National Health (Pharmaceutical Benefits Scheme‑Exempt items ‑ Section 84AH) Determination 2017

Pharmaceutical item has the meaning given by section 84AB of the National Health Act 1953: a listed drug in a particular form, strength, and manner of administration. This is the unit at which PBS pricing, listing, and therefore exemption operate. The Schedule specifies each exempt item by enumerated drug name, form (including strength, type, size, etc.), and manner of administration. For example, “Ciclosporin, Oral liquid 100 mg per mL, 50 mL, Oral”. If any of those parameters differs - say, a different pack size or strength - the item is not covered, even if the drug is the same. Statutory price reductions under Division 3A are mandatory price cuts triggered automatically over time or by the entry of competing brands; they do not require departmental action once the conditions are met. Price disclosure under Division 3B requires suppliers to report actual transaction prices (including rebates and discounts) to the Department. The Department then calculates a weighted average disclosed price and, if it is lower than the approved PBS price, reduces the PBS price to that average. This is a powerful mechanism for driving down government expenditure on multisource drugs. The Determination declares that for the scheduled items, neither of those mechanisms apply. The exemption is absolute: no notice, no phase‑in, no alternative reduction. The concept of “exempt item” does not appear elsewhere in the Act in this form; it is a creation of s 84AH, which gives the Minister power to determine that specified pharmaceutical items are exempt from either or both of those Divisions. The Commonwealth retains the ability to amend the Schedule at any time to add or, theoretically, remove items, which creates a form of regulatory uncertainty for suppliers who rely on the exemption to maintain viability.

Suppliers (manufacturers or sponsors) of the listed items are the primary beneficiaries. They are freed from the administrative burden of preparing price disclosure reports - reports that require collecting data from wholesalers and pharmacies, calculating weighted averages, and submitting to the Department under strict timeframes - and from the risk that disclosure will force a price cut that makes the product unprofitable. For a product like mercaptopurine oral suspension 20 mg per mL, a niche paediatric oncology product with a tiny patient base, price disclosure could render supply commercially unsustainable. The exemption effectively guarantees the supplier a higher PBS price, which is a direct subsidy from the Commonwealth budget to maintain availability. Pharmacists must dispense these items under the PBS but cannot substitute a non‑exempt version (e.g., a standard tablet) because the patient’s prescription is for the specific form. Pharmacists should be aware that the approved price for an exempt item may be significantly higher than the price of a comparable non‑exempt product, affecting both the patient’s copayment and the pharmacy’s margin (which is tied to the approved price). Patients may or may not benefit: they gain continued access to a formulation that might otherwise vanish from the market, but they may pay a higher copayment if the price exceeds the general patient contribution threshold. For example, the oxycodone oral solution 1 mg per mL is listed as a single‑millilitre item - a very small package likely for neonates - where any price increase relative to a hypothetical non‑exempt version could have disproportionate out‑of‑pocket effects. The Commonwealth bears the cost: the higher PBS price means higher expenditure per prescription than if the item were subject to reduction and disclosure. However, the alternative - no supply - may force patients into hospital or onto more expensive therapeutic alternatives, so the net fiscal effect is uncertain. Competitor suppliers of similar drugs in non‑exempt forms may be disadvantaged: their products must compete on price through the disclosure system, while the exempt items are protected. However, because the exempt forms are typically not interchangeable (you cannot substitute an oral liquid for a tablet on a purely price‑driven basis), the competitive distortion is limited.

The Determination creates no new duties on any person. Its entire operative effect is to grant a right in the nature of an immunity to the suppliers of the scheduled items: they are not subject to the obligations under Division 3A (statutory price reductions) and Division 3B (price disclosure) of Part VII of the National Health Act. This means, for example, that a supplier of valproic acid oral liquid 200 mg per 5 mL, 300 mL need not submit a price disclosure report for that item, and the price will not be reduced by the statutory percentage that would otherwise apply when the item reaches a certain age or when a new brand enters. The right is conditional on the product exactly matching the description in the Schedule. If the supplier changes the container size, the strength, or the excipients such that it becomes a different “pharmaceutical item” (under s 84AB), the exemption may cease. The supplier also retains all other PBS listing obligations: the item must be supplied to meet demand, the supplier must comply with any brand‑premium or therapeutic‑group pricing arrangements that apply, and the supplier must honour the PBS‑approved price. The Commonwealth has the right to amend the Schedule at any time via a legislative instrument, with the potential to remove an item from exemption with little notice - the instrument itself provides no transitional relief. The Determination does not confer any private right of action; a patient cannot sue for loss of supply if an item is removed from the PBS altogether.

The Determination itself imposes no penalties. Enforcement occurs through the National Health Act 1953 and related PBS rules. If a supplier fails to supply an exempt item at the PBS price, the normal sanctions apply: the Secretary may suspend or revoke the listing of the drug, and the supplier may be required to repay any over‑payments (if the supply failure is coupled with improper claims). If a supplier incorrectly claims that an item is exempt when it does not match the Schedule (for example, by applying price disclosure immunity to a product that is a different strength), the Department could recover the difference between the price that should have been paid and the price actually paid, plus interest and administrative penalties under the Act. The instrument is a legislative instrument registered on the Federal Register of Legislation and subject to disallowance by either House of Parliament (though the Legislation Act 2003 provides for disallowance within 15 sitting days after tabling). Disallowance would void the exemption, but in practice this has not occurred. There is no specific investigative or prosecutorial machinery attached to this Determination; enforcement relies on the Department’s routine auditing of PBS claims and pricing data.

The Determination operates within the framework of the National Health Act 1953, specifically as a delegation of power under s 84AH. It interacts most directly with Divisions 3A and 3B of Part VII: it disapplies those Divisions for the scheduled items. It does not affect the operation of Division 2 (PBS listing and pricing generally) or Division 4 (brand substitution and therapeutic group pricing). The Determination has no effect on state and territory pharmacy legislation, such as the Pharmacy Regulation Act in New South Wales or similar laws in other states, which govern who may dispense and under what conditions. It does not interact with the Therapeutic Goods Act 1989; each listed drug must still have TGA marketing approval and be manufactured in compliance with Good Manufacturing Practice. The Determination does not create any exemption from the Competition and Consumer Act 2010; however, because the PBS pricing is set by the Commonwealth, suppliers are not engaging in price fixing that would fall foul of Part IV. The instrument may be considered in administrative law challenges: if a supplier’s product is not included in the Schedule, the supplier may argue that the Secretary misapplied s 84AH or that the Determination is ultra vires because it does not cover the item. The Administrative Appeals Tribunal or Federal Court could review such a decision, but the Determination itself is usually not the subject of litigation; it is the underlying listing or pricing decision that gets challenged. The Determination is amended via the same process as other health legislative instruments, and each amendment is subject to parliamentary scrutiny and disallowance.

The Determination was originally made on 26 September 2017 (PB 81 of 2017) and registered on 26 September 2017. Since then, it has been amended 25 times, with the latest amendment (No. 4 of 2025) taking effect on 1 December 2025, producing Compilation No. 25. The schedule has been amended by every single amendment determination: each of the 26 entries in the legislation history (including the original) adds items to the Schedule. There is no evidence in the provided text of any item ever being removed; the endnote 4 shows only “am” (amended) for the Schedule, never “rep” (repealed) for any entry. This suggests the Schedule is monotonic - items are added but not removed - though it is possible that earlier repealed items are not visible because the compilation does not show a history of individual entries. The amendments occur at a steady pace, typically quarterly (sometimes two or three times per quarter), indicating that the Department regularly processes requests from suppliers for exemption. The types of drugs added range from common paediatric antibiotics (amoxicillin, azithromycin) to immunosuppressants (ciclosporin), psychotropic drugs (amisulpride, clonazepam), and specialised formulations (oxybutynin transdermal patches, voriconazole oral suspension). The amendment history reveals that the exemption is not a static list but a dynamic tool the Commonwealth uses to manage PBS pricing sustainability. Suppliers seeking exemption must apply and be added via an amending instrument; no self‑assessment is permitted.

There is no litigation history recorded in the source material, and no judicial decisions referring to this Determination are publicly known. The instrument is of low profile: it is a ministerial determination that merely lists items. Challenges to PBS pricing and listing decisions are common in the Federal Court and the Administrative Appeals Tribunal, but those typically concern the classification of a drug as a “new brand” or the calculation of a price reduction, not the exemption list itself. If a supplier’s product was wrongly excluded from the Schedule, the supplier would likely petition the Department for an amendment rather than bring a court action, as the remedy - inclusion in the next amending determination - is administrative and relatively swift. A judicial challenge would lie on the ground that the Minister had failed to exercise the power under s 84AH reasonably (a Wednesbury‑type unreasonableness argument), but given the breadth of the discretion, success would be unlikely. The instrument has survived 25 amendments without any litigation reported, which suggests it is administratively uncontroversial. However, the absence of litigation does not mean the instrument is immune; if the Department were to remove an item from the Schedule without adequate justification, a supplier might argue procedural unfairness or failure to consider the objects of the Act. No such case has been recorded.

Several traps await the unwary. Exact match requirement: the exemption applies only to the pharmaceutical item as described. A product that is a different strength, pack size, or form - even if it contains the same drug and is PBS‑listed - is not covered. For example, capsaicin (not listed) or different pack sizes of valproic acid liquid are not automatically exempt; only the 300 mL oral liquid is. Suppliers who vary their packaging risk losing exemption. No grandfathering on removal: if the Schedule is amended to remove an item, there is no transitional period. The exemption ends on the commencement date of the amending instrument. A supplier who has invested in production based on the exemption could be caught out. Exemption is not complete immunity: the item remains subject to all other PBS pricing rules, including any brand‑premium or therapeutic‑group pricing agreements. The exemption only lifts the specific burdens of Div 3A and 3B. Definitional scope: “pharmaceutical item” under s 84AB may include matters not immediately obvious, such as a particular container type or reconstitution method. If a supplier uses a different diluent or a different primary packaging, it may technically be a different pharmaceutical item and lose exemption. Pharmacist risk: if a pharmacist dispenses an exempt item but the prescribing software treats it as a non‑exempt item for pricing, the pharmacist may claim a higher or lower price than permitted, risking audit recovery. Patient impact: patients who are chronic users of an exempt item may face higher out‑of‑pocket costs over time if the price is not reduced through disclosure, and may not understand why their medicine is more expensive than a similar drug in tablet form. No enforcement right for suppliers: if a competitor or the Department misapplies the exemption, the supplier has no direct cause of action under this Determination; they must rely on administrative review of the underlying decision. Uncertainty about additions: suppliers who believe their product merits exemption must apply through the Department; there is no right to be included, and the decision process is not transparent in this instrument. The Department may deny inclusion without reasons apparent from the Determination itself.

For suppliers (manufacturers or sponsors): First, verify that your product exactly matches a listing in the Schedule - drug name, form (including strength, type, size), and manner of administration. A spreadsheet cross‑referencing the Schedule with your TGA‑approved product information is a prudent first step. If your product does not appear, you cannot rely on exemption; you must comply with Div 3A and 3B price reductions and disclosure. If you believe your product should be exempt (because it is a low‑volume, specialised formulation), you may approach the Department of Health and Aged Care (PBS Pricing Section) to request inclusion in a future amending determination. There is no prescribed form for such a request, but supporting evidence of low sales volume, risk of discontinuation, and lack of alternative supply is typical. Once your product is listed, maintain records that demonstrate the product’s conformity with the Schedule - for example, batch records, labels, and packaging specifications. Do not make any change (even a minor change in pack size or excipient) that might alter the “pharmaceutical item” without checking whether the exemption still applies. If a change is necessary, request a determination amendment before implementing the change. Continue to comply with all other PBS duties: supply must be uninterrupted, annual supply data must be submitted if required, and any brand‑premium or therapeutic‑group pricing arrangements must be honoured. Price disclosure reports are not required for exempt items, but you must still submit pricing information for non‑exempt items if you supply both.

For pharmacists: Check each exempt item on dispensing. The approved price may be higher than for a comparable non‑exempt product. Use the PBS Online Schedule or your dispensing software (which should be updated with the latest PBS price data) to ensure the correct price is charged to the patient and claimed from the Commonwealth. If a patient questions a higher copayment, explain that the medicine is a specialised formulation that cannot be substituted with a cheaper alternative. Do not attempt to substitute a non‑exempt form even if it contains the same drug, as the prescription is for the specific exempt item and substitution may breach PBS rules. Maintain adequate stock levels: because these items are often low‑demand but critical, back‑orders can cause significant patient harm. Report any supply issues to the supplier and the Department. Stay informed of amendments: subscribe to the PBS e‑list or monitor the Federal Register of Legislation for new amending determinations, which may add or (theoretically) remove items from exemption. If an item is removed, be prepared for a price reduction and possible change in patient copayment from the commencement date.