Impact of major Australian complementary medicines recall

Australia's largest contract manufacturer of complementary medicines, Pan Pharmaceuticals Ltd, has had its licence to manufacture medicines suspended for six months, a recall carried out on some 1,546 of its products since 1 May 2002 and approximately 1,650 of its "export only" medicines cancelled from the Register of Therapeutic Goods, with effect from 28 April 2003. Therapeutic products cannot be sold in Australia unless they are listed or registered on the Register.

This suspension stemmed from an audit of manufacturing premises carried out by the Australian Therapeutic Goods Administration ("TGA"), which is stated to have revealed the systematic and deliberate manipulation of quality control test data, the substitution of ingredients and deficiencies in the manufacturing process.

The recall has been reported in the Australian media as the world's biggest medicines recall and has had a major impact across the Australian medicines, pharmaceutical and insurance industries.

Background

Pan Pharmaceuticals Limited is Australia's largest contract manufacturer of complementary medicines (such as herbal, vitamin, mineral and nutritional supplements), and some over the counter (OTC) medicines (such as pain relievers, cold and flu remedies).

In January 2003, the TGA worked with Pan Pharmaceuticals to seek a voluntary recall of Travacalm Original Tablets (a travel sickness product) after 87 adverse drug reactions were reported. The adverse reactions were described by the TGA as "serious and life threatening" with 19 cases requiring hospitalisation. It was as a result of this that Pan was audited by the TGA. A series of these audits found evidence of widespread and serious deficiencies in the company's manufacturing and quality control procedures. Where the quality of a medicine cannot be assured, neither can the safety or effectiveness of that medicine. This therefore prompted the TGA to suspend Pan Pharmaceutical's manufacturing licence for 6 months and, following expert advice regarding potential risks, recall all batches of medicine manufactured by Pan Pharmaceuticals since 1 May 2002. However, apart from the Travacalm product, the TGA has not identified any specific adverse events or incidents with the other recalled products.

Impact

Medicines manufactured by Pan Pharmaceuticals are widely available in Australia as well as exported to overseas countries.

A range of products manufactured by Pan Pharmaceuticals is also supplied to other companies which market the products under their own brands.

The Pan Pharmaceuticals website states that it is perhaps the largest independent contract healthcare manufacturer in the world, supplying a global market of over 40 countries and being the largest supplier of nutritional supplements to the Australian market.

As a result of the number of products affected, the recall will affect most companies in Australia's complementary medicines sector. Those companies who had had their products manufactured by Pan Pharmaceuticals are responsible for carrying out the recall recommended by the TGA. If these companies fail to carry out a recall, the TGA would order a compulsory recall of these products.

Consequences

Product Liability Litigation

To date, two legal actions have reportedly been commenced against Pan Pharmaceuticals by consumers who suffered serious side-effects after taking Travacalm. Theoretically, the potential also exists for a personal injury class action to be brought against Pan Pharmaceuticals, sponsors of products and retailers such as health food stores and pharmacies. However, no adverse events have been reported, at this stage, other than for the Travacalm product.

Commercial Litigation

Various legal actions have been threatened, including a class action on behalf of shareholders of Pan Pharmaceuticals and legal action against Pan Pharmaceuticals by the TGA to recover their advertising costs of the recall. Also, given the breadth of the area and the number of different companies involved, it is likely that there will be considerable differences in wording between insurance policies for product liability, product recall, product guarantee and industrial special risks and therefore it is likely that there will be further litigation in the recovery of any business loss claim.

Corporate Impact

As well as the negative impact on this previously buoyant market and the knock-on effect to associated companies, Australia's corporate watchdog (the Australian Securities and Investments Commission) has announced it is making inquiries into the continuous disclosure and trading in Pan Pharmaceuticals shares before the trading halt sought by the company. Pan Pharmaceuticals' shares have now been suspended from quotation on the Australian Stock Exchange.

Legislative Amendments

Additional proposed amendments have been put forward by the TGA to the Therapeutic Goods Act 1989 to tighten the existing requirements placed on manufacturer and sponsors of therapeutic goods to ensure further the quality, safety and efficacy of therapeutic goods that are supplied in or exported from Australia. The proposed amendments will seek to:

• Increase maximum penalties for a range of existing offences under the Act;
• Create new offences for falsification of documents or records relating to the manufacture, testing or evaluation of therapeutic goods;
• Insert a "fit and proper person" test into the provisions for granting a manufacturing licence;
• Insert new statutory conditions of licence to ensure compliance with manufacturing principles and reporting of adverse effects known to a manufacturer;
• Require sponsors of therapeutic goods to maintain records of all manufacturers involved in the manufacture of each batch of therapeutic goods and have them available for inspection or risk cancellation of the goods from the Register;
• Provide for better identification of therapeutic goods in the event of a recall; and
• Improve adverse event reporting of listed goods.

In addition, the Australian Government has just announced that it will be setting up an expert committee to examine the role of complementary medicines in the healthcare system.

Lessons to be Learnt

The proposed amendments to the Therapeutic Goods Act 1989 will better reflect strict regulatory requirements in the UK and EU. Nevertheless, even these requirements can never create absolute certainty against the systematic and deliberate manipulation of quality control test data, deficiencies in the manufacturing processes and the substitution of ingredients.

Manufacturing companies should have their own thorough and independent audit processes in place in order to prevent any manipulation of figures, data or numbers from any particular area or department. Companies in receipt of contract-manufactured medicines should also have an independent audit procedure in place to protect their brand name and reputation in the market and to ensure the best quality for their product. In light of these events we suggest insurance policies should be checked for appropriate coverage.

All companies should ensure their recall provisions are regularly checked and updated.

Sources

Australian Therapeutic Goods Administration

Pan Pharmaceuticals Limited

Clayton Utz