Price Disclosure

Page last updated: 18 November 2022

Contents

What is Price Disclosure?

The legislative requirements for price disclosure arrangements are set out in Part VII, Division 3B of the National Health Act 1953 (the Act) and Part 7 of the National Health (Pharmaceutical Benefits) Regulations 2017 (the Regulations).

Price disclosure arrangements have been in place since 2007 to ensure the prices that patients and the Australian Government pay for multi-branded medicines more closely reflects the average prices those medicines are supplied to the market. These arrangements result in price reductions based on weighted average disclosed prices (WADPs) which can occur twice a year. A price reduction for a brand may occur if the percentage difference between the current price and the WADP is greater than the prescribed threshold for the brand (refer to price reduction thresholds).

All brands of pharmaceutical items containing a drug on the F2 formulary are subject to price disclosure, unless they are exempt items. A drug will move to the F2 formulary (and become subject to price disclosure) when it no longer meets the criteria for F1 and is not on the combination drug list. Generally, this occurs when the drug becomes multi-branded (i.e. the first new brand is listed, which is bioequivalent or biosimilar and has the same manner of administration as an existing pharmaceutical item on the PBS). The Department publishes a list of drugs subject to price disclosure and updates the list on the first day of each month to reflect updates to the Schedule of Pharmaceutical Benefits.

Responsible persons are required to collect and submit data on sales revenue, sales volume, and the value of incentives for each of their brands of pharmaceutical items that are subject to price disclosure.

The Department of Health is responsible for the administration of Price Disclosure. An external service provider, the Price Disclosure Data Administrator (PDDA), receives the data from responsible persons and performs all calculations on the Department’s behalf. The Department also administers the Dispute Resolution Process and liaises with members of the public and industry regarding enquiries about price disclosure.

More information about price disclosure is available in the Price Disclosure Guidelines and other content linked below:

Price Disclosure cycles

A price disclosure cycle is 12 months in length and comprises a six month data collection period, followed by a six month processing period, ending in a reduction day of 1 April or 1 October. Cycles occur twice a year and overlap, requiring the responsible person of a brand to disclose data every six months.

Information on the latest Price Disclosure reductions and prices can be found on the Current Price Disclosure cycle webpage. Information on previous cycles since 2014 is located at the Historical Price Disclosure cycles webpage.

The calculation of a WADP for a brand may be affected by the removal of Originator brand data (refer to early removal of Originator brand data below). A list of drugs and manners of administration which meet the 18 and 30 month clocks, resulting in the removal of Originator brand data, is available for the latest cycle.

A price reduction for a brand may occur if the percentage difference between the current price and the WADP is greater than the prescribed threshold for the brand (refer to price reduction thresholds). A list of drugs and manners of administration which meet the 42 month clock resulting in a 30% threshold or 12.5% average price reduction threshold test under s99ADH of the Act is available for the latest cycle.

Reforms under the New Strategic Agreements

Amendments made by the National Health Amendment (Enhancing the Pharmaceutical Benefits Scheme) Act 2021 (Cth) (Amendment Act) and the National Health (Pharmaceutical Benefits) Amendment (2021 Measures No. 1) Regulations 2021 (Cth) (Amendment Regulations) give effect to the comitments in the Strategic Agreements with the medicines industry (2022-2027). The legislative amendments take effect from 1 July 2022 and include the following changes to price disclosure:

  • Introduction of floor prices for designated brands – see ‘Designated Brands’ and ‘floor price protections’ below.
  • Changes to the threshold for applying price disclosure price reductions – see ‘price disclosure thresholds' below.
  • Changes to the timing for removal of originator brands from calculations  – see  ‘early removal of originator brand data’ below.
  • Changes to exclusion of supplies to public hospitals within disclosed data – see ‘public hospital data disclosure’ below.
  • Changes to adjusted net revenue calculations (effective from the October 2023 price disclosure cycle) – see part 7.2 of the price disclosure guidelines.

The information in this section is also available in the Price Disclosure Reforms under the New Strategic Agreement Fact Sheet (PDF 735 KB) -  (Word 443 KB)

Unless otherwise specified, the following reforms take effect from the 2022 October cycle. Refer to the Price Disclosure guidelines for further details about these changes.

Designated brands

From 1 July 2022, brands of pharmaceutical items that are ‘designated brands’ will be subject to floor price protections and the 30% threshold or 12.5% average price reduction threshold test under s99ADH of the Act.

Designated brands meet one of the following criteria under s99ADHC of the Act:

  • the drug and manner of administration of the brand’s pharmaceutical item has been on F2 for at least 42 months, and at least 30 months have passed since the first price disclosure price reduction for any brand of pharmaceutical item with the same drug and manner of administration (42-month clock) (s99ADHC(1)(a));
  • the approved ex-manufacturer price (AEMP) of the brand is $4 or less (s99ADHC(1)(b));
  • the AEMP of the brand has been increased on and after 1 July 2022 through a new price agreement and the Minister has determined that the brand be designated (s99ADHC(1)(c));
  • the AEMP of the brand has received a price increase on 1 October 2022 under s104B of the Act (s99ADHC(1)(d)).

Medicines that are listed in Schedule 2 of the Poisons Standard, in a quantity that is equal to or greater than the PBS quantity, are not designated brands.

From 1 July 2023, designated brands will be subject to the minimum stockholding requirements outlined under Division 3CAA of the Act. More information about designated brands including a list of designated brands can be found on the designated brand webpage.

Floor price protections

Designated brands are not subject to price reductions under Part VII of the Act. That is, they will not have their prices reduced as a result of an anniversary, first new brand, combination item flow-on or price disclosure reduction (apart from designated brands with an AEMP of more than $4 that exceed the price disclosure thresholds below). The price may reduce through a price agreement between the responsible person and the Minister.

Designated brands with an AEMP of more than $4 are subject to the 30% price disclosure threshold or the 12.5% average test and 10% price disclosure threshold (refer to price reduction thresholds). Designated brands with an AEMP of more than $4 are subject to price disclosure reductions if they exceed one of the thresholds.

If a designated brand with an AEMP of more than $4 exceeds one of the thresholds, the price reduction will not reduce the AEMP any lower than $4.  For example, if a designated brand has an AEMP of $4.50, a WADP that exceeds the 12.5% average threshold and will be subject to a 25% reduction, instead of a new AEMP of $3.38 applying, the new AEMP will be $4.

Price Disclosure reduction thresholds

A price disclosure reduction may occur when the unadjusted price reduction meets the relevant threshold. The relevant price disclosure thresholds are set out in s99ADH(1)(c) of the Act and are as follows:

  1. For brands that are not designated brands – 10%;
  2. For designated brands with an AEMP of more than $4 – 30%; or
  3. For designated brands with an AEMP of more than $4, if there has been discounting averaging at least 12.5% over the last 3 data collection periods including the one for which calculations are performed and there has not been a price reduction under s99ADH of the Act – 10%.

Refer to the ‘s99ADH price reduction application decision tree’ in the Price Disclosure Reforms under the New Strategic Agreement Fact Sheet.

Early removal of originator brand data

The Minister may determine an originator brand for a brand of a pharmaceutical item listed on the F2 formulary. The Minister must have regard to whether, when the brand of the pharmaceutical item was first PBS listed, it was in the F1 formulary or administrative Combination Drugs List (CDL). For certain pharmaceutical items, calculations are performed with and without originator brand data, and the calculation resulting in the lowest new price is applied.

If brands of a drug and manner of administration have:

  • been listed on the F2 formulary for at least 18 months; and
  • there have been no price disclosure reductions in that period; and
  • one or more generics are listed during the data collection period of a cycle

the originator brand data is removed for the calculation of a WADP if it results in a lower price.

The early removal of originator brand data (at 18 months) will operate in addition to the existing 30 month clock, whereby the originator brand data is removed after the drug in the brand has been on F2 for at least 30 months.

Refer to the ‘remove originator decision tree’ in the Price Disclosure Reforms under the New Strategic Agreement Fact Sheet.

Public hospital data disclosure

For the first 42 months that a drug is listed on F2 public hospital data is excluded from the data which is provided by responsible persons. From 1 October 2022, if the drug in the pharmaceutical item has been on F2 for at least 42 months at the end of the previous data collection period for the brand, then supply to a public hospital must be included in the data provided by responsible persons.

Refer to the ‘Disclosure of Public Hospital supply’ diagram in the Price Disclosure Reforms under the New Strategic Agreement Fact Sheet.

Reference documents

Explanatory Materials

Archived Material