Apr 1, 2022

Australia’s Department of Health (DoH) released its Memorandum of Understanding (MoU) for the policy parameters of Prostheses List reforms.

With this guidance, the DoH revised its medical device reimbursement schedules for private insurers which may result in benefit reductions. Medical device manufacturers planning on current pricing may be significantly affected.

The measure aims to improve the Prostheses List to better align the benefit set for private providers with prices paid in the public hospital system. Under the rule, prostheses listings are to have their benefit levels set to respective public prices from July 1, 2022 to June 30, 2026.

How will DoH’s new prostheses medical device reimbursement schedule work?

To understand how the new benefits will be calculated, medical device manufacturers must first understand that one of the multipliers for the calculation is the Weighted Average Price (WAP)

The WAP will be calculated by the Independent Hospital Pricing Authority (IHPA) using sponsor-supplied data for the financial year ended June 30, 2021. The WAP will be calculated based upon existing Benefits Groups on the Prostheses List.

The WAP is calculated as follows:

Average public price for all devices included under the billing codes in the Benefit Group weighted by private volumes.

Following the reformed approach, the schedule of benefit reductions will be:

  1. Prostheses List benefits for devices with a small gap between the Prostheses List benefit and WAP of less than seven percent would not be reduced.
  2. Prostheses List benefits for devices with a gap of more than seven percent would not reduce below seven percent. The seven percent floor for all products will remain for the reforms period.

The Prostheses List benefits for devices with a benefit level of more than seven percent above the WAP will be reduced by:

  1. 40% of the difference between the Prostheses List benefit and the WAP on July 1, 2022.
  2. 20% of the difference between the Prostheses List benefit and the WAP on July 1, 2023.
  3. 20% of the difference between the Prostheses List benefit and the WAP on July 1, 2024.

The following table, included in the MoU, offers a comparison of how the benefits reductions will be calculated over the four-year period.

Weighted average public price = 100

 

Current

1 July 2022

1 July 2023

1 July 2024*

1 July 2025*

EG 1: PL

105

105

105

105

105

Differential

5%

5%

5%

5%

5%

EG 2: PL

115

109

107

107

107

Differential

15%

9%

7%

7%

7%

EG 3: PL

200

160

140

120

120

Differential

100%

60%

40%

20%

20%

 

The chart shows examples of the application of the seven percent floor and the 40:20:20 phasing and no reduction in year four.

Learn more about Australian prostheses medical device regulations and compliance from Emergo by UL:

  • Australian Therapeutic Goods Administration (TGA) registration consulting for medical device companies
  • Australia TGA Prostheses List application preparation and consulting
  • Whitepaper: Medical device registration in Australia and New Zealand

 

Author

  • Kathryn Burke's picture
    Kathryn Burke

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