Therapeutic Goods and COVID-19 or other emergency exemptions: what does the future hold (for liability)?

By Alexandra Rose, Caitlin Sheehy and Grace Feehan
30 Apr 2020
Expedited development and widespread distribution of a product or products that have not been adequately tested or registered in any other market, or registered in a system that does not adopt equivalent standards to the Australian system, could cause problems.

This past year, Australia has faced a series of crises; some limited to certain States and Territories, but the current COVID-19 crisis is unprecedented in its international scale.

In times of crisis, emergency powers exist under State and Territory legislation to enable centralised control of the nation’s functioning, including with respect to the movement of its citizens, the operation of businesses or the allocation of government resources (see for example the State Emergency and Rescue Management Act 1989 (NSW)). The exercise of these powers raises many interesting questions, not only in relation to the immediate legal implications but also potential future liability. The current COVID-19 crisis will force a number of industries, including notably the healthcare industry, to consider these and many other unique and complex legal issues.

In this article, the first in a series considering crisis-related issues involving the healthcare industry, we explore the emergency powers in the Therapeutic Goods Act 1989 (Cth) (TG Act), and the potential product liability issues that may arise for manufacturers and suppliers of therapeutic goods (such as pharmaceuticals, medical devices and biologicals) that introduce goods into the Australian market.

In short – in Australia at least – providing products in response to an emergency need does not come with immunity from liability. That applies to consumer and therapeutic goods including much needed personal protective equipment, such as masks and hand sanitizer.

Process to register or list a therapeutic good

In "business as usual" circumstances, there are steps that a person who wishes to supply therapeutic goods must take before those goods can be supplied in Australia. The precise requirements for registration of a therapeutic good, including the evidence required by the Therapeutic Goods Administration (TGA) to demonstrate its safety and efficacy, are dependent on the nature of the good, for example, how it interacts with the human body, whether it is implanted and its materials.

At a general level, the steps that must be taken to register a therapeutic good include:

  1. Application to the TGA – to register or list the therapeutic good. This application must meet the requirements that relate to the specific type of good being registered, and must be accompanied by the appropriate fee. Whether a good is "registered" or "listed" will depend on the nature of the ingredients used in the product (and their quantities), manufacturing processes and the product's intended use, including any claims for therapeutic use.
  2. Evaluation by the TGA – following preliminary assessment, the TGA must evaluate the goods for registration. This evaluation will involve consideration of the quality, safety and efficacy of the goods, the purposes for which the goods are to be used and a variety of other integers, including the Product Information (ie. for a restricted medicine, including prescription medicines, the presentation of the goods, and where and to what standard the goods are manufactured).
  3. Decision by the TGA – as to whether or not to register the good. For a new entry on the Australian Register of Therapeutic Goods (ARTG), the applicant must also provide a patent certificate or notice to the TGA.
  4. Notification of decision – the Applicant will be notified in writing, and provided with a certificate of registration.

Once the good is registered or listed, the TGA can also impose conditions, including in relation to the manufacture, custody, use, supply, disposal or destruction of the goods, and the maintenance of records.

Criminal offences and pecuniary penalties – the ramifications of supplying an unregistered therapeutic good in Australia

The TG Act contains offences and penalty provisions in relation to the manufacture and supply of therapeutic goods without the requisite approvals or exemptions. In particular, section 19B(4A) provides that it is a criminal offence to import, export, manufacture or supply a therapeutic good for human use in Australia unless the goods are either registered with the TGA, exempt from compliance or are otherwise subject to a specific approval or authority. This provision is a strict liability offence, meaning that it can be breached by a person regardless of whether they are aware of the facts giving rise to the offence, and attracts a penalty of 100 penalty units ($21,000).

Section 19B(4) contains an offence that is identical to that of section 19B(4A), however it is not a strict liability offence, and therefore attracts a higher maximum penalty (this being imprisonment for 12 months or a fine of 1,000 penalty units) ($210,000), or both. Section 19B(1) also contains a similar offence, however this only applies in circumstances where the use of the goods in question has, will or is likely to cause harm. The maximum penalty for contravening this provision is 5 years' imprisonment or a fine of 4,000 penalty units ($840,000).

Lastly, section 19D(1) contains an equivalent civil penalty provision, with a maximum penalty of 5,000 ($1,050,000) penalty units for an individual, or 50,000 for a corporation ($10,500,000).

TG Act emergency exemptions

The COVID-19 pandemic has seen emergency powers used in various circumstances but perhaps most prominently in response to the need to secure additional "personal protective equipment" such as masks, goggles and gowns to be used by frontline health workers, additional antiviral medicines and ventilators for patients in respiratory distress. Unlike in the United States, Australia has not passed laws granting immunity to suppliers of those products in these extraordinary times.

Exemptions to compliance with certain legislative requirements for registration can be granted in limited circumstances. Under section 18A of the TG Act, the Minister may exempt specified therapeutic goods or therapeutic goods in a specified class from the registration and listing requirements outlined in Division 2 of Part 3-2 of the TG Act in the following "emergency" circumstances set out in section 18A:

(a) preparedness to deal with a potential threat to public health – so that the goods may be stockpiled as quickly as possible to create a preparedness to deal with a potential threat to public health that may be caused by a possible future emergency; or

(b) an actual threat to public health – the exemption should be made so that the goods can be made available urgently in Australia in order to deal with an actual threat to public health caused by an emergency that has occurred.

Similar emergency exemption provisions exist under Part 3-2A of the TG Act for biologicals and Part 4-6A for medical devices.

Division 3 of Part 3-2 of the TG Act outlines specific offence and penalty provisions for goods exempt under section 18A. Similar provisions are found in Division 3 of Part 3-2A with respect to biologicals and Division 3A of Part 4-11 with respect to exemptions under Part 4-6A for medical devices. The potential offences and penalties that may be imposed are similar to those outlined above.

Market entry by emergency exemption – what are the possible implications?

An exemption granted in these circumstances is accompanied by various conditions, including in relation to the quantity of goods that are exempt, how the goods may be supplied and to whom. Importantly, an exemption granted under the TG Act does not operate as a blanket exemption; manufacturers and suppliers are still required to comply with other legislative requirements with respect to product labelling, packaging and advertising restrictions and have record keeping obligations.

While the importance of having these emergency exemptions in place and available to the TGA in response to said threats to public health is evident, there may be a risk that those therapeutic goods introduced to the Australian market in this context may not otherwise meet the quality, safety and efficacy requirements that apply in "business as usual" conditions.

This is less of a concern in instances where the product in question has already been registered for supply in a reputable overseas market. For example, products registered under the European Directives concerning the manufacture of medicinal products or medical devices for human use. Products registered in accordance with those Directives are understood to have met requirements that are largely similar to the Australian registration requirements, given the congruence between the Australian system for therapeutic goods registration and the requirements under the European Directives.

However, issues may arise where a global health crisis results in the expedited development and widespread distribution of a product or products that have not been adequately tested or registered in any other market, or registered in a system that does not adopt equivalent standards to the Australian system.

Protection from future product liability claims?

Even in ordinary circumstances, the TGA's approval of a product is not a complete defence to a defective products claim. That does not change now.

However, in circumstances where a product is introduced under s18A, Part 3-2A or Part 4-6A of the TG Act, what protections are afforded to sponsors, manufacturers and suppliers of therapeutic goods to guard against future product liability claims? If the distribution of the product is sufficiently widespread, such litigation could have a huge impact on the relevant product sponsor, manufacturer and/or supplier. Neither section 18A, nor the provisions under Parts 3-2A or 4-6A, of the TG Act provide a defence or protection to sponsors, manufacturers or suppliers of therapeutic goods introduced via the emergency exemptions.

In defective goods actions brought under the Australian Consumer Law (ACL), section 142 of Schedule 2 of the Competition and Consumer Act 2010 (Cth) outlines defences available, including the state of scientific or technical knowledge defence. In accordance with section 142(c), it is a defence in a defective goods action if it is established that the state of scientific or technical knowledge at the time that the goods were supplied by their manufacturer was not such as to enable the safety defect to be discovered. This defence will likely not be available in circumstances of expedited product development if the defect allegedly causing injury was capable of being discovered but was not investigated because of time or market pressure.

In the current environment, manufacturers, sponsors and suppliers of therapeutic goods should be particularly mindful of these issues and the limited defences available under the ACL in defective goods actions.

Importantly, manufacturers and suppliers must still comply with their general law obligations. There is no immunity from liability from claims such as economic loss and personal injury claims caused by defective products, though an assessment of any such claim would consider the circumstances of supply including that it occurred during a global pandemic. In short, ordinary principles of common law negligence, product liability and statutory consumer law and product defect provisions continue to operate. Some but not all of the risk associated with these products can be addressed by individual companies in the supply chain via risk sharing arrangements. Accordingly, stakeholders should carefully review their contractual arrangements, insurance policies and product warnings to best limit their liability and understand residual exposure.

In the articles to follow, we will be focusing on crisis-related issues in the context of:

  • exemptions that have been granted for therapeutic goods in response to COVID-19;
  • advertising of therapeutic goods and specific warnings for stakeholders who seek to supply products to meet COVID-19 needs;
  • product recall (with respect both consumer goods and therapeutic goods); and
  • supply chain issues (more specifically in relation to pharmacies).

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.