Australia: The TGA Gets Set to Get Tough: Likely New Enforcement Options

On 17 August 2005 the Therapeutic Goods Amendment Bill 2005 ("the Bill") was introduced into the Federal Parliament.

In May 2003, the Therapeutic Goods Act 1989 ("the Act") was amended to improve regulatory compliance in the wake of the Pan Pharmaceuticals recall. Despite these amendments, there are still perceived inadequacies in the ability of the Therapeutic Goods Administration ("TGA") to address continuing non-compliance by some manufacturers.

The Bill proposes to amplify significantly the enforcement options available to the TGA under the Act by introducing a tiered regime of criminal offences and civil penalty provisions. To enable the more flexible enforcement of these provisions, the TGA will be able to issue infringement notices and accept enforceable undertakings.

Other proposed amendments include extending liability to executive officers and overseas conduct, increasing powers under warrants and expanding the TGA's power to release information.

This article explores and discusses the proposed amendments.

The Bill proposes to introduce a tiered regime of criminal offences to ensure that serious offences resulting in or likely to cause harm or injury will attract appropriate sanctions. This new regime supplements the existing criminal offences and comprises:

• a new fault-based offence with an aggravating element (for conduct that results in or will result in harm) attracting a maximum penalty of $440,000 for corporations or individuals and/or five years imprisonment for individuals;
• a new strict liability offence with an aggravating element (for conduct likely to result in harm) attracting a maximum penalty of $220,000 for corporations or individuals but no term of imprisonment; or
• the existing fault-based offence with no aggravating element, which will be retained either as it is or with an increased penalty, where appropriate.

The introduction of strict liability offences is designed to act as a strong deterrent to conduct that could threaten the public's health and safety. Strict liability will apply in relation to the most important regulatory requirements, such as those relating to:

• compliance with applicable standards for therapeutic goods and exemptions granted in relation to the need to comply with such standards;
• the inclusion of goods in the Australian Register of Therapeutic Goods ("the Register");
• compliance with conditions applying to inclusion of goods in the Register and conditions attaching to exemptions granted in relation to the need to include goods in the Register;
• the provision of information that is not false or misleading in a material particular in connection with applications to include goods in the Register; and
• compliance with manufacturing standards and conditions attaching to manufacturing licences.

When a strict liability provision is breached and that breach is likely to result in harm or injury to any person, criminal sanctions will apply regardless of any mental element. This is similar in application to the strict liability offences created under the consumer protection provisions in Part V of the Trade Practices Act 1974.

The existing fault-based provisions cover intentional or reckless non-compliance with the Act. The new fault-based provisions cover circumstances where the conduct is intentional or reckless and is likely to cause harm, ie where there is a so-called "aggravating element". These new fault-based provisions have higher maximum penalties, which reflects that these offences are regarded as posing a serious and direct threat to public health and safety.

The Bill provides for alternative verdicts for the various tiered offences. If a jury acquits a person of an offence specifying an aggravating element, this proposal would allow them to convict the person of a lesser offence.

The Government has said that the alternative verdict approach is necessary because the tiered regime creates different offences which comprise the same necessary elements. There are similar alternative verdict provisions in other Commonwealth legislation.

The Bill proposes to create an exception to the aggravated fault-based offence of importation, exportation, supply or manufacture of therapeutic goods and medical devices that are not included in the Register and which result in, or will result in, harm. The exception applies if the harm does not or will not result from:

• the quality, safety or performance of the therapeutic good or medical device;
• a matter relating to the labelling or packaging of the therapeutic good or medical device; or
• the improper use of the therapeutic good or medical device.

If a defendant has been committed to be summarily tried for this offence, and the defendant chooses to rely on this exception, the defendant must provide the Director of Public Prosecutions with a notice of the particulars of the exception. This notice must include the name and address of any person that the defendant intends to call to give evidence in support of the exception. The defendant must provide this notice 21 days before the trial or hearing begins.

In addition to the criminal sanctions, the Bill will also introduce civil penalty sanctions for certain existing offences. These provisions will impose a maximum penalty of $330,000 or $550,000 for an individual, and $3,300,000 or $5,500,000 for a corporation. They are imposed through civil proceedings, not criminal prosecution.

This civil penalty scheme is intended to supplement the TGA's enforcement options so that it can more quickly and efficiently address and deter non-compliance. Civil penalty systems form part of other Commonwealth legislation and are used as an enforcement method by the Australian Competition and Consumer Commission ("ACCC") and the Australian Securities Investment Commission ("ASIC").

The Government has said that these civil penalties are primarily aimed at ensuring compliance by corporate entities. The penalties that will attach to these sections are consequently high so to provide a sufficient deterrent to the corporate sector.

There is a safeguard in the Bill to prevent double jeopardy or multiple punishments for the same conduct. If a person has been convicted of a criminal offence, the proceedings for a civil penalty contravention will be dismissed.

A new warrant mechanism is included in the Bill to facilitate investigations into civil penalty contraventions. A magistrate can issue a civil penalty warrant if they are satisfied that there are reasonable grounds for suspecting that there is, or that there may be within the next 72 hours, in or on the premises, evidential material in respect of the contravention of a civil penalty provision.

The Bill also increases the powers of authorised persons under search warrants. These powers will enable additional evidence to be secured where the person believes on reasonable grounds that it is evidence of a civil penalty breach (or suspected breach) and that the evidence would be lost, destroyed or concealed unless it is secured.

The Bill proposes to introduce infringement notices as an alternative to criminal prosecutions or the commencement of civil penalty proceedings. This proposal is an acknowledgment that a lengthy prosecution process or civil proceedings may not be the best way of dealing with some breaches.

Infringement notices may be issued in relation to strict liability offences and civil penalty provisions where easily assessable elements of the breach are present. The person issued with the notice will be given the option of paying the penalty detailed in the notice or have the matter dealt with by a court. If the fine is paid on time, no further liability will arise.

Another more rapid enforcement method introduced by the Bill is the enforceable undertaking. It is proposed that the Secretary of the Department of Health and Ageing (the department responsible for the TGA) will be able to accept enforceable undertakings as a means of securing compliance with the Act.

Those in breach of the Act will be able to provide an undertaking to correct, address or remedy non-compliance as an alternative to having sanctions imposed. A party in breach will not be able to be compelled to give such an undertaking and the Secretary will not have to accept one. However, once undertakings are accepted, they will become enforceable by the Federal Court of Australia.

It is proposed that details of undertakings given will be published on the internet. The ACCC and ASIC also use undertakings as a method of enforcement, and make these enforceable undertakings available to the public.

If the body corporate commits an offence or breaches a civil penalty provision, executive officers of the body corporate may also incur liability under the Bill.

An executive officer will commit an offence or breach a civil penalty provision if they knew that the offence or breach would be committed, they were in a position to influence the conduct of the body corporate regarding that offence or breach and they failed to take all reasonable steps to prevent its commission. The meaning of executive officer is not limited to a director; it is a person who is concerned in, or takes part in, the management of the business.

The Bill prescribes factors to which the court must have regard in determining whether an executive officer has failed to take reasonable steps to prevent the commission of an offence or breach. These are:

• what action the officer took to ensure employees, agents and contractors had a reasonable knowledge and understanding of requirements to comply with the Act; and
• what action the officer took once they became aware that the body corporate was contravening the Act.

The maximum penalty the executive officer could face under these new provisions is the maximum penalty a court could impose on an individual for the relevant offence or breach committed by the body corporate. For example, the maximum penalty for a fault-based offence with an aggravating element is $440,000 and/or five years imprisonment.

The Bill proposes to extend the reach of the Act to cover certain overseas conduct by Australian citizens or Australian corporations. The conduct regulated by these new extraterritorial provisions relate to:

• making false and misleading statements, in a material particular, in connection with an application to include therapeutic goods in the Register;
• the manufacture, supply, export or import of counterfeit therapeutic goods;
• the manufacture or supply of tampered goods; and
• the failure to notify the Secretary of the Department of Health and Ageing or the National Manager of the TGA about actual or potential tampering of therapeutic goods.

A lack of transparency and timely release of information was a major criticism of the TGA's actions in relation to Pan Pharmaceuticals. To address this criticism, and generally improve the TGA's ability to protect public health and safety, the Bill proposes to extend the circumstances in which information about actions taken or decisions made under the Act can be released to the public.

There is also increased scope for information about an offence or contravention (actual or alleged) to be released to Australian and overseas regulatory agencies.

Conclusion

These numerous proposals have been designed to give the TGA more power to prevent non-compliance and ensure that public health and safety is protected. The amendments are significant, but their effect in current proposed form may be short-lived. On or about 1 July 2006, the trans-Tasman agency is due to be established. This agency will replace Australia's TGA and New Zealand's Medicines and Medical Devices Safety Authority. It is reasonable to expect that the strengthened enforcement regime proposed by this Bill will be transferred to the new joint Australian and New Zealand regulatory environment.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.