be exercised.

 

The Regulations commence on 1 July 2008.

 

The Regulations are a legislative instrument for the purposes of the Legislative Instruments Act 2003.

 

 

ATTACHMENT A

 

OVERVIEW OF THE Therapeutic Goods (Charges) Amendment Regulations 2008 (No. 1)

 

The Regulations increase the annual charges for maintaining the listing, registration or inclusion of therapeutic goods (except for certain [specified] medicines) by 3.6 per cent. The 3.6 per cent increase also applies to annual charges in respect of all types of manufacturing licences.

 

The 3.6 per cent increase has been calculated using a formula agreed with industry associations which is comprised of 50 per cent of the annual Wage Cost Index (WCI) for the year ended December 2007 and 50 per cent of the Consumer Price Index (CPI) for the year ended December 2007.

 

The Regulations also increase the annual charges for the registration of specified medicines on the Register by 10 per cent. The purpose of the 10 per cent increase is to curtail continuing under recovery of costs from industry charges over recent years. Generally, significant changes to regulatory arrangements of new regulatory proposals involve additional consultation with affected sectors and result in the preparation of Cost Recovery Impact Statements (CRIS). A CRIS ensures that the TGA’s cost recovery arrangements are consistent with the Government’s Cost Recovery Guidelines for Regulatory Agencies issued in December 2002. The last full review of TGA’s cost recovery arrangements were undertaken in May 2005 and a CRIS was prepared. Subsequent CRIS’ have examined arrangements for the regulation of in-vitro diagnostic devices (March 2006) and the increases to annual charges for non prescription medicines (June 2006).

 

As the 10 per cent increase exceeds the current agreed rate of indexation it represents a material amendment to an existing cost recovery arrangement and requires a CRIS to be prepared in accordance with Australian Government Cost Recovery Guidelines. A Cost Recovery Impact Statement incorporating stakeholder views was completed and approved on 29 May 2008 and published on the TGA’s website. The regulations that similarly increase specified medicines application, processing and evaluation fees by 10 per cent as part of the return to full cost recovery are the subject of a separate Executive Council Minute.

 

The Regulations also include a technical amendment to amend the note to subregulation 3(3) of the Principal Regulations to ensure that it is consistent with regulations amending the Therapeutic Goods Regulations 1990 (which are the subject of a separate Executive Council Minute). Regulations amending the Therapeutic Goods Regulations 1990 amend the title heading of regulation 45A, and subregulation 45A(1), of those regulations to increase the low turnover threshold from $71,000 to $73,600 (this is the turnover threshold at which the annual charge for a licence to manufacture therapeutic goods in respect of a person required to hold such a licence is reduced). The note to subregulation 3(3) of the Principal Regulations refers to the current low turnover threshold of $71,000 and, accordingly, need to be changed to ensure consistency across the two sets of regulations.

 

The new charges have been rounded to the nearest ten dollars (for amounts less than ten thousand dollars) or one hundred dollars (for amounts greater than ten thousand dollars).

 

As a result of the TGA’s rounding policy, the following charges will remain unchanged, despite the 3.6 per cent increase:

·      the application fee for low volume low value (LVLV) exemptions (for exemptions granted under Subregulation 4E(1) of the Principal Regulations), which will remain unchanged at $120; and

·      the annual charge for Class I ‘Other medical devices’ (therapeutic goods referred to in Regulation 3, Paragraph 3(1B)(a) of the Principal Regulations), which will remain unchanged at $60.

 

ATTACHMENT B

 

Details of the Therapeutic Goods (Charges) Amendment Regulations 2008 (No. 1)

 

Regulation 1 provides for the Regulations to be referred to as the Therapeutic Goods (Charges) Amendment Regulations 2008 (No. 1).

 

Regulation 2 provides for the Regulations to commence on 1 July 2008.

 

Regulation 3 provides for Schedule 1 to amend the Therapeutic Goods (Charges) Regulations 1990 (the Principal Regulations).

Schedule 1 - Amendments

 

Item [1]

 

Subregulation 45A(1) of the Therapeutic Goods Regulations 1990 currently provides that the annual charges in respect of a licence payable by a person who is required to hold a licence under Part 3-3 of the Act are reduced if the wholesale turnover of therapeutic goods of the person is not more than $71,000. The regulations that increase the low turnover threshold by 3.6 per cent, to $73,600, are the subject of a separate Executive Council Minute. The note to subregulation 3(3) of the Principal Regulations currently refers to the $71,000 threshold. This item amends the note to subregulation 3(3) so that it refers to the new $73,600 threshold.

 

Item [2]

 

This item increases annual charges applicable, respectively in subparagraphs 3(1)(a)(ii), 3(1)(a)(iii), 3(1)(b)(i), 3(1)(b)(ii), 3(1)(c)(i), 3(1)(c)(ii), 3(1)(c)(iii), 3(1A)(a)(ii), 3(1A)(a)(iii), 3(1A)(b)(i), 3(1A)(b)(ii), 3(1A)(c)(i), 3(1A)(c)(ii), 3(1A)(c)(iii), 3(2)(j)(i), 3(2)(j)(ii), and paragraphs 3(1B)(b), 3(1B)(c), 3(1B)(d), 3(2)(a), (b), (c), (d), (e), (f), (g) and (h), 3(2)(ja) and (k), and 3(2)(l) of the Principal Regulations, by 3.6 per cent.

 

This item also increases annual charges for specified medicines, applicable in subparagraphs 3(1)(a)(i) and 3(1A)(a)(i) of the Principal Regulations, by 10 per cent to curtail continuing under recovery of costs from industry charges over recent years.

 

Under subregulation 4C(1) of the Principal Regulations, a person who has, or expects to have, low volume and low value turnover (as defined in subregulation 4B(1)) of particular registered or listed therapeutic goods or kinds of medical devices, may apply to the Secretary of the Department of Health and Ageing for a declaration to that effect.

 

The effect of a declaration of the Secretary under regulation 4C is that annual charges in respect of the registration or listing of therapeutic goods, or the inclusion of the kinds of medical devices in the Register under Chapter 4 of the TG Act, are not payable by the person.

 

The fee specified at subregulation 4E(1) for making an application under paragraph 4C(2)(b) of the Principal Regulations for a declaration that their turnover is of low volume and low value remains unchanged at $120 due to rounding. However, this item increases the maximum amount payable in subregulation 4E(2) of the Principal Regulations by 3.6 per cent, from $12,400 to $12,800. Subregulation 4E(2) currently provides that if the total amount of application fees incurred by an applicant in a year reaches $12,400, the applicant is not required to pay all or part of an application fee for any more applications made in the year.

 

The annual charge for Class I ‘Other medical devices’ (therapeutic goods referred to in Regulation 3, Paragraph 3(1B)(a) of the Principal Regulations), will remain unchanged due to rounding at $60.

These increases enable the TGA to recover its costs in administering the Act and continue to meet the Government’s requirement that the TGA operate on a full cost-recovery basis.