Cost recovery impact statement: Blood, blood components and biologicals (human cell and tissue therapies), 1 July 2014 - 30 June 2015

Version 1.0, June 2014

26 June 2014

Version history

Version Description of change Author Effective date
V1.0 Original publication Office of Corporate Services/ Office of Scientific Evaluation 1 July 2014

© Commonwealth of Australia 2014
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1. Introduction

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1.1. Purpose of the Cost Recovery Impact Statement (CRIS)

The CRIS provides key information on how the TGA implements cost recovery of activities associated with the inclusion of biologicals (human cell and tissue therapies) onto the Australian Register of Therapeutic Goods (ARTG) and the regulation of blood, blood components and biologicals through inspection and licensing of manufacturers. It covers the ongoing monitoring and licensing of blood, and biologicals. It also reports on financial and non-financial performance of these activities and contains up-to-date financial forecasts. The TGA will maintain the CRIS until the activity or its cost recovery has been discontinued.

This CRIS will apply from July 2014 to June 2015.

1.2. Description of the activity

The TGA forms a part of the Department of Health, responsible for evaluating the safety, quality and efficacy of medicines, medical devices and biologicals available for supply in, or export from Australia. The TGA recovers the full costs of its regulatory activities through fees and charges imposed on sponsors and manufacturers of therapeutic products.

The Australian community has an expectation that therapeutic products in the marketplace are safe and of high quality, to a level equal to that of countries with comparable standards.

Australia has a risk based system where the level of regulatory control of a therapeutic product is based on the relative safety of the product and the seriousness of the condition for which it is intended to be used. Products are reviewed at a level consistent with the risk associated with their use in the community.

Most products for which therapeutic claims are made must be assessed and entered on the ARTG before they can be marketed in Australia. The ARTG keeps a record of products that are approved for marketing, the ingredients contained in each product, the therapeutic claims made for medicines and biologicals, and the intended use of medical devices. Not all human cell and tissue therapies available in Australia are regulated by the TGA.

The TGA also regulates blood components. These products are not generally included on the ARTG; they are regulated through inspection of manufacturers based on an assessment of their ability to comply with relevant manufacturing standards.

1.3. Australian Government cost recovery framework

Cost recovery involves the government entities charging individuals or non-government organisations some or all of the efficient costs of a specific government activity. This may include goods, services or regulation, or a combination of these. The Australian Government Cost Recovery Guidelines (CRG) set out the overarching framework under which government entities design, implement and review cost recovered activities.

1.4. Policy and statutory authority to cost recover

1.4.1. Government policy approval to cost recover the activity

In the 1997-98 Budget1, the Government decided to cost recover 100 percent of all TGA's activities by 1998-99. This policy authority encompasses recovering expenses incurred by the TGA in regulating blood, and biologicals.

1.4.2. Statutory authority to impose cost recovery charges

The Therapeutic Goods Act 1989 (the Act) provides a legal authority for the TGA to charge for its regulatory activities within the scope of the Act on a cost recovery basis. Applicable fees and charges are prescribed in regulations made under the Act and the Therapeutic Goods (Charges) Act 1989 (the Charges Act). These regulations are included in the Therapeutic Goods (Charges) Regulations 1990 and the Therapeutic Goods Regulations 1990.

Footnote

  1. 1997-98 Budget Paper 2, Revenue Measures, Other Measures p 203.

2. Cost recovery model

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2.1. Outputs and business processes of the activity

Blood, blood components and plasma derivatives are regulated under the Act. Plasma derivatives are prescription medicines subject to full regulation, including compliance with set standards, licensing of manufacture and inclusion in the ARTG after review of manufacturing, pre-clinical and clinical data. Under the Act 'blood' means whole blood extracted from human donors and 'blood components' means therapeutic components that have been manufactured from blood (including red cells, white cells, progenitor cells, platelets and plasma). 'Blood components' does not include products derived through fractionation of plasma.

Some blood and blood components are exempt from regulation by TGA including blood and blood components that are:

  • collected by a medical practitioner in the course of medical treatment and for the purposes of diagnosis or testing for a medical condition
  • manufactured by a medical practitioner for therapeutic application to a particular patient under the practitioner's care
  • manufactured by a blood collection centre for a medical practitioner for therapeutic application to a particular patient under the practitioner's care

Manufacturers of blood components are required to demonstrate compliance with manufacturing principles equivalent to the Australian Code of Good Manufacturing for human blood and blood components, human tissues and human cellular therapy products (2013) and to submit a technical master file which demonstrates compliance to relevant standards.

Biologicals include human tissue and cell therapy products. Tissue therapy products involves the use of tissues as therapeutic goods, while cell therapy products involves the use of isolated living cells either as therapeutic goods or as replacements for cells that are defective or deficient in particular disorders.

Some examples of tissue therapies currently being used are:

  • skin replacement after severe burns
  • transplantation of heart, kidney, liver, lung or pancreas
  • bone, tendons and ligaments to repair injuries
  • heart valves to replace defective heart valves
  • corneas to restore eyesight

Some examples of cell therapies currently being used, or currently under development, are:

  • chondrocytes used for cartilage regeneration
  • isolated pancreatic islet cells for the treatment of diabetes
  • mesenchymal progenitor cells for the treatment of musculoskeletal defects and in a range of other clinical applications such as cardiovascular repair

2.1.1 Inclusion on the ARTG

The regulatory activities for biologicals involve the following registration and approval activities:

2.1.2 Compliance monitoring and enforcement

  • Post-market controls include ongoing manufacturing inspections, managing adverse event reporting, investigations and recalls.
  • The TGA also provides information and support to the regulated industry and consumers and is responsible for the maintenance of the regulatory framework.

2.1.3 Risk management

TGA works with consumers, health professionals, industry, and its international counterparts in order to effectively regulate therapeutic products, many of which are increasingly complex as a result of rapid scientific developments.

The TGA applies a risk management approach to regulating therapeutic goods by:

  • identifying, assessing, and evaluating the risks posed by therapeutic goods before they can be approved for use in Australia (pre-market assessment or evaluation);
  • identifying, assessing, and evaluating the risks posed by manufacturing processes before a manufacturer is issued with a licence to manufacture therapeutic goods (licensing of manufacturers); and
  • identifying, assessing, and evaluating the risks that may arise following approval of the product and licensing of the manufacturer (post market surveillance)

2.2 Reform of business processes

The TGA has started work on a series of reforms to improve understanding of the regulatory processes by its stakeholders; significantly enhance post market and surveillance capability and enhance public trust in the safety and quality of therapeutic goods. For blood, and biologicals, these reforms aim to:

  • Provide more information on the regulatory framework so that stakeholders understand regulatory processes and requirements
  • Improve the usability, accuracy and consistency of guidelines
  • Improve the management of adverse event reporting in support of consumer safety
  • Promote the distribution of therapeutic goods safety information so that consumers are alert to warning signals
  • Align recall procedures including communication of alerts to the public and health professionals
  • Develop technology to support business processes

2.3. Activity level assumptions

2.3.1. Inclusion on the ARTG

The TGA estimates demand for its services based on prior years' volumes which are adjusted for forecast changes in the industry operations and changes in the regulatory framework and/or service delivery models.

2.3.2. Compliance monitoring and enforcement

Estimates for the number of products on the register incorporate expected cancellations and new goods. New goods estimates include the outcomes of work on assessing products for registering on the ARTG.

Tables 1-3 contain activity level assumptions based on the number of premises for manufacture of blood, blood components and human tissues; human cell and tissue therapy products; and good manufacturing practice inspections for manufacturers of human cell and tissue therapy products that are subject to annual licence charges and/or inspection fees.

Table 1: Annual licence charges for manufacturers of blood, blood components and biologicals
Number of premises 2013-14 2014-15
Blood Primary Site 8 5
Blood Secondary Site 78 80
Single Step and Single Human Tissue 14 14

Audits of manufacturers of primary blood sites are entitled to 3 free inspections within a 3 year period under the terms of their annual licence charge.

Table 2: Annual charges for biologicals
Annual charges 2013-14 2014-15
Class 2 biological products 5 2

A sponsor can seek exemption from the liability to pay an annual charge for an entry on the ARTG if the therapeutic good qualifies for low value turnover (LVT) that is a product with a turnover of not more than 15 times the applicable annual charge.

Table 3: Good manufacturing practice inspection hours for manufacturers of human cell and tissue therapy products
Inspection hours 2013-14 2014-15
Domestic subsequent manufacturing audit 1,382 1,400

2.4. Design of cost recovery charges

TGA recovers the cost of its regulatory activities through fees and charges for services provided to product manufacturers and sponsors.

2.4.1. Fees

Fees are used to recover the cost of the evaluation required before a product can be listed.

Fees are also charged to cover the cost of manufacturing compliance inspections except where the costs have been included in annual licence charges, e.g. for primary blood site audits.

2.4.2. Charges

Annual charges are payable by manufacturers that produce human tissues (biologicals), and for products registered on the ARTG.

Annual charges are used to recover the cost of activities, usually post market, where:

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

2.4.3. Reform program

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.

2.4.4. Indexation

For the 2014-15 financial year, fees and charges were indexed by 2.4% which is a 50:50 composite of the Australian Bureau of Statistics Consumer Price Index and the Wage Price Index.

2.5. Fees and charges

Evaluation fees - per submission for blood, blood components and human tissues
Evaluation fees - per submission for blood, blood components and human tissues Pages 2013-14
$
2014-15
$
Page counts - Blood Plasma Master File & Blood Technical Master File 1 - 10 1,180 1,210
11 - 50 10,200 10,400
51 - 100 22,700 23,200
101 - 1000 30,500 31,200
1001 - 3000 47,600 48,700
3001 - 4000 63,300 64,800
> 4000 77,100 79,000
Good manufacturing practice (GMP) inspections
Good manufacturing practice (GMP) inspections 2013-14
$
2014-15
$
GMP inspection of primary site of Manufacturers of Blood and Blood Components except Haematopoietic Progenitor Cells Hourly rate per inspector $810 Hourly rate per inspector $830
GMP inspection of site other than primary site of Manufacturers of Blood and Blood Components except Haematopoietic Progenitor Cells Hourly rate per inspector $600 Hourly rate per inspector $615
GMP inspection of Manufacturers of Haematopoietic Progenitor Cells Hourly rate per inspector $600 Hourly rate per inspector $615
GMP Audit of Manufacturers of Human Tissues Hourly rate per inspector $600 Hourly rate per inspector $615
Application and notification fees for human cell and tissue therapy products
Application and notification fees for human cell and tissue therapy products 2013-14
$
2014-15
$
Application for manufacturing licence 980 1,005
Application for variation 980 1,005
Application for inclusion of a Class 1,2,3,4 biological 980 1,005
Notification Fee for a biological (CTN) 310 315
Evaluation fees for human cell and tissue therapy products
Evaluation fees for human cell and tissue therapy products 2013-14
$
2014-15
$
Evaluation of dossier for a Class 2 biological 65,200 66,800
Evaluation of dossier for a Class 3 biological 130,400 133,500
Evaluation of dossier for a Class 4 biological 211,900 217,000
Class 2 biological 5,980 6,125
Variation Class 3 and 4 15,700 16,100
Major Variation Class 3 and 4 31,000 31,700
Evaluation of an ingredient/component 21,100 21,600
Evaluation Clinical Trial Exemption 23,500 24,100
Inspection fees for human cell and tissue therapy products
Inspection fees for human cell and tissue therapy products 2013-14
$
2014-15
$
Domestic initial manufacturing inspection 19,400 19,900
Domestic subsequent manufacturing inspection 14,700 15,100
Overseas initial manufacturing inspection 19,400 19,900
Overseas subsequent manufacturing inspection 14,700 15,100
Inspection Fee - in addition to initial or subsequent inspection fee outside Australia 600 615
Annual charges
Annual charges 2013-14
$
2014-15
$
Primary site of Manufacturers of Blood and Blood Components except Haematopoietic Progenitor Cells 144,700 148,200
Additional fixed site (non-mobile) of Manufacturers of Blood and Blood Components except Haematopoietic Progenitor Cells 7,120 7,290
Manufacturing premises of Haematopoietic Progenitor Cells 6,230 6,380
Single step and single human tissue of manufacturers of Human Tissues 6,230 6,380
Two or more steps of manufacturers of Human Tissues 12,100 12,400
Annual charge for Class 1 biological 600 615
charge for Class 2,3,4 biological 5,980 6,125

3. Stakeholder engagement

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The TGA external communication and education framework: Priorities and projects 2013-2015 describes the TGA's approach to providing:

  • better information that is easily understood by consumers
  • therapeutic goods information that can be received and shared by health professionals
  • information that will provide greater certainty on regulatory arrangements for the therapeutic goods industry

It also details specific communication and education projects that will target consumers, health professionals or industry.

TGA consults with industry associations separately on regulatory matters and cost impacts relating to specific sectors. Industry associations are also consulted in the process of regulatory development and reform, and feedback is taken into account in developing regulatory implementation statements, and in developing cost recovery arrangements. Meetings are held with key industry representative bodies each year to discuss financial forecasts and as a part of the consultation process on cost recovery. The TGA also reports to stakeholders against a set of agreed Key Performance Indicators (KPIs).

4. Financial estimates

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4.1. Revenue

Total revenues are a factor of the expected activity volume and the fee or charge2.

Table 4: Revenues from regulation of blood, blood components and human tissues
2013-14
Estimated outcome
$m
2014-15
Forecast
$m
Annual charges 1.8 1.4
Evaluation fees 0.3 0.3
Other3 0.1 0.1
Total 2.2 1.8
Table 5: Revenues from regulation of human cell and tissue therapy products
2013-14
Estimated outcome
$m
2014-15
Forecast
$m
Evaluation fees 0.9 0.8
Other3 - 0.1
Total 0.9 0.9

4.2. Costs of the activity

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 employees. Direct costs are incurred in the regulatory offices. 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 staff (FTE) 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 chosen from a range that includes FTE staff numbers, budget size and floor space, based on how closely these approximate use of the support service.

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 blood, tissues and human cell and tissue therapies sector, these are the Office of Scientific Evaluation, Office of Manufacturing Quality, and the Office of Product Review.

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 and information technology costs 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.

Table 6: Costs included in the registration of blood, blood components and human tissues
2013-14
Estimated outcome
$m
2014-15
Forecast
$m
Direct costs 0.4 0.4
Corporate costs 0.1 0.1
Support costs 0.3 0.3
Total 0.8 0.8
Table 7: Costs included in the registration of human cell and tissue therapy products
2013-14
Estimated outcome
$m
2014-15
Forecast
$m
Direct costs 0.9 0.9
Corporate costs 0.2 0.2
Support costs 0.3 0.3
Total 1.4 1.4
Table 8: Costs included in monitoring and compliance of blood, blood components and human tissues
2013-14
Estimated outcome
$m
2014-15
Forecast
$m
Direct costs 0.8 0.8
Corporate costs 0.2 0.2
Support costs 0.8 0.9
Total 1.8 1.9
Table 9: Estimated revenue and expenses
2013-14
Estimated outcome
$m
2014-15
Forecast
$m
Expenses 4.0 4.1
Revenue 3.1 2.7
Balance (0.9) (1.4)

Footnotes

  1. The costs of the reform program are being recovered over a number of years from the whole therapeutic goods industry.
  2. Other revenue incorporates fee for service charges for review of advertising materials and appropriation in lieu of interest on cash holdings.

5. Financial performance

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Cost recovery revenue will be reported in the Department of Health's Annual Report in accordance with the Finance Minister's Orders.

The TGA executive is provided with monthly financial reports showing progress budget and an analysis of financial performance and position undertaken by the TGA Chief Financial Officer.

Table 10: Financial results for the activity
2011-12
$m
2012-13
$m
2013-14
Estimated outcome
$m
Expenses 5.6 5.6 4.0
Revenue 2.2 2.5 3.1
Balance (3.4) (3.1) (0.9)

6. Non-financial performance

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The TGA reports to stakeholders at six monthly intervals on our progress in delivery against a set of agreed Key Performance Indicators (KPIs). The KPIs have been endorsed by the Australian Therapeutic Goods Advisory Council following consultation with the TGA-Industry Consultative Committee. For more information on the TGA's KPIs please visit: TGA key performance indicators: Our indicators and reporting measures.

The KPIs are high-level indicators for the TGA's overall performance against our broad strategic intent. Within that matrix of KPIs is a requirement for measuring whether 'business operations are consistent and meet agreed service and timeliness standards'. Measures of specific business activities will continue to be documented in our Half-yearly performance reports.

These reports are provided to members of the TGA-Industry Consultative Committee to enable us to report on specific parameters of relevance to industry stakeholders and to enable stakeholders to provide performance feedback. They provide detailed quantitative information about our performance on the timeliness of business activities as well as information for industry about the volumes of work performed by the TGA.

7. Key forward events

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During 2014-15 a review of fees and charges will be undertaken following development of a new activity based costing prepared in 2013-14. Consultation with industry representatives will be carried out to gather input on the framework of fees and charges and on proposed changes identified by the TGA, leading to revised fees and charges where appropriate.

Opportunities include alignment of over-the-counter (OTC) medicine fees to the new risk based categorisation of applications, and review of Good Manufacturing Practice (GMP) fees and charges. Annual charges, which primarily fund post-market regulatory activities such as the monitoring of product safety and of compliance with regulatory obligations, are subject to possible change with the review of the low value turnover (LVT) exemption scheme and the proposed introduction of clinical quality registers for implantable cardiac and breast devices.

The LVT scheme, introduced in 1990, allows sponsors to seek an exemption from payment of an annual charge where the annual turnover of the product is less than or equal to 15 times the annual charge for that product. The TGA has commenced a policy and operational review of the LVT scheme, the first stage of which was the release of the public consultation paper with submissions received in May 2014.

In 2014-15, the TGA will continue to identify opportunities for reducing regulatory burden on industry, consistent with the Government's deregulation and red tape reduction agenda, while continuing to meet the objectives of safeguarding and enhancing the health of the Australian community. Changes to the regulatory framework arising from this work may have a flow on impact on fees and charges.

8. Certification

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I certify that this CRIS complies with the Australian Government Cost Recovery Guidelines.

Jane Halton

Secretary

Department of Health

Date: 26 June 2014