Chapter 1Introduction and background
1.1On 3 August 2023, the Public Governance, Performance and Accountability Amendment (Vaccine Indemnity) Bill 2023 (the bill) was introduced into the Senate by Senator Ralph Babet.
1.2On 10 August 2023, following an amendment to Report No. 9 of 2023 of the Senate Selection of Bills Committee, the Senate agreed to refer the bill to the Finance and Public Administration Legislation Committee (the committee) for inquiry and report by 18 March 2024.
1.3The committee welcomes the introduction of the bill as an opportunity to respond to concerns raised by submitters and contribute to a broader public debate about vaccines and the proper assessment of their benefits and risks.
1.4The committee considers it critical that public confidence in vaccine indemnification, for the exceptional occasions it is required, is not taken for granted and is based on sound public policy, risk benefit assessment and a strong public interest test.
Conduct of the inquiry
1.5The committee agreed to open submissions on 10 August 2023 and set 29September2023 as the closing date. The committee wrote to a range of key stakeholder groups, organisations, and individuals, drawing their attention to the inquiry and inviting them to make a written submission.
1.6The committee received 101 submissions, which are available on the committee’s webpage and listed at Appendix 1.
1.7The committee received 127 survey responses through Senator Gerard Rennick’s webpage. A representative sample of 15 de-identified survey responses was published as submission 66. The remainder of the survey responses were taken by the committee as correspondence.
1.8Details of the inquiry, including links to the bill and associated documents, are published on the committee's website.
Acknowledgement of submitters and witnesses
1.9The committee thanks all those who contributed to the inquiry by making submissions to the committee.
1.10The committee also acknowledges those submitters who provided personal accounts of vaccine related injuries and the effects on their health and wellbeing.
Report structure
1.11This chapter begins with a brief description of the Public Governance, Performance and Accountability Act 2013 (PGPA Act) as it pertains to the granting of indemnities on behalf of the Commonwealth. The chapter finishes by setting out the purpose and key provisions of the bill.
1.12The second and concluding chapter outlines the key issues put forward in evidence and presents the committee's views and recommendations.
Legislation governing Commonwealth indemnities
1.13A stated object of the PGPA Act is to:
‘establish a coherent system of governance and accountability across Commonwealth entities’;and
act as ‘the cornerstone’ of the Commonwealth Resource Management Framework.
1.14Section 60 of the PGPA Act provides that the Minister for Finance may, on behalf of the Commonwealth, grant an indemnity, guarantee, or warranty in accordance with any requirements prescribed by the rules.
1.15Section 107 of the Act provides that this power may, by written instrument, be delegated to the Finance Secretary.
1.16Section 109 of the Act provides that the Finance Secretary may, by written instrument, further delegate this power to an official of the Department of Finance.
1.17The Department of Finance defines a Commonwealth indemnity as ‘a legally binding promise whereby the Commonwealth undertakes to accept the risk of loss or damage another party may suffer’.
1.18When exercising the delegation, the delegate (or sub-delegate) must consider two overarching policy principles:
that risks should be borne by the party best placed to manage them; and
benefits to the Commonwealth should outweigh the risks involved.
1.19The Department of Finance’s Resource Management Guide 400: Commitment of Relevant Money provides that delegation of the power to grant indemnities, guarantees and warranties on behalf of the Commonwealth is limited to circumstances in which:
the delegate is satisfied that the likelihood of the event occurring is less than 5 per cent; and
the potential expenditure is likely to be less than $30 million.
1.20In circumstances where an indemnity exceeds these thresholds, power to grant an indemnity on behalf of the Commonwealth must be explicitly agreed in a decision of Cabinet, the National Security Committee of Cabinet (NSC) or its successor or the Prime Minister, or a written determination of the Minister for Finance.
1.21The Charter of Budget Honesty Act 1998 requires that contingent liabilities, including indemnities, with a possible impact on the forward estimates greater than $20 million in any one year, or $50 million over the forward estimates period are disclosed in Budget Paper 1 – Budget Strategy and Outlook.
The issue that the bill seeks to address
1.22The arguments put forward by the proponent of the bill, Senator Babet, are highly contested and the evidence is explored further in Chapter 2.
1.23Senator Babet argues that granting indemnities to vaccine manufacturers compromises the quality and safety of vaccines by incentivising risk-taking behaviour on the part of manufacturers, removing the legal, fiscal, and social responsibilities of manufacturers, and expediting, or short-cutting, the quality assurance processes undertaken by manufacturers and regulatory bodies like the Therapeutic Goods Administration (TGA).
1.24This argument was stated in the explanatory memorandum to the bill:
Indemnification has created an incentive for risk-taking in the pharmaceutical industry which is not aligned with the fundamental principles of medicine.
1.25In the explanatory memorandum, Senator Babet also argued that the indemnification of vaccine manufacturers is, or risks becoming, ‘commonplace’ in Australia.
What currently happens—the process for registering vaccines for use in Australia
1.26For a vaccine to be registered for use in Australia, a sponsor (generally a pharmaceutical company) is required to submit a complete and comprehensive package of data to the TGA. A formal evaluation is then carried out in multiple stages by technical experts, prior to a decision being made regarding the provisional or full registration of a vaccine.
1.27Following a positive assessment on the quality, safety, and efficacy of the product by the TGA, vaccines must be registered on the Australian Register of Therapeutic Goods (ARTG) before supply can commence.
1.28After receiving TGA approval, the Australian Technical Advisory Group on Immunisation (ATAGI) considers a range of information, including safety, and efficacy and effectiveness data from clinical trials. ATAGI provides recommendations to the Minister for Health and Aged Care on whether to include a vaccine in the national vaccine rollout program.
1.29The process for registering vaccines is separate to the process for granting indemnities to vaccine manufacturers.
Policy rationale and history of indemnities granted to vaccine manufacturers
1.30To understand the policy rationale and the history and nature of the indemnities offered to vaccine manufacturers, it is first necessary to distinguish between the routine provision of vaccines under the National Immunisation Program (NIP) and the exceptional circumstances in which an indemnity may be granted.
1.31The NIP provides a schedule of free, routine vaccinations over the life course to Australians eligible for Medicare. It is a joint initiative delivered by Commonwealth, State and Territory governments, in consultation with expert advisory groups.
1.32None of the individual purchase agreements or Head Deeds for the 31 vaccines procured from four suppliers for the NIP are indemnified.
1.33The Department of Health and Aged Care explained the policy rationale behind the consideration of indemnities in exceptional circumstances:
…indemnities for use of vaccines can be a useful tool to allow the Commonwealth to appropriately share risk with vaccine providers, who incur significant upfront costs in bringing a vaccine candidate to market. While vaccine providers may in the ordinary course be able to price their upfront investment and risk of liability into the cost per dose of a vaccine, this may not be possible in the exceptional circumstances of a pandemic or public health emergency. These events often affect large sections of domestic and global populations and demand the urgent development and deployment of vaccines or treatments to prevent the spread of illness or to mitigate its effects. Even where utmost care is taken by vaccine providers, the uncertainty of pandemic and emergency circumstances may make the investment in vaccine development impossible to justify for vaccine providers (many of which are publicly listed and therefore responsible to shareholders) without a degree of risk sharing with purchasers.
1.34The limited instances in which indemnities have been granted to vaccine manufacturers have been in relation to COVID-19, monkeypox, smallpox and pandemic influenza H1N1 (‘Swine flu’) and H5N1 (‘Bird flu’) strains. In other words, in pandemic, potential pandemic, and emergency situations.
1.35In December 2002, the Commonwealth Government granted an indemnity to the manufacturer of smallpox vaccine for an initial shipment of 50000 as part of the 2002–03 Budget measure Incident Response Capability.
1.36In December 2006, the Commonwealth Government granted certain indemnities to manufacturers of pandemic and pre-pandemic H5N1 vaccines for the supply or future supply of influenza vaccines under certain conditions.
1.37In the May 2010–11 Budget, the Commonwealth Government granted certain indemnities to manufacturers of pandemic and pre-pandemic H1N1 vaccines for the supply or future supply of influenza vaccines under certain conditions.
1.38In August 2020, in response to the COVID-19 pandemic, procurement decisions for COVID-19 vaccines were exempted from standard Commonwealth Procurement Rules which enabled the Commonwealth to enter into Advance Purchase Agreements (APAs) with early-stage vaccines in short supply and high international demand. Many of these vaccine manufacturers required indemnities as a condition of supply. These APAs have since been varied as required, including in response to new variants or changes in supply and demand.
1.39In the October 2020–21 Budget, the Commonwealth Government announced it had granted indemnities to the suppliers of two potential COVID-19 vaccine candidates: AstraZeneca and Seqirus.
1.40In the May 2021–22 Budget, the Commonwealth Government announced it had granted two additional indemnities and entered into Advance Purchasing Agreements and risk-sharing arrangements for COVID-19 vaccines with Pfizer and Novavax.
1.41In the May 2021–22 Budget, the Commonwealth Government also announced it had also joined the COVAX Facility (a global risk-sharing mechanism for pooled procurement and equitable distribution of COVID-19 vaccines) and had made an upfront payment towards Australia’s purchase of future COVID-19 vaccine doses through the Facility.
1.42An international precedent was set, in accordance with guidance from the COVAX facility, requiring that all 172 member states, including Australia, who received vaccines through the COVAX Facility indemnify manufacturers.
1.43In the March 2022–23 Budget, the Commonwealth Government announced it had granted an additional indemnity to Moderna as well as entered a partnership with Moderna for onshore end-to-end population scale mRNA manufacturing capability for COVID-19 vaccines.
1.44In the October 2022–23 Budget, the Commonwealth Government announced it had granted an additional indemnity to a manufacturer of monkeypox vaccine held by the Australian Government.
1.45Requests for indemnification would generally be raised in contract negotiations, which are managed by the Department of Health and Aged Care.
1.46Indemnities granted by the Commonwealth Government to vaccine manufacturers are protected as ‘commercial in confidence’.
Purpose of the bill
1.47The bill seeks to remove the power of the Minister for Finance, or their delegate, to grant indemnities on behalf of the Commonwealth to vaccine manufacturers.
1.48This objective is highly contested by Australian medical experts who provided evidence to the inquiry that the ability of the Minister for Finance, or their delegate, to grant indemnities on behalf of the Commonwealth to vaccine manufacturers, though rarely exercised, is a vital pandemic and/or emergency response capability that should not be removed.
1.49In his second reading speech, Senator Babet stated that the bill would:
…ensure that no future indemnities are granted by the Commonwealth to the manufacturers of vaccines in relation to the use of vaccines. This bill will limit financial and legal risk to the Commonwealth and aid in the restoration of trust in medicine.
1.50The committee acknowledges all those Australians who made adverse event reports and those who have died following the administration of COVID-19 vaccines.
Key provisions of the bill
1.51The bill has one schedule with four items which would amend the PGPA Act and would commence the day after Royal Assent.
1.52Proposed subsection 61A(1) provides:
The Finance Minister must not grant an indemnity on behalf of the Commonwealth to a manufacturer of a vaccine in relation to the use of the vaccine.
1.53Proposed subsection 61A(2) provides:
A corporate Commonwealth entity must not grant an indemnity to a manufacturer of a vaccine in relation to the use of the vaccine.
1.54The bill does not propose to retrospectively apply to existing indemnities.
Consideration by the Scrutiny of Bills Committee
1.55The Scrutiny of Bills Committee did not make any comment on the bill.
Compatibility with human rights
1.56The Parliamentary Joint Committee on Human Rights did not make any comment on the bill.