Consultation Response: Cost Recovery Discussion Paper
The following information summarises the feedback received on the APVMA's Cost Recovery Discussion Paper published in December 2011.
The discussion paper invited submissions from industry and other parties to inform development of interim cost recovery arrangements for the APVMA from 1 July 2012 to 30 June 2015.
The interim cost arrangements will be in place while a "First Principles Review" of the cost recovery arrangements for the APVMA is undertaken by the Department of Agriculture Fisheries and Forestry. This review will examine all existing fees and charges.
The APVMA is working with industry and stakeholders to identify interim cost-recovery arrangements that will operate while the First Principles Review is completed and are fair, equitable and transparent, and which provide certainty and sustainability for both industry and the APVMA.
A Cost Recovery Impact Statement (CRIS) will be published by the APVMA once approved by the Minister for Agriculture, Fisheries and Forestry. The publication of the CRIS is dependent on the passage of the exposure draft of the Agricultural and Veterinary Chemicals Amendment Bill 2011 through the Australian Parliament.
The APVMA has a formal stakeholder feedback process. A total of 14 submissions were received from industry organisations and individuals on the discussion paper. The APVMA is happy to provide specific feedback to organisations and individuals on issues raised in their submissions or to respond to any further questions about the proposed interim cost recovery arrangements.
Feedback on the discussion paper highlighted some legitimate concerns of stakeholders.
In response, the APVMA has held further discussions with some stakeholders on specific issues and has made some adjustments to proposals contained in the discussion paper:
- The APVMA has decided not to proceed with some proposals.
- Other proposals are being revised following additional industry consultation.
Feedback from stakeholders in this report has been grouped into major themes, with examples from submissions included, followed by the APVMA's response.
It should be noted that not all topics covered in submissions are represented here, nor do the examples of feedback necessarily represent all feedback on a particular topic. Examples included are provided to give a general sense of feedback only.
Full submissions to the discussion paper are available on the APVMA website.
Indexation of fees
Several stakeholders expressed concern relating to the proposal to introduce indexation on application fees, particularly before the First Principles Review is completed.
For example, Accord Australasia (the national industry association representing the manufacturers and suppliers of formulated products such as hygiene and cosmetics products, household pesticides and disinfectants) disagreed with the indexing of fees in the context of the rising fees of other agencies and schemes its members are regulated by, which it perceived came with reduced quantity and quality of services.
In view of concerns raised in submissions, indexation of fees will not be introduced as part of the interim cost recovery arrangements.
Indexation of fees will now be considered as part of the First Principles Review.
Increase the annual fee to include post-market activities
Several stakeholders expressed concern relating to the proposal to increase the annual fee to recover costs of various post-market activities, such as the Adverse Experience Performance Program (AERP), chemical review and other post-market activities.
For example, the Veterinary Manufacturers and Distributors Association (VMDA) argued these activities are an ongoing part of the APVMA's administration of the National Registration Scheme and were thus more appropriate funded via the levy. It also believed information activities should be funded by government.
Similarly, Accord Australasia argued in its submission that many of these post-market activities (such as Freedom of Information and the Information Publication Scheme) fall under public interest and should be funded by government.
The APVMA notes that the public funding of activities has been considered in previous cost recovery reviews and on each occasion the government has not accepted the argument that these activities should be funded by the tax payer. The issue will be reexamined as part of the First Principles Review.
In relation to the proposed increase of the annual fee in view of stakeholder concerns the annual fee will not be increased as part of the interim Cost Recovery arrangements.
The proposal to increase the annual fee, will now be included in the First Principles Review.
Restore application fees to 40% cost recovery
Submissions broadly supported restoring the cost recovery on application fees to 40 per cent, with the remaining fees coming from the levy.
Some submissions (for example, Competitive Advantage Pty Ltd) noted that a higher level of cost recovery via an application fee may be a significant disincentive for new innovative products to be introduced into the market, particularly for small businesses and low volume chemical products.
Some submissions also highlighted the need for the APVMA to show efficiency and greater productivity. Some believed the AVPMA had achieved only limited improvements in the efficiency of the regulatory system for agricultural chemicals (such as CropLife Australia, the peak industry organisation representing the agricultural chemical and biotechnology sector).
The APVMA notes the Signatories Working Group (SWG) set the current notional recovery rate of 40 per cent for application fees. The current arrangements have operated for more than 15 years with no evidence the 40 per cent recovery rate for application fees has stifled innovation.
The APVMA also notes its substantial improvement in efficiency. One example is the legislative amendments of July 2010 which delivered significant improvements in outputs (including a 20 per cent increase in applications finalised). It is also noteworthy the Australian Government has completed a number of reviews into the APVMA's efficiency and performance over recent years. These include the 2006 ANAO Performance Audit into the Regulation of Pesticides and Veterinary Medicines, and more recently, the Better Regulation Reforms.
In terms of the restoration of application fees to 40 per cent cost recovery, the APVMA will proceed with the proposal to restore cost recovery on application fees to 40 per cent, but will spread the increase over an extra year (from two to three years) to reduce the impact of the increase on applicants.
Increase cost recovery for Category 17 (generic actives) to 100%
Application Category 17 is for approval of an active constituent that requires less than a full assessment and does not require a toxicological assessment. Category 17 applicants are not innovators but rather seek to copy existing approved active constituents once the period of data protection has ended. The discussion paper argued the recovery of 100 per cent of the cost of processing the application would thus not stifle innovation and should be recovered at 100 per cent of the cost of processing the application.
A submission from the Veterinary Manufacturers and Distributors Association (VMDA) expressed concern at this proposal, and disagreed that no element of innovation existed in Category 17. The VMDA argued there are many instances of existing active constituents that have been put to new and valuable uses in the animal health sector and so there may well be an aspect of innovation for certain new products based on old actives. The VMDA proposed a negotiated fee based upon the complexity of the application.
In view of the concern raised, the proposal to increase cost recovery for Category 17 will now be considered as part of the First Principles Review.
Recover the full costs of compliance with Good Manufacturing Practice
Arrangements currently in place only partly recover the cost of the Good Manufacturing Practice including the Manufacturing Licensing Scheme (MLS). The proposal to recover the full costs for these activities only affects veterinary medicines.
The discussion paper proposed ways to establish more equitable cost recovery arrangements for compliance with GMP for veterinary medicines, whereby scheme participants pay for the cost of the activity.
Some industry stakeholders raised concerns about the proposed arrangements, particularly the VMDA. Its submission argued the proposal was excessive, unfair and unrelated to the costs of GMP, and that an annual fee on all products to recover the cost of operating GMP would result in a limited number of registrants paying an excessive amount towards these costs.
The APVMA recognises that the current proposal could be improved.
The APVMA has held subsequent discussions with key stakeholders to develop an alternative proposal based upon a mix of options.
This discussion paper will be available from the APVMA website in late April 2012 for further consultation.
Introduce a fee rebate
The discussion paper proposed new arrangements to automatically refund to applicants 10 per cent of the cost of their original application fee if the application is not finalised within the specified statutory timeframe.
Feedback on the proposal to introduce a fee rebate was generally not supported.
For example, VMDA noted in its submission that its members did not want a rebate. Rather, members placed a priority of applications being treated scientifically, expeditiously and uniformly.
Accord Australasia supported the proposal in principle if accompanied by administrative efficiencies of the APVMA's assessment processes. It believes these would impose discipline on assessors to complete the work on time through a more efficient application of risk assessment and resource allocation. However, it did not believe the 10 per cent refund was a sufficient incentive to bring about this cultural change and would not compensate a company for loss of sales from delaying registration (which it argued would be significantly more than 10 per cent of a registration fee).
In view of the concerns raised by stakeholders, the APVMA will not proceed with the proposal to introduce a fee rebate.
Introduce a $350 pre-application guidance fee
This proposal flowed directly from the Australian Government's Better Regulation reform agenda.
Stakeholders either supported the proposal to introduce a $350 guidance fee or were neutral on it.
For example, Torill Holm, International Registration Specialist with Bell Laboratories (Wisconsin, USA) welcomed pre-application guidance for a product or active constituent, especially when an application is to be assessed on the modular level, such as a Category 10. With APVMA advice directed at choosing the correct application form(s) and advising of the data requirements, Ms Holm noted this could save time and effort on the part of the registrant and the evaluator. This fee for application guidance would also be helpful when an application doesn't fit neatly into any of the descriptions in the AgMORAG. Ms Holm also supported the refund of the guidance fee if the application is lodged.
The APVMA will proceed with the proposal subject to the passage of the exposure draft of the Agricultural and Veterinary Chemicals Amendment Bill 2011, but may make some minor adjustments to the charging model to accommodate different application categories.
Introduce a new fee for the Continuation Scheme
Several submissions raised concerns about introducing a $700 fee to recover 40 per cent of costs for the Continuation Scheme (re-registration scheme).
For example, in its submission the Veterinary Manufacturers and Distributors Association (VMDA) said it saw no need for any cost recovery arrangements in relation to this for veterinary chemicals given the existence of the Adverse Experience Performance Program (AERP) and Existing Chemical Review Program (ECRP) and the auditing of veterinary chemical manufacturers. It noted that if agricultural chemicals required such a scheme the full cost recovery should be applied to that sector only.
The Animal Health Alliance also expressed concern that the proposed fee may drive further cross subsidisation. The Animal Health Alliance supports a "users pays" system, especially when a new process is likely to deliver attrition in product registration and approval.
Accord Australasia argued the Continuation Scheme is in the public interest and should be funded by government.
The decision to implement the Continuation Scheme for Agvet chemicals is a government decision beyond the scope of this cost recovery review.
The costs associated with the Continuation Scheme can be directly attributed to applicants and does not meet the public good test and thus would not qualify for tax payer funding.
Subject to the passage of the exposure draft of the Agricultural and Veterinary Chemicals Amendment Bill 2011 the proposed Continuation Scheme fee will proceed.
Minor use permits
The discussion paper proposed to retain the 2005 approach of a $350 fee for Minor Use permits (Categories 19-21) where the balance of costs are recovered through the levy on wholesale sales.
This proposal was widely supported in submissions, including from the Australian Mushroom Growers Association (AMGA), Pulse Australia and the Australian Custard Apple Growers Association (ACAGA).
One submission (the Western Australian Farmers Federation) noted the potential for the fee to restrict applications and ultimately lead to possible off-label use of chemicals.
The National Farmers Federation noted the impact of fees for Minor Use applications on small agricultural industries must be considered as if they did not follow the process correctly, they could lose their application fee with further delays in obtaining access to chemicals they require.
Dr. Luc Streit from Sumitomo Chemical Australia also noted the need to ensure that minor uses and small market segments are attractive targets for market development, and thus costs need to be kept low.
The AMGA and ACAGA suggested that refining the current fee associated with Minor Use permit renewals should be considered where no technical assessment is required. They argued that in these cases where processing the permit renewal is essentially administrative, either a nil or substantially reduced fee should apply.
The APVMA will maintain the current approach to cost recovery for minor use permits. The funding arrangements will however be examined as part of the First Principles Review.
Application category 25
Some submissions (such as from the AMGA and Pulse Australia) called for the approach for Minor Use permits to be extended to Application Category 25 (which is used for applications that do not meet the requirements of Categories 1–24).
The AMGA argued if the APVMA were to apply an equivalent fee for user industry-initiated Category 25 applications, the opportunity would exist for the mushroom industry to pursue more permanent regulatory solutions to its pest management needs (registrations via label extensions). However, the current modular fee structures associated with a Category 25 application creates a significant hurdle, making such an approach potentially prohibitively expensive (modular fees coupled with the cost of data generation).
Similarly, in its submission Pulse Australia argued that applying the approach used for Minor Use permits to Category 25 will encourage movement of applications for minor uses to outcomes that are registration focused.
The APVMA will examine the use of Category 25 where the applicant is not seeking a permit but rather a regulatory decision that particular uses may be accepted for registration (on-label).
Following an assessment of the proposed new use or variation the APVMA could then advise the applicant and applicable registrants that the use may be registered, at which point registrants of the type of product contained in the Category 25 submission could seek an administrative label change via Category 12 at a cost of $560.
The APVMA will examine the implementation of this system noting that, if implemented, it would only apply to third parties and bona fide minor uses. The proposal will be considered as part of the First Principles Review.