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Regulation impact statement: International harmonisation of ingredient names

Version 1, November 2015

22 November 2015

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Appendix A: Costings and assumptions

Option 1 - Baseline assumptions

Number of medicine products in Australia (as at January 2015):

  • There are approximately 33,000 medicine entries on the ARTG (15,000 Prescription; 3,000 OTC; 12,000 Listed; and 3,000 Export Only).
  • Low value turnover rates have been used to estimate how many ARTG entries are not associated with a product currently marketed in Australia. Approximately half of ARTG entries are reported to TGA as having a low value turn-over38, with the following breakdown:
    • Prescription - 62%
    • OTC - 36%
    • Listed - 35%
  • Some ARTG entries cover more than one medicine unit (e.g. different pack sizes). A multiplier39 is applied to ARTG entries for each of the following types of medicines:
    • Prescription - 2.3 medicines per ARTG entry
    • OTC - 2.5 medicines per ARTG entry
    • Listed -1.0 medicines per ARTG entry
  • Based on the above figures, there are 25,585 total medicine products marketed in Australia (12,889 Prescription; 4,895 OTC; and 7,800 Listed)
  • For many medicines, there is more than one label associated with a product. For example, a medicine in a blister pack is assumed to be associated with 2 labels (the backing of the blister container and the outside carton). Based on an analysis of ARTG entries, a multiplier is applied to the number of medicine products to estimate the number of associated labels:
    • Prescription - 1.89 labels per medicine product
    • OTC - 1.85 labels per medicine product
    • Listed -1.05 labels per medicine product
    • An average multiplier of 1.60 is applied for some calculations.
  • Over half (55%) of medicines are either a single product under a unique brand name or the first product in a range comprising the same brand name and active ingredient (usually differing in strength - e.g. 20mg vs. 40mg). The remaining 45% of products are the second and subsequent strengths in the brand with the same active ingredient.

Business-as-usual (BAU) variations to existing medicines:

  • There is high variability between how often sponsors change an aspect of their product (e.g. update label, PI etc.). Some sponsors vary their ARTG entry regularly (even more than once a year), whereas other sponsors will not vary their products for several years. The majority of ARTG variation applications are for prescription products. For most listed medicines, instead of varying an ARTG entry, sponsors will cancel the product and replace it with a new ARTG entry.
  • Based on a 2014 survey of companies, TGA assumes that existing products will change their labels as part of BAU, on average, every 3 years (i.e. half of all medicines will make an amendment to their label within 3 years).
  • Total costs for minor changes to labels (e.g. changing an ingredient) as part of BAU vary depending on the type of medicine. However, as outlined in the 2014 consultation for medicine labelling reforms40, the average cost for minor label changes is estimated as $2,180 per medicine.
  • These minor label change costs include pre-production costs (such as label redesign and approval, artwork and proofing) and production costs (new printing plates for conventional printing processes, changes to the digital printing process). The costs also cover any potential changes to the PI/CMI.
  • A minor label change is defined as a small change to the phrasing of text on a label that does not necessitate a change to, or rearrangement of, other label graphics.

Costs associated with a lack of harmonisation

  • Based on similarities between products registered in Australia versus the US and European Union, 75% of affected products are marketed overseas as well as in Australia by the same company.
  • There is a time-cost imposed on sponsors associated with preparing advertising/marketing materials using unharmonised ingredient names. Due to seasonal marketing, most advertising materials are assumed to be updated yearly. Many international companies are able to use marketing material from overseas. The cost of changing this ingredient name on international marketing material is estimated at 2 hours per product line41 per year, at an hourly wage of $65.45 per hour42.
  • There is a time-cost for sponsors resulting from a lack of harmonisation or inconsistencies and ambiguity within the TGA Business Services Ingredient Tables. These costs include time spent researching and selecting appropriate ingredient names, complexity during internal safety or technical complaints reporting, and/or responding to TGA requests for further information if an ingredient within a product application does not match the Australian Approved Name. This cost is estimated at 3 hours per year per affected sponsor, at an hourly wage rate of $65.45 per hour.
  • The indirect costs of imposing a barrier to international trade for Australian businesses through a lack of harmonisation could not be calculated.

Option 2 - Mandatory adoption - the full proposal

Option 2 proposes to change the names of 478 ingredients.

This option would affect 18,758 ARTG medicine entries (approximately 54% prescription, 12% OTC, 35% Listed) and 1,029 sponsors. The same baseline assumptions for BAU have been used as outlined under Option 1.

Regulatory cost assumptions

Number of medicine products affected and cost of changes
  • Based on the baseline assumptions, 16,431 medicine products currently marketed in Australia will be affected, with the following breakdown:
    • Prescription: 8,698 products
    • OTC: 3,526 products
    • Listed: 4,208 products
  • Labels will be affected if the change is to an active ingredient (25% of the changes).
  • Based on the BAU costs outlined in Option 1, the following label pre-production and production costs are assumed (total $14.89M):
    • Prescription: $8.95M
    • OTC: $3.54M
    • Listed: $2.41M
  • Most of the ingredient name changes involve the change of one letter, addition/removal of a hydration state, removal of hyphen or a change in word order. Products affected by dual labelling will require additional information on the label (as an ingredient needs to be identified with both old and new names), however this still fits the definition of a minor change. Medicines associated with 194 ARTG entries will require dual labelling at an estimated cost of $1.96M.
  • Where an ingredient is within a Proprietary Ingredient, there would be no effect on label or other documentation and no regulatory burden has been estimated. Approximately 34% of the proposed changes are to ingredients within Proprietary Ingredients.
  • The above costs of updating labels include costs associated with updating PI/CMI documentation. Some PIs will only need to update an excipient name without updating a label - estimated at 15% of prescription only product lines. Production costs for a changed PI document are estimated at $147. The PI/CMI updating cost is estimated at $0.10M.
  • The one-off labour burden for businesses that need to make the required changes on internal documents, labels and PI/CMI documents would be approximately 4 hours per product line, at a labour rate of $65.45 per hour. This includes 2 hours to assess what changes need to be made to products and 2 hours to make any changes (update names, QA, complete and return template TGA letter as part of the application to vary the ARTG).
  • The labour involved in the second and subsequent products in a product line would equate to an extra 2 hours per additional product. The total labour cost for the changes is estimated as $3.33M.
  • The total one-off cost for ingredient changes under Option 2 (prior to discounts due to BAU and transition timeframes) is estimated as $18.33M.
Benefits of harmonisation
  • In an attempt to provide an estimate of the benefits of harmonisation, TGA assumes that each individual ingredient name change will result in an equal amount of benefit to each sponsor.
  • According to the costs identified in Option 1, harmonisation of active ingredient names would provide an ongoing saving to sponsors. This arises from the reduction of costs associated with developing and varying advertising and marketing materials and supporting documentation between Australia and other markets and is estimated at $353,210 per annum over 10 years.
  • Harmonisation and resolution of Ingredients Tables inconsistencies will also save industry time spent researching and selecting appropriate ingredient names, complexity during internal safety or technical complaints reporting, and/or responding to TGA requests for further information if an ingredient within a product application does not match the Australian Approved Name. This saving is estimated at $202,044 per annum over 10 years.
  • The total benefit from Option 2 per annum over 10 years is estimated at $0.56M.
Transition options

Transition Option (i): proposes a three year transition period for changing ingredient names. Substances identified as being of 'high clinical significance' would be required to be dual-labelled (with old and new names) for an additional three years. Those medicines with dual-labelling could voluntarily move to use of the new ingredient name as the sole name after this period.

  • Approximately 50 per cent of affected products would have changed within the three year period as part of BAU (as per a normal skewed right distribution curve).
  • The remaining 50 per cent of products would need to bring forward any planned changes to labels and other documentation to avoid having to pay twice for changes (once for the regulatory changes, once for the business need). A 6 per cent discount rate (per annum) has been applied to products that would need to change labels earlier than would be required as part of ordinary business:
    • Those that would normally change in a four year cycle, but are being forced to change 1 year earlier (25 per cent). A 6% rate has been applied to the full cost of changes for these products as part of BAU.
    • Those that would normally change in a five year cycle, but are being forced to change 2 years earlier (15 per cent). A 12% rate has been applied to the full cost of changes for these products as part of BAU.
    • Those that would never normally change (10 per cent). The full cost of the ingredient name changes would apply for products in this category.
  • The total cost for Option 2(i), including the benefits outlined above, is $0.91M per annum over 10 years.

Transition Option (ii): proposes a four year transition period for changing ingredient names. Substances identified as being of 'high clinical significance' would be required to be dual-labelled (with old and new names) for an additional three years. Those medicines with dual-labelling could voluntarily move to use of the new ingredient name as the sole name after this period.

  • Approximately 75 per cent of affected products would have changed within the four year period as part of BAU (as per a normal skewed right distribution curve).
  • The remaining 25 per cent of products would need to bring forward any planned changes to labels and other documentation to avoid having to pay twice for changes (once for the regulatory changes, once for the business need). A 6 per cent discount rate (per annum) has been applied to products that would need to change labels earlier than would be required as part of ordinary business:
    • Those that would normally change in a five year cycle, but are being forced to change 1 year earlier (15 per cent). A 6% rate has been applied to the full cost of changes for these products as part of BAU.
    • Those that would never normally change (10 per cent). The full cost of the ingredient name changes would apply for products in this category.
  • The total cost for Option 2(ii), including the benefits outlined above, is $0.23M per annum over 10 years.

Option 3 - Mandatory adoption - a reduced proposal (PREFERED OPTION)

Under this option, 336 ingredient names will change. This option would affect 17,886 ARTG entries (55% prescription, 11% OTC, 34% Listed) and 972 sponsors.

The same baseline and transition assumptions have been used for Option 3 as for the previous options.>/

Regulatory cost assumptions

Number of medicine products affected and cost of changes
  • Based on the baseline assumptions, Option 3 will affect 15,636 medicine products currently marketed in Australia, with the following breakdown:
    • Prescription: 8,496 products
    • OTC: 3,228 products
    • Listed: 3,917 products
  • Labels will be affected if the change is to an active ingredient (22% of the changes).
  • Based on the BAU costs outlined in Option 1, the following label pre-production and production costs are assumed (total $12.82M):
    • Prescription: $7.88M
    • OTC: $2.93M
    • Listed: $2.02M
  • Where an ingredient is within a Proprietary Ingredient, there would be no effect on label or other documentation and no regulatory burden has been estimated. Approximately 18% of the proposed changes are to ingredients within Proprietary Ingredients.
  • The PI/CMI updating cost is estimated at $0.10M.
  • The one-off labour burden for businesses that need to make the required changes on internal documents, labels and PI/CMI documents would be approximately 4 hours per product line, at a labour rate of $65.45 per hour. This includes 2 hours to assess what changes need to be made to products and 2 hours to make any changes (update names, QA, complete and return template TGA letter as part of the application to vary the ARTG).
  • The labour involved in the second and subsequent products in a product line would equate to an extra 2 hours per additional product. The total labour cost for the changes is estimated as $3.17M.
  • The total one-off cost for ingredient changes under Option 3 (prior to discounts due to BAU and transition timeframes) is estimated as $16.09M.
Benefits of harmonisation
  • In an attempt to provide an estimate of the benefits of harmonisation, TGA assumes that each individual ingredient name change will result in an equal amount of benefit to each sponsor.
  • According to the costs identified in Option 1, harmonisation of active ingredient names would provide an ongoing saving to sponsors. This arises from the reduction of costs associated with developing and varying advertising and marketing materials and supporting documentation between Australia and other markets and is estimated at $303,160 per annum over 10 years.
  • Harmonisation and resolution of Ingredients Database inconsistencies will also save industry time spent researching and selecting appropriate ingredient names, complexity during internal safety or technical complaints reporting, and/or responding to TGA requests for further information if an ingredient within a product application does not match the Australian Approved Name. This saving is estimated at $190,852 per annum over 10 years.
  • The total benefit from Option 3 per annum over 10 years is estimated at $0.49M.
Transition options

Transition Option (i): proposes a three year transition period for changing ingredient names. Substances identified as being of 'high clinical significance' would be required to be dual-labelled (with old and new names) for an additional three years. Those medicines with dual-labelling could voluntarily move to use of the new ingredient name as the sole name after this period.

  • Approximately 50 per cent of affected products would have changed within the three year period as part of BAU (as per a normal skewed right distribution curve).
  • The remaining 50 per cent of products would need to bring forward any planned changes to labels and other documentation to avoid having to pay twice for changes (once for the regulatory changes, once for the business need). A 6 per cent discount rate (per annum) has been applied to products that would need to change labels earlier than would be required as part of ordinary business:
    • Those that would normally change in a four year cycle, but are being forced to change 1 year earlier (25 per cent). A 6% rate has been applied to the full cost of changes for these products as part of BAU.
    • Those that would normally change in a five year cycle, but are being forced to change 2 years earlier (15 per cent). A 12% rate has been applied to the full cost of changes for these products as part of BAU.
    • Those that would never normally change (10 per cent). The full cost of the ingredient name changes would apply for products in this category.
  • The total cost for Option 3(i), including the benefits outlined above, is $0.73M per annum over 10 years.

Transition Option (ii): proposes a four year transition period for changing ingredient names. Substances identified as being of 'high clinical significance' would be required to be dual-labelled (with old and new names) for an additional three years. Those medicines with dual-labelling could voluntarily move to use of the new ingredient name as the sole name after this period.

  • Approximately 75 per cent of affected products would have changed within the four year period as part of BAU (as per a normal skewed right distribution curve).
  • The remaining 25 per cent of products would need to bring forward any planned changes to labels and other documentation to avoid having to pay twice for changes (once for the regulatory changes, once for the business need). A 6 per cent discount rate (per annum) has been applied to products that would need to change labels earlier than would be required as part of ordinary business:
    • Those that would normally change in a five year cycle, but are being forced to change 1 year earlier (15 per cent). A 6% rate has been applied to the full cost of changes for these products as part of BAU.
    • Those that would never normally change (10 per cent). The full cost of the ingredient name changes would apply for products in this category.
  • The total cost for Option 3(ii), including the benefits outlined above, is $0.13M per annum over 10 years.

Option 4 - Mandatory adoption - Direct harmonisation of INN/reference and substances of high clinical significance

Under this option, 160 ingredient names will change. This option would affect 6,478 ARTG entries (47% prescription, 13% OTC, 29% Listed) and 350 sponsors.

The same baseline and transition assumptions have been used for Option 4 as for the previous options.

Regulatory cost assumptions

Number of medicine products affected and cost of changes
  • Based on the baseline assumptions, Option 4 will affect 5,142 medicine products currently marketed in Australia, with the following breakdown:
    • Prescription: 2,599 products
    • OTC: 1,330 products
    • Listed: 1,213 products
  • Labels will be affected if the change is to an active ingredient (50% of the changes).
  • Based on the BAU costs outlined in Option 1, the following label pre-production and production costs are assumed (total $9.44M):
    • Prescription: $5.37M
    • OTC: $2.68M
    • Listed: $1.39M
  • The PI/CMI updating cost is estimated at $0.01M.
  • The one-off labour burden for businesses that need to make the required changes on internal documents, labels and PI/CMI documents would be approximately 4 hours per product line, at a labour rate of $65.45 per hour. This includes 2 hours to assess what changes need to be made to products and 2 hours to make any changes (update names, QA, complete and return template TGA letter as part of the application to vary the ARTG).
  • The labour involved in the second and subsequent products in a product line would equate to an extra 2 hours per additional product. The total labour cost for the changes is estimated as $1.04M.
  • The total one-off cost for ingredient changes under Option 4 (prior to discounts due to BAU and transition timeframes) is estimated as $10.50M.
Benefits of harmonisation
  • In an attempt to provide an estimate of the benefits of harmonisation, TGA assumes that each individual ingredient name change will result in an equal amount of benefit to each sponsor.
  • According to the costs identified in Option 1, harmonisation of active ingredient names would provide an ongoing saving to sponsors. This arises from the reduction of costs associated with developing and varying advertising and marketing materials and supporting documentation between Australia and other markets and is estimated at $221,899 per annum over 10 years.
  • Harmonisation and resolution of Ingredients Database inconsistencies will also save industry time spent researching and selecting appropriate ingredient names, complexity during internal safety or technical complaints reporting, and/or responding to TGA requests for further information if an ingredient within a product application does not match the Australian Approved Name. This saving is estimated at $68,723 per annum over 10 years.
  • The total benefit from Option 4 per annum over 10 years is estimated at $0.29M.
Transition options

Transition Option (i): proposes a three year transition period for changing ingredient names. Substances identified as being of 'high clinical significance' would be required to be dual-labelled (with old and new names) for an additional three years. Those medicines with dual-labelling could voluntarily move to use of the new ingredient name as the sole name after this period.

  • Approximately 50 per cent of affected products would have changed within the three year period as part of BAU (as per a normal skewed right distribution curve).
  • The remaining 50 per cent of products would need to bring forward any planned changes to labels and other documentation to avoid having to pay twice for changes (once for the regulatory changes, once for the business need). A 6 per cent discount rate (per annum) has been applied to products that would need to change labels earlier than would be required as part of ordinary business:
    • Those that would normally change in a four year cycle, but are being forced to change 1 year earlier (25 per cent). A 6% rate has been applied to the full cost of changes for these products as part of BAU.
    • Those that would normally change in a five year cycle, but are being forced to change 2 years earlier (15 per cent). A 12% rate has been applied to the full cost of changes for these products as part of BAU.
    • Those that would never normally change (10 per cent). The full cost of the ingredient name changes would apply for products in this category.
  • The total cost for Option 4(i), including the benefits outlined above, is $0.51M per annum over 10 years.

Transition Option (ii): proposes a four year transition period for changing ingredient names. Substances identified as being of 'high clinical significance' would be required to be dual-labelled (with old and new names) for an additional three years. Those medicines with dual-labelling could voluntarily move to use of the new ingredient name as the sole name after this period.

  • Approximately 75 per cent of affected products would have changed within the four year period as part of BAU (as per a normal skewed right distribution curve).
  • The remaining 25 per cent of products would need to bring forward any planned changes to labels and other documentation to avoid having to pay twice for changes (once for the regulatory changes, once for the business need). A 6 per cent discount rate (per annum) has been applied to products that would need to change labels earlier than would be required as part of ordinary business:
    • Those that would normally change in a five year cycle, but are being forced to change 1 year earlier (15 per cent). A 6 per cent rate has been applied to the full cost of changes for these products as part of BAU.
    • Those that would never normally change (10 per cent). The full cost of the ingredient name changes would apply for products in this category.
  • The total cost for Option 4(ii), including the benefits outlined above, is $0.12M per annum over 10 years.

Footnotes

  1. LVT Consultation
  2. Sourced from the 2104 survey of companies
  3. Consultation: Medicine labelling
  4. Only active ingredients are included in advertising material.
  5. OBPR data, includes on-cost multiplier 1.75

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