4.4 Cost recovery
From 1 January 2010, amendments to the National Health Act 1953 provide authority for the cost recovery of Australian Government–funded services from sponsors seeking new, or changes to existing, listings of medicines, vaccines and other products or services on the PBS or the NIP. The requirements of cost recovery are prescribed by the National Health (Pharmaceuticals and Vaccines – Cost Recovery) Regulations 2009 (Cost Recovery Regulations).
Cost recovery provides an important means of improving the efficiency with which Australian Government products and services are produced and consumed. The cost of evaluating, pricing and listing medicines, vaccines and other products or services on the PBS or the NIP was previously fully funded by the taxpayer. Fee revenue is returned to Australian Government consolidated revenue and remains separate to the consideration of submissions by the PBAC and the listing process on the PBS or the NIP.
The procedures for cost recovery are undertaken by the department and the sponsor. The PBAC, other committees and groups involved in the evaluation or listing processes are not informed or aware of cost-recovery decisions. The cost-recovery process has no effect on the evaluation of the submissions.
4.4.1 Fees for cost recovery
A PBS service fee application form: to accompany PBAC submission will need to be completed for any major or minor submission to be considered by the PBAC.
The completed application form must be lodged at the same time as the submission. The form requires a ‘self-assessment’ by the sponsor as to the evaluation category of the submission to the PBAC – that is, whether it is a major or minor submission for the purposes of cost recovery. Additional information can be found in Section 4.1 of the Cost Recovery Regulations on the PBS website or by emailing the OHTA (refer to Appendix A).
When the department receives the submission and the application form, the fee category self-assessment (as indicated by the sponsor) is checked against the Cost Recovery Regulations. After the assessment, an invoice and request for payment letter is emailed to the sponsor. Cost-recovery fees are payable within 28 days of notification.
In certain circumstances, an exemption or waiver of fees may apply, detailed in Part 5.1 of the Cost Recovery Regulations. Examples of fee exemptions include submissions identified by the TGA as an ‘orphan drug’ or where a medicine is for ‘temporary supply’.
The sponsor must supply supporting documentation with the application form at the time of lodgment. A sponsor may apply to the Secretary of the Department of Health to waive the fee if the submission involves a public interest and where payment of the fee would make the application financially unviable. Further details may be found in Part 5.2 of the Regulations. The Secretary (or delegate) of the Department of Health may request further information from the sponsor and/or other sources before making a decision.
A sponsor may withdraw a submission any time after lodgment. Where a sponsor withdraws the submission, the sponsor must provide written notice of withdrawal to the department (refer to Appendix A for contact details) within 14 days of receiving the invoice. The request must be in writing, on appropriate company letterhead, and signed by a suitably authorised representative of the sponsor before being emailed or posted to the department (refer to contact details in Appendix A).
After withdrawing a submission, if the sponsor:
- provides evidence of withdrawal within 14 days of receiving the invoice, there will be no charge and the invoice, if raised, will be cancelled
- has already paid the invoice, there will be a full refund of any fees paid
- does not provide evidence of the withdrawal of a submission within 14 days, the sponsor will be liable for the cost-recovery fee, because the costs associated with evaluation of the submission have started.
Sponsors should note that the requirement to provide an email to the PBS Cost Recovery officers is in addition to any communication with OHTA officers managing the agenda for the upcoming PBAC meetings regarding withdrawing the submission from consideration (refer to Appendix A for contact details).
4.4.2 Submission categories for cost-recovery fees
The submission categories for the purpose of cost recovery, and associated fees, are defined in the Cost Recovery Regulations (see also Section 4.1 for descriptions of the submission types). The Regulations also provide for an independent review (see Section 7.2 for details).
4.4.3 Fee payment
The Cost Recovery Regulations underpin PBS and NIP cost recovery.
Part 4.7 of the Regulations provides for the annual indexation of fees based on increases in the Consumer Price Index (CPI). As per the Australian Government Cost Recovery Guidelines, a periodic review of all existing and potential charging activities must be conducted at least every 5 years. Information on the current indexed fees can be found on the PBS website.
Any queries about an invoice raised should be emailed to PBS Cost Recovery (refer to contact details in Appendix A).
Fees are to be paid within 28 days of notification. The invoice is sent to the responsible person nominated by the sponsor by email. Payment should not be forwarded before receiving an invoice from the department. In some circumstances, where short timeframes are required before the department incurs major expenses – for example, if undertaking an independent review – a 14-day terms of trade for payment will be required.
Three payment points have been identified:
- when lodging a submission, including resubmissions (see Section 5)
- at the completion of pricing negotiations (see Section 8.1)
- at the request for an independent review of a PBAC decision (see Section 7.2).
Payment should be made by electronic funds transfer (EFT) to the account nominated on the invoice. The invoice number must be entered in the free-text portion of the EFT transaction when paying. A request for payment letter, which will accompany the invoice, will advise the sponsor of a unique identifying number assigned by OHTA to identify the application for payment of fees through the fee process.
Fees must be paid in full at the time of payment. Payment by instalment will not be accepted unless previously arranged with the department’s delegate.
If a pharmaceutical company or other organisation has a computerised financial control system and needs to add the Department of Health to the system for processing payments, contact the department to advise of the issue and provide a copy of the form used by the company detailing the information required (refer to contact details in Appendix A).
If an invoice is not paid within 28 days, the department may stop processing the submission until the fee is paid. Before evaluation work halts, or the invoice is referred for debt-recovery action, the department will contact the sponsor.
Unpaid fees shall be a debt owing to the Australian Government and will be subject to standard Australian Government debt-recovery actions.
4.4.4 Disagreement or dispute procedures
Should the sponsor disagree with the delegate’s fee determination, the Cost Recovery Regulations provide for a review process. Further details on rights of review can be found in Part 6 of the Regulations.
Where a sponsor disputes the decision on the cost-recovery fee, the sponsor must forward a request for a review, in writing, to the department within 14 days of receiving the invoice (refer to Appendix A for contact details).