TGA Amendments 2005
In brief: Senior Associate Lorien Beazley looks at the new sanctions (including criminal sanctions and personal liability for officers) planned for manufacturers of therapeutic goods who breach the therapeutic goods regulatory regime.
Background
In 2003 the Therapeutic Goods Administration (TGA) suspended Pan Pharmaceuticals Ltd's (Pan ) manufacturing licence and a recall of Pan's therapeutic goods followed.
Soon after, the Federal Government made changes to the Therapeutic Goods Act 1989 (the Act) to tighten the requirements placed on manufacturers and sponsors of therapeutic goods to further ensure the quality, safety and efficacy of therapeutic goods supplied in Australia or exported from Australia (AAR wrote an article at the time).
Since then, the Federal Government has identified the need for wider powers and more aggressive sanctions to address and deter breaches of the therapeutic goods regulatory regime.
The changes proposed by the Federal Government under the Therapeutic Goods Amendment Bill 2005 (the Bill) will give the TGA those powers and sanctions.
New and expanded sections
Purpose of the Bill
The Bill was introduced into Federal Parliament on 17 August 2005. The main purposes of the Bill are to:
- introduce a new 'tiered offences regime' which will include offences of criminal and civil liability, offences with aggravating elements and offences of strict liability;
- make executive officers of organisations, who are directly involved in the day-to-day management of the organisation, personally liable if the organisation commits an offence or contravenes a civil penalty provision;
- introduce the ability for the TGA to issue infringement notices;
- introduce enforceable undertakings as an option for remedies of breaches of the Act;
- allow juries to give alternative verdicts under the tiered offence regime;
- extend offences to conduct of Australian citizens, residents and organisations outside of Australia;
- introduce a new warrant mechanism and extend the powers of authorised persons under search warrants;
- allow the TGA to use the media to release information about actions taken or decisions made under the Act.
We focus on the first four of these purposes in more detail below.
Tiered offence regime
The offence regime is tiered – from fault based with aggravating circumstances resulting in criminal sanctions to purely civil penalties. The more serious the offence (by reference to the harm likely to be caused or actually caused to the public) the more serious the penalty. The Bill also introduces an aggravating element to some of the offences that currently exist.
Fault-based offence with aggravating circumstances (will result in harm)
If there is conduct that results in, or will result in, harm it will be a fault-based offence with an aggravating element. The maximum penalty is $440,000 and/or 5 years imprisonment.
The conduct must incorporate:
- a mental element. For example deliberate acts, fraud, recklessness, a serious pattern of continuous intentional contraventions; and
- the 'aggravating circumstance.'
The 'aggravating' circumstances are breaches of key requirements of the regulatory scheme which have resulted in, or will pose, a serious and direct threat to public health and safety. Some of the key requirements of the regulatory scheme considered to be 'aggravating' circumstances if breached include provisions dealing with:
- supplying unassessed or unapproved therapeutic goods in the market, which is not otherwise permitted;
- breaching conditions attaching to the inclusion of therapeutic goods in the Australian Register of Therapeutic Goods (ARTG);
- non-compliance with standards applicable to therapeutic goods, including essential principles for medical devices;
- not meeting or breaching manufacturing standards (including conformity assessment procedures or standards for medical devices);
- failure to comply with conditions applying to particular exemptions in relation to the inclusion of goods on the ARTG; and
- non-compliance with product recall procedure.
The aggravated offences are not intended to apply where the harm or injury to a person was caused by reasons other than a breach of the Act.
Strict liability with aggravating circumstances (likely to result in harm)
If there is conduct that is likely to result in harm or injury, there is a new strict liability offence with an 'aggravating' element attracting a maximum penalty of $220,000 (but no term of imprisonment).
The Explanatory Memorandum to the Bill states that the "strict liability provisions are considered to be necessary to maintain the integrity of the regulatory scheme and to better achieve the objective of establishing an effective system of controls for the safety, quality, and efficacy (or performance) of therapeutic goods supplied in Australia or exported from Australia" and also "because of the importance of having an effective deterrent to action that could threaten the health and safety of the Australian public, and the importance of ensuring that sponsors and manufacturers have a high level of care in the course of engaging in commercial activities that have a direct impact on public health."
As a consequence, the strict liability provisions apply to, what the Federal Government considers to be, the most critical aspect of the regulatory regime including compliance with:
- applicable standards for therapeutic goods;
- conditions attaching to standards and inclusion of goods on the ARTG;
- conditions attaching to exemptions granted;
- manufacturing standards and conditions attaching to manufacturing licences.
Again, the aggravated offences are not intended to apply where the harm or injury to a person was caused by reasons other than a breach of the Act.
The test for the strict liability offences is an objective test: "is it reasonably likely that harm or injury would occur to any person."
The defence of honest and reasonable mistake of fact is available in strict liability offences.
Existing fault-based offence (with no aggravating element)
The existing fault-based offences are retained either "as is" or with an increased penalty.
These offences arise where non compliance with a relevant regulatory requirement:
- is not likely to cause harm or injury; but
- is either intentional or reckless.
Civil penalty provisions
Civil penalties (with no aggravating circumstance) have been introduced as an alternative sanction to certain existing offences.
Civil penalties are financial (rather than criminal) penalties for offences not involving either aggravation or fault.
The Explanatory Memorandum to the Bill states that "the inclusion of a civil penalty regime is proposed to strengthen the TGA's enforcement options to more quickly and effectively address and deter non-compliance with regulatory requirements, particularly by incorporated bodies" and to "act as a deterrent to behaviour that breaches regulatory requirements, and as an incentive for sponsors and manufacturers to establish systems designed to avoid breaches of regulatory requirements."
The new civil penalty provisions impose a maximum of:
- $330,000 or $550,000 for individuals; and
- $3,300,000 or $5,500,000 for corporations.
Personal liability
The Bill proposes to make executive officers of organisations, who are directly involved in the day-to-day management of the organisation, personally liable if the organisation commits an offence or contravenes a civil penalty provision under the Act.
Importantly, the liability is not limited to directors. It can extend to any person, by whatever title and whether or not a director, who is concerned in or takes part in, the management of the organisation.
This is an extremely significant change for all those involved in the day to day management of organisations regulated by the TGA.
Specifically, the officer:
- commits an offence if the organisation commits an offence; or
- is in contravention of the Act if the organisation contravenes a civil provision, where the officer:
- knew that the offence or contravention would be committed; and
- was in a position to influence the conduct of the organisation in relation to the commission of the offence or contravention; and
- failed to take all reasonable steps to prevent the commission of the offence or contravention. Where "reasonable steps" is considered by reference to
- what action (if any) the officer took towards ensuring that the organisation's employees, agents and contractors have a reasonable knowledge and understanding of the requirements to comply with the Act (in so far as those requirements affect the employees, agents or contractors concerned); and
- what action (if any) the officer took when he or she became aware that the body was committing an offence against, or otherwise contravening the Act.
Infringement notices
As an alternative to prosecution in court proceedings, the TGA may issue infringement notices. These kinds of notices would be typically issued in the case of strict liability offences and civil penalty contraventions (that is, not in circumstances where harm or injury has been sustained).
The notice must set out the grounds of infringement (pursuant to terms which will be prescribed in the Regulations). The recipient of the notice has the option of paying a fine in lieu of court proceedings.
Enforceable undertakings
The Bill also introduces enforceable undertakings to correct, address or remedy non-compliance with the Act. They are not mandatory but may be offered by a party in breach of the Act in lieu of sanctions. The undertaking can be tailored to the circumstances by addressing issues such as:
- regulatory requirements;
- public health and safety; and
- the needs and circumstances of the sponsor, the manufacturer or any other person who is in breach.
The TGA is not required to accept an offer to give an undertaking, however, if accepted, they are enforceable by a Court.
Summary
If the Bill is enacted:
- organisations regulated by the TGA will need to understand the increased penalties, including criminal penalties, that apply and implement appropriate risk management strategies and introduce relevant compliance training; and
- any person, by whatever title and whether or not a director of an organisation regulated by the TGA, who is concerned in or takes part in, the management of the organisation needs to understand their personal liability position under the Act and ensure they have taken all reasonable steps to prevent the happening of an offence or contravention of the Act.
This Bill was referred to the Senate Community Affairs Legislation committee on 7 September 2005. The committee is to provide a report on the Bill by 28 October 2005.