$10m penalty for prescription-only advertisements by supplements retailer: TGA gets tough on suppliers

Alex Rose, Sheena McKie and Dean Gerakiteys

08 Aug 2019

The Peptides Clinic case is another in a growing line of enforcement proceedings over the advertising of therapeutic goods brought by the Secretary since the reforms to the Therapeutic Goods Act introduced a new streamlined complaints process and stronger compliance and enforcement powers.

The Therapeutic Goods Administration continues to actively pursue conduct contravening the recently-strengthened advertising regime for therapeutic goods, with the Federal Court handing down a $10 million penalty against an online peptides retailer. 

The judgment serves as a warning to businesses that non-compliance with advertising provisions in the Therapeutic Goods Act and Therapeutic Goods Advertising Code (TGAC), including the prohibition against advertising prescription medicines to consumers, can lead to substantial penalties.

The Peptide Clinics case

On 23 July 2019, the Federal Court delivered its judgment in proceedings brought by the Secretary of the Department of Health (Therapeutic Goods Administration (TGA)) against Peptide Clinics Australia ([2019] FCA 1107). The Court held that Peptide Clinics contravened the Therapeutic Goods Act by advertising prescription medication in various forms on its website, Facebook, Instagram and via telephone in 2018 and early 2019.

In addition to breaching the general prohibition against advertising prescription medicines to consumers, the advertisements did not comply with restrictions set out in the Act and TGAC, which prohibit advertisements for therapeutic goods that:

  • contain restricted or prohibited representations (for which no prior approval or permission was granted);
  • mislead, or are likely to mislead, directly or by implication or through emphasis, comparisons, contrasts or omissions;
  • claim, state or imply that the advertised therapeutic good is safe or cannot cause harm; or
  • expressly or impliedly encourage the use of therapeutic goods for inappropriate uses listed in the TGAC such as treating anxiety, body building, tanning or injury repair.

In commenting on the nature and extent of the contraventions, the Court found that:

  • the contraventions involved numerous serious breaches of Part 5-1 of the Therapeutic Goods Act, which regulates the advertising of therapeutic goods and was introduced to promote the protection of public health;
  • the contraventions formed part of a deliberate marketing strategy to promote the supply and use of the peptides sold by the business (which were prescription only medicines);
  • the contraventions took place over a 12 month period and did not cease until Peptide Clinics was in liquidation;
  • modified business practices introduced by Peptides Clinic to address concerns raised by the TGA continued to breach the Act were "egregious" because they further gave consumers a false impression that the information in the advertisements was provided by medical practitioners acting in the consumer's best interests;
  • the contraventions had a wide reach (advertisements referring to 50,000 satisfied patients); and
  • the conduct exposed a deliberate decision to pursue profits at the expense of public health and safety, and continued despite the TGA's repeated concerns.

The Court inferred that all of the company's income (over $2 million), was derived from the contraventions.  Finding that the maximum penalty for each contravention was $10,500,000, and that there were nine separate courses of contravening conduct at the "higher end of each range", the total potential penalty was $20 million. Having regard to the totality principle, the Court imposed a $10 million penalty against Peptide Clinics, which it described as being in the "mid-range" proposed by the Secretary.

What does the case mean for suppliers of therapeutic goods?

The case is another in a growing line of enforcement proceedings brought by the Secretary since the reforms to the Therapeutic Goods Act introduced a new streamlined TGA complaints handling process for the advertising of therapeutic goods, stronger compliance and enforcement powers for the regulator and graduated penalties to allow the Secretary to better respond to the full range of breaches.  We expect similar enforcement actions by the regulator to continue into the future.

While the language of the judgment is forceful and is in response to what appears to be a unique set of facts, the penalty ordered by the Court was set with general deterrence in mind.  Adopting the words of the Secretary, the Court observed that the penalty would send a "clear message that companies will not be able to profit from their wrongdoing".

The case is also interesting, because the TGAC would not ordinarily be applicable to materials about prescription medicines directed to consumers.  This is because (1) it is an offence to advertise prescription medicines to consumers and (2) advertisements directed to healthcare professionals fall outside the TGAC's scope.  Although no comment was made in the judgment, the Court accepted that breaches of the TGAC could result in penalties in respect of products properly classified as prescription only medicines. This highlights the need for suppliers to ensure that they understand how their products are regulated in Australia, before selling or promoting any goods to consumers (including those which may be intended or advertised for a therapeutic use).

For sponsors whose products are listed on the Australian Register of Therapeutic Goods (and are not therefore the subject of a blanket prohibition on advertising to consumers) the decision is a reminder of the importance of ensuring that their product advertising complies with the Therapeutic Goods Advertising Code. For most listed therapeutic goods, representations regarding serious forms of diseases, conditions, ailments and defects will not be warranted and restricted or prohibited representations will not be approved by the Secretary. A high level of care should therefore be taken in developing advertising that refers to the symptoms that may be associated with those diseases, conditions, ailments and defects, even where the product is indicated for management of those symptoms. The Secretary has demonstrated a willingness to take action in respect of such contraventions knowing that most sponsors will be hard-pressed to justify the representations.

The case is also indicative of an increased focus in recent years to the pursuit of regulatory enforcement action in respect of misleading conduct (here, under therapeutic goods legislation, but also seen in the consumer protection arena).  It further highlights the need for companies to engage early and proactively with regulators, should contravening conduct be identified.  Co-operation may assist in limiting or avoiding litigation and any penalties imposed.  The TGA's own regulatory compliance framework makes clear that proceedings are reserved for deliberate and continued non-compliance. Most advertising complaints will be redressed through the issue of warning letters, the issue of advertising directions or the issue of infringement notices which, if managed appropriately from the outset, will avoid the need for legal proceedings.

Thanks to Ethan Tindall for his help with this article.

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