Case Note: Therapeutic Goods Regulation and Digital Marketing


In this case, a $10 million penalty was imposed on a supplier of scheduled medicines for egregiously flouting regulations relating to representing, advertising, and prescribing therapeutic goods.

CORPORATE AND CLINICAL GOVERNANCE

Secretary, Department of Health v Peptide Clinics Australia Pty Ltd [2019] FCA 1107

Introduction

In Secretary, Department of Health v Peptide Clinics Australia Pty Ltd [2019] FCA 1107, the Federal Court of Australia ordered Peptide Clinics Pty Ltd (Peptide Clinics) to pay $10 million to the Commonwealth for contraventions of the Therapeutic Goods Act 1989 (Cth) (the Act).

Jagot J found that Peptide Clinics had breached several provisions of the Act, including making prohibited representations about their products and making misleading claims that breached the Therapeutic Goods Advertising Code.

The case is an important reminder that in an age where the provision of health care is progressively moving online, organisations need to be aware that claims made in relation to the supply of therapeutic goods on digital platforms are likely to attract serious scrutiny from the Australian Therapeutic Goods Administration (the TGA).

Facts

Peptide Clinics operated an online retail business through its website and advertised “Peptides” and “Peptide Treatments” on its Instagram and Facebook accounts. Peptides, which are chains of amino acids that form proteins and can be used to stimulate growth hormones in the body, are captured in Schedule 4 of the current Poisons Standard and can only be supplied by prescription.

Peptide Clinics’ business model changed over time. Customers were able to purchase peptide products and treatments through:

  • the front end of Peptide Clinics website from 6 March 2018 until 23 November 2018;
  • a “five-step process” that included a questionnaire for the purpose of providing a medical practitioner with sufficient information to prescribe peptides, before allowing customers access to the back end of the website upon the practitioner’s approval from 6 March 2018 until 21 December 2018 (the Five-Step System);
  • a “telephone ordering system” that involved the same questionnaire and added a consultation with a medical practitioner via telephone, before being transferred to a company representative to order the recommended peptide products from 22 December 2018 until 20 March 2019 (the Telephone System).

Peptide Clinics claimed that their products could be used for conditions such as anxiety, mood regulation, anti-ageing, body building, tanning, injury repair, weight loss, heart health and insomnia among other things.

The Secretary of the Department of Health (the Secretary) alleged that Peptide Clinics contravened sections 42DLB and 42DMA of the Act from 6 March 2018, on and from that date until placed into liquidation in March 2019, for false advertising and misrepresentations regarding their peptide products.

Evidence

Advertising contraventions

The Court accepted the Secretary’s submissions that Peptide Clinics’ advertisements made prohibited and restricted representations by referring to serious diseases and conditions and making misleading claims regarding the use of their products. Jagot J heard evidence from experts that supported the Secretary’s submissions. Professor David Handelsman, Professor of Medicine and Reproductive Technology and Andrology stated:

“With the exception of using Minoxidil for hair loss, there is no medical justification for using the peptides and peptide treatments advertised by Peptide Clinics to treat the so-called “conditions” that were listed on their website”.

Professor Rebecca Mason, who specialises in endocrine physiology, further explained:

“The scientific information is not balanced, is substantially misleading and in some important instances contradicts key public health messages. The information on the website could mislead even someone with a scientific background.”

Breaches of the Act (misrepresentations)

Peptide Clinics specifically contravened section 42DLB(1) of the Act by:

  • advertising substances contained in Schedule 4 to the current Poisons Standard on their website, on Instagram and on Facebook;
  • making “restricted representations” in advertisements that referred to serious forms of cardiovascular diseases and diseases of joint and bone, being diseases, conditions, ailments or defects specified in the Therapeutic Goods Advertising Code 2015 (Cth) (the 2015 Code) without an approval or permission under the Act;
  • making “prohibited representations” in advertisements that refer to anxiety and depression, which are mental illnesses, being conditions specified in the 2015 Code without permission under the Act.

Therapeutic Advertising Code breaches

Peptide Clinics contravened section 42DMA(1) of the Act by failing to comply with the Therapeutic Goods Advertising Code (No. 2) 2018 (Cth), through:

  • advertising products that misled, or were likely to have misled, directly or by implication or through emphasis, comparisons, contrasts or omissions;
  • advertising products that contained claims, statements and implications that the advertised products were safe or alternatively, could not cause harm, when in fact they were not safe and could cause harm;
  • advertising products that expressly or impliedly encouraged the use of substances, or goods containing substances, included in Schedule 4 to the current Poisons Standard for one or more of the following uses, when such uses would be inappropriate:
    • anxiety, mood regulation, anti-ageing, body building, tanning, injury repair, weight loss, heart health and insomnia etc;
  • advertising products that presented scientific information in an inaccurate, imbalanced and misleading manner.

Exceptions

Jagot J accepted that the exception in section 42AA(4) of the Act was inapplicable to Peptide Clinics. The exception applies to advertisements directed to a prescribed class of people (namely, medical practitioners and various other health professionals) and advice or information given directly to a patient by a medical practitioner in the course of treatment.

Advertisements

The section 42AA(4) exception did not apply to the advertisements on Peptide Clinics’ website, Instagram and Facebook accounts because they were publicly accessible and there was no medical practitioner involved in the process at all.

Business model

The Secretary successfully established that the exception did not apply because the methods used to sell products and treatments by Peptide Clinics generally fell well short of the minimum standards expected of a doctor when treating a “patient” in respect of a medical condition.

Neither the Five-Step System nor the Telephone System would be captured because there was no “direct contact between the customer and the medical practitioner.” The customers were not considered patients of the clinic or the medical practitioner for the purposes of section 42AA(4) because the relationship “lacked the elemental features of a doctor/patient relationship” and the minimum requirements of a medical assessment were not met.

In drawing this conclusion, Jagot J accepted further expert evidence from Professor Handelsman, before stating:

“A complete medical assessment requires a complete physical examination, information on risks of a proposed treatment and fully informed consent among other things. In his opinion, none of the criteria are satisfied by the inadequate online Medical Questionnaire (or phone call) as the sole medical assessment of the patient.”

Penalty considerations

The key factors Jagot J considered in determining the penalty included:

  • Peptide Clinic’s use of doctors to give the business “the veneer of medical legitimacy” and compliance with the Act when, in substance, there was none;
  • the contraventions had a wide reach with the company advertising that it had 50,000 satisfied patients;
  • the conduct exposed a deliberate decision to pursue profits at the expense of public health and safety, and continued despite the TGA repeatedly raising concerns about the conduct;
  • the TGA gave Peptide Clinics every opportunity to address its concerns and correct its conduct; Peptide Clinics failed to do so;
  • Peptide Clinics was obstructionist, refusing to provide the TGA with information when requested;
  • Peptide Clinics did not co-operate with the Secretary in the course of the proceeding;
  • Peptide Clinics showed no contrition for its conduct, giving the impression that the company lacked a “compliance culture”;
  • the fact that, although Peptide Clinics was in liquidation, it was still appropriate to order a penalty as a measure of the Court’s disapproval and for the seriousness in which the contraventions were regarded.

Ultimately, the Court determined the case warranted a significant penalty as the conduct was “egregious because it gave consumers the false impression that the information contained in the advertisements was provided by a medical practitioner acting in their best interests to treat their individual needs”. Jagot J held that Peptide Clinics had no intention of complying with its obligations under the Act unless it was forced to do so. The $10 million penalty secured the objective of general deterrence by making it clear that companies will not be able to profit from their wrongdoing.

Compliance Impact

Subscribers should be aware of the serious nature of making false advertising claims when providing health services and products that contravene the Act and the Therapeutic Goods Advertising Code.

Peptide Clinics deliberately and recklessly pursued its own financial self-interest at the expense of its legal obligations and the interests of public health.

Although the circumstances of Peptide Clinics were especially egregious, the case is an important reminder of the TGA’s preparedness to pursue court proceedings and seek substantial penalties against organisations who put their own interests ahead of public health and safety.