Minimum Stockholding Requirements consultation

Overview

The Australian Government entered into Strategic Agreements with Medicines Australia (MA) and the Generic and Biosimilar Medicines Association (GBMA) in July 2022. These Agreements included the Medicines Security Supply Guarantee (MSSG) designed to improve supply chain security for older, lower-cost, multi-branded medicines that are more vulnerable to shortages or supply disruptions.

As part of the MSSG, a Minimum Stockholding Requirement (MSR) requires Responsible Persons (RPs) to hold a minimum of either 4 or 6 months of stock in Australia for certain PBS listed medicines, referred to as ‘Designated Brands’. While these measures will not prevent shortages that are outside the control of Australian companies, they will help to ensure that Australian manufacturers are better placed to maintain supply when global disruptions occur. Holding buffer stocks allows time for supply disruptions to be resolved, including through identifying alternative sources of supply (where possible).

Amendments made to the National Health Act 1953 (Act) by the National Health Amendment (Enhancing the Pharmaceutical Benefits Scheme) Act 2021 (Amendment Act) gave effect to the MSSG reforms. The MSRs are outlined in Division 3CAA of the Act and involve:

1. Substantive stockholding requirements: RPs of ‘designated brands’ must hold 6 months stock by reference to ‘usual demand’ if the brand received a price increase on or after 1 July 2022, and 4 months stock if the brand did not receive a price increase. The stock that is kept must be available for sale in Australia by the RP (e.g., stock held by wholesalers is not counted as available for sale).
2. Disclosure requirements: twice a year RPs must disclose their quantity of stock of the designated brands kept in Australia to Australian Healthcare Associates (AHA). The two disclosure periods are 1 April to 30 September (disclosure due 11 November), and 1 October to 31 March (disclosure due 12 May) with disclosure being provided for the last day in each month in the disclosure period.
3. Notification requirements: RPs of designated brands are required to notify the Minister of a likely or actual breach of the MSR in accordance with s99AEKD of the Act. RPs must report an actual or likely breach of the MSR 'as soon as practicable':

1. In the case of a likely breach, as soon as they form a belief that they are likely to breach the MSR in relation to a designated brand; or
2. In the case of an actual breach, as soon as they breach the MSR in relation to a designated brand.

The investment by the medicines industry in managing supply chain risks through the MSR has been supported by the Australian Government through:

1. One-off price increases on 1 October 2022 to improve the viability of low-cost medicines in the F2 formulary. The Approved Ex-Manufacturer (AEMP) price of Brands with an AEMP of:

1. $2.00 or less were increased to $2.50
2. between $2.00 and $3.00 were increased by $0.50.
3. more than $3.00 but less than $3.50 were increased to $3.50.

Approximately 950 brands of pharmaceutical items received a price increase on 1 October 2022, with an average increase to the AEMP of 44%.

2. Protective price disclosure thresholds for designated brands
   1. Designated brands are protected from price disclosure reductions through thresholds which ensure that price reductions occur only where there is significant discounting in the market (the 30% threshold), or where there is sustained discounting over a period of time (the 12.5% averaging and 10% threshold).
3. Floor price protections for designated brands
   1. Designated brands are not subject to price reductions under Part VII of the Act other than price disclosure reductions. That is, they will not have their prices reduced as a result of an anniversary, first new brand or combination item flow-on reduction.
   2. Designated brands with an AEMP of more than $4 are not subject to price disclosure reductions unless the relevant threshold is met for a price disclosure reduction to occur.
   3. The Act establishes a floor price of $4 for designated brands. Designated brands with an AEMP of $4 or less are protected from further legislated price reductions. Where a designated brand with an AEMP of more than $4 meets the threshold for a price reduction to occur, the price reduction will not reduce the AEMP any lower than $4.

Why your views matter

This survey is being conducted as part of a 12-month review of the MSR to provide feedback to the Australian Department of Health and Aged Care (the Department) in relation to industry’s initial experience and progress with the MSR. This feedback will form an important input to the Department's review of the MSR. 

The questions in the survey are optional. The Department recognises that for some of the questions you may not have all of the information available, or there may be challenges in ascertaining some information. The Department would appreciate you completing the survey as comprehensively as possible. This will provide the best outcome in terms of the policy review and the operation of the MSR. Where you provide answers based on averages, ranges or estimates, please indicate this in the free text boxes provided. 

A PDF copy of the survey is attached below to allow you to see all of the questions asked and prepare the responses in advance.