"Catch up" price reductions for PBS-listed medicines are coming – what should you be thinking about?

4 minute read 02.06.2022 Jonathan Kelp and Grace Tilney

Sponsors who anticipate that their PBS-listed medicines may be included in the indicative list of "catch up" price reductions on 1 July 2022 should start considering now whether to ask the Minister to intervene in any proposed reduction.

Key takeouts

On 1 July 2022, the Australian Government Department of Health will announce that certain PBS-listed medicines will be subject to so-called “catch up” price reductions.

If a sponsor asks the Minister to intervene in any proposed reduction, the Minister may take into account any relevant matter, including certain matters listed in a Ministerial Discretion Guidance.

It may be possible to seek judicial review of a decision by the Minister to proceed with the price reduction, if the sponsor acts quickly.

The catch up price reduction is a one-time measure that will apply to brands of medicines that:

have been listed on the PBS for fifteen years or more;
are not exempt items; and
have not already taken a price disclosure-related PBS price reduction.

Any catch up PBS price reductions will take effect on 1 April 2023.

While sponsors of medicines proposed to be subject to the reduction will be notified on 1 July 2022, they only have until 29 July 2022 to apply for Ministerial discretion not to apply the reduction or to apply a lesser reduction. The Minister will give final notice of the catch up PBS price reductions to be implemented on 15 November 2022.

The Ministerial Discretion Guidance provides more information about the application process and timelines (page 5 of the Guidance) and a summary of matters and material the Minister may take into account when deciding whether to exercise the discretion (pages 3-4 of the Guidance). The catch up PBS price reduction is formally provided for in section 99ACN of the National Health Act 1953 (pages 26-27 of the Guidance) and the Minister is given the power to exercise discretion in section 99ACF(3) of the Act (page 16 of the Guidance).

Matters for the Minister to take into account

When considering an application to exercise his discretion, the Minister may take into account any matter that they consider relevant, including the matters listed on page 3 of the Guidance.

It is open to sponsors to submit any material which may support their application, including the material listed on page 4 of the Guidance. The only matter the Minister must take into account is what the Approved Ex-Manufacturer Price (AEMP) for the medicine would be if the full catch up price reduction is applied. This information will already be available to the Minister (and will be included in the indicative list published 1 July 2022, hence will be known to all parties).

Importantly, one of the matters the Minister may take into account is whether the price reduction will lead to the sponsor delisting the medicine from the PBS (see page 3 of the Guidance, item 2(b)(ii)).

Sponsors are invited to provide information regarding their plans for the listing should the price be reduced, and if they intend to delist if the price is reduced, material should be provided addressing the effect of delisting on patients, including the availability (or lack thereof) and price of alternative brands, products and treatments.

There may of course be adverse implications if a sponsor raises the risk of delisting a medicine to seek to encourage the Minister to exercise their discretion, but the medicine remains on the market even if the Minister declines to intervene.

Judicial review of decision not to exercise discretion

There is no statutory right to appeal a decision by the Minister not to exercise his discretion to intervene in a proposed catch up PBS price reduction.

Depending on the specific circumstances however, it may be possible for the sponsor to seek judicial review of such a decision in the Federal Court.

To do so, the sponsor would need to establish as threshold matters that it has standing as a person aggrieved, and that the decision is reviewable in that it affects legal rights and is final and determinative.

The sponsor would also need to identify at least one ground of judicial review that supports an appeal; most commonly, an error of law, jurisdictional error, lack of procedural fairness, or taking into account irrelevant considerations / failure to take into account relevant considerations.

A judicial review application might include an application for interlocutory injunctive relief seeking to restrain the Minister from applying the price reduction. Given that the Minister will give notice of final decisions on 15 November 2022 and price reductions take effect on 1 April 2023 (4½ months later), sponsors will need to act quickly in any event.

We are able to assist in identifying (ahead of 1 July 2022) which products may be subject to a “catch up” PBS price reduction, identifying information that may be relevant to an application requesting Ministerial intervention, and preparing such an application itself. Contact us to find out more.