Responsible Person survey for 24-month review of the Minimum Stockholding Requirements

Overview

Purpose of Survey:

The Australian Department of Health and Aged Care (the department) is conducting a 24-month review of the outcomes and impacts of the Minimum Stockholding Requirements (MSR) policy that commenced on 1 July 2023 under Division 3CAA under the National Health Act 1953. We are seeking your input to the review through this online survey.

This is the second survey of RPs on the MSR. The first survey, conducted in 2024 for the 12-month review, provided the department with very useful feedback about the operation of the MSR. This feedback informed a number of recommendations made in the 12-month review that the department is implementing, such as the Online Notification portal which is currently under development.

The 24-month survey is designed to give you the opportunity to provide the department with feedback about your experience of the MSR to date, about the department's administration of the MSR, and to bring any issues to the department’s attention. The focus of the 24-month review will be on the following areas:

• RPs' understanding of the MSR  
• Administrative requirements  
• Compliance  
• Inventory management and supply chains  
• Effect of the MSR on shortages of designated brands 
• Viability of older, low-cost medicines  
• Medicine wastage

Many of the questions in the survey are optional. The department recognises that some of the questions may be difficult for you to answer, but encourages you to complete the survey as comprehensively as possible. This will provide the best outcome in terms of the policy review and the operation of the MSR.  The survey may contain some confidential information disclosed by you. This information will be treated as highly confidential and will not be disclosed outside the department.

Background to the MSR:

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 of stock by reference to ‘usual demand’ if the brand received a price increase on or after 1 July 2022, and 4 months of 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':
   • 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
   • 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:
   • $2.00 or less were increased to $2.50.
   • between $2.00 and $3.00 were increased by $0.50.
   • 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
   • 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
   • 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.
   • 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.
   • 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.

PLEASE NOTE: As a result of feedback provided by RPs through the 12-month review of the MSR on the administrative burden of preparing and lodging likely and actual breach notifications, the department has developed a new online portal for lodging breach notifications. The portal is currently in the final stages of development and testing before being deployed. To allow time for RPs to experience the portal and form a view on whether it improves the notification reporting process for RPs, the department will undertake a separate follow up survey 2-3 months after the portal is launched. Therefore, this current survey does not ask for feedback from RPs about their experience using the new online notification portal, which will be covered in the follow up survey. The department apologises for any inconvenience caused by a subsequent survey, but recognises the importance of RP feedback on the effectiveness of the new portal in reducing administrative burden for RPs.