National Health Amendment (Enhancing the Pharmaceutical Benefits Scheme) Bill 2021 - Commentary on Ministerial Responses [2022] AUSStaCSBSD 14 (4 February 2022)

• National Health Amendment (Enhancing the Pharmaceutical Benefits Scheme) Bill 2021
• Broad discretionary power
• Instruments not subject to parliamentary disallowance22

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National Health Amendment (Enhancing the Pharmaceutical Benefits Scheme) Bill 2021

Purpose	This bill seeks to amend Part VII of the National Health Act 1953 to implement a range of measures, including changes to the operation of Statutory Price Reductions, changed price disclosure arrangements and a new stockholding requirement for certain medicines that are more susceptible to global medicines shortages.
Portfolio	Health
Introduced	House of Representatives on 28 October 2021
Bill status	Received the Royal Assent on 13 December 2021

Broad discretionary power
Instruments not subject to parliamentary disallowance^[22]

2.49 In Scrutiny Digest 17 of 2021 the committee requested the minister's advice as to why the bill proposes to provide the minister with a broad discretionary power to apply statutory price reductions and amend minimum stockholding obligations and to do so by way of written or notifiable instrument (noting that such instruments are not subject to disallowance).^[23]

Minister's response^[24]

2.50 The minister advised:

The Bill provides for the continuation of statutory price reductions to Pharmaceutical Benefits Scheme (PBS) medicines under the National Health Act 1953 (Act) which would otherwise cease on 30 June 2022 and amends their operation to close loopholes that have enabled some medicines to avoid statutory price reductions when others in the same circumstances have taken them. The Bill also provides for new price protections and stockholding requirements for certain PB medicines that have, in recent years, been more susceptible to global medicines shortages.
Minimum stockholding obligations
I note that the Digest states that power to amend the minimum stockholding obligation is by way of written or notifiable instrument. I respectfully submit that the proposed power to alter the minimum stockholding obligation provided at subsection 99AEKC(2) of the Bill is by way of determination by legislative instrument.
Statutory price reductions
The Bill proposes to amend existing provisions in the Act that provide the Minister with discretion to determine that the approved ex-manufacturer price of a brand of a medicine is not to be reduced by a statutory price reduction, or is to be reduced by a lower amount than would otherwise apply, so that instead of being made by written instrument (as is the case now), they would be made by notifiable instrument. The Bill also proposes to introduce these discretions for statutory price reductions where it was previously not available (e.g. for combination flow-on statutory price reductions under section 99ACC of the Act). The Bill also proposes to continue the existing requirement that the Minister, when making such a determination, must take into account what the approved ex-manufacturer price would otherwise be if a determination were not made.
These are important powers to ensure that there is the ability to intervene in particular cases where a statutory price reduction would not be appropriate in the circumstances - such as where a statutory price reduction would result in the approved ex-manufacturer price of an important medicine being below an amount needed for a pharmaceutical company to secure supply. Under the Act currently, these decisions are not disallowable and, for the reasons outlined below, the Bill does not propose to make them disallowable.
In response to the Committees query as to why these determinations would be made by notifiable instrument, as opposed to a legislative instrument that would be subject to disallowance, the proposed instruments do not meet the test set out in subsection 8(4) of the Legislation Act 2003 (the Legislation Act).
Subsection 8(4) provides that an instrument is a legislative instrument if:
(a) the instrument is made under a power delegated by the Parliament; and
(b) any provision of the instrument:
i. determines the law or alters the content of the law, rather than determining particular cases or particular circumstances in which the law, as set out in an Act or another legislative instrument or provision, is to apply, or is not to apply; and
ii. has the direct or indirect effect of affecting a privilege or interest, imposing an obligation, creating a right, or varying or removing an obligation or right.
Decisions to make a determination will be made on a case by case basis in relation to individual brands, or potentially small numbers of related brands, of a pharmaceutical company. In practice, consideration is given to exercising a Ministerial discretion on request from the pharmaceutical company for a brand about to take a reduction.
The proposed determinations in the Bill would merely give effect to a legislative and policy outcome that is already provided for in legislation. The determinations would not seek to determine or alter rights, but ascertain how to fulfil those rights in a given circumstance and would not determine or alter the content of the law. They would instead determine, for particular brands of PBS medicines, that the approved ex-manufacturer price should not be reduced by a statutory price reduction, or should be reduced by a lesser amount than would otherwise apply.
In deciding whether to exercise discretion for a particular brand, under both current and proposed arrangements, the Minister must consider what the approved ex-manufacturer price of the brand would otherwise be if the discretion were not exercised. This requirement is to ensure that, in deciding whether to make a determination, the Minister is aware of the impact that the statutory price reduction would otherwise have on the approved ex-manufacturer price of the brand.
Under current and proposed arrangements, the Minister may also consider any other matters the Minister considers relevant. This is because consideration of requests from pharmaceutical companies to exercise Ministerial discretion can involve consideration of a broad range of matters including the impact on government expenditure on the PBS, broad issues of the sustainability of supply of PBS listed medicines, cost of goods for the medicine at the time the statutory price reduction is due to apply, and potential impacts on access to medicines by the public. In particular cases, advice on the exercise of the discretion may be referred for expert advice from the Pharmaceutical Benefits Advisory Committee due to the highly technical nature of the subject matter. The matters that are relevant to a decision to make a determination are broad and can vary significantly depending on the circumstances. The drafting of this provision is to ensure that legislation does not exclude any matters that should be relevant, or place inappropriate weight on matters that are not relevant, to a decision to make a determination in a given circumstance.
The information considered can be highly technical and includes commercially sensitive information supplied by pharmaceutical companies on the basis that it is treated confidentially.
For this and the above reasons, the determinations under the Act are not currently open to disallowance. If they were, it would risk statutory price reductions applying where important commercial and technical information that the Parliament would not be privy to would indicate that the reduction would not be appropriate - resulting in the approved ex­manufacturer prices of important medicines being reduced below an amount needed to secure supply. This could negatively impact patient access to necessary and life-saving treatments.

Committee comment

2.51 The committee thanks the minister for this response. The committee acknowledges the minister's advice that the power to amend the minimum stockholding obligation is by legislative, rather than notifiable, instrument. This power is therefore subject to parliamentary disallowance.

2.52 In relation to statutory price reductions, the minister advised that it is appropriate that determinations to vary a statutory price reduction are exercisable by notifiable instrument as the determinations are not legislative in nature. The minister advised that these determinations do not seek to determine or alter rights or determine or alter the content of the law. Rather, the minister advised that the determinations give expression to rights already included within the primary legislation. The minister advised that determinations are made in relation to individual brands, or to small groups of related brands of a pharmaceutical corporation.

2.53 The minister also advised that the matters that are relevant to a decision about whether or not to make a determination are broad and vary significantly depending on the circumstances. The minister advised that, as a result, the power to make the determinations is drafted intentionally broadly so as to capture these varying circumstances.

2.54 The minister further advised that the relevant considerations in making a determination to vary a statutory price reduction can be highly technical and include commercially sensitive information. The minister advised that, as a result, it is appropriate that these determinations not be subject to parliamentary disallowance. The minister advised that should these determinations be subject to parliamentary disallowance, statutory price reductions may apply in circumstances where commercial and technical information would indicate that such a reduction is in fact not appropriate. The minister advised that this could negatively impact patient access to necessary and life-saving treatments.

2.55 The committee thanks the minister for this detailed advice and notes that it would have been useful had the information provided by the minister been included in the explanatory memorandum to the bill.

2.56 At a general level, the committee notes that mere fact that a decision may be underpinned by scientific, technical, or commercially sensitive considerations is not a sufficient justification for exempting an instrument from the usual parliamentary disallowance process. Rather, exemptions from disallowance are only justified in exceptional circumstances. The committee expects the explanatory memorandum to a bill which includes instruments that are not subject to the usual disallowance process to address the exceptional circumstances that justify that individual exemption. This issue has been highlighted recently in the committee's review into the Biosecurity Act 2015,^[25] the inquiry of the Standing Committee for the Scrutiny of Delegated Legislation into the exemption of delegated legislation from parliamentary oversight,^[26] and a resolution of the Senate on 16 June 2021 emphasising that delegated legislation should be subject to disallowance and sunsetting to permit appropriate parliamentary scrutiny and oversight unless there are exceptional circumstances.^[27]

2.57 In light of the fact that the bill has already passed both Houses of the Parliament, the committee makes no further comment on this matter.

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^[22] Schedule 1, item 28, proposed subsection 99ACB(6A); item 33, proposed subsection 99ACC(5C); item 51, proposed subsection 99ACD(7A); item 76, proposed subsection 99ACR(6); item 80, proposed subsection 99ADHB(6); item 82, proposed subsection 99ADHC(2); item 85, proposed subsection 104B(2). The committee draws senators’ attention to these provisions pursuant to Senate Standing Order 24(1)(a)(iv).

^[23] Senate Scrutiny of Bills Committee, Scrutiny Digest 17 of 2021, pp. 32-33.

^[24] The minister responded to the committee's comments in a letter dated 30 November 2021. A copy of the letter is available on the committee's website: see correspondence relating to Scrutiny Digest 1 of 2022 available at: www.aph.gov.au/senate_scrutiny_digest.

^[25] Scrutiny Digest 7 of 2021, chapter 4, pp. 33-44.

^[26] Senate Standing Committee for the Scrutiny of Delegated Legislation, Inquiry into the exemption of delegated legislation from parliamentary oversight: Interim report, December 2020; and Inquiry into the exemption of delegated legislation from parliamentary oversight: Final report, March 2021.

^[27] Journals of the Senate, 16 June 2021, pp. 3581–3582.