Costs of TGA activities

In line with the Australian Government Charging Framework total costs are categorised into the following groups for cost allocation.

Direct costs: can be easily traced to a cost object with a high degree of accuracy. The allocation of direct costs to a cost object is relatively straightforward. The most common direct costs are staff salaries (including oncosts, such as training, superannuation and leave) and supplier costs (e.g. office supplies).

Indirect costs: are the costs that cannot be easily linked to a cost object or for which the costs of tracking this outweigh the benefits. Indirect costs are apportioned to a cost object using the internal costing methodology. Common indirect costs include overhead costs such as salaries of staff in corporate (e.g. finance, human resources, IT) areas, or accommodation costs (e.g. rent, maintenance, utilities).

In 2015, a software solution was installed to improve TGA's activity based costing (ABC) capability. The first staff work effort survey was conducted in 2015 to attribute the time of regulatory staff to regulatory activities. Due to a significant restructure of TGA on 1 July 2015, the work effort survey is being undertaken again.

Fees and charges

The characteristics of a government activity determine the type of cost recovery charge used. There are two types of cost recovery charges:

Cost recovery fees: fees charged when a good, service or regulation (in certain circumstances) is provided directly to a specific individual or organisation.

Fees are used to recover the cost of the pre-market services performed. Fees are designed to reflect as closely as possible the underlying cost of service. TGA has limited authority under the Act to waive or reduce fees.

Cost recovery levies: charges imposed when a good, service or regulation is provided to a group of individuals or organisations (e.g. an industry sector) rather than to a specific individual or organisation. A cost recovery levy is a tax and is imposed via a separate taxation Act. It differs from general taxation as it is 'earmarked' to fund activities provided to the group that pays the levy.

All therapeutic products registered, listed or included on the ARTG are subject to annual charges except for export only products and IVD medical devices. Annual charges are used to recover the costs of pharmacovigilance and other post market monitoring and compliance activities where:

• they cannot reasonably be assigned to individual sponsors;
• they maintain the integrity of the regulated industry to the benefit of all sponsors; and
• assigning costs to individual sponsors would deter sponsors from disclosing important public health information, such as reporting adverse events.

Different levels of pharmacovigilance are required for different classes of therapeutic goods depending on the level of risk the good could pose. Annual charges have been set to reflect the level of pharmacovigilance and post-market work required for the regulated good rather than the size of the individual business. For example, the annual charge for a class 1 medical device (other than a class 1 medical device that has a measuring function or is supplied in a sterile state) is $80 whereas for a high risk prescription medicine (biologic) the annual charge is $6,725.

2016-17 fees and charges

TGA fees and charges are reviewed annually to ensure full cost recovery. An increase of 2.25 per cent was applied for 2016–17 to meet estimated cost increases mainly in employee expenses as a result of a 2 per cent salary increase in the Department of Health Enterprise Agreement.

A well-established formula has been used in most years, based on the Australian Bureau of Statistics' Consumer Price Index (50 per cent) and Wage Price Index (50 per cent) (both for the year to September). This year the formula resulted in 2.25 per cent. The Office of Best Practice Regulation has advised that a Regulatory Impact Statement was not required for this change.

The amendment regulations were approved by the Executive Council at their meeting of 5 May 2016. As a result all TGA fees and charges will increase by 2.25 per cent from 1 July 2016, subject to rounding. In addition, a small number of other, minor, changes relating to fees for biologicals were also approved. These changes are:

• to clarify that the fees applying under the Regulations for requests by sponsors to vary an entry in the Register for a biological do not apply where the variation would result in the creation of a separate and distinct biological (a new application for marketing approval must be made in such a case);
• to allow sponsors of Class 3 and 4 biologicals to pay a lower fee ($1,050 from 1 July 2016 rather than that fee and an evaluation fee of $16,800) for a request to vary an entry in the Register if the request does not involve the evaluation of quality and manufacturing information (this higher fee has not been charged to date); and
• to set separate evaluation fees for 'safety-related' variations to an entry in the ARTG for Class 3 or 4 biologicals (these are changes resulting only in reducing the class of persons for whom the biological is suitable, or in adding a warning or precaution not involving a comparison with any other goods in relation to quality, safety or efficacy), and setting different fees depending on whether the request involves evaluation by the TGA.

A link to the fees and charges applicable from 1 July 2016 is provided in Appendix 2.