Bills Digest no. 151 2007–08
Therapeutic Goods Legislation Amendment (Annual Charges) Bill
2008
WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced
and does not canvass subsequent amendments. This Digest does not have
any official legal status. Other sources should be consulted to determine
the subsequent official status of the Bill.
CONTENTS
Passage history
Purpose
Background
Financial implications
Main provisions
Concluding comments
Contact officer & copyright details
Passage history
Therapeutic
Goods Legislation Amendment (Annual Charges) Bill 2008
Date introduced: 18 June 2008
House: House
of Representatives
Portfolio: Health and Ageing
Commencement: The formal provisions commence on Royal Assent. Schedule 1
commences on a date to be fixed by Proclamation, or six months and one
day after Royal Assent, whichever occurs first.
Links: The relevant
links to the Bill, Explanatory Memorandum and second reading speech
can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/. When Bills
have been passed they can be found at ComLaw, which is at http://www.comlaw.gov.au/.
The Bill amends the Therapeutic Goods Act 1989
(Cth) (the Therapeutic Goods Act) and the Therapeutic Goods (Charges)
Act 1989 (Cth) (the Charges Act) in relation to the imposition and
collection of annual charges (and exemption from paying a charge).
The Therapeutic Goods Administration (TGA) ‘carries out a range of assessment
and monitoring activities to ensure therapeutic goods available in Australia
are of an acceptable standard with the aim of ensuring that the Australian
community has access, within a reasonable time, to therapeutic advances’.[1]
Particularly, the TGA is responsible for maintaining the Australian Register
of Therapeutic Goods (the Register) ‘for the purpose of compiling information
in relation to, and providing for evaluation of, therapeutic goods for
use in humans’.[2] According to the TGA’s website:
[The Register] is a computer database of therapeutic
goods. Therapeutic goods are divided broadly into two classes: medicines
and medical devices. Unless exempt, medicines must be entered as either
‘registered’ or ‘listed’ medicines and medical devices must be ‘included’
before they may be supplied in or exported from Australia.[3]
The Register includes details about product names and formulations, and
the sponsor and manufacturer of the product. As at 23 May 2008, there
were approximately 54 000 products on the Register.[4]
Under the Therapeutic Goods Act, an ‘annual registration charge, annual
listing charge or annual charge for inclusion’ in the Register is payable
by ‘the person in relation to whom the therapeutic goods concerned are
registered, listed or included in the Register’ (subsection 43(1)). In
addition, an ‘annual licensing charge’ is payable by ‘the holder of the
licence to which the charge relates’ (subsection 43(2))—usually a manufacturer.
The annual charges for the registration, listing or licensing of therapeutic
goods are set out in regulation 3 of the Therapeutic Goods (Charges) Regulations
1990 (Cth).
The time for the payment of such charges is set out in section 44 of
the Therapeutic Goods Act. Currently, the annual charge is payable on
the anniversary of the registration, listing or inclusion in the Register
of the relevant therapeutic goods, unless the Secretary to the Department
of Health and Ageing specifies another day in a notice in writing to the
person responsible for paying the charge. The Therapeutic Goods Act currently
makes no provision for exemption from paying a charge under that Act.
A charge that is not a fee for service is considered to be a tax, and
section 55 of the Constitution provides (in part) that ‘[l]aws imposing
taxation shall deal only with the imposition of taxation, and any provision
therein dealing with any other matter shall be of no effect’. The purpose
of the Charges Act (as revealed by the long title) is therefore ‘to impose
an annual charge on the registration, listing and inclusion in the Register
of therapeutic goods, and on the licensing of manufacturers of therapeutic
goods’. Subsection 5(3) of the Charges Act states that the regulations
may exempt from the payment of such charges (but not licensing charges)
‘persons whose turnover of those goods or devices is of low volume and
low value’. It provides:
(3) The regulations shall provide that annual charges
in respect of the registration or listing of therapeutic goods, or the
inclusion of kinds of medical devices in the Register under Chapter 4
of the Therapeutic Goods Act 1989, are not payable by persons
whose turnover of those goods or devices is of low volume and low value.
The phrases ‘low volume’ and ‘low value’ are not defined in the Charges
Act. However, regulation 5 of the Therapeutic Goods (Charges) Regulations
1990 deals with turnover of low volume and low value. Subregulation 5(1)
states:
A person who has turnover, or expects to have turnover,
of particular registered or listed therapeutic goods, or kinds of medical
devices that are included in the Register under Chapter 4 of the Therapeutic
Goods Act 1989, may apply to the Secretary for a declaration that
the turnover is of low volume and low value.
Subregulations 5(4) and (5) set out the matters which the Secretary may
take into account in determining whether to make a declaration that the
turnover is of low volume and low value:
(4) In considering the application, the Secretary
may take into account:
(a) the value of the wholesale turnover of the goods
in the financial year immediately before the financial year to which
the charge relates; or
(b) if there was no turnover of those goods in the
preceding financial year — the value of the estimated wholesale
turnover of the goods in the financial year immediately after the
financial year to which the charge relates.
(5) However, the Secretary must make a declaration
if the Secretary is satisfied that the charge for registration or listing,
or inclusion in the Register under Chapter 4 of the Therapeutic Goods
Act 1989, that would be payable, if the application was refused,
is more than:
(a) 6.8% of the value of the wholesale turnover
of those goods in the financial year immediately before the financial
year to which the charge relates; or
(b) if there was no turnover of those goods in that
preceding financial year — 6.8% of the value of the estimated
wholesale turnover of those goods in the financial year immediately
after the financial year to which the charge relates.
There appears to be no press commentary on the Bill.
At the time of writing, no political party (other
than the ALP in introducing the Bill into Parliament) has expressed
any position on the Bill.
According to the Explanatory Memorandum for the Bill, the amendments
‘will have very low impact on business, individuals or the economy’.[5] This is because the proposed amendments
really do no more than alter the dates for payment of annual charges,
in circumstances where (a) administrative arrangements that mirror the
proposed legislative scheme are already in place, and (b) the charges
are already levied but paid at different dates throughout the year. It
may be that the Bill will have positive financial implications. The Bill
proposes that regulations will provide for greater scrutiny of applications
for exemption from liability to pay annual charges, including the ability
to recover charges previously the subject of successful, but presumably
fraudulent or misleading, applications for exemption. The actual financial
implications will thus depend on the extent and efficiency of the TGA’s
administrative cost recovery procedures.
Item 1 of Schedule 1 repeals current section 44 of the
Therapeutic Goods Act, which, as mentioned above, provides that an annual
charge is payable on the anniversary of the registration, listing or inclusion
in the Register of the relevant therapeutic goods, unless the Secretary
to the Department of Health and Ageing specifies another day in a notice
in writing to the person responsible for paying the charge.
Item 1 then inserts proposed revised section 44, which
provides for the payment of all annual charges on a date to be ‘worked
out under the regulations’ or 1 October each year (unless the regulations
specify another date).
This change would seem to have obvious benefits for simplifying administrative
processes for the TGA. For example, it can issue one large batch of invoices
for payment of charges due on 1 October each year (or such other date
as may be prescribed in the regulations), rather than issuing numerous
invoices throughout the year. The TGA will be in a better position to
know what its expected income is for the coming year and when to expect
the moneys, and to take appropriate action to recover unpaid moneys in
a wholesale, rather than piecemeal, way.
On the other hand, the current arrangement provides the TGA with year-round
cashflow—although admittedly, the flow may be irregular and of varying
amounts. It also has the advantage of accounts being issued as a matter
of daily (or fortnightly/monthly) routine.
However, presumably the proposed arrangement has emanated from, or been
developed in consultation with, the TGA in light of its experience with
the current arrangement. It can only be assumed that the TGA is supportive
of the proposed arrangement, whatever its advantages or disadvantages
may be. Also, according to its website, it seems that the TGA already
issues invoices in September, and so it seems that the proposed legislative
change simply brings the legislation into line with current administrative
practice.[6]
Item 2 of Schedule 1 inserts proposed section 44A,
which deals with exemptions from liability to pay charges. According
to the second reading speech by the Hon Bill Shorten MP, Parliamentary
Secretary for Disabilities and Children’s Services:
The Australian National Audit Office also recently raised
some concerns on the lack of ability of the TGA to review the eligibility
of sponsors applying for, or who have been granted, exemption. Under
the current provisions, the TGA does not have power to seek evidence
verifying the eligibility of persons applying for, or who have been
granted, the exemption for paying annual charges for low turnover of
therapeutic goods.[7]
The Explanatory Memorandum for the Bill states that the ‘changes will
ensure that persons who apply for or are granted the exemption from paying
annual charges have the requisite supporting evidence that is certified
by a third party’.[8] It
goes on to say:
This will address the concern raised by the Australian
National Audit Office in their Financial Statement Audit Report for
2006–2007 for the Department of Health and Ageing in relation to the
lack of third party confirmation that the applicant does meet the eligibility
criteria for the low value exemption.[9]
Proposed subsection 44A(4), for example, states that the regulations
may provide for ‘the obtaining of additional information or documents
from applicants for exemptions or persons granted exemptions’. Proposed
paragraph 44A(1)(c) states that the regulations may make provision
for ‘cancelling an exemption and requiring payment of that charge for
the current year’. It is not clear why matters such as these are to be
the subject of regulations, rather than just being contained in the parent
Act itself.
Proposed subsection 44A(2) states that the regulations may require
an application for an exemption to be accompanied by a fee and goes on
to say that the fee ‘must not be such as to amount to taxation’.
The TGA is a division of the Department of Health and Ageing, which is
an agency subject to the Financial Management and Accountability Act
1997 (Cth) and is thus required to comply with the Government’s cost
recovery policy, including the imposition of fees and charges where appropriate.[10]
Proposed subsection 44A(2) permits the imposition of such a fee
for the processing of an application for exemption from liability to pay
a charge. It is not clear if, or in what circumstances, such a fee can
be waived—although that may be an issue for the regulations.
Many of the matters contained in proposed section 44A are currently
contained in the Therapeutic Goods (Charges) Regulations 1990. However,
the difficulty is that those regulations are made under the Therapeutic
Goods (Charges) Act, not the Therapeutic Goods Act itself. Amendments
will be required to the Therapeutic Goods Regulations 1990 and the existing
regulations (in the Therapeutic Goods (Charges) Regulations 1990) dealing
with charges may need to be repealed (unless there is no possibility of
inconsistency between the two). In some instances, a proposed amendment
to the Therapeutic Goods Act is meaningless without new regulations being
made. For example, the term ‘turnover’ in proposed subsection 44A(9)
is defined by cross-reference to the definition of the term ‘prescribed
by the regulations’. However, the term is not currently defined in the
Therapeutic Goods Regulations 1990.
Item 3 provides that the amendment made by item 1 applies
in relation to the financial year beginning 1 July 2009. Persons who
are liable to pay annual charges and licensing fees are thus given just
over 12 months’ notice of the proposed change to the invoice and payment
arrangement (from the time of the introduction of the Bill).
Items 4 and 5 of Schedule 1 contain proposed amendments
to the Charges Act. The proposed changes seem to be little more than
consequential amendments to the Act which ought properly to have been
made in 2002 (or shortly thereafter) when the Therapeutic Goods and
Other Legislation Amendment Act 2002 (Cth) was passed. By that Act,
section 6A of the Therapeutic Goods Act was repealed, and sections
6AAA–6AAE were enacted in its place.[11]
It is not clear why the proposed amendments did not occur in 2002 or at
some other time in the past five or six years. It is also not clear what
effect the delay in making these consequential amendments may have on
the validity of charges imposed under the Charges Act in the intervening
period. Neither the second reading speech nor the Explanatory Memorandum
for the Bill mentions these issues.
Item 4 repeals subsections 4(3) to (6) of the Charges Act and
inserts proposed subsections 4(3) to (7). Ostensibly, apart from
tidying up some language, item 4 replaces references to the repealed
section 6A of the Therapeutic Goods Act with references to sections 6AAA–6AAE
of that Act where appropriate.
Item 5 repeals subsection 5(3) of the Charges Act. As quoted
above, subsection 5(3) provides that the regulations may exempt from the
payment of such charges ‘persons whose turnover of those goods or devices
is of low volume and low value’. Proposed subsection 44A of the
Therapeutic Goods Act will perform this function instead (see above discussion
in relation to item 2 of the Bill).
Item 6 provides that current section 5(3) of the Charges Act (which
is to be repealed by item 5) continues to apply when working out
annual charges payable in respect of the financial year beginning on 1
July 2008 and all earlier financial years.
Concluding
comments
None of the amendments in the Bill appears to be controversial. The
proposed amendments to the Therapeutic Goods Act dealing with changes
to dates for the payment of annual charges simply bring the legislative
framework into line with administrative practice, noting that while this
order seems to be the reverse of the usual situation, it was permissible
under the current legislative framework. The proposed amendments dealing
with exemptions from liability to pay such charges expand on the requirements
currently set out in regulations, and also give the TGA the power to require
applicants for exemptions (or persons granted exemptions) to provide additional
information or documents. Such amendments empower the TGA to implement
fully its obligations to comply with the Government’s cost recovery guidelines,
particularly by enabling it to verify information supplied by applicants
and to require applicants to provide additional information not previously
supplied by them.
The proposed amendments to the Charges Act are a somewhat delayed response
to the passage of the Therapeutic Goods and Other Legislation Amendment
Act 2002 (Cth). The amendments are also consequential upon the passage
of item 2 of the Bill.
[11]. The text of the
Therapeutic Goods and Other Legislation Amendment Bill 2002 is available
electronically at: http://www.austlii.edu.au/au/legis/cth/bill/tgaolab2002470/
(accessed on 24 June 2008).
Morag Donaldson
27 June 2008
Bills Digest Service
Parliamentary Library
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