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Cost recovery impact statement - Good manufacturing practice, 1 July 2013 - 30 June 2014

28 June 2013

Book pagination

3. Cost recovery model

3.1 Key activity components

The GMP related regulatory activities undertaken, are as follows:

Licencing

TGA usually undertakes on-site inspections of Australian manufacturers prior to the issue of a licence to ensure that the manufacturer can comply with the Manufacturing Principles set under the Act and has suitable premises to undertake the proposed manufacturing steps. The extent of the inspection depends on the size and complexity of the manufacturing processes.

The TGA communicates with overseas agencies to ensure that GMP requirements applied in Australia are world best practice.

Monitoring compliance

The TGA undertakes periodic planned and unplanned inspections of licensed manufacturers to assess the level of compliance with the GMP standards, both domestically and overseas. The level and frequency of inspections for a particular manufacturer is influenced by its size and complexity but also its previous compliance history. In particular, manufacturers with a history of lower levels of compliance are subject to a higher frequency of on-site inspections, compared with more compliant manufacturers, to ensure that those lower levels of compliance do not adversely affect the quality and safety of the products that they manufacture.

Investigation and enforcement

The TGA undertakes enforcement activities to promote compliance with the applicable GMP standards by manufacturers. Where a manufacturer breaches GMP, sanctions available range from (but are not limited to) revocation or suspension of the manufacturing licence to restriction of the type, kind or quantity of goods that can be manufactured for the Australian market at that site. Where required, sanctions are decided on a case-by-case basis after consideration of the circumstances involved and the best interests of the Australian consumer. Where the manufacturer is based outside Australia, limits are placed on the ability of sponsors to make the products available on the Australian market.

Information and education

The TGA promotes compliance with the GMP standards by producing guidelines and other informational materials primarily targeted at manufacturers whose products are supplied in Australia. These resources are made available through the TGA website. In addition, the TGA conducts seminars and information briefings to raise awareness of regulatory requirements, particularly when changes are proposed.

TGA contributes strongly to international programs to improve and harmonise manufacturing practices in developing regions through international meetings, seminars and training events.

Policy development and services to government

The TGA provides services to Government in relation to the regulation of manufacturers, including specific technical and policy advice that is considered to be integral to the regulation of manufacturers.

Broader policy advice is generally provided by DoHA as part of its tax payer funded activities and is not included in the fees and charges.

Reform of business processes

TGA has embarked on a series of reforms designed to improve its communication and engagement with the community. The reform program is detailed in the report TGA reforms: a blueprint for TGA's future which can be accessed from the TGA website.

Reform activities in the GMP sector aim to

  • Provide more information on the regulatory framework so that stakeholders understand the regulatory processes and requirements
  • Improve the usability, accuracy and consistency of supporting guidelines
  • Consolidate trans-Tasman inspection processes
  • Improve stakeholder understanding and confidence in the regulatory processes
  • Make reliable and relevant information easily accessible to stakeholders
  • Develop technology to support business processes
  • Reform the charging structures for the GMP compliance program
  • Develop closer relationships with international regulators
  • Pursue administrative efficiencies in relationships with industry

3.2 Costs to be recovered

Fees and charges are established to cover the cost of all direct, corporate and support costs for the sector. The costing methodology allows costs to be allocated to activities based on their resource consumption at each stage of the process through to the final product or services.

Total costs are categorised into the following groups for cost allocation and transparency purposes.

  1. direct costs: are costs directly related to the regulatory activity, mainly labour. Labour costs are based on the current Enterprise Agreement applicable to all Department of Health and Ageing employees. Direct supplier costs include the use of contract staff, travel (where not otherwise recovered) and consumables.
  2. corporate costs: include rent and information technology that regulatory offices can control consumption of but not the unit price. The allocation of corporate costs uses a range of cost drivers including floor space, full time equivalent (FTE) staff numbers, and budget size, chosen according to the nature of the costs to be allocated.
  3. support costs: include costs for providing support services such as human resource management, finance, legal and information technology support. Regulatory offices have limited or no control over these costs. In allocating support costs, a cost driver is again chosen from a range that includes FTE staff numbers, budget size and floor space, based on how closely it approximates use of the support services.

Cost allocation is undertaken in a three stage process.

In the first stage, the regulatory offices with significant contribution to the sector, as the source of direct costs, are identified. For the GMP sector, this is the Office of Manufacturing Quality.

In the second stage, corporate costs are allocated to all offices, both regulatory and support, based on the driver that best reflects the use of the corporate service. For example, rent and other property operating costs are allocated using floor space; information technology and communications are allocated by FTE.

In the third stage, support costs are assigned to regulatory offices based on a driver that is related to the services provided by the support team. For example, the property team costs are allocated by the floor space driver, the human resources team are allocated by FTE.

Table 1: Costs included in the GMP sector
2012-13
Estimated outcome
$m
2013-14
Forecast
$m
Direct Costs 5.9 6.1
Corporate Costs 1.7 1.7
Support Costs 2.4 2.4
Total 10.1 10.2

3.3 Outline of charging structure

The cost of regulating therapeutics manufacturers is recovered through inspection fees and annual licence charges.

Licence and inspection fees

Fees are used to recover the cost of the premarket services performed. For licensed domestic manufacturers, the fee structure is based on the licence and inspection fees. Prior to being granted an Australian licence, a domestic manufacturer is subject to an on-site inspection to ensure it could comply with the GMP code and standards and has suitable premises to conduct the manufacturing steps it proposes. The cost of the site inspection is based on the number of on-site hours, which reflects the size and complexity of the manufacturer's facilities. The inspection fee reflects the full cost of undertaking the inspection, including travel and preparation time.

Overseas manufacturers are not able to hold an Australian licence, but they must demonstrate that they operate to an acceptable manufacturing standard before being granted access to the Australian market. Evidence relating to manufacturing standards is accepted from other Government authorities or may be achieved through an on-site inspection.

Overseas manufacturers are not subject to an annual licence charge. Inspections to approve overseas manufacturers attract an hourly fee for time on site, together with ancillary costs. Approval of an overseas manufacturer through the compliance verification process attracts one or more fixed fees per application.

Annual licence charges

All domestic manufacturers of medicines are required to hold a licence with the level of annual charge reflecting the risk and complexity of the products manufactured. The TG Regulations prescribe a higher and lower annual charge for operations of higher and lower complexity. An allowance for the cost of periodically inspecting the manufacturer’s facilities is included in the annual charge, based on an estimated typical inspection required to routinely ensure compliance with the GMP code and standards. Compliant manufacturers are inspected less frequently and thus an incentive for compliance is built into the charges.

Reform program

All fees and charges include a component for the cost of the reform program, which was introduced through a 2% increase in fees and charges from 2012-13. The implementation of the reform program is scheduled to continue through to mid 2015-16. As changes in regulatory activities are implemented, fees and charges will be adjusted to ensure that they continue to accurately reflect the costs of underlying activities.

3.4 Fees and charges

The fees and charges for 2012-13 and 2013-14 are in the tables below. For the 2013-14 financial year, fees and charges were indexed by 2.9% which is a 50:50 composite of the Australian Bureau of Statistics Consumer Price Index and the Wage Price Index (for the September Quarter 2011 to September Quarter 2012).

Table 2: GMP Fees
Good Manufacturing Practice Fees 2012-13 2013-14
Licence application fee (excluding Biologicals) $890 $920
Australian Manufacturers - GMP Inspection Fee for all types of therapeutic goods Hourly rate per Inspector
$580
Hourly rate per Inspector
$600
Overseas Manufacturers – GMP Inspection Fee for all types of therapeutic goods Hourly rate per Inspector
$1,190
Hourly rate per Inspector
$1,220
Overseas manufacturers - Assessment of GMP evidence (per manufacturer, per site and per sponsor) $340 $350
Overseas manufacturers - Obtaining evidence from overseas regulatory agency (per manufacturer, per site and per sponsor) $600 $620
Overseas manufacturers - Reinstatement of expired GMP clearance approval (per manufacturer, per site and per sponsor) $1,020 $1,050
Overseas manufacturers - Compliance verification (in-lieu of an overseas GMP inspection) $1,820 $1,870
Certificate of GMP Compliance $140 $150
Quality Systems Certificate $140 $150
Table 3: GMP Charges
Good Manufacturing Practice Annual Licence Charges 2012-13 2013-14

Low level GMP licence

  • Single step / single medicine / single type of therapeutic device
  • In-vitro diagnostic products
  • Ingredients or components
  • Herbal / Homeopathic medicinal products
$5,600 $5,760

High level GMP licence

  • Other types of therapeutic goods, including containers in which therapeutic goods are to be packed
$10,900 $11,200

An allowance for inspection hours is incorporated in the annual licence charge. For manufacturers with low level licence charges, a total of 16 inspection hours over 3 financial years are included. For manufacturers with high level licence charges, a total of 48 inspection hours over 3 financial years are included. Standard GMP inspection fees are payable once the available hours have been exceeded.

3.5 Revenues

Total revenues are a factor of the expected activity volume and the fee or charge. In addition, reasonable travel expenses are recovered at cost.

Estimated revenues are as follows:

Good manufacturing practice estimated revenue and volume for 2012-13 and 2013-14
Item Estimated Volume2
2012-13
Estimated Revenue
2012-13
Forecast Volume
2013-14
Forecast Revenue
2013-14
Licence application fee (excluding Biologicals) 37.2 $33,108 35 $32,200
Australian Manufacturers – GMP Inspection Fee for all types of therapeutic goods 1,064.2 $617,236 1,065 $639,000
Overseas Manufacturers – GMP Inspection Fee for all types of therapeutic goods 3,891 $4,630,290 4,228.5 $5,158,770
Overseas manufacturers - Assessment of GMP evidence (per manufacturer, per site and per sponsor) 3,212.4 $1,092,216 3,200 $1,120,000
Overseas manufacturers - Obtaining evidence from overseas regulatory agency (per manufacturer, per site and per sponsor) 661.2 $396,720 645 $399,900
Overseas manufacturers - Reinstatement of expired GMP clearance approval (per manufacturer, per site and per sponsor) - $0 - $0
Overseas manufacturers - Compliance verification (in-lieu of an overseas GMP inspection) 310.8 $565,656 325 $607,750
Certificate of GMP Compliance 129.6 $18,144 0 $0
Quality Systems Certificate 26 $3,640 0 0

Low level GMP licence

  • Single step / single medicine / single type of therapeutic device
  • In-vitro diagnostic products
  • Ingredients or components
  • Herbal / Homeopathic medicinal products
103 $576,800 101.5 $584,640

High level GMP licence

  • Other types of therapeutic goods, including containers in which therapeutic goods are to be packed
167 $1,820,300 171.5 $1,920,800
Total cost recovery revenue $9,754,110 $10,463,060

Other Revenues

  • interest
  • recovery of travel costs
n/a $1,321,000 $1,112,000
Total Revenue $11,075,110 $11575,060

Footnotes

  1. Volumes are based on work completed and thus revenue earned.

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