Spotlight: medicine and medical device pricing and reimbursement in Australia

All questions

Introduction

The Australian life sciences sector is subject to regulation by both Commonwealth and state or territory legislation.

The manufacture and supply of therapeutic goods is primarily regulated by Commonwealth legislation, in particular, the Therapeutic Goods Act 1989 (TG Act) and its accompanying regulations, namely the Therapeutic Goods Regulations 1990 (TG Regulations) and the Therapeutic Goods (Medical Devices) Regulations 2002 (Medical Devices Regulations). Commonwealth legislation also provides a system of pricing and reimbursement of certain pharmaceutical products, known as the Pharmaceutical Benefits Scheme (PBS), through the National Health Act 1953 (NH Act) and its associated regulations.

Also relevant are the consumer protection provisions of the Competition and Consumer Act 2010 (CCA), and the equivalent state and territory legislation, which apply to all consumer transactions. State and territory legislation may impose additional requirements, including in relation to clinical and non-clinical trials, wholesale of medicines, and possession and distribution of controlled substances.

The Therapeutic Goods Administration (TGA) is the national authority responsible for regulating medicines and medical devices. The Australian Competition and Consumer Commission (ACCC) is the national authority that administers the CCA (although the CCA also provides a private right of action for enforcement of certain consumer law provisions). The Commonwealth government's Department of Health (DOH) manages, and Services Australia administers, the PBS.

The regulatory regime

i Classification

Broadly, there are three categories of therapeutic goods under the TG Act, namely biologicals, non-biologicals and medical devices. Biological and non-biological therapeutic goods are distinguished on the basis that biologicals comprise, contain or are derived from human cells or human tissues, whereas, as the name suggests, non-biologicals do not. Medical devices are products whose principal intended action is not by pharmacological, immunological or metabolic means. The TGA has the power to specify products that do, or do not, fall into these categories; for example, recombinant products (such as recombinant antibodies) are not biologicals.²

Devices that are used to administer medicines – for example, a transdermal patch containing medicine – are regulated as a medicine rather than a medical device. The TGA provides guidance on the appropriate classification of products that are on the device–medicine boundary.³

The TG Act also applies to foods, cosmetics, chemicals and general consumer products in respect of which therapeutic claims are made. For example, a moisturising preparation that contains a sunscreen agent as a secondary component and has a stated therapeutic purpose (e.g., 'helps protect skin from the damaging effects of UV radiation') is regulated as a medicine.

ii Non-clinical studies

Although the use of animals in research is separately regulated by each state and territory, all require compliance with the Australian Code for the Care and Use of Animals for Scientific Purposes (Animal Code).⁴ The purpose of the Animal Code is 'to promote the ethical, humane and responsible care and use of animals for scientific purposes'. In most cases, an institution must be licensed to conduct such research.

The TGA has adopted a number of the European Medicines Agency's scientific guidelines for non-clinical studies.⁵

iii Clinical trials

Any product not entered in the Australian Register of Therapeutic Goods (ARTG) (including any new formulation, strength, dosage form, brand, etc.) is classified as an unapproved therapeutic good (UTG) and can only be supplied in certain circumstances. One such circumstance is a clinical trial.

A clinical trial in Australia must have an Australian sponsor (whether it be an individual (e.g., medical practitioner), an organisation (e.g., hospital) or a company) and must be approved by a human research ethics committee (HREC).

An HREC must have notified its existence to the Australian Health Ethics Committee of the National Health and Medical Research Council (NHMRC) and provided assurances that it is operating within NHMRC guidelines. HRECs in Australia generally provide both an ethical and a scientific review of the proposed trial and ensure compliance with the NHMRC's National Statement on Ethical Conduct in Human Research.⁶

Sponsors must also ensure compliance with the relevant guidelines as to good clinical practice⁷ and safety monitoring and reporting,⁸ and ensure that the use of personal information complies with the Privacy Act 1988.

Two of the avenues for supply of UTGs for clinical trials are the Clinical Trial Approval (CTA) (formerly the Clinical Trial Exemption) Scheme and the Clinical Trial Notification (CTN) Scheme. The choice of which scheme to follow lies first with the sponsor and then with the HREC.

The CTA Scheme is an approval process. The sponsor submits an application, including proposed guidelines for use, to the TGA. The trial may not commence until written advice is received from the TGA and approval obtained from an HREC and the institution at which the trial will be conducted. Any number of clinical trials can be conducted without further assessment by the TGA, provided that the use of the product falls within the approved guidelines for use and notification is given to the TGA of each trial conducted.

The CTN Scheme is a notification scheme. All material relating to the proposed trial is submitted directly to the HREC, which is responsible for reviewing the scientific validity of the trial design, the balance of risk versus harm of the therapeutic good, and the ethical acceptability of the trial and approval of the trial protocol. The institution at which the trial will be conducted gives the final approval. The TGA does not evaluate any data relating to the trial.

Studies in which products already entered in the ARTG are used within the conditions of their marketing approval are not subject to CTN or CTA requirements but still need to be approved by an HREC.

Commercial sponsors of clinical trials are required to hold insurance of at least A$10 million or A$20 million per occurrence depending on the state or territory.⁹ Additionally, members of Medicines Australia are recommended, and other sponsors encouraged, to comply with the Compensation Guidelines.¹⁰

iv Named-patient and compassionate use procedures

The Special Access Scheme (SAS) is a mechanism under the TG Act that provides three pathways for access to UTGs:

1. Category A is a notification pathway that in respect of medicines and biologicals can only be accessed by medical practitioners (i.e., doctors) for seriously ill patients who 'have a condition from which death is reasonably likely to occur within a matter of months, or from which premature death is reasonably likely to occur in the absence of early treatment' and in respect of medical devices 'have a condition that is reasonably likely to lead to the person's death within less than a year or, without early treatment, to the person's premature death'.
2. Category B is an application pathway that can be accessed by health practitioners (e.g., doctors, dentists, radiographers, nurses, pharmacists and psychologists) for patients who do not fit the Category A definition and where the UTG is not deemed to have an 'established history of use' (Category C pathway). Approval from the TGA is required before the UTG may be accessed.
3. Category C is a notification pathway that allows health practitioners to supply UTGs that are deemed to have an 'established history of use' without first seeking prior approval. The TGA has published lists of goods deemed to have an 'established history of use' and the types of health practitioners who may supply those goods.¹¹

A supplier must comply with reporting obligations to the TGA, including six-monthly reports detailing the supply of UTGs under the SAS and communication of any information that has an important bearing on the benefit–risk assessment of the product. The prescribing health practitioner is also responsible for monitoring the use of the UTG and reporting any adverse events or defects to the TGA and to the supplier.

Access to UTGs is also possible through an authorised prescriber, the personal importation scheme or a clinical trial. An authorised prescriber is a medical practitioner who is allowed to prescribe a specified UTG (or class of UTGs) to specific patients (or classes of recipients) with a particular medical condition. An authorised prescriber does not need to notify the TGA when they are prescribing the UTG but must report to the TGA the number of patients treated on a six-monthly basis. Under the personal importation scheme, an individual can import a UTG to be used by that individual or a member of their immediate family. Quantity restrictions and customs rules apply.

v Pre-market clearance

A therapeutic good must be entered in the ARTG before it can be supplied in Australia, subject to certain exceptions (see Sections II.iii and II.iv). The sponsor of the good must be a resident of Australia or be an incorporated body in Australia and conducting business in Australia where the representative of the company is residing in Australia.

The route of evaluation, including time frame and fees, depends on the category of the application.

Medicines are either 'registered' or 'listed'. Registration involves individual evaluation of the quality, safety and efficacy of the product and is required for higher risk medicines (including all prescription medicines). Listing typically does not require demonstration of efficacy and is reserved for lower risk medicines (including some over-the-counter medicines and most complementary medicines).

The approval process can be expedited where the medicine has been approved by a 'comparable overseas regulator' (COR) or through the priority review pathway. To rely on a COR, the medicine must be identical (in terms of dosage form, strength, formulation and manufacture), and the indications must be identical or equivalent (to allow for minor textual differences), to the overseas approval. To be eligible for the priority review pathway, the medicine must satisfy a number of conditions: (1) it must be indicated for the treatment, prevention or diagnosis of a 'life-threatening condition' or 'seriously debilitating condition'; (2) there must be no other goods registered on the ARTG for that condition (or there must be substantial evidence demonstrating a significant improvement in efficacy or safety compared to those goods); and (3) there must be substantial evidence demonstrating that the medicine provides a 'major therapeutic advance'.

There is also a provisional approval pathway whereby sponsors may apply for time-limited provisional registration on the ARTG (up to a maximum of six years). The eligibility criteria for provisional approval requires the registration to:

1. be a new prescription medicine or a new indication of an already registered prescription medicine;
2. be for treating a serious condition;
3. provide a favourable comparison against existing therapeutic goods;
4. provide a major therapeutic advance; and
5. include evidence of a plan to submit comprehensive clinical data.¹²

The medicine or use must be for the treatment, prevention or diagnosis of a life-threatening or seriously debilitating condition and be likely to provide a major therapeutic advance, and there must be evidence of a plan to submit comprehensive clinical data. The pathway is intended to provide access to promising new medicines where the TGA assesses that the benefit of early availability of the medicine outweighs the risk inherent in the fact that additional data is still required.

The application and evaluation fees for a new chemical entity from 1 July 2022 are A$51,608 and A$206,842, respectively (or A$54,686 and A$218,743, respectively, for the priority pathway) and for a new biological are A$1,170 and A$77,873 to A$253,217, respectively.

In relation to follow-on products, to gain registration a generic medicine must demonstrate bioequivalence to the originator product and a biosimilar must demonstrate comparability (biosimilarity) to the reference biological medicine. Applications to register biosimilars are managed through the prescription medicines process and, as such, guidance is currently set out in the Australian Regulatory Guidelines for Prescription Medicines.¹³

Medical devices are 'included' on the ARTG, which requires compliance with the 'essential principles'¹⁴ as to quality, safety and performance, and the appropriate conformity assessment procedures. There are three slightly different application processes depending on whether the medical device is classified as being Class I (as defined in the Medical Devices Regulations), export-only or other than Class I.

Similarly to medicines, the approval process may be expedited where the medical device has been approved by a COR or through priority review designation. The application fees for new medical devices vary depending on the class of the device and the level of audit and conformity assessment required.

vi Regulatory incentives Patent term extension

The Patents Act 1990 provides that in situations where the time taken for regulatory approval of a pharmaceutical substance claimed by the patent exceeds five years, the term of the patent may be extended. However, the period of extension cannot exceed five years. Extensions are not available for patents for medical devices.

Data exclusivity

The TG Act provides a data exclusivity period of five years in relation to therapeutic goods containing a new active component (that is, an active substance that has not previously been a component of a product entered in the ARTG). The exclusivity period applies to information provided to the TGA in relation to an application for registration, provided that the information is not available to the public and the TGA has not been given written permission to use it.

Products for rare diseases

Orphan drugs are medicines, vaccines or in vivo diagnostic agents that are intended to treat, prevent or diagnose a life-threatening or seriously debilitating condition that is rare or for which supply to do so is not likely to be financially viable. As an incentive to develop products for these small markets, the TGA waives the application and evaluation fees normally required.

vii Post-approval controls

Sponsors are typically required to have a nominated contact person responsible for fulfilling the sponsor's reporting requirements to the TGA. Under the TG Act, a sponsor must provide to the TGA, in writing, information relevant to the benefits and risks of products entered in the ARTG as soon as the sponsor becomes aware of it. This includes information that: (1) indicates that the goods may have an unintended harmful effect or are less efficacious than reported in the original application; (2) is contradictory to that previously provided to the TGA; and (3) indicates that the quality, safety or efficacy of the goods is unacceptable (Section 29A TG Act). Failure to notify the TGA can lead to removal of the product from the ARTG as well as civil and criminal penalties. Sponsors are also required to submit regular periodic safety update reports and, from 1 January 2019, report shortages of, or decisions to permanently discontinue, reportable medicines.

The TGA also takes an active role in post-market surveillance, including random and targeted laboratory testing of approved products, good manufacturing practice (GMP) audits, and inspections of manufacturer's or sponsor's records. In addition, there are systems in place by which anyone can report adverse effects involving medicines, vaccines and medical devices. Adverse event reports are published online.¹⁵

The transfer of product approvals is relatively straightforward but may only take place once all the regulatory issues have been addressed.

viii Manufacturing controls

The manufacture of therapeutic goods must meet an acceptable standard of GMP, the nature of which depends on the type of therapeutic good.

Medicines, active pharmaceutical ingredients, and biologicals that comprise or contain live animal cells, tissues or organs must meet the Guide to Good Manufacturing Practice for Medicinal Products published under the Pharmaceutical Inspection Convention and Pharmaceutical Inspection Cooperation Scheme (PIC/S Guide to GMP).¹⁶ The Australian Code of Good Manufacturing Practice for Human Blood and Blood Components, Human Tissues and Human Cellular Therapy Products applies to blood, human tissues and human cellular product manufacturers that undertake the collection, processing, testing, storage, release for supply, and quality assurance of such products.¹⁷ Australian manufacturers of medicines and biologicals are required to obtain a licence from the TGA, while overseas manufacturers may either be approved by the TGA itself or the TGA may accept certification by a comparable overseas regulator. The TGA has the right to undertake an audit of an overseas manufacturing site at any time and fees apply.

Manufacturers of medical devices need to comply with the appropriate conformity assessment procedures and may require certification by the TGA.

Transfer of ownership of manufacturing facilities is straightforward but might trigger an audit, particularly if the transferee is not an entity that has previously been audited by the TGA.

ix Advertising and promotion

All advertising of therapeutic goods must comply with the TG legislation.

Advertising to the public of certain therapeutic goods, including biologicals, prescription medicines and controlled substances, is prohibited. For those goods that can be advertised to the public, compliance with the Therapeutic Goods Advertising Code 2021 (the 2021 Code) is required. The TGA is responsible for handling complaints about the advertising of therapeutic goods to the public.

All claims must be valid, accurate and substantiated (i.e., supported by evidence) and consistent with the indications or intended purpose as entered in the ARTG.

Certain advertisements require approval by the TGA before publication. These include advertisements referring to a serious form of a disease, condition, ailment or defect, being a form for which: it is medically accepted that diagnosis, treatment or supervision by a suitable qualified health professional is required; or a diagnostic, preventative, monitoring, susceptibility or pre-disposition test requires medical interpretation or follow-up.

Advertisements must also be in accordance with the CCA, which imposes penalties on persons who engage in conduct that is (or is likely to be) misleading or deceptive, or make false representations (e.g., in relation to the quality, benefits or performance characteristics of goods).

Advertising and promotion of therapeutic goods is also subject to codes of conduct maintained by the relevant industry bodies. The four main codes are: (1) the Medicines Australia Code of Conduct (MA Code), covering the discovery-driven pharmaceutical industry; (2) the Generic and Biosimilar Medicines Association Code of Practice, covering generic and biosimilar suppliers; (3) the Medical Technology Industry Code of Practice, covering the medical devices sector; and (4) the Australian Self Medication Industry Code of Practice, covering the non-prescription consumer healthcare sector.¹⁸

Membership of each of the sponsoring bodies, and hence applicability of the relevant code, is effectively voluntary but regulatory conditions may mandate code compliance. For example, it is typically a condition of registration of prescription medicines that any promotion complies with the requirements of the MA Code, regardless of whether the sponsor is a member of Medicines Australia.

x Distributors and wholesalers

Distributors and wholesalers are regulated at a state and territory level. Typically, a licence or permit is required to wholesale medicines and controlled drugs listed in the Poisons Standard (see Section II.xi) and compliance with the PIC/S Guide to GMP and the Australian Code of Good Wholesaling Practice for Medicines in Schedules 2, 3, 4 and 8 is mandated.¹⁹

xi Classification of products

Australia has a national scheduling system for the categorisation of medicines, the Poisons Standard,²⁰ which is adopted by each state and territory as part of its poisons and controlled substances legislation. Products are divided into 10 schedules, the most relevant for human applications being:

1. Schedule 2 – pharmacy medicines;
2. Schedule 3 – pharmacy-only medicines;
3. Schedule 4 – prescription-only medicines;
4. Schedule 8 – controlled drugs; and
5. Schedule 9 – prohibited substances.

Scheduling decisions are made by the secretary to the DOH or a delegate.

Medical devices are classified in accordance with the Medical Devices Regulations. In vitro diagnostic (IVD) medical devices are classified separately from other medical devices. Criteria for classification include degree of invasiveness, intended length of use, and whether it contains a medicine or matter of animal origin (for non-IVD devices) or the intended purpose of the device in accordance with the degree of personal and public health risk (for IVD devices).

xii Imports and exports

Therapeutic goods typically must be entered in the ARTG to be imported into or exported from Australia. The import or export of goods not entered in the ARTG, such as for use in clinical trials, requires approval from the TGA unless an exemption applies (see Section II.iv). See also Section II.xiii.

xiii Controlled substances

Australia is a signatory to the Single Convention on Narcotic Drugs 1961. Commonwealth legislation embodies the obligations of this convention through the Narcotic Drugs Act 1967 (Drugs Act) and requires licences and permits to manufacture, import and export certain narcotic drugs, psychotropic substances, precursor chemicals, antibiotics and androgenic or anabolic substances. The possession, use and sale of controlled substances (and relevant licences) are also regulated at a state and territory level.

xiv Enforcement

The TGA is primarily responsible for enforcement actions and has the power to suspend or cancel non-compliant goods from the ARTG, issue infringement notices, accept court-enforceable undertakings, and commence civil and criminal actions. The degree of the TGA's response is dependent on whether non-compliance is accidental, opportunistic or intentional. The TGA supports voluntary compliance and, in practice, a number of issues are resolved by the relevant industry body and code, such as in relation to the marketing and promotion of products.

In addition, the ACCC has powers in relation to misleading and deceptive conduct, product recall obligations, and consumer rights and remedies (see also Sections VI and VIII).

Pricing and reimbursement

Under the PBS, the Commonwealth government subsidises the cost of certain prescription medicines.

Applications for listing of new medicines on the PBS are made to the Pharmaceutical Benefits Advisory Committee (PBAC), which in turn makes a recommendation to the Minister for Health. Under the NH Act, the PBAC must consider the effectiveness and cost of the proposed medicine compared with alternative therapies (comparators). The PBAC cannot make a positive recommendation for a medicine that is substantially more costly than a comparator unless it is satisfied that the proposed medicine also provides a significant improvement in health. Claims of cost-effectiveness must be supported by appropriate economic models.

In recent years, there has been a significant policy emphasis on managing and minimising the cost to government of the PBS. To manage the overall cost of a new medicine, the government may require a sponsor to enter into a cost-sharing agreement. This arrangement may take the form of a rebate, for example, whereby the sponsor rebates a percentage of government expenditure for sales in excess of a set dollar value.²¹

Products listed on the F1 formulary (which contains single-branded medicines that are deemed not interchangeable at the patient level with another medicine that has multiple PBS-listed brands) are subject to automatic one-off price reductions on the fifth, 10th and 15th anniversaries of the PBS listing date of 5, 5 and 26.1 per cent (increasing to 30 per cent in 2027), respectively. Certain 'catch-up' price reductions are also introduced, from 1.48 per cent to a maximum of 36.82 per cent where medicines have not taken a price reduction under the price disclosure arrangements for certain specified periods.

In relation to follow-on products, applications for the listing of biosimilars will be considered by the PBAC whereas applications for the listing of generic medicines will usually be considered by a delegate of the DOH.

Applications for the listing of biosimilars must be supported by a clinical evaluation, with an estimate of the expected use of the product and its consequent impact on government expenditure. Applications for the listing of generic medicines must include a statement from the TGA regarding the equivalence of the new brand to currently listed brands.

The listing of the first generic or biosimilar version of a product on the PBS results in a 25 per cent statutory reduction in the price of the listed brand, subject to certain rules as to pre-existing price reductions which may have already been applied. In addition, the Minister may exercise discretion not to apply the statutory price reduction in whole or part.

Following this, the PBS price disclosure regime requires sponsors of all brands of the drug to provide data to the DOH concerning sales revenue, volume of sales, and discounts or other incentives offered by sponsors, such as cash rebates. This information is then used to adjust the subsidy that the government pays to more closely reflect the price at which the medicines are supplied in the market.

There is no formal scheme specifically for reimbursement for medical devices. However, under Medicare, a wide variety of medical procedures are reimbursed by the government, including diagnostic tests, thus providing a de facto reimbursement scheme for the use of those devices.

Administrative and judicial remedies

i Challenging a decision under the Therapeutic Goods Act 1989

A person wishing to challenge a decision made under the TG legislation may: request an internal review by the TGA; apply to the Administrative Appeals Tribunal (AAT) pursuant to the Administrative Appeals Tribunal Act 1975; or apply to the Federal Court of Australia (FCA) pursuant to the Administrative Decisions (Judicial Review) Act 1977.

A request for an internal review will lead to a reconsideration of the merits of the 'initial decision' by the Minister of Health. An initial decision includes decisions relating to the registration and listing of therapeutic goods on the ARTG, suspension and cancellation of medical devices from the ARTG, and revocation or suspension of a manufacturing licence. Following such a request, the Minister must reconsider the initial decision and may confirm or revoke the initial decision, or revoke the initial decision and make a decision in substitution.

An application to the AAT can also involve a reconsideration of the merits of the decision (including discretionary matters) and may also, in certain circumstances, take into account new information not available when the initial decision was made.

A review by the FCA will be limited to correcting an error of law, including on the grounds that: the decision was an improper exercise of power or was unreasonable; the decision maker took into account irrelevant factors or failed to take into account relevant factors; and there was a denial of natural justice.

ii Challenging a decision by the PBAC

An applicant whose submission to the PBAC has not resulted in a recommendation to list, or to extend the listing of, a drug on the PBS is entitled to apply to have the decision reviewed by the FCA. However, in circumstances where new information or evidence is likely to be relevant, the DOH encourages applicants to resubmit the drug for consideration by the PBAC, as such material will not be considered in judicial review.

Financial relationships with prescribers and payers

The financial relationships between pharmaceutical or device companies and prescribers are largely regulated by industry codes. The scope and detail of the restrictions imposed differs depending on the relevant membership (see Section II.ix).

The MA Code requires that members report on payments or benefits provided to individual healthcare professionals, including fees paid for:

1. speaking at an education meeting or event;
2. sponsorship to attend an educational event;
3. the purpose of market research where the identity of the healthcare professional is known to the pharmaceutical company that contracted the market research; and
4. being an Advisory Board member.

Pharmaceutical companies must not make a transfer of value to a healthcare professional unless they have taken appropriate steps to give notice of this disclosure obligation. However, this does not include payments in relation to research and development work, including clinical trials.

There is no specific legislation dealing with relationships with payers but there are various provisions at both the Commonwealth and state or territory levels relating to bribery and facilitation payments. For example, under Commonwealth legislation, it is an offence to dishonestly provide or offer (directly or indirectly) a benefit with the intention of influencing a Commonwealth public official (such as from the TGA or the PBAC) in the exercise of their duties, or where the receipt of the benefit would tend to influence the exercise of those duties.

Special liability or compensation systems

There are no specific liability or compensation systems designed to compensate persons injured by medicines or medical devices in Australia. Instead, product liability claims are made under common law (such as the tort of negligence or breach of contract) or state, territory or Commonwealth legislation (such as the CCA). The CCA provides that manufacturers are liable directly to consumers for goods that: (1) do not correspond with their description; (2) are not of acceptable quality; (3) are unfit for their stated purpose; (4) do not comply with a safety standard; or (5) do not comply with express warranties.

As noted above, commercial sponsors of clinical trials are required to hold insurance of at least A$10 million or A$20 million, depending on the state or territory, and are encouraged to comply with Medicines Australia's Compensation Guidelines. In relation to public sector clinical trials, an indemnity or insurance cover for the trial site and investigator is provided by the state or territory.

Transactional and competition issues

i Competition law

The ACCC is responsible for enforcing Australia's competition and restrictive trade practices laws, provided for primarily in the CCA (defined in Section I).

On 13 September 2019, an intellectual property exemption was removed from the CCA, meaning conditions in intellectual property transactions are treated like any other dealing from a competition law perspective.

The following maximum civil penalties apply for breach of the CCA:

1. for corporations, the greater of:
   • A$10 million;
   • three times the value of the benefit from the act or omission; or
   • where the benefit cannot be calculated, 10 per cent of the corporation's annual turnover in the preceding 12 months; and
2. for individuals, A$500,000.

In addition to the imposition of fines by the ACCC (which can be in the range of millions of dollars), there is the potential for class actions.

In its public comments on the intersection between competition law and the pharmaceutical industry, the ACCC has remarked that its focus is on arrangements between market participants that have the effect of lessening competition.

Although the ACCC has successfully taken action against pharmaceutical companies for breaches of consumer law (e.g., for misleading and deceptive conduct), it has rarely pursued pharmaceutical companies for restrictive trade practices.

One recent example, however, is the prosecution and sentencing of Alkaloids of Australia Pty Ltd and its former export manager for cartel conduct.

Alkaloids is a family owned Australian producer and supplier of the active pharmaceutical ingredient in antispasmodic medications (SNBB), used for the treatment of bowel cramps and stomach pain. The Court heard the export manager regularly met and communicated with competing manufacturers of SNBB, which led to Alkaloids and its competitors agreeing to fix the minimum price for SNBB, to allocate customers between each other and to agree the price that would be quoted to customers to ensure a particular manufacturer won the sale. In addition, the export manager attempted to induce its competitor SNBB manufacturers to limit the production of SNBB and its precursor plant, Duboisia, which is grown in Australia.

In 2021, Alkaloids and its former export manager pleaded guilty to three criminal charges and admitted to a further seven offences, in respect of making, attempting to make and giving effect to several cartel arrangements with overseas pharmaceutical ingredient suppliers that involved price-fixing, bid rigging, output restriction and market allocation over a seven-year period. Alkaloids was fined A$1,987,500, and its former export manager was sentenced to two years and eight months' imprisonment to be served as an intensive corrections order, including 400 hours of community service, disqualified from managing corporations for five years, and fined A$50,000.

ii Transactional issues

The potential for liability under the CCA in the pharmaceutical sector mainly arises in relation to settlement of disputes and, more specifically, settlement of patent infringement or validity proceedings. The key issue that arises in such scenarios is whether, absent the settlement, there was a real possibility that the generic or biosimilar company would otherwise have supplied its version of the medicine to the Australian market at a date earlier than that agreed in the settlement transaction.

Liability may also be relevant in relation to mergers and acquisitions, which are subject to the CCA and must be authorised by the ACCC. Acquisitions that would have the effect or would be likely to have the effect of substantially lessening competition in any market are prohibited by Section 50 of the CCA.²²

Current developments

i Advertising of therapeutic goods

The transitional period for the implementation of the 2021 Code ended on 30 June 2022. As mentioned above, the advertising of therapeutic goods is now governed by the 2021 Code. This replaced the 2018 code and commenced operation from 1 January 2022, with a a six-month grace period having ended on 30 June 2022.

The explanatory memorandum to the 2021 Code identifies the key changes introduced by the 2021 Code as follows:

1. simplifying the language and structure of the Code to improve readability, reduce complexity and, therefore, increase overall compliance;
2. revising and streamlining the mandatory statements required to be included in advertisements about therapeutic goods;
3. clarifying the requirements relating to testimonials and endorsements about therapeutic goods, and resolving inconsistencies relating to these requirements; and
4. expanding the types of therapeutic goods that may be offered as a sample.

ii Transparency measures for prescription medicines

From January 2021, the TGA commenced publishing on its website a description of major innovator medicine applications that are under evaluation by the TGA. This covers information about the potential availability of new medicines, new uses for existing medicines and new combinations.

The Australian government has also given approval to proceed with a second transparency measure, namely an earlier patent notification scheme for first generic and biosimilar medicines. The proposed changes would require applicants for the first generic and biosimilar form of an originator product to notify the patent holder when their application is accepted for evaluation by the TGA. However, public consultations regarding this measure concluded in 2020, and legislation required to introduce these changes that were expected is yet to be introduced.

iii Medicinal cannabis regulation

On 28 March 2022, the Therapeutic Goods (Standard for Medicinal Cannabis) (TGO 93) Amendment Order 2022 (the Amendment Order) came into effect.²³ The Amendment Order introduces new manufacturing, labelling and packaging requirements for medicinal cannabis products imported into and supplied or manufactured in Australia.

Among other things, the Amendment Order:

1. clarifies that the active ingredients or other cannabinoids in medicinal cannabis products must not be synthetic or modified;
2. imposes new requirements that medicinal cannabis products imported to Australia be manufactured in accordance 'good manufacturing practice' or equivalent international standards (aligning the manufacturing standards for domestically produced and imported products); and
3. introduces additional labelling and child-restraint packaging requirements.

Outlook