FEDERAL COURT OF AUSTRALIA

 

Application by Medicines Australia Inc [2007] ACompT 4



TRADE PRACTICES – applications for review of authorisation determinations under s 88 of the Trade Practices Act –proposed contract, arrangement, understanding or conduct involving exclusionary provisions – exclusive dealing arrangement – industry association – Code of Conduct – little anti-competitive detriment – sufficient public benefit to outweigh anti-competitive detriment and to allow authorisation of exclusionary provisions and third line forcing – public benefit limited by inefficiencies in enforcement of Code – nature of authorisation – nature of discretion to authorise where public benefit test satisfied – nature of power to impose conditions – where anti-competitive detriment low and public benefit case not strong – condition justified strengthening particular public benefit – Code of Conduct regulating promotion of pharmaceutical medicines by pharmaceutical companies to healthcare professionals – provisions relating to conferral of hospitality and other benefits on healthcare professionals – low level of complaint and enforcement of such provisions – whether conditions should be imposed to require Code to include public reporting of hospitality and sponsorship benefits – authorisation affirmed but varied as to terms of condition and period of authorisation   


 


Trade Practices Act 1974 (Cth) s 88, s 90, s 91, s 101, s 102

Therapeutic Goods Act 1989 (Cth)

Therapeutic Goods Amendment Act (No 1)2003 (Cth)

National Health Act 1953 (Cth)


Jones v Australian Competition and Consumer Commission (2003) 200 ALR 234; 131 FCR 216 cited

Re Queensland Co-operative Milling Association Ltd; Re Defiance Holdings Ltd (1976) 8 ALR 481; 25 FLR 169

Re Howard Smith Industries Pty Ltd (1977) 28 FLR 385

Re Rural Traders Co-operative (WA) Ltd (1979) 37 FLR 244

Re 7-Eleven Stores Pty Ltd  (1994) 16 ATPR 41-357

Re Southern Cross Beverages Pty Ltd (1981) 50 FLR 176

Qantas Airways Ltd  [2004] ACompT 9

Re VFF Chicken Meat Growers Boycott Authorisation [2006] ACompT 2

Application by Michael Jools (2006) 233 ALR 115

Re QIW Ltd (1995) 132 ALR 225

Re Media Council of Australia Authorisation; Re Australian Consumers’ Association’s Application (1987) 88 FLR 1

Re Australian Competition and Consumer Commission by Australian Association of Pathology Practices Inc (2004) 206 ALR 271

Re EFTPOS Interchange Fees Agreement (2004) 26 ATPR 41-999

Water Conservation and Irrigation Commission (NSW) v Browning (1947) 74 CLR 492

Oshlack v Richmond River Council (1998) 193 CLR 72

Re Herald and Weekly Times Ltd (1978) 17 ALR 281

Re Queensland Timber Board (1975) 24 FLR 205



Lord Wilberforce, Campbell and Elles Restrictive Trade Practices and Monopolies (Sweet & Maxwell, London, 1966)

Donald BG and Heydon JD, Trade Practices Law (Law Book Co, 1978)

Barnes and Blakeney, Advertising Regulation (Law Book Co, 1982)

Gunningham N, “Codes of Practice: The Australian Experience” in Webb K (ed), Voluntary Codes: Private Governance, the Public Interest and Innovation (Carleton Research Unit for Innovation, 2004, Ch 12)

Webb K and Morrison A, “The Law and Voluntary Codes: Examining the “Tangled Web”” in Webb K (ed), Voluntary Codes: Private Governance, the Public Interest and Innovation (Carleton Research Unit for Innovation, 2004)


 

File No 6 of 2006

 

RE:     APPLICATION BY MEDICINES AUSTRALIA INC FOR REVIEW OF A DETERMINATION BY THE AUSTRALIA COMPETITION AND CONSUMER COMMISSION GRANTING AUTHORISATION OF EDITION 15 OF MEDICINES AUSTRALIA’S CODE OF CONDUCT

 

BY:      MEDICINES AUSTRALIA INC (ABN 57 105 836 803)                           Applicant

 

 

 

 

 

 

 

 

 

 

FRENCH J, MR GF LATTA and PROFESSOR C WALSH

27 JUNE 2007

perth (heard in sydney)



 



IN THE AUSTRALIAN COMPETITION TRIBUNAL

 

 

No 6 of 2006

 

RE:

APPLICATION BY MEDICINES AUSTRALIA INC FOR REVIEW OF A DETERMINATION BY THE AUSTRALIAN COMPETITION AND CONSUMER COMMISSION GRANTING AUTHORISATION OF EDITION 15 OF MEDICINES AUSTRALIA’S CODE OF CONDUCT

 

BY:

MEDICINES AUSTRALIA INC

(ABN 57 105 836 803)

Applicant

 

 

 

tribunal:

french J (dEPUTY PRESIDENT),

MR GF LATTA

PROFESSOR C WALSH

 

DATE OF DETERMINATION

27 JUNE 2007

WHERE MADE:

PERTH (HEARD IN SYDNEY)

 

THE TRIBUNAL DETERMINES THAT:

 

1.         Authorisations A90779 and A90780 are revoked.

2.         The determination of the Australian Competition and Consumer Commission dated 26 July 2006 granting authorisation to applications A90994, A90995 and A90996 is affirmed subject to the succeeding variation to the conditions on the authorisations and their duration.

3.         The condition on each of the authorisations is varied to read as follows:

3.1       The Code of Conduct is varied within three months of this determination to include the requirement that each member company report to Medicines Australia all educational meetings and symposia as defined in ss 6, 7 and 10 of the Code held or sponsored by that company:

 

            (a)        by completing the table set out at Attachment A to the Determination for each month of the financial year;

 

            (b)        by providing a copy of the completed table for two six month periods every year (July to December; January to June) to Medicines Australia within 14 days of the end of each six month period.

 

3.2       The Code is further amended to provide that:

 

            (c)        Medicines Australia will make publicly available on its website the completed table provided by each member company within three months of the end of each six month period;

 

            (d)        The Monitoring Committee will, at the end of each financial year conduct a review of the information provided by the members for three months selected by it at random for the preceding 12 month period.

 

3.3       The Monitoring Committee will be empowered in any case to request information concerning a particular event such as a copy of the invitation to the meeting and a copy of any printed material provided to attendees. 

 

3.4.      Where the Monitoring Committee considers that the conduct of the member company with regard to the meeting may breach the Code of Conduct, it will refer a report about the meeting and the member company’s response to the Code of Conduct Committee which, after giving notice to the member company, may deal with it as though it were a complaint.

 

3.5       The Monitoring Committee shall also provide a detailed report on its other activities to Medicines Australia for publication in the Code of Conduct Annual Report.  This report shall also list any cases forwarded to the Code of Conduct Committee under the preceding provisions setting out the name of the member company and the date it was referred.

 

4.         The authorisations referred to in paragraph 2 of this Determination shall be in force for a period of five years.

5.         Liberty to apply to the Tribunal for such further determinations as may be necessary to implement and to carry into effect this determination.




Attachment A

 

Summary of Events Sponsored by member Companies: Month, Year 2006

 

Company Name:                    X

Number of events held:         Y

 

 

Venue

Description of function including duration of educational content delivered

 

 

Professional status of attendees

 

 

 

Hospitality provided

 

 

 

 

Total cost of hospitality

 

 

 

Number of attendees

 

 

 

Total Cost of Function

 

 

 

 

Specify venue name and location

 

 

 

Companies to provide as much information as they feel is necessary to explain the educational component, eg type of function, nature of education provided etc.

 

 

 

 

Specify, eg: GPs, anaesthetists, Occupational Therapists

 

 

Specify the nature of the hospitality provided and whether it included any of the following elements:

 

Food and/or beverages

Accommodation

Travel

Entertainment

 

 

$ cost

 

This must state the total cost of the items listed in the hospitality column.  A breakdown of those costs may be provided if desired.

 

 

 

 

 

 

 

 

 

xx

 

 

 

 

$cost

 

Including speakers fees, venue hire, transportation cost, materials provided to attendees etc.




IN THE FEDERAL COURT OF AUSTRALIA

 

WESTERN AUSTRALIA DISTRICT REGISTRY

 No 6 of 2006

re:

 application by medicines australia inc for review of a determination by the australian competition and consumer commission granting authorisation of edition 15 of medicines australia’s code of conduct

 

by:

 medicines australia inc (abn 57 105 836 803)

Applicant

 

TRIBUNAL:

FRENCH J (DEPUTY PRESIDENT),

 MR GF LATTA

 PROFESSOR C WALSH

DATE:

27 JUNE 2007

PLACE:

PERTH (HEARD IN SYDNEY)


INDEX

 

Introduction  [1] – [8]

Medicines Australia – Objects and Rules [9] – [19]

The    Code of    Conduct – an    overview [20] – [26]

The Code of Conduct – provisions relating to

benefits    for healthcare    professionals [27] – [34]

The    Code of    Conduct – enforcement    committees    [35] – [47]

The    Code of    Conduct – guidelines    for complaints [48] – [49]

Differences between Edition 14 and Edition 15 [50] – [51]

The authorisation applications [52] – [55]

The    ACCC determination    [56] – [89]

The application for review [90] – [92]

Statutory framework for authorisation [93] – [100]

Who    may apply    for authorisation  [101] – [104]

General    principles – the    authorisation    process  [105] – [106]

General    principles    - the public    benefit    test  [107] – [116]

General principles – the future with and without test [117] – [121]

General principles - the discretion to authorise [122] – [128]

General    principles    - conditions    upon authorisation  [129] – [134]

General    principles    - the function    of the    Tribunal    on review    [135] – [139]

The application for authorisation  [140] – [143]

The    evidence    before    the Tribunal  [144] – [145]

 Deborah Jane Monk – on the administration of the Code      by Medicines  Australia  [146] – [181]

Harry      Michael      Nespolon – a      general      practitioner on      the Code      Committee [182] – [192]

John      Paul      Seale – a      pharmacologist      on the      Code Committee [193] – [209]

Kenneth Williams – an Appeals Committee member  [210] – [223]

Gary      Jonathan      Phillips – a      non-member      company’s perspective      on the      Code  [224] – [236]

Stephen Ackland – a medical oncologist’s interaction with

the      pharmaceutical      industry  [237] – [247]

Ian Edwin Haines – a medical oncologist concerned about

pharmaceutical      company      benefits  [248] – [259]

David Alexander Henry – a pharmacologist’s research into

the scale and effect of interactions between the industry and

healthcare      professionals  [260] – [278]

 

The  external  regulatory  framework  [279] – [286]

The  relevant  market  [287] – [288]

An overview of voluntary codes and their interaction

with  statutory  regulation  [289] – [308]

The  future without  the Code  [309] – [324]

The  future with  the Code  - anti-competitive  detriment  [325] – [333]

The future with the Code – public benefits and entailed

public  detriments  [334] – [358]

Whether  the public  benefit is  sufficient  to justify  authorisation  [359]

Whether  a condition  should be  imposed as  a matter  of discretion  [360] – [374]


Annexure 1 – Summary of the Medicines Australia Code

as set out in paragraphs 3.5 to 3.90 of the ACCC

Final Determination and as Reworked by Medicines Australia

Annexure 2 – Results of consideration of complaints by

Code Committee

Annexure 3 – Results of consideration of appeals by

Appeals Committee

Annexure 4 – Comparison of alleged versus actual breaches

of the Code

Annexure 5 –  Rule Creation: Comparison of Regulatory

And Voluntary Code Regimes from Webb K and Morrison M

The Law and Voluntary Codes: Examining the “Tangled Web”

Annexure 6 – Rule Administration: Comparison of Regulatory

And Voluntary Codes Regimes from Webb K and Morrison M,

The Law and Voluntary Codes: Examining the “Tangled Web”

Annexure 7 – Adjudication: Comparison of Regulatory

And Voluntary Code Regimes from Webb K and Morrison M, The

Law and Voluntary Codes: Examining the “Tangled Web”

Annexure 8 – Summary of Cost Information in relation

To Hospitality  Provided by Pharmaceutical Companies

To Healthcare Professionals


 

IN THE AUSTRALIAN COMPETITION TRIBUNAL

 

 

No 6 of  2006

 

RE:     APPLICATION        BY        MEDICINES        AUSTRALIA        INC        FOR        REVIEW        OF        A DETERMINATION        BY        THE        AUSTRALIA        COMPETITION        AND        CONSUMER        COMMISSION        GRANTING        AUTHORISATION        OF        EDITION        15        OF        MEDICINES        AUSTRALIA’S        CODE        OF        CONDUCT

 

BY :     MEDICINES AUSTRALIA INC

            (ABN 57 105 836 803)

                                                            Applicant

 

 

TRIBUNAL:

 FRENCH J (Deputy President)

 MR GF LATTA

 professor C WALSH

 

DATE:

27 June 2007

PLACE:

SYDNEY


REASONS FOR DETERMINATION

Introduction

1                     Medicines Australia Inc (Medicines Australia) is a national association of firms and companies involved in the manufacture and marketing of prescription medicines in Australia.  Prior to April 2002 the Association was known as the Australian Pharmaceutical Manufacturers’ Association Inc (APMA).

2                     In 1960 APMA established a Code of Conduct (Code) to be observed by its members.  That Code has evolved from its first edition, which was 12 pages in length, to the most recent and 15th Edition, which is some 144 pages in length.  Broadly speaking it is said, in its Preamble, to set standards for:

 
   

(a)        the        provision        of      information        about      prescription        medicines        to      healthcare        professionals;

   

(b)        the      advertising      of prescription      medicines      and other      promotional      activities,      including      printed      materials,      audio      visual      materials,      use of      the internet      and trade      displays;

   

(c)        interactions      between      healthcare      professionals      and pharmaceutical      companies,      including      the provision      of benefits      to healthcare      professionals      by pharmaceutical      companies;      and

   

(d)        the      manner      in which      pharmaceutical      companies      may deal      with      the general      public      including      the prohibition      of promotion      of prescription      products      to members      of the      general      public.

 
 

3                     The first interaction of the Code with competition law in Australia occurred in 1977.  The then Trade Practices Commission granted clearance under s 92(2) of the Trade Practices Act 1974 (Cth) (the TPA) in respect of the 4th Edition on 30 June 1977.  On 1 July 1977 s 92 of the TPA was repealed.  Extant clearances were deemed to be authorisations granted by the Commission under s 88(1) or (5) of the TPA. 

4                     When the Code reached its 13th Edition, in February 2001, APMA applied for its authorisation and the revocation of the 1977 clearance. Before the Australian Competition and Consumer Commission (ACCC) issued its determination in respect of the 13th Edition, a 14th  Edition was adopted by APMA which had by then become Medicines Australia.  That adoption occurred on 3 December 2002.  Medicines Australia subsequently requested that the ACCC consider a 14th Edition for authorisation.  Authorisations A90779 and A90780 were granted in respect of  that Edition on 14 November 2003.  They came into effect on 6 December 2003 for a period of three years.  Between November 2004 and July 2005 Medicines Australia conducted a review of the Code which resulted in Edition 15, which is the subject of the present proceedings.  

5                     On 30 November 2005 Medicines Australia applied for revocation of the existing authorisations and substitution of an authorisation for the 15th Edition.  The ACCC granted authorisation in respect of that edition on 26 July 2006 subject to a condition requiring each member to report twice yearly to Medicines Australia on events sponsored by the member for healthcare professionals.  The condition required Medicines Australia to make such reports publicly available in tabular form on its website and to review them through its Monitoring Committee.  Authorisation was for a period of three years.

6                     On 15 August 2006 Medicines Australia lodged an application with the Australian Competition Tribunal (the Tribunal) for review of the determination by the ACCC.  It, in effect, challenged both the imposition of the condition and the three year duration of the authorisation.   It sought a determination that the authorisations A90779 and A90780 be revoked and that its applications for authorisations numbered A90994, A90995 and A90996 be granted for a period of five years without conditions. 

7                     Although Medicines Australia maintained, as its primary position, that it should have an unconditional authorisation for a period of five years it proffered at the hearing its own formulation of a condition on authorisation in relation to information about member company sponsorship of events for the benefit of healthcare professionals.

8                     In our opinion the public benefit likely to flow from the implementation of the proposed Code outweighs any anti-competitive detriment flowing from it.  So far as the Code proposes exclusionary provisions and an exclusive dealing provision in relation to the training of medical representatives, the benefits are such that they should be allowed.  The necessary conditions for authorisation are thus satisfied.  There remains the question whether, in the exercise of its discretion under the Act, the Tribunal should authorise the proposed conduct.  In our opinion the authorisations should be granted but upon a condition, in each case, that the Code be amended to  require reporting by the members of Medicines Australia and public disclosure of hospitality benefits conferred by members on healthcare professionals.  The purpose of the condition is to increase the likelihood that the public benefit claimed for the Code is realised in respect of the provisions dealing with the conferral of such benefits on doctors.  We are also of the view that authorisation should be for a period of five years.

Medicines Australia – Objects and Rules

9                     Medicines Australia is an incorporated association governed by the Associations and Incorporation Act 1984 (NSW). 

10                  The objects of Medicines Australia are set out in the Statement of Objects section of its Objects and Rules.  They include the maintenance of the highest standards in research, development, manufacture, production, promotion and distribution of prescription pharmaceutical products (1.1), the  development of the industry (1.2), cooperation with Federal and State governments (1.3), provision of information to members (1.4) and the establishment and maintenance of liaison with similar organisations in Australia and  overseas (1.5).  There is a general object of fostering awareness among members of the health professions, the media and the general public of the industry’s contribution to the health and wellbeing of the Australian community (1.6).  Objects 1.7 and 1.8 are of particular relevance to this application:

To adopt and administer mechanisms for Industry self-regulation.

 

To promote cordial relations and to encourage a spirit of cooperation between members of the Industry, related health care organisations and the general public.

11                  The membership of Medicines Australia is defined in Rule 2.  Its primary membership classes comprise “firms or companies operating a prescription pharmaceutical business in the Commonwealth of Australia either as a separate business or as a division of another business, in any one or more sections of the Industry, which include both research based firms or companies and non research based firms or companies” (r 2.1). 

12                  There are three principal classes of members defined in r 2.2.  They are:

(a)        Class 1 Members – being firms or companies operating a business described in Rule 2.1 but being only research based firms or companies.

 

(b)       Class 2 members – being firms or companies operating a business described in Rule 2.1 and being

 

            (i)         non research based firms or companies OR

 

            (ii)        affiliates of Class 1 Members (where separate participation is desired).

 

(c)       Class 3 Members – being firms or companies significantly engaged in research into potential pharmaceutical products, but which have not yet commenced commercial production.

There is additional provision for “Honorary Life members” and “Affiliate Members” (r 2.1(d) and (e)).   The Association presently has 39 Class 1, 2 and 3 members and 7 affiliate members.  Their combined sales represent over 90 per cent of the sales of prescription medicines in Australia.

13                  Rule 2.6 provides:

Members shall comply with all the provisions of the Objects the Rules and the Code of Conduct, and any alterations or additions thereto.

A membership application must be submitted to the Board of the Association which determines whether or not to approve it.  On approval, the applicant is to receive a copy of the Objects and Rules and the Code of Conduct and is required to acknowledge their receipt  to the Public Officer (r 3.4):

Such acknowledgment shall be deemed for all purposes an admission by such applicant that he is fully acquainted with and shall conform and be bound by the Objects, the Rules and the Code of Conduct and until such acknowledgment is received by the Public Officer the applicant shall not be deemed to be a Member and shall not be entitled to exercise any of the privileges of membership.

14                  Rule 11 provides for cessation of membership.  Circumstances in which a person, firm or company ceases to be a member of the Association include mental illness, bankruptcy, insolvency, resignation and expulsion.  A breach of the Code is not set out as a ground for cessation of membership under r 11.  The only way in which non-compliance with the Code can lead to non-consensual cessation of membership is by expulsion.  Expulsion is one of three disciplinary remedies set out in r 13.1 which provides:

Where the Board is of the opinion that a Member:

 

(a)        has infringed or neglected to comply with any provision or provisions of the Objects, the Rules or Sections 12.2 or 12.3 of the Code of Conduct; or

 

(b)       is guilty of any act proceeding or practice which the Board considers to be inconsistent with his position as a Member or has acted in a manner prejudicial to the interests of the Association,

 

the Board may, by resolution: 

 

(i)         expel the Member from the Association ; or

 

(ii)        suspend the Member from membership of the Association for a specified period or until the breach for which he was suspended is remedied;

 

and/or

 

(iii)       ratify the imposition of a fine under Section 12.3 of the Code of Conduct.

There is a right of appeal from a decision of the Board to a general meeting of the Association. 

15                  The powers of the Board include the control and management of the affairs of the Association “subject to the Act, the Regulations, the Objects, the Code of Conduct, these Rules and to any resolution passed by the Association in general meeting …” (r 15). 

16                  The Code is defined in r 1.1 as follows:

“the Code of Conduct” means the Code of Conduct adopted by the Association defining the responsibilities of Members to the Australian medical profession and to all members of the community with regard to promotional procedures.

17                  There is no specific provision relating to the adoption of the Code, however r 37.1 provides:

The Objects, the Code of Conduct and the Rules may be altered, rescinded or added to only by a special resolution of the Association.

18                  Rule 23 empowers the Board, by instrument in writing, to delegate to one or more committees the exercise of such of the functions of the Board as are specified in the instrument other than the power of delegation, a function which is a duty imposed on the Board by the Act or any other law and the power to expel or suspend a member as provided in r 13.1.  The Board may also delegate to a committee “the power to impose a charge for abuse of the Code as recommended by the Code of Conduct Committee” (Code Committee) (r 23.1(d)). 

19                  The existence of the Code Committee appears to be assumed by the Objects and Rules, there being no express provision establishing it.  

The Code of Conduct – an overview

20                  The Preamble to Edition 15 of the Code states that it sets out standards of conduct for the activities of companies when engaged in the marketing of prescription products used under medical supervision as permitted by Australian legislation.  It asserts the responsibility of members of the industry to provide ongoing, objective and scientifically valid interpretations of data on prescription medicines to healthcare professionals and appropriate non-promotional information to the public.  It is the responsibility of members of the pharmaceutical industry to be aware of the Advertising Principles under the  Therapeutic Products Advertising Code (TPAC):

Principle 1

Advertisements must comply with the Therapeutic Products Act(s) and Rules and the Therapeutic Products Advertising Code (TPAC).

 

Principle 2

Advertisements must be truthful, balanced and not misleading.

 

Claims must be valid and have been substantiated.

 

Principle 3

Advertisements must observe a high standard of social responsibility.

21                  Acceptance and observance of the Code is said to be a condition of the membership of Medicines Australia and the Preamble adds:

In accepting and observing the Code companies must comply with both the letter and spirit of the Code.

The Preamble also states that the Code will be supervised and administered by the Board of Medicines Australia.     

22                  The Code is said to reflect the industry’s commitment to ensure that all activities with, or materials provided to, healthcare professionals and members of the general public are never such as to bring discredit upon, or reduce confidence in, the pharmaceutical industry.  Such activities are described in the Preamble as a “Severe Breach” of the Code.  Failure to comply with the Code will result in sanctions being applied under the provisions of s 12. 

23                  After the Preface and the Preamble there are 16 sections with many subsections followed by two Appendices and a Glossary.  The headings of the sections provide an outline of the content of the Code.  They are as follows:

1.         Nature and Availability of Information and Claims

2.         Types of Product Information

3.         Promotional Material

4.         Company Representatives

5.         Product Starter Packs

6.         Involvement in Educational Symposia, Congresses and Satellite Meetings

7.         Sponsorship

8.         Research

9.         Relationship with the General Public

10.       Relationship with Healthcare Professionals

11.       Administration of the Code

12.       Sanctions

13.       Appeals

14.       Monitoring

15.       Compliance Procedures

16.       Reporting


Appendix 1 to the Code comprises “Guidelines for Complaints”.  Appendix 2 is an extract from the Objects and Rules dealing with the disciplining of members and rights of appeal.  This extract comprises Rules 13, 14 and 23.

24                  The determination by the ACCC dated 26 July 2006 sets out, at [3.5] to [3.90], a convenient summary of each of the sections of the Code.  A reworked version of that summary was prepared by Medicines Australia and handed up to the Tribunal as Annexure C to its closing submissions.  It appears to be common ground that the document fairly summarises the Code.  In order that the substantive part of these reasons is not more lengthy than it has to be, the reworked summary is reproduced as Annexure 1.  There are tables attached to it which refer to complaint and disposition statistics.  There was some dispute as to whether Tables 3 and 4 were based on the relevant Annual Reports of complaint and disposition statistics produced by Medicines Australia.  The ACCC and Medicines Australia have agreed that the tables were compiled from the Reports.  They differ about the presentation of the material.  Medicines Australia in compiling the tables says it recorded complaints received rather than the number of breaches found in each financial year. 

25                  As appears from the index of sections and the appended summary of the Code it contains detailed and apparently comprehensive provisions directed to securing completeness, accuracy and balance and to prohibiting misleading or inaccurate claims in advertising and promotional information provided to healthcare professionals.  Chapter 3, which deals with the various forms of advertising and promotion, is highly prescriptive.  The Code deals specifically with product samples or starter packs in Ch 5.  The remaining substantive parts are concerned with the training of medical representatives and the relationships between industry members and healthcare professionals.

26                  The evidence and the submissions put to the Tribunal by Medicines Australia and the ACCC have focussed substantially, although not exclusively, upon issues raised by the contested condition which the ACCC imposed upon its authorisation.  That was a condition under which Medicines Australia would require each member to report, for each month of the financial year on a twice yearly basis, all educational meetings and symposia as defined in ss 6, 7 and 10 of the Code held or sponsored by that member.  It is appropriate, without detracting from the totality of the review to be undertaken by the Tribunal, to direct particular attention to ss 6, 7 and 10.

The Code of Conduct – provisions relating to benefits for healthcare professionals

27                  The opening provisions of s 6 under the heading “General Principle” describes its coverage thus:

This section covers:

 

.           Congresses which are events sponsored and organised by a society, college, university or other non-company entity;

 

.           Symposia which are scientific meetings sponsored by a company as an independent event or as a satellite to a congress; and

 

.           Satellite meetings which are meetings held in conjunction with international or Australasian congresses and are under the auspices of the society, college or other non-company entity.

Educational meetings are said to be important for the dissemination of knowledge and experience to healthcare professionals.  Companies involved in these events must have the primary objective of the enhancement of medical knowledge and the quality use of medicines in Australia.  The section goes on to deal with trade displays which must be directed only to healthcare professionals. 

28                  Section 6.2 deals with hospitality and provides:

Hospitality

 

6.2.1    Any hospitality provided by companies either directly or by sponsorship or assistance to the organisers of educational meetings, must be secondary to the educational purpose.

 

6.2.2    For educational meetings directly organised by, and the responsibility of companies, all hospitality must be consistent with the professional standing of the delegates.  Meals provided at an educational meeting should not be extravagant or exceed standards which would meet professional and community scrutiny.  No entertainment should be provided.

Section 6.4 deals with sponsorship or involvement in independently organised congresses:

Companies may assist and make financial contributions to educational meetings organised by third parties and may sponsor the attendance of healthcare professionals at these meetings, if:

 

.           the primary objective of the meeting is the enhancement of medical knowledge and the quality use of medicines in Australia; and

 

.           any assistance or sponsorship provided will be used for activities that further that objective, which would not bring discredit upon the industry and are able to successfully withstand public and professional and community scrutiny and conform to professional and community standards of ethics and good taste.

29                  Section 6.5 deals with the sponsorship of healthcare professionals.  It requires that the selection criteria for sponsorship to attend educational meetings be based solely on the interests of the relevant professional in the area of medicine being discussed and his or her ability to communicate any relevant information to Australian healthcare professionals to enhance the quality use of medicines.  Section 6.6 relates to the selection of venues for educational meetings organised by or the responsibility of companies.  The venues must be “suitable for the attainment of the primary objective of enhancing medical knowledge and the quality use of medicines in Australia”.  They must be able to withstand “public and professional scrutiny and conform to professional and community standards of ethics and good taste”.

30                  Section 6.8 allows companies sponsoring healthcare professionals to subsidise their travel to and from and within Australia to symposia and/or congresses.  The symposium or congress must be directly related to the professional’s area of expertise.  Travel within Australia should be by economy class unless business class is appropriate.  For international travel, economy or business class should be used.  Travel costs and expenses for family or travel companions must not be paid for or subsidised by the sponsoring company. 

31                  Section 7 deals with the sponsorship, by members of the pharmaceutical industry, of healthcare professional organisations and activities involving healthcare professionals.  Again there is a general requirement of conformity to professional and community standards of ethics and good taste and an objective of enhancing the quality use of medicines (7.1.1).  Sponsorship is not to be conditional upon an obligation to prescribe a particular product.  Nothing is to be offered or provided in a manner or on conditions that would interfere with the independence of a healthcare professional’s prescribing or dispensing practices (7.1.2).

32                  Section 10 of the Code deals with relations with healthcare professionals.  It opens with a general statement that companies may choose to support, initiate or become involved in activities with healthcare professionals.  The formula is again used:

Such involvement either by financial or other means must be able to successfully withstand public and professional scrutiny, and conform to professional and community standards of ethics and of good taste.

Benefits must not be offered to healthcare professionals to influence them in their prescribing or dispensing of pharmaceutical products.  Interactions must have the primary objective of enhancing medical knowledge and the quality use of medicines in Australia. 

33                  In relation to entertainment, s 10.1 provides:

Interactions between companies and healthcare professionals must not include entertainment.

 

An exception to this requirement is that educational meetings of two or more day’s duration may include a modest opportunity for unstructured and individual recreational activities at the delegate’s own expense.


Section 10.2, relating to hospitality, provides:

Hospitality

 

Any hospitality offered by companies to healthcare professionals must be secondary to the educational content, provided in an environment that enhances education and learning and reflect the professional standing of the audience.  The venue and location at which a company provides hospitality to healthcare professionals must be conducive to education and learning and must not be chosen for its leisure or recreational facilities.  Meals provided by companies at an educational meeting should not be extravagant or exceed standards which would meet professional and community scrutiny.

 

A company must not subsidise or pay for the costs of family or companions of attendees at educational meetings.

Section 10.3 deals with subsidised travel and imposes restrictions along the lines of those already referred to.  Other provisions of s 10 relate to the supply of materials for medical education and the use of medical literature and reprints. 

34                  Section 10.6 contains new provisions relating to the use of healthcare professionals as consultants and members of advisory boards to companies.  Section 10.6 states:

Companies may legitimately seek the services of suitably qualified and experienced healthcare professionals to provide advice and guidance on a range of matters.  It is appropriate that healthcare professionals who provide these services be offered remuneration and reimbursement for reasonable travel, accommodation and meal expenses incurred as part of providing those services.

There follow criteria for consultancy arrangements and membership of advisory boards set out in ss 10.6.1 through to 10.6.5.  There must be a legitimate need for the services clearly identified in advance of requesting the services of the healthcare professional.  The purposes and objectives of the interaction must be to obtain advice and be clearly articulated in the original advice to healthcare professionals.  Moreover there must be a written contractual agreement outlining the nature and duration of the services to be provided. 


The Code of Conduct – enforcement committees

35                  Section 11 provides for the administration of the Code and states that it shall be supervised by the Code Committee which will be responsible to the Medicines Australia Board.  The Committee may seek external expert advice in reaching a decision as to whether or not a breach of the Code has occurred.

36                  Section 11.1 sets out procedures which shall apply in the event of Medicines Australia receiving information alleging contravention of the Code by a member.  The complaint is to be acknowledged in writing by the Chief Executive Officer of the Association or the relevant delegate within five working days of receipt.  The respondent to the complaint shall be given full details of information lodged with the Association.  It will be invited to state within ten days whether or not the information supporting the complaint is correct and to give any answer or explanation which may be deemed necessary.  The respondent is to provide the Association with whatever references or information are deemed by the Chief Executive Officer or delegate to be necessary to fully investigate the complaint. 

37                  Clause 11.1.2 provides:

If the Code Committee, after making such further inquiry as is necessary or desirable, meets and reaches a decision that a breach of the Code has occurred, the Chief Executive Officer or his or her delegate will:

 

(a)        within two (2) working days of the Committee meeting notify the Subject Company and the complainant in writing that a breach has been found and identifying the section of the Code that the Committee has determined has been breached.

 

(b)       within ten (10) working days of the Committee meeting provide copies of the extract of the minutes of the Committee meeting to the subject company and the complainant which will include a full explanation for the decision made and the form of any sanction to be applied to the subject company, as provided for under Section 12 of the Code.

 

The Code Committee may also request the Code of Conduct Secretary to notify Medicines Australia’s Board, and any other bodies or individuals with a direct interest, of the Committee’s decision.  

 

All findings and/or sanctions of the Code Committee shall remain confidential and shall not be released to any third parties until after the Subject Company and complainant have exhausted all appeal procedures and the outcome of any appeal is known.

There is a requirement under s 11.1.3 that if the Code Committee requires a company to cease or withdraw a promotional activity it shall at once comply with that ruling pending any appeal.  A suspended promotional activity is not to be reactivated before the conclusion of the appeal process (11.1.3).

38                  Section 11.2 sets out the membership of the Code Committee.  That is reproduced in the summary at Annexure 1.  Under s 11.3 no member of the Code Committee, whether a full member or observer, can have a conflict of interest with respect to either the therapeutic class of a medicine the subject of a complaint or with respect to the complainant or respondent member.  Medicines Australia asks the respondent to identify any potential conflicts of interest.  The complainant is asked to declare any potential conflict when notifying its complaint on the Complaint Submission Form or within 48 hours of lodging the complaint if the form is not completed.  Evidence was given by Ms Deborah Monk, the Director, Scientific and Technical Affairs of Medicines Australia that permanent members of the Code Committee are advised in advance of any meeting of the Committee of the complaints that are scheduled and asked to identify any potential conflicts. 

39                  Section 11.5 allows for complaints concerning the promotional activities of non-members to be forwarded to the non-member with an invitation to have the complaint adjudicated by the Code Committee and to abide by the Committee’s decision and any sanctions imposed.  If the non-member accepts such an invitation the complaint will proceed in accordance with the provisions of the Code.  Alternatively, where the non-member declines the invitation to have the complaint adjudicated by the Code Committee, the complaint may be referred to the Therapeutic Goods Administration (TGA) or to the ACCC.

40                  Section 12 provides for sanctions to be imposed where breaches of the Code have been established.  Section 12.1 provides that sanctions may consist of one or more of the following under the procedures laid down in s 11:

12.1.1  The requirement that the Subject Company take immediate action to discontinue or modify any practice which is determined to constitute a breach of the Code.  Written notification of this action must be provided to Medicines Australia within 5 working days of the receipt of the decision of the Committee.

 

12.1.2  Retraction statements, including corrective letters and advertising, to be issued by the Subject Company.  The number, format, size, wording, mode of publication, prominence, timing and method of distribution of such statements shall be subject to the approval of the Committee or its delegate prior to release and will in general conform with the original statement.  The Committee or its delegate, pursuant to the Rules, will ensure that such statement is made.

 

            It is the company’s responsibility to ensure that the requirements of the Committee or its delegate are met and to immediately inform and provide evidence to Medicines Australia of their fulfilment.

 

            As a general rule, there is a requirement for corrective action to be taken where Moderate or Severe breaches have been found.

 

            Any corrective action required by the Code Committee should be completed within 30 calendar days of the company being advised of the decisions (subject to any appeal that may be lodged under Section 13 of the Code).  Companies are required to provide a statement to the effect that the action has been undertaken together with a copy of the published advertisement or a copy of the final version of a corrective letter signed by the company Managing Director or Medical Director.

 

            Where corrective action has not been actioned within the required 30 calendar days from receipt of the minutes of the Code or Appeals Committee meeting, the Code Committee may impose a fine of up to $50,000 for that breach of not actioning the corrective action.

 

12.1.3  The imposition of a fine by the Code Committee on the Subject Company in accordance with Section 12.1.4 of the Code.  The fine must be paid within 30 calendar days from receipt of the minutes of the Code Committee meeting subject to any appeal that may be lodged under Section 13 of the Code.

41                  Section 12.1.4 sets out a schedule of fines that may be imposed by the Committee for breaches.  They are as follows:

Breach                                                            Fines

Technical Breach

Minor Breach                                                   maximum of

Moderate Breach                                             $100,000

Severe Breach

 

Severe Breaches where

activities have ceased                                        maximum of

Breach Repetitions                                           $200,000

Repeat of Previous Breach

42                  Section 12.2 provides:

If the Code Committee believes that the breach of the Code warrants the suspension or the expulsion of the Member, it will make such a recommendation to the Medicines Australia Board.  The Board, under the Rules of the Association, may impose the following Sanctions:

 

12.2.1  Suspension of the Member from the Association for a period to be determined by the Board, under the provisions of the Rules of the Association.

 

12.2.2  The expulsion of the Member from the Association, under the provisions of the Rules of the Association.

43                  Section 13 provides for appeals to be heard by an Appeals Committee.  Notification of an appeal must be lodged in writing by the respondent member within five working days of receiving advice of findings and/or sanctions.  The respondent is given five days thereafter to prepare a written response in support of its appeal.  The written appeal will be given to the complainant who is given a further five days to prepare any response.  The written appeal and any response shall be provided to the Appeals Committee.

44                 There is a new provision of the Code, in s 13.1.2,  under which a complainant may also lodge an appeal in relation to the findings of the Code Committee.  When a respondent or an industry complainant lodges an appeal under s 13.1 of the Code the appellant must lodge a bond of $20,000 with Medicines Australia.  A non-industry complainant is not required to lodge an appeal bond. In all appeals an administration charge of $6,000 is automatically retained by Medicines Australia.  This does not apply to non-industry complainants who are not required to lodge any bond.  The Appeals Committee may refund all, part or none of the balance $14,000 component of the bond in the event of the appeal being successful in whole or in part (s 13.1.3).  The membership of the Appeals Committee is prescribed in s 13.2  and is set out in Annexure 1.

45                  Section 14 of the Code provides for the monitoring of compliance.  There is a Monitoring Committee the membership of which is set out in the Code and reproduced in Annexure 1.   Section 14 provides, inter alia:

To support compliance with the Medicines Australia Code of Conduct, the Medicines Australia Monitoring Committee (Monitoring Committee) will proactively monitor selected promotional material and activities of Member Companies on a regular and ongoing basis.

 

The Monitoring Committee may review all forms of promotional material and activities for those identified products in light of the Code of Conduct and thereby support the Quality Use of Medicines. 

 

The aims of this monitoring process are to encourage compliance with the Code of Conduct, provide advice on compliance where necessary, obtain and publish statistical data on the rate of compliance and to provide an ongoing mechanism for the identification of potential future amendments to the Code of Conduct.

46                  Under s 14.1 member companies are required to submit to the Monitoring Committee ten copies of the type of promotional material identified by the Committee and which has been used over the past three months for the product under review.  If, following the review of the submitted material or activities, the Monitoring Committee considers that a breach of the Code may have occurred, the member in question will be contacted and asked to state whether the determination of the Monitoring Committee is correct and to give any necessary answer or explanation.  The Monitoring Committee may refer the matter to the Code Committee as a complaint.

47                  Section 16 provides for the issue by Medicines Australia of an annual report on the activities of the Code Committee, the Appeals Committee and the Monitoring Committee which will be available to the industry, members of the healthcare profession and the general public.  The Code Annual Report will contain information relating to complaints considered by the Code and Appeals Committees during the reporting year.  The classes of information to be included in the annual report are set out in s 16.1.  There is a new requirement under s 16.2 for Medicines Australia to publish a quarterly report on the outcomes of all complaints finalised during that quarter.  The report will be available on the Medicines Australia website.  This obligation is in addition to the annual report.

Code of Conduct – guidelines for complaints

48                  Appendix 1 to the Code, which contains guidelines for complaints, includes a requirement for inter-company dialogue prior to the lodgement of an industry generated complaint.  The guidelines state that Medicines Australia will not accept a complaint from a company unless it has been clearly demonstrated that inter-company dialogue has taken place and that, despite every effort on the part of both the complainant and the subject company, resolution of the matter has not been achievable. 

49                  Relevant definitions in the glossary include the following:

Breach repetitions” means when a company repeats the same breach in the promotion of any of the Company’s products.

 

Educational material” means any representation or literature which is intended to provide information about a medical condition or therapy which does not contain specific promotional claims.

 

Entertainment” means the provisions of any diversion or amusement.

 

Hospitality” means the provision of food and/or beverages.

 

Medical representative” means a person expressly employed by a company whose main purpose is the promoting of the company’s products to healthcare professionals.

 

Minor breach” is a breach of this Code that has no safety implications to the patient’s wellbeing and will have no major effect on how the medical profession will prescribe the product.

 

Moderate breach” is a breach of this Code that has no safety implications to the patient’s wellbeing but may have an effect on how the medical professional will prescribe the product.

 

Promotional material” means any representation concerning the attributes of a product conveyed by any means whatever for the purpose of encouraging the usage of a product.

 

“Repeat of previous breach” means where the same or similar breach is repeated in the promotion of a particular product of a company which has been found in breach.

 Severe breach” is a breach of this Code that will have safety implications to the patient’s wellbeing, and/or will have a major effect on how the medical profession will prescribe the product and/or will have a significant commercial impact on the relevant market.  A Severe breach of the Code will also be found for activities that bring discredit upon or reduce confidence in the pharmaceutical industry.

 

“Starter pack” means a quantity of a product supplied without cost to medical practitioners, dentists and hospital pharmacists.  Starter packs are also referred to as “samples” by healthcare professionals.

 

Intriguingly the Code defines “competition” as “any activity that includes an element of chance or random selection”.


Differences between Edition 14 and Edition 15

50                  A review of Edition 14 of the Code was initiated at the end of 2004.  The review process involved the issue of invitations for submissions from consumer and professional and other organisations.  Medicines Australia conducted seminars in July 2005 to discuss proposed amendments with member and non-member companies and again in October 2005 to communicate final proposed changes.  The review process led to the adoption of Edition 15 of the Code by Medicines Australia. 

51                  The principal changes between Edition 14 and Edition 15 were conveniently set out in the Medicines Australia’s closing submissions.  They can be paraphrased as follows:

1.         A new provision in s 3.9 of the Code requires member companies to ensure that no advertisements are placed with clinical tools or patient education materials which may be used by a prescriber for consultation or discussion with the patient (s 2.9.1).  So if a patient is to be shown educational or informational material relating to his or her condition on the doctor’s computer screen, the relevant images should not be accompanied by advertisements for pharmaceutical company products.   This change was the result of consideration by the Code Committee of an article submitted to the Medical Journal of Australia by a healthcare professional and treated by the Code Committee as a complaint.

2.         Sales representatives and those directly involved in the development, review and approval of promotional materials are required to complete the Code module of the endorsed Medicines Australia education program within a specified time of commencing employment (ss 4.13 and 4.14).

3.         Section 5.1 is expanded to set out a detailed regime governing the supply of starter packs, including record keeping, labelling, storage and security.   This change  resulted from the adoption by the Australian Health Ministers’ Advisory Council, on 28 June 2005, of recommendations contained in the Final Report of the National Competition Policy Review of Drugs, Poisons and Controlled Substances Legislation (Galbally Review).

4.         A new s 10.6 is inserted setting out detailed principles governing consultancy arrangements including the membership of advisory boards.  This resulted from two complaints set out in the Code Annual Report 2005 and referred to later in these reasons.

5.         Section 11.2 is amended to include a representative of the TGA as a member of the Code Committee.  Up to now the representative has been an observer only.

6.         Section 12.2 is amended to include a new sanction, being a fine of up to $50,000, where a requirement for corrective action imposed as a sanction is not taken within 30 days (s 12.1.2).

7.         Section 13 is amended to allow an appeal to be lodged by a complainant without cost where the complainant is not an industry member (s 13.1.2).  The amount of the bond required to be lodged where the appeal is by a respondent company or an industry complainant is increased from $5,000 to $20,000.  $6,000 is to be retained in each case as an administration fee (s 13.1.3).

8.         Section 14 is amended to include a consumer representative as a member of the Monitoring Committee (s 14.2).  This amendment was the result of a suggestion of the Consumers Health Forum. 

9.         Section 16 is amended to require quarterly reporting of the outcomes of all complaints (ss 16.2 and 16.4).

The authorisation applications

52                  There were three authorisation applications lodged with the ACCC by Medicines Australia on 30 November 2005 in relation to its Code. 

53                  The first application, No A90994, was made under subs 88(1) of the TPA for an authorisation under that subsection:

.           to make a contract or arrangement, or to arrive at an understanding, where a provision of the proposed contract, arrangement or understanding would be, or might be, an exclusionary provision within the meaning of section 45 of that Act

 

.           to give effect to a provision of a contract, arrangement or understanding where the provision is or may be an exclusionary provision within the meaning of section 45 of that Act.

 

54                  The second application, No A90995, made under subs 88(1) was for an authorisation under that subsection:

.           to make a contract or arrangement, or arrive at an understanding, a provision of which would have the purpose, or would have or might have the effect, of substantially lessening competition within the meaning of section 45 of that Act

 

.           to give effect to a provision of a contract, arrangement or understanding which provision has the purpose, or has or may have the effect, of substantially lessening competition within the meaning of section 45 of that Act.

The third application, No A90996, was made under subs 88(8) for an authorisation under that subsection to engage in conduct that would or may constitute exclusive dealing by requiring certain persons to participate in an education program endorsed by Medicines Australia from time to time, where the education program is not supplied by Medicines Australia.

55                  In respect of the first application, A90994, the contract, arrangement or understanding referred to was described in the application as “Medicines Australia Code of Conduct 15th Edition”.  The same description was applied to the contract, arrangement or understanding referred to in the second application, A90995.  The authorisation application A90996 related to Code provisions dealing with the participation of persons in an education program endorsed by Medicines Australia.  There was no authorisation sought for the guidelines prepared in relation to Edition 15 of the Code.

The ACCC determination

56                  The review process requires an application by the Tribunal of the relevant statutory tests to the conduct or proposed conduct in respect of which authorisation is sought.  It does not require a critique of the ACCC determination.  Nevertheless, the ACCC put a position to the Tribunal supportive of the conclusion reached in its determination.  The central question in this case relates to the condition imposed upon its authorisation by the ACCC and whether the conduct can or should be authorised without a condition or subject to some other condition.  A reference to the salient features of the determination by the ACCC may therefore be undertaken as a way of defining, within the framework of the relevant statutory tests, the real issues upon which the Tribunal’s attention is focussed in dealing with these applications.

57                  The determination began by describing the role of the ACCC in considering an authorisation application, a description of the applications and a chronology of the ACCC’s assessment process.  There followed a brief background description of the prescription medicine industry noting, inter alia, that Medicines Australia has 39 full and 9 affiliate member companies which it states represent over 90% of the Australian prescription medicine market.  The determination then referred to Commonwealth, State and Territory laws regulating therapeutic goods and the TGA.  This external regulatory framework is considered later in these reasons.

58                  The ACCC stated that the TGA is currently responsible for administering the Therapeutic Goods Act 1989 (Cth) (TG Act).  The ACCC states, and it is not in dispute, that in the near future the TGA and its New Zealand counterpart, the New Zealand Medicines and Medical Devices Safety Authority, will be replaced by a joint authority known as the Australia New Zealand Therapeutic Products Authority (ANZTPA).  That Authority will assume responsibility for regulating therapeutic products including prescription and over the counter medicines, complementary medicines, medical devices and blood products in both countries.  It is said that the start date for the new Authority is expected to be sometime in the second half of 2007.   The determination also referred to the Australian Pharmaceutical Benefits Scheme (PBS). 

59                  The Code was set out in overview in Pt 3. A revised version of that overview is Annexure 1 as already noted.  The substance of that overview is appended.   The determination also set out tables of statistics showing the number and source of complaints and the proportion of those complaints that resulted in the Code Committee finding a breach of the Code in the period from July 2002 to June 2005.  Statistics of the sanctions imposed in that period were recorded. 

60                  Part 4 of the determination contained a list of the submissions received and Pt 5 set out the statutory tests for authorisation under the TPA together with commentary on the application of the tests, the definition of public benefit and public detriment and the approach to assessment.

61                  In Pt 6 the ACCC undertook its evaluation of the applications.  It made the important point, at [6.5], that when considering an application for authorisation the ACCC is required under the TPA to assess the likely benefits and detriments of the arrangements before it.  It stated:

If it is not satisfied that the arrangements are likely to result in a net public benefit, it may impose conditions.  However, its role is not designing a better code, nor considering whether other regulatory arrangements may be more or less appropriate.

In addition the ACCC made the point, in answering a submission from the Australian Consumers Association, that the question whether self regulation of the pharmaceutical industry is appropriate is a matter for government policy and beyond the scope of the authorisation process. 

62                  The ACCC defined the relevant market for the purposes of the authorisation as (at [6.12]):

… the market for supply of prescription products used under medical supervision as permitted under Australian law…

The characteristics of the market were discussed in terms of its regulation by Commonwealth, State and Territory legislation.  Two effects of that regulation were identified.  The first is that the retail price of approximately 80% of prescription medicines is determined by the Australian Government through the PBS.  Decisions by doctors about which medicines to prescribe for their patients are therefore unlikely to impact on the price that consumers pay for those medications.  The second effect is that consumers cannot purchase prescription medicines directly.  They must first consult a medical practitioner whose role is to determine the appropriate medicine for that person.  Consumers therefore have a limited role in product choice. 

63                  The ACCC observed that medical practitioners might not always possess perfect information on the range of remedies available and may not have sufficient time to absorb the volume of scientific studies and research available on pharmaceutical products.  They might therefore rely heavily on information provided by pharmaceutical manufacturers.  Three factors reducing the impact of information imperfections on prescribing were identified ([6.16]):

.           under the TG Act, prescription medicines may only be supplied in Australia after being rigorously tested to ensure their safety, quality and efficacy

 

.           medical practitioners are highly trained professionals with expertise in assessing information about pharmaceutical products and

 

.           sections 52 and 53 of the TPA (and certain provisions of the TG Act) prevent pharmaceutical companies from engaging in misleading or deceptive conduct when promoting or providing information on medicines to medical practitioners.

 

64                  Areas of competition between pharmaceutical companies identified related to the development of new drugs and the supply of drugs no longer subject to patent. 

65                  The ACCC considered the future with and without authorisation.  At [6.20] it said:

Based on the evidence before it, the ACCC considers that the most likely scenario is that if the ACCC does not grant authorisation, Edition 15 of the Code will not come into effect.  The ACCC considers it is unlikely that Medicines Australia and its member companies would choose to enforce the Code without immunity from legal action under the TPA.

In that event, Edition 14 of the Code would continue until the previous authorisations granted in respect of it expired on 31 December 2006.  The most likely scenario would be that the conduct of members of the pharmaceutical industry would be regulated only by existing legislation.  There was no indication that it is likely that in the absence of the Code governments would pass legislation regulating the conduct of pharmaceutical companies in respect of the matters currently covered by the Code.  The ACCC pointed to a general move away from legislated regulation of the pharmaceutical sector. 

66                  The ACCC identified three main categories of conduct regulated by the Code, namely:

.           the provision of information about prescription medicines to healthcare professionals and the general public ;

.           the provision of benefits (financial and otherwise) to healthcare professionals; and

 .          other conduct, such as the supply, storage and handling of starter packs.


It considered claimed public benefits constituted by the reduction of misleading or deceptive conduct, the enhancement of compliance with the TG Act’s prohibition on direct to consumer advertising, the encouragement of rational prescribing practices and benefits resulting from the provision of information more generally.

67                  On the topic of misleading conduct, the ACCC noted that the majority of complaints received by the Code Committee related to the provision of information by industry members to healthcare professionals and the general public.  Consistently with previous authorisations, it found that the Code was likely to give rise “to a small public benefit by facilitating compliance with the general prohibitions on misleading and deceptive conduct contained in the TPA”.  Some of the amendments contained in Edition 15 would impose additional requirements on the provision of information by companies.  These might increase the likely public benefit by reducing the probability that companies would engage in misleading or deceptive conduct.  The additional elements included ([6.36]):

.           the requirement that company commissioned articles which contain promotional claims comply with the requirements for a primary or secondary advertisement

 

.           the additional requirements in respect of printed promotional material and

 

.           the requirement that any company employees directly involved in the development, review and approval of promotional/educational materials or who have direct interaction with healthcare professionals undertake the Code of Conduct component of the Medicines Australia education program within 12 months of commencing employment.

 

While acknowledging that a number of interested parties considered that the Code does not go far enough in regulating the provision of information by companies, the ACCC observed that authorisation requires assessment of the benefit and detriment of the Code as presented by Medicines Australia and not the design of an “ideal” Code. 

68                  Another claimed public benefit was the encouragement of compliance with the prohibition on direct-to-consumer advertising contained in the TG Act.  At [6.44] of its determination the ACCC said:

The ACCC notes that the prohibition on direct-to-consumer advertising is incorporated into the TG Act.  It therefore considers that if the Code encourages compliance with this legislative prohibition, it could result in a public benefit.

 

69                  The ACCC found that a limited public benefit could result from the prohibition of advertising on electronic prescribing software.  It remained concerned that the current wording of s 3.9.1 only prohibited advertising “with clinical tools or patient education material which may be used by a prescriber for consultation or discussion with a patient”.  This prohibition would not appear to prevent advertising in other functions of software packages which might be seen by a patient even though they are not “clinical tools or patient education material”.  The section might therefore not ensure full compliance with the legislative prohibition on advertising to consumers.  By way of example, the screen displayed when a prescription is printing may contain advertisements.  The ACCC considered that the restriction on advertising in s 3.9.1 imposed by the Medical Director software was self-imposed and any benefit resulting from it could not be attributed to the Code.

70                  The ACCC considered it likely that, absent the Code, pharmaceutical companies would market their products more aggressively to healthcare professionals.  While such promotion would still be required to comply with the prohibitions on misleading and deceptive conduct in the TPA, the Code would require companies to include additional information in promotional materials over that required by legislation.  Companies would not be required to include that information in promotional materials absent the Code.  The ACCC considered that some public benefit may therefore result from these provisions. 

71                  Under the heading of “Provision of information more generally”, the ACCC did not dispute that the provision of balanced and impartial information on pharmaceutical products may be a public benefit.  However, it considered that the benefit was likely to be nominal.  Companies would be likely to provide the information regardless of the existence of the Code as it might provide them with a competitive advantage.  Even in the absence of the Code the possibility of legal action under the TPA was likely to provide an incentive to ensure that information provided was not misleading or deceptive. 

72                  The second broad area of conduct regulated by the Code is the provision of benefits to healthcare professionals.  The ACCC referred to the pre-existing ethical obligation imposed on doctors requiring them to give primacy to the welfare of their patients and, in that context, cited guidelines produced by the Australian Medical Association (AMA) on doctors’ interactions with pharmaceutical companies.  Those guidelines provide that a doctor’s primary obligation is to the patient and that considerations involving the pharmaceutical industry are appropriate only insofar as they do not intrude upon or distort that primary obligation.  The ACCC observed however that the fact that pharmaceutical companies offer benefits indicate that they consider they can influence a doctor’s choices.  A range of organisations, including the AMA, the TGA, Medicines Australia and other similar overseas bodies, believe that at least some pharmaceutical companies are likely to engage in conduct that would result in at least some healthcare professionals inappropriately prescribing medicines.  The ACCC considered that a public benefit was likely to result from the reduction of inappropriate prescribing not based upon scientific evidence.   At the same time the ACCC expressed doubt that the Code was “actually effective at regulating companies’ conduct”.  It found therefore that the actual public benefit generated by the Code in this regard was small ([6.87]).   The preceding relates to Edition 14.

73                  In this area, Edition 15 of the Code has a broader scope than its predecessor.  It regulates the provision of some types of benefits not previously covered such as medical practice activities.  At the same time there was a continuing perception, since the previous determination, that the provision of benefits by pharmaceutical companies could inappropriately influence healthcare professionals prescribing.  The view seemed to be becoming more prevalent.

74                  In May 2006 the Royal Australasian College of Physicians (RACP) had updated its “Guidelines for ethical relationships between physicians and industry”.  These recommend, inter alia:

.           … that physicians reject gifts, including items of small value

 

.           … that while accepting hospitality in connection with a professional educational meeting may be acceptable, ‘it is current practice for doctors to reject pharmaceutical company entertainment invitations, and this response is appropriate and expected’ and

 

.           … that in respect of pharmaceutical companies’ support of meetings and other educational activities, physicians exercise ‘great care’ before accepting travel sponsorship or gifts.

The ACCC repeated its view that the amount of money that pharmaceutical companies spend on promotion is an indication of their belief that it will be effective.  It said (at [6.95]):

In light of this information, the ACCC considers that to the extent the Code prevents the provision of benefits that are likely to inappropriately influence healthcare professionals – and thus reduce the level of inappropriate prescribing that may otherwise occur – it could result in some public benefit.  However, the ACCC still doubts whether the code can effectively regulate company behaviour without an appropriate level of transparency.

75                  The ACCC referred to the Monitoring Committee activities and to its previous determination in which it had imposed a condition requiring that Committee to monitor members’ provision of benefits to healthcare professionals.  Medicines Australia had asked that the ACCC not re-impose that condition in relation to the current applications because of its “limited benefit” and its impact on regular activities of the Monitoring Committee.  Medicines Australia told the ACCC that compliance with the condition had taken up a significant proportion of the Monitoring Committee’s meetings in 2004 and 2005 so that it was unable to fulfil its primary function of reviewing promotional material.  Copies of  Committee reports were supplied to the ACCC which observed that they did not provide some of the details that it had requested be included, such as the number of meetings that raised concerns, nor what aspects of the meetings were of concern.  It was difficult to determine the effectiveness of the Code in regulating the provision of benefits to healthcare professionals and so the likely extent of any public benefit.  Following the release of its draft determination the ACCC formed the view that in order to be satisfied of the Code’s effectiveness in this regard there should be greater disclosure of the details of each event.  This view lies at the heart of the condition in contention in this application. 

76                  The regulation of members’ conduct in other regards was considered with particular reference to so called “starter packs” or free samples.  The distribution, storage and information included with clinical samples is dealt with in s 5 of the Code.  This section was revised and expanded as a result of the Galbally Review.  That Review recommended that States and Territories repeal legislation relating to the supply of samples of medicines and poisons and that Medicines Australia amend its Code to include those standards.  The recommendation was accepted by the Australian Health Ministers’ Council Working Party.  State and Territory Health Departments supported the amendments to the Code as they appeared to improve accountability and standards around the possession and handling of starter packs.  The ACCC considered that s 5 of the Code was likely to result in some public benefit particularly if the anticipated repeal of State and Territory legislation proceeded. 

77                  The ACCC assessed the effectiveness of the Code and said that the extent to which the benefits it had identified would flow would be determined by its effectiveness in regulating the conduct of pharmaceutical companies.  If not effective, the companies would be unlikely to comply with it and the public benefit would, in all likelihood, be minimal.  In its determination in relation to the 14th Edition, the ACCC had expressed concern about practical enforcement of the Code and found that the actual public benefit generated by it was small.  Criticisms of the Code referred to the vagueness of its terms which were capable of easy interpretation in favour of the industry.  Some interested parties considered the Code ineffective because of flaws in its administration including the following:

.           the complaints process is too onerous (particularly for consumers) and not transparent

 

.           the sanctions imposed by the Code committees are not significant, and hence do not deter companies from breaching

 

.           there is a lack of transparency surrounding the Code processes

 

.           the committees that enforce the Code are not independent

 

.           the monitoring undertaken by the Monitoring Committee is ineffective and

 

.           the processes for reviewing the Code are inadequate.

78                  The ACCC’s view of these criticisms, reflected in its determination, may be summarised as follows:

1.         The vast majority of complaints made under the Code are made by pharmaceutical companies.  It is difficult to determine whether the lack of complaints by others and particularly consumers is due to a lack of awareness of the existence of the Code or difficulty in accessing its mechanism ([6.141]).  Some amendments to Edition 15 including the provision of independent facilitators may improve accessibility for non-industry complainants.  While Medicines Australia advised that further changes are to be implemented to improve the complaints process, it is difficult to determine that these changes have actually had an effect until they have been operating for a period of time.

2.         The sanctions recorded thus far indicates it is far more likely that the Code Committee will require a company to take corrective action, including the withdrawal of material, than it will be to impose a fine.  Nearly all the fines imposed were at the lower end of the range.  It was a matter of concern that the Code and Appeals Committees did not appear to impose heavy sanctions in any circumstances.  This would raise some doubt about the effectiveness of the Code.

3.         Code Annual Reports indicated that some companies had been found to breach the Code a number of times.  Although it was said that these tended to be those with a greater product range, it was still a matter of concern that they were regularly breaching the Code and that the penalties imposed did not appear to reflect this.

79                  The ACCC remained concerned about the general level of transparency surrounding the activities of pharmaceutical companies and, in particular, whether the Code was effective in regulating what it regarded as a key area for potential public benefit, namely the provision of benefits to healthcare professionals.  It found that the level of complaints about this area of conduct continued to be low.  This could be due to a high level of compliance by member companies or a low level of awareness of what benefits companies are providing to healthcare professionals.

80                  Importantly, the ACCC said (at [6.149]):

The ACCC considers that it is difficult to determine the level of compliance in the absence of published information on the details of meetings.  Without this information, it is difficult for outside groups to access information on what activities companies are engaging in, or to understand the standards applied by the Monitoring Committee when assessing whether companies are complying with the Code.  This is particularly relevant as many of the standards are subjective (eg whether meals provided are ‘extravagant or exceed standards which would meet professional and community scrutiny’).

The ACCC stated that it was therefore imposing the condition which is in contention.

81                  The ACCC acknowledged the continuing role of the Monitoring Committee in the review of companies’ promotional material.  It noted that Edition 15 does not specify the amount or subject matter of material to be reviewed each year.  However Medicines Australia had stated that, at a minimum, it would review:

.           one type of promotional material in three different therapeutic classes;

.           three different promotional activities across all therapeutic classes.


This appeared to be less than that required by Edition 14.  The ACCC nevertheless considered it might be more useful for the Monitoring Committee to assess a wider variety of promotional activities than similar promotional activities over different therapeutic classes.  It particularly encouraged the review by the Monitoring Committee of “non-traditional” promotional activities such as company websites. 

82                  The ACCC then expressed the view that the Code’s effectiveness in actually modifying the conduct of pharmaceutical companies remained unclear.  It was therefore difficult to determine the extent of any public benefit ([6.155]).

83                  The ACCC accepted that the sections of Edition 15 of the Code regulating the provision of information were unlikely to significantly affect competition.  While there had been some amendments to those provisions, particularly in the additional information companies are required to include in their advertisements, these were not likely to have a significant impact on competition ([6.171]). 

84                  In connection with the regulation of provision of benefits to healthcare professionals, no interested party had considered that these provisions of the Code were likely to result in a lessening of competition.  The ACCC considered that the anti-competitive detriment resulting from the sections of the Code regulating the provisions of benefits to healthcare professionals was likely to be minimal ([6.181]).  It came to the same conclusion in relation to the regulation of the use of starter packs.

85                  The ACCC did not identify any other likely public detriment. 

86                  In considering the balance of benefit and detriment, the ACCC said it considered that the Code could result in some public benefit through:

.           enhancing compliance with the legislative prohibitions on misleading or deceptive conduct

 

.           enhancing compliance with the legislative prohibition on direct-to-consumer advertising and

 

.           encouraging rational prescribing practices.

It remained concerned about the Code’s effectiveness in regulating the conduct of pharmaceutical companies.  It considered that the extent of the public benefit that would actually result from the Code was uncertain particularly with respect to its regulation of the provision of benefits to healthcare professionals.  This was an area which the ACCC identified as a “key area of possible public benefit” ([6.197]).  It also considered that the Code was likely to result in minimal public detriment, particularly as its effect on competition between pharmaceutical companies was likely to be negligible. 

87                  At [6.199] of its determination, the ACCC said:

The ACCC considers it is difficult to precisely determine the potential (but not certain) public benefits arising from the code.  It therefore considers that there is some uncertainty about whether the public benefit outweighs the public detriment.  In cases such as this, the ACCC may consider whether it is possible to grant authorisation subject to conditions.  Conditions can be aimed at reducing the anti-competitive detriment or increasing the public benefit, to ensure that the public benefit outweighs the public detriment of the proposed arrangement.

It continued to be concerned about the level of transparency surrounding the activities of pharmaceutical companies in the provision of benefits to healthcare professionals.  After consideration of the submissions by Medicines Australia in this regard, the ACCC imposed a condition on its authorisation of the Code in the following terms:

1.         Medicines Australia will require member companies to, with regard to all educational meetings and symposia as defined in sections 6, 7 and 10 of the Code held or sponsored by that company:

 

a.         complete the table set out at Attachment A for each month of the financial year

 

b.         provide a copy of the completed table for two six month periods every year (July to December; January to June) to Medicines Australia at the end of each six month period.

 

Medicines Australia is required to:

 

c.         make publicly available on its website the completed table provided by each member company within three months of the end of each six month period

 

d.         at the end of each financial year the Monitoring committee must scrutinise the detail of three random months selected from information provided by the members.

 

2.         Further to the above, where the Monitoring Committee suspects a potential breach of the Code, it may request further information such as a copy of the invitation to the meeting and a copy of any printed material provided to attendees.

 

3.         If the Monitoring Committee is not satisfied that the conduct of the member company with regard to the meeting would withstand public or professional scrutiny (or otherwise considers that it may breach the Code of Conduct), it will refer a report in relation to the meeting, and the member company’s response, to the Code Committee as a complaint.

 

4.         The reporting and monitoring requirement will come into effect on 1 October 2006.

 

5.         The Monitoring Committee shall also provide a detailed report on its other activities to Medicines Australia for publication in the Code of Conduct Annual Report.  This Report shall also list any concerns that were forwarded to the Code of Conduct Committee as a complaint, setting out the name of the member company and the date it was referred.

 

88                  It should be noted that the Objects and Rules of Medicines Australia do not appear to empower it to require members to undertake specific actions except as provided by those Rules or the Code.  The condition as proposed appears to be beyond the power of Medicines Australia to implement.  The same result could no doubt be achieved by requiring, as a condition of authorisation, that the Code be amended to incorporate the reporting obligation.  This would appear to necessitate a special resolution of the Association under r 37.1.

89                  Medicines Australia sought authorisation for five years.  Section 11.4 of the Code states that Medicines Australia will carry out a review of the Code with input from interested parties every three years.  The ACCC observed that such a review could result in significant amendments to the Code.  It considered that in this situation it was likely that Medicines Australia would need to seek a revocation of the authorisations relating to Edition 15.  On that basis it thought it more appropriate to grant authorisation for the same time as Edition 15 is likely to remain current.  It granted authorisation for a period of three years.

The application for review

90                  In its application to the Tribunal for review made pursuant to s 101 of the TPA, Medicines Australia set out its dissatisfaction with the determination of the ACCC in the following respects:

(a)        The ACCC considered there was difficulty determining precisely the public benefit arising from the Code; and

(b)        The ACCC granted authorisation for a period of three years subject to a revised condition requiring publication of details of educational events held by members of Medicines Australia.

91                  Medicines Australia seeks from the Tribunal a determination as follows:

That authorisations A90779 and A90780 be revoked.  That applications  for authorisation A90994, A90995 and A90996 be granted for a period of five years without conditions.

92                  With its application for review Medicines Australia lodged a statement of facts and contentions in which it identified the following issues:

1.         Whether Edition 15 of Medicines Australia’s Code of Conduct is likely to result in such benefit to the public that the arrangements should be authorised, or as would outweigh the public detriment (if any) constituted by any lessening of competition that would be likely to result from the arrangements (as respectively required by subsections 90(6) and (8) of the Trade Practices Act).

 

2.         Whether the revised condition imposed by the Commission is appropriate in all the circumstances and contributes to the public benefit conferred by the provisions of the Code of Conduct.

 

3.         Whether authorisation should be granted for a period of five years or some lesser period.  

Statutory framework for authorisation

93                  Part VII of the TPA deals with authorisations and notifications in respect of restrictive trade practices.  The relevant parts of s 88(1) provide:

Subject to this Part, the Commission may, upon application by or on behalf of a corporation, grant an authorisation to the corporation:

 

(a)        to make a contract or arrangement, or arrive at an understanding, where a provision of the proposed contract, arrangement or understanding would be, or might be, an exclusionary provision or would have the purpose, or would have or might have the effect, of substantially lessening competition within the meaning of section 45; or

 

(b)       to give effect to a provision of a contract, arrangement or understanding where the provision is, or may be, an exclusionary provision or has the purpose, or has or may have the effect, of substantially lessening competition within the meaning of section 45.

The effect of authorisation is set out in pars (c), (d) and (e) of s 88(1) and is in substance to disapply the prohibitions imposed by s 45 on contracts, arrangements or understandings of the kind referred to in s 88(1)(a) and (b).

94                  Section 88(8) provides:

Subject to this Part, the Commission may, upon application by or on behalf of a corporation, grant an authorisation to the corporation to engage in conduct that constitutes or may constitute the practice of exclusive dealing and, while such an authorisation remains in force, section 47 does not prevent the corporation from engaging in that conduct in accordance with the authorisation.

95                  Relevant criteria for the grant of authorisations of the kind sought in this case are set out in s 90(6) which provides:

The Commission shall not make a determination granting an authorisation under subsection 88(1), (5) or (8) in respect of a provision (not being a provision that is or may be an exclusionary provision) of a proposed contract, arrangement or understanding, in respect of a proposed covenant, or in respect of proposed conduct (other than conduct to which subsection 47(6) or (7) applies), unless it is satisfied in all the circumstances that the provision of the proposed contract, arrangement or understanding, the proposed covenant, or the proposed conduct, as the case may be, would result, or be likely to result, in a benefit to the public and that that benefit would outweigh the detriment to the public constituted by any lessening of competition that would result, or be likely to result, if:

 

(a)        the proposed contract or arrangement were made, or the proposed understanding were arrived at, and the provision concerned were given effect to;

 

(b)       the proposed covenant were given, and were complied with; or

 

(c)        the proposed conduct were engaged in;

 

as the case may be.

96                  Section 90(7) imposes a similar test in relation to existing contracts, arrangements or understandings.  Section 90(8) deals with exclusionary provisions and third line forcing thus:

The Commission shall not:

 

(a)        make a determination granting:

 

            (i)         an authorisation under subsection 88(1) in respect of a provision of a proposed contract, arrangement or understanding that is or may be an exclusionary provision; or

            …

 

            (iii)        an authorisation under subsection 88(8) in respect of proposed conduct to which subsection 47(6) or (7) applies; or

            …

            unless it is satisfied in all the circumstances that the proposed provision or the proposed conduct would result, or be likely to result, in such a benefit to the public that the proposed contract or arrangement should be allowed to be made, the proposed understanding should be allowed to be arrived at, or the proposed conduct should be allowed to take place, as the case may be…

 

It is important to bear in mind the definition of “exclusionary provision” in s 4D of the TPA. 

97                  Section 91 of the TPA provides, in the relevant parts:

(1)       An authorization may be expressed to be in force for a period specified in the authorization  and, if so expressed, remains in force for that period only.

 

 

(3)       An authorization may be expressed to be subject to such conditions as are specified in the authorization.

 

There are also provisions relating to the revocation of prior authorisations and substitution of a replacement and the date of coming into effect of authorisations in those circumstances.  It is not necessary for present purposes to refer to the detail of those provisions although they have application to the present proceedings.

98                  Applications for review to the Tribunal may be made under s 101 which provides, inter alia:

(1)       A person dissatisfied with a determination by the Commission under Division 1 of Part VII:

 

(a)        in relation to an application for an authorisation or a minor variation of an authorisation; or

 

(b)       in relation to the revocation of an authorisation, or the revocation of an authorisation and the substitution of another authorisation;

 

may, as prescribed and within the time allowed by or under the regulations or under subsection (1B), as the case may be, apply to the Tribunal for a review of the determination.

99                  Section 102(1) provides:

On a review of a determination of the Commission under Division 1 of Part VII in relation to:

 

(a)        an application for an authorisation; or

 

(b)       an application for a minor variation of an authorisation; or

 

(c)        an application for, or the Commission’s proposal for, the revocation of an authorisation; or

 

(d)       an application for, or the Commission’s proposal for, the revocation of an authorisation and the substitution of another authorisation;

 

the Tribunal may make a determination affirming, setting aside or varying the determination of the Commission and, for the purposes of the review, may perform all the functions and exercise all of the powers of the Commission.

Section 102(2) provides that a determination by the Tribunal affirming, setting aside or varying a relevant determination of the ACCC is, for the purposes of the Act, to be taken to be a determination of the ACCC.

100               The role of the ACCC on a review is referred to in s 102(6), where it is said that:

For the purposes of a review by the Tribunal under this Division, the member of the Tribunal presiding at the review may require the Commission to furnish such information, make such reports and provide such other assistance to the Tribunal as the member specifies.

Under s 102(7) the Tribunal may, for the purposes of a review, have regard to any information furnished, documents produced or evidence given to the ACCC in connection with the making of the determination or the giving of the notice to which the review relates.

   

Who may apply for authorisation

101               Under s 88(1) authorisation is granted to a corporation.  The grant is made and can only be made upon application “by or on behalf of a corporation”.  “Corporation” is defined in s 4 as a body corporate that:

(a)        is a foreign corporation;

 

(b)       is a trading corporation formed within the limits of Australia or is a financial corporation so formed;

 

(c)        is incorporated in a Territory; or

 

(d)       is the holding company of a body corporate of a kind referred to in paragraphs (a), (b) or (c).

 

Where the applicant for authorisation is not itself a corporation within the meaning of the definition in s 4 it must bring the application on behalf of a corporation or corporations.

102               The standing requirement in s 88(1) was considered by the Full Court in Jones v Australian Competition and Consumer Commission (2003) 200 ALR 234; 131 FCR 216. A chicken meat processor applied for authorisation of a code of conduct which would have permitted collective bargaining by chicken growers.  The growers opposed the authorisation for unspecified economic and political reasons. Authorisation was, nevertheless, granted.  It was challenged by the growers on judicial review but that challenge was unsuccessful.  The Full Court allowed an appeal on the basis that the application for authorisation was not brought by or on behalf of the growers.  The submission accepted by the Court was that the application had been made by processors for the authorisation of growers to engage in collective bargaining in accordance with a code of conduct.   Section 88(1) did not provide statutory authority for an authorisation so applied for (at [60]). 

103               The second proposition upheld by the Full Court was that “s 88 does not, and cannot, authorise a code of conduct.  It authorises the applicant (or, if relevant, the person on whose behalf the applicant applies) to do something contemplated by s 88(1)(a) and (b)” (at [65]).  In that case although the application might have been differently framed to bring it within the authority of the ACCC to grant authorisation this did not allow the application to be treated as though it were seeking something not asked for (at [67]-[68]). 

104               The extended application of the Act under s 6 would operate to permit authorisation in respect of conduct by entities other than corporations where the conduct is in trade or commerce among the States or between the States and Territories or between two Territories.  The Tribunal in this case was not referred to evidence about the extent, if any, to which the conduct for which authorisation was sought involved interstate and/or territory trade or commerce.

General principles - the authorisation process

105               The provisions of the TPA relating to authorisation allow that certain classes of possibly anti-competitive conduct may be exempted from the prohibitions of the TPA if the public benefit deriving from the proposed conduct outweighs its anti-competitive detriment or, in the case of exclusive dealing, is sufficiently great that the proposed conduct or arrangement should be allowed to proceed.  The legislative scheme recognises that the benefits of competition may themselves be in competition with benefits flowing from anti-competitive conduct. It provides an administrative process to remove the risk that proposed beneficial conduct may contravene competition laws.    

106               The power conferred on the ACCC to authorise conduct is discretionary.  The opening words of s 88(1) are:

Subject to this Part, the Commission may, upon application by or on behalf of a corporation, grant an authorisation to the corporation.

Similar words are used elsewhere in s 88.  The requirement that the exercise of the discretion be “subject to this Part” means that necessary conditions prescribed by s 90 must be met.  But they are necessary conditions only.  Their satisfaction does not require that the ACCC grant authorisation.  There is a discretion to refuse authorisation even where the relevant public benefit test is satisfied.  That follows, not only from the discretionary language of s 88, but also from the way in which s 90 is framed beginning, as it does, with the words “The Commission shall not make a determination granting an authorisation … unless it is satisfied …” (emphasis added).  What may inform that discretion is considered below. 

General principles - the public benefit test

107               The words “public benefit” which lie at the heart of the authorisation process encompass “… the widest possible conception of public benefit… anything of value to the community generally, any contribution to the aims pursued by the society, including as one of its principal elements (in the context of trade practices legislation) the achievement of the economic goals of efficiency and progress” : Re Queensland Co-operative Milling Association Ltd; Re Defiance Holdings Ltd (1976) 8 ALR 481 at 510; 25 FLR 169 at 182-183 (Re QCMA).  The term “public” refers to the Australian public: Re Howard Smith Industries Pty Ltd (1977) 28 FLR 385; Re Rural Traders Co-operative (WA) Ltd (1979) 37 FLR 244.  The range of public benefits which may be considered is limited, in the context of authorisation, by the requirement that the benefit be the result or the likely result of the conduct which is the subject of authorisation: Re QCMA 8 ALR 481;25 FLR 169.  Thus the public benefit which may be considered under s 90 is confined to the extent that it must be related to classes of conduct amenable to authorisation and causally related to the conduct authorised.  Subject to those constraints the range of matters that may be brought to account as benefits is not limited.  While economic efficiency will loom large in many authorisation applications, the Act and its objects do not limit it to such matters.

108               Sections 90(6) and 90(7) of the TPA require consideration of the risk of “detriment to the public”, a concept extending to “… any impairment to the community generally, any harm or damage to the aims pursued by the society including as one of its principal elements the achievement of the goal of economic efficiency…”: Re 7-Eleven Stores Pty Ltd (1994) 16 ATPR 41-357 at 42,683.  Although “detriment” covers a wider field than anti-competitive effects in many cases the important detriments will have that character.  The relevant detriment will flow from the anti-competitive effect of the conduct to which authorisation is sought: Re QCMA  8 ALR 481; 25 FLR at 184.  This does not exclude consideration of other detriments which may be incidental to and therefore detract from, a claimed public benefit.  To that extent such detriment will be relevant in weighing the benefit: Re Southern Cross Beverages Pty Ltd (1981) 50 FLR 176. 

109               The test in s 90 requires assessment of “likelihoods” in relation to apprehended detriments and benefits.  In Qantas Airways Ltd [2004] ACompT 9, the Tribunal said (at [156]):

… for a benefit or detriment to be taken into account, we must be satisfied that there is a real chance, and not a mere possibility, of the benefit or detriment eventuating.  It is not enough that the benefit or detriment is speculative or a theoretical possibility.  There must be a commercial likelihood that the applicants will, following the implementation of the relevant agreements, act in a manner that delivers or brings about the public benefit or the lessening of competition giving rise to the public detriment. We must be satisfied that the benefit or detriment is such that it will, in a tangible and commercially practical way, be a consequence of the relevant agreements if carried into effect and must be sufficiently capable of exposition (but not necessarily quantitatively so) rather than “ephemeral or illusory”, to use the words of the Tribunal in Re Rural Traders Co-operative (WA) Ltd at 263.

 

In a passage in Re VFF Chicken Meat Growers Boycott Authorisation  (2006) ATPR 42-120  which was adopted by the Tribunal in Application by Michael Jools (2006) 233 ALR 115, the Tribunal said of benefits and detriments to be considered (at [83]):

 

there must be a real chance that [they] will eventuate, rather than merely being “possible” or even “more probable than not”.

 

110               The ACCC and therefore the Tribunal must have regard to “all the circumstances” in applying the authorisation test prescribed by the Act.  In Re QIW Ltd (1995) 132 ALR 225, the Tribunal said (at 234):

The examination of “all the circumstances” must in our view involve the tribunal in an examination of matters of detriment, including anti-competitive detriment, in order to conclude whether in all the circumstances there is such a degree of benefit to the public that the acquisition should be allowed to proceed…

111               In weighing anti-competitive detriment against public benefit there is not always a quantitative basis for comparison.  The Tribunal said in Qantas Airways Ltd  [2004] ACompT 9 (at [208]):

All other things being equal, detailed quantification is the best option.  However, quantification at all costs is not required by the Act, and has never been sought by the Tribunal.  There are diminishing returns to the quantification exercise.  Benefits should be quantified only to the extent that the exercise enlightens the Tribunal more than the alternative of qualitative explanation.

112               The test in relation to per se prohibitions, such as that applicable to exclusionary provisions or third line forcing, is simply whether the public benefit is such that the conduct “should be allowed”.  This flows from the unqualified nature of the statutory prohibition that would otherwise apply to such conduct.  There have been two views expressed in the Tribunal about the nature of this test.  As noted in Qantas Airways Ltd [2004] ACompT 9, it has expressed the view in a number of previous decisions that the test for authorisation is the same whether or not the provisions under consideration constitute a contract, arrangement or understanding governed by s 90(6) or s 90(7)  or an exclusionary provision or arrangement governed by s 90(8) or (9): Re Rural Traders Co-operative (WA) Ltd 37 FLR 244; (1979) ATPR 40-110 at 18,123; Re Media Council of Australia Authorisation; Re Australian Consumers’ Association’s Application (1987) 88 FLR 1 at 9; Re 7-Eleven Stores (1994) 16 ATPR 41-357 at 42,683.

113               In Re Australian Competition and  Consumer Commission by Australian Association of Pathology Practices Inc (2004) 206 ALR 271, the Tribunal said at [93]:

Re Rural Traders and subsequent cases have proceeded upon the basis that where the phrase “such a benefit to the public” is used in s 90, the reference is to a net benefit even though the subsection does not specifically designate a weighing of benefit and detriment.  We agree with that view.  But it does not follow, with respect, that the two tests are precisely the same.  That is because s 90(6) limits the consideration of detriment to “the detriment to the public constituted by any lessening of competition” resulting from the relevant conduct, whereas no such limitation is to be found in s 90(8).

 

The Tribunal held in that case that alleged detriment, arising other than by lessening of competition, and flowing from the arrangements or conduct to which authorisation was sought, should be taken into account in determining whether there was such a benefit to the public as is required by s 90(8).  The Tribunal noted that the earlier cases in which it had effectively equated the two authorisation tests, were cases in which the relevant detriment was constituted by lessening of competition.  It rejected the submission then put by the ACCC that the tests posed by ss  90(6) and (8) are the same. 

114               As the Tribunal observed in Qantas Airways Ltd [2004] ACompT 9, the correctness of the broader approach to detriment under s 90(8) and (9) was raised in Re EFTPOS Interchange Fees Agreement (2004) 26 ATPR 41-999 at [25] but not finally determined.  In the Qantas proceedings no detriment other than detriment arising from a lessening of competition was in issue.  The Tribunal there said (at [148]):

Accordingly, for present purposes, the practical application of the two tests is the same, although we reserve for further consideration in future proceedings the question of whether the two tests have differing applications.

 

115               The difference in the public benefit test applicable in s 90(6) on the one hand and under s 90(8) on the other, reflects the difference in language of the prohibitions in respect of which immunity is proposed.  Section 90(6) is concerned with conduct prohibited subject to a substantial lessening of competition.  Section 90(8) is concerned with per se prohibitions.  The relevant prohibition in the latter class of case being effectively absolute, it does not carry within it any implied qualification which would confine the character of the detriment to be assessed in determining whether there is “such a public benefit” as to warrant authorisation. Similarly, the Tribunal found in VFF Chicken Meat Growers’ Boycott Authorisation (2006) ATPR 42-120 at [71] that:

The distinction is rational.  With [substantial lessening of competition] SLC provisions there is reason to look at the actual detriment caused by the lessening of competition in the instant case because that is the only kind of detriment which makes the conduct unlawful in the first place.  Exclusionary provisions, however, are unlawful per se. No assessment of effect on competition is called for.  Accordingly, the test is one of public benefit (or net public benefit) not confined to competition issues.

 

 In our opinion the tests are different in the sense that a wider range of detriments than the lessening of competition can be considered in determining the sufficiency of the public benefit associated with proposed exclusionary conduct.

116               In Application by Michael Jools 233 ALR 115 the Tribunal treated as “not self-evidently correct” the ACCC’s approach that any net public benefit is sufficient to meet the public benefit requirement of s 90(8).  It said (at 120-121) :

It must be remembered that … an authorisation may be granted in respect of conduct which if engaged in in the absence of authorisation will result in the commission of a per se offence, that is an offence which parliament has assumed will by its very nature have an anti-competitive effect.  One should also not forget the very high penalties that can be imposed in respect of a contravention of provisions for which an authorisation may be granted.  These factors at least suggest that something more than a negligible benefit is required before the power to grant authorisation can be exercised.  Even if the power to grant an authorisation were treated, these factors at the least indicate that if particular conduct will give rise to only a negligible benefit perhaps the conduct should not be authorised.

 

 

General principles – the future with and without test

117               In assessing relevant detriments and public benefits associated with a proposal the subject of an authorisation application, the Tribunal looks to hypothetical futures with and without the proposed conduct.  As explained in Re QIW Ltd 132 ALR at 276 and repeated by the Tribunal in Qantas Airways Ltd  [2004] ACompT 9 (at [151]):

The test is not to compare the present situation with the future situation, were the acquisition to take place: a ‘before and after’ test.  Rather the test is to appraise the future, were the acquisition to take place, in light of the alternative outcome, were the acquisition not to take place: the ‘future with-and-without test’.

 

118               The necessary condition for authorisation under s 90(6) requires consideration and comparison of the anti-competitive detriment and the public benefit likely to result if the proposal were to be put into effect.  In the case of s 90(8) in its application to exclusionary provisions or third line forcing it is the public benefit likely to result if the proposal proceeds that must be considered (subject to discount for incidental or consequential detriment).  The words “likely to result” in each case require consideration of a hypothetical future in which the subject proposal is in effect. Consideration of that future allows assessment of the nature and scale of relevant benefits and detriments and the likelihood of their occurrence. 

119               Consideration of a future without the proposal in effect assists the public benefit and anti-competitive detriment assessment in at least three ways:

(i)         If the claimed public benefits are unlikely to exist without the proposal they can be described as benefits flowing from the proposal.

(ii)        If the claimed public benefits exist, in part, in a future without the proposal the weight accorded to them may be reduced appropriately.

(iii)       If, in a future without the proposal, there are public detriments which are removed or mitigated in the future with the proposal that may be considered as an element of the claimed public benefit flowing from the proposal.


An example of the latter case, relevant to the present application, arises where statutory regulatory systems are not able to provide enforcement coverage in respect of the full range of conduct which is the target of their underlying policy.  A voluntary industry code may provide an additional informal low cost complaint and enforcement mechanism covering both the conduct formally addressed by the statutory system and analogous or related conduct which the statutory system does not reach because of legal boundaries or resource limitations.  Even if the voluntary enforcement mechanism has gaps and deficiencies the additional coverage it provides may be identified as a public benefit by reason of its capacity to lessen the detriment associated with conduct within the letter or policy of the statutory theme.  The relationship between statutory regulation and complementary voluntary codes in such cases is sometimes referred to as “co-regulation”.

120               The so called “future with or without test” is not a comparison of a hypothetical  future in which the proposal the subject of the application is authorised against a hypothetical  future in which it is not authorised.  What the test requires is comparison of a future in which the conduct, the subject of the authorisation application, occurs with a future in which that conduct does not occur.  This is not the same as comparing a future with authorisation to a future without authorisation.  That is, a decision by the ACCC or, on review, the Tribunal, not to grant authorisation should not be equated with an assumption that the conduct the subject of the authorisation application would not occur. 

121               We note that in, Re Media Council of Australia (1987) 88 FLR 1 at 9 the Tribunal said:

When applying the statutory test of balancing public benefit against public detriment we must determine, so far as is reasonably practicable, what would be likely to happen in practice in the absence of this Tribunal’s authorisation of the 1986 Codes such that the 1986 Codes would not be operative. 

 

In its context that formulation is reduced to a consideration of the future without the proposed conduct for it assumed that the refusal of authorisation would result in the proposed conduct not proceeding.  It is not authority for the proposition that the Tribunal is required to compare the future in which the proposal is authorised with the future in which it is not. 

General principles - the discretion to authorise

122               Where a proposed contract, arrangement or understanding or proposed conduct satisfies the relevant public benefit test under s 90, the decision whether to authorise remains discretionary.  Given the wide evaluative considerations which may inform the assessment of public benefit, it is not a straightforward matter to ascertain the classes of consideration relevant to the discretion.   The discretion was referred to in discussion before the Tribunal as “residual”.  However that term may not be appropriate as it may have a tendency to distract the decision-maker from the need to have regard to the fact that it is exercising a discretion and not merely automatically authorising upon satisfaction of the relevant public benefit test.

123               The ACCC submitted that while public benefit is a broad concept, it is not all inclusive.  Its contextual construction directs the decision-maker to economic and consumer considerations: Re QCMA 25 FLR at 182-183.  It submitted that the exercise of the discretion under s 88 is to be guided by factors which would not be encompassed by “public benefit” but which are necessarily relevant to “all the circumstances of the application”.

124               The ACCC identified the kinds of factors upon which the Tribunal could conclude that it should not exercise a discretion either at all or without subjecting an authorisation to conditions – but which might not otherwise fall to be counted in the net benefit test.  These factors were said to include:

1.         A factor which does not constitute an anti-competitive or public detriment because it is not causally related to the proposed conduct but is relevant in all the circumstances of the application.  So a Voluntary Industry Code may regulate some, but not all, aspects of a certain area.  Insofar as the Tribunal considered that a detriment arose from failure to regulate the remaining aspects of that area, it might consider that omission a reason not to exercise its residual discretion or to do so conditionally notwithstanding that the reason would not be causally related to the proposed conduct.

2.         A factor which constitutes a public detriment which is neither an anti-competitive detriment nor a detriment entailed by a purported benefit (leading to the discount of that benefit) which is or is not causally related to the proposed conduct but which is relevant in all the circumstances of the application.  This could include a morally offensive provision in an otherwise net beneficial code of ethics such as a provision that involved inappropriate discrimination.

125               Medicines Australia’s position on the discretion was very much linked to the matters in issue in the Tribunal’s review and the use of the conditioning power which is discussed below.  Whatever the width of the discretion, it could not be used to create a regulatory framework thought by the ACCC or the Tribunal, as the case may be, to be desirable.

126               The discretion conferred on the ACCC and on the Tribunal by s 88(1) is enlivened upon satisfaction of the necessary conditions as to public benefit set out in s 90.  It is not in terms limited other than by the subject matter, scope and purpose of the TPA and the statutory context in which it appears: Water Conservation and Irrigation Commission (NSW) v Browning (1947) 74 CLR 492 at 505;  Oshlack v Richmond River Council (1998) 193 CLR 72 at 84.  The discretion is not narrowly confined given the enormous variety of circumstances to which it may have to be applied.  It is neither necessary nor desirable to try to define its outer limits.  It is sufficient to say that considerations relevant to the objectives of the Act may play a part in the exercise of the discretion even where the public benefit test has been satisfied.   In the context of this case those considerations link the discretion closely to the exercise of the conditioning power which is discussed in the next section.    

127               Where there is a likelihood of a substantial anti-competitive detriment flowing from the relevant conduct which is outweighed by a likelihood of more substantial public benefit it may be open to the ACCC to say that, notwithstanding the high level of public benefit, the anti-competitive detriment is unacceptable.  Proposed conduct which involves marginal or almost non-existent anti-competitive or other relevant detriment might satisfy the necessary conditions for authorisation with a weak public benefit case.  The ACCC in that event might come to the view that it did not wish to give its sanction to conduct giving rise to a sufficient but nevertheless weak public benefit result.  There is a difficulty so construing the discretion when an application for authorisation of an exclusionary provision or exclusive dealing  yields a finding that its likely benefit is such that the proposed conduct “should be allowed”.  Such a conclusion might be thought to pre-empt or subsume the exercise of the discretion.  Nevertheless the public benefit condition prescribed by s 90(8) must be read consistently with the existence of the discretion.  Absent any countervailing considerations, the discretion in such a case is most likely to be exercised in favour of authorisation.  It may be, however, that there is some other factor which justifies the exercise of a discretion to refuse authorisation.  This approach enables the test in s 90(8) to be applied in a way which is consistent with the way in which the language of s 90(6) requires the test prescribed in that sectionbe applied and consistent with the existence of the discretionary term “may” in s 88.

128               Where there is a low to non existent anti-competitive or other detriment the ACCC may be entitled to look closely at what it is being asked to authorise.  Authorisation is a public and official act of some seriousness.  It is not to be invoked for trivial cause.  To grant authorisation in such cases may risk like applications with wastage of resources as well as the risk that the authority of the ACCC itself may be diminished.  Similarly, where the anti-competitive detriment is low to non-existent the ACCC may be entitled to say, as a matter of discretion, that it would only authorise the conduct if the public benefit to be derived from it, beyond that necessary to outweigh the anti-competitive detriment, or satisfy the per se conduct test is substantial.  That is to say that the ACCC can require, in the proper exercise of its discretion, that the conduct yields some substantial measure of public benefit if it is to attract the ACCC’s official sanction.  The Tribunal is in a similar position.  Subject to the discussion which follows, the ACCC may impose a condition on its authorisation which effectively requires that the relevant contract, arrangement, understanding or conduct yield a more substantial public benefit than is required to get over the threshold of the necessary conditions comprising s 90.  Alternatively, it may impose a condition requiring that the public benefit identified be enhanced in terms of the likelihood of its realisation.

General principles - conditions upon authorisation

129               Section 91 of the TPA provides that an authorisation may be expressed to be subject to such conditions as are specified in it.  There is no express limit upon the kinds of conditions that may be imposed.  That does not mean that there is an unconfined discretion to impose whatever conditions the ACCC or the Tribunal on review, considers appropriate.  The power to impose conditions is constrained, like the discretion discussed above, by the subject matter, scope and purpose of the statute.

130               The nature and function of the conditions which can be specified in an authorisation pursuant to s 91(3) are to be discerned by reference first to the meaning of the word “condition” and its immediate statutory context.  The relevant ordinary meanings of  “condition” are:

1.         Something demanded or required as a prerequisite to the grant or performance of something else; a provision, a stipulation.

2.         In a legal instrument, eg a will or contract, a provision on which its legal force or effect is made to depend.

3.         Something that must exist or be present if something else is to be or take place; that on which something else is contingent; a prerequisite.

4.         A restraint qualification or restriction.

131               The authorisation may be expressed to be “subject to” a condition.  This suggests that the authorisation is not effective unless the condition is satisfied.  The kinds of condition which have that effect are:

1.         A condition which requires something to be done before the authorisation comes into effect.

2.         Something which must be done for the authorisation to continue.

132               The subject matter of the authorisation is necessarily a contract or arrangement, an understanding or covenant or the conduct giving effect to it.  A condition purporting to require a variation of the terms of the contract, arrangement or understanding is logically capable of being a condition precedent.  Upon the variation being effected, the condition can take effect.  The second logical category, a continuing condition, may be of a kind that requires the party authorised to do certain things, either continuously or periodically.  So the provision to the ACCC of quarterly returns indicating that certain things have or have not been done could be a form of continuing condition with the authorisation lapsing in the event that it is not observed.   An authorisation may be made subject to a condition precedent and a continuing condition.

133               A condition may be imposed upon authorisation for reasons which include the following:

1.         In a case in which there is no or insufficient public benefit in the proposed contract, arrangement, understanding or conduct satisfying the ACCC for the purposes of s 90(6) or 90(8) that authorisation can be granted, a condition may be imposed requiring a variation of the proposal which would yield the requisite public benefit.  Such a condition may:

            (i)         reduce the anti-competitive detriment of the proposal for the purposes of s 90(6);  

            (ii)        reduce the public detriment which would otherwise cause the claimed public benefit to be discounted;

            (iii)        increase the public benefit to a level assessed by the ACCC to be sufficient for the purposes of the applicable statutory test.

2.         In a case in which a theoretically sufficient public benefit has been identified a condition may be imposed to vary the proposal so that the likelihood of the benefit resulting is raised to a sufficient level.

3.         In a case in which the proposal has satisfied the relevant public benefit test under s 90(6) or 90(8) as the case may be, a condition may be imposed without which the ACCC would not be prepared to exercise its discretion in favour of authorisation.  The range of permissible conditions under this head is necessarily limited by the range of considerations relevant to the exercise of the discretion. While not in terms mandated by the conditioning power, it would be appropriate in exercising that power that the ACCC (or the Tribunal) have regard to any burdens it may impose upon the party seeking authorisation.

134               The Tribunal accepts that where a proposed contract, arrangement or understanding, covenant or conduct is an industry code of ethics which creates a system of self-regulation in the public interest, it is not for the ACCC or the Tribunal to use the conditioning power and its discretion in order to construct and impose its ideal or preferred system of self-regulation.  The imposition of a condition designed to enhance or increase the likelihood of benefits said to flow from a voluntary code is a far cry from redrafting the Code.  

General principles - the function of the Tribunal on review

135               The function of the Tribunal on review is to undertake a complete rehearing of the authorisation application: Re 7-Eleven Stores Pty Ltd 16 ATPR 41-357; Re Media Council of Australia 88 FLR 1.  It must make its own findings of fact and reach its own decision as to whether authorisation should be granted or not and, if so, any conditions to which it is to be subject: Re Herald and Weekly Times Ltd (1978) 17 ALR 281 at 295-296.

136               In this case counsel for Medicines Australia accepted that there was a degree of consensus about a lot of the evaluation undertaken by the ACCC in relation to the Code and that the focus of the application for review from the point of view of Medicines Australia, was largely upon the conditioning power.  Medicines Australia’s primary position was that there was no need to get to the conditioning power.  The Tribunal was told by counsel for Medicines Australia that it could treat much of what is contained in the determination by the  ACCC as common ground.

137               Notwithstanding that there is a degree of common ground the Tribunal must itself be satisfied, before authorising the proposed Code, conditionally or otherwise, that the statutory tests are satisfied and that it is appropriate that the discretion under s 88 be exercised in favour of authorisation. 

138               The Tribunal in undertaking a review of an authorisation determination is not concerned to ascertain whether the ACCC was right or wrong in the conclusion it reached or whether it could have better formulated its determination.  It is for the Tribunal to assess the applications for authorisation on their merits and by reference to the information and evidence given to the ACCC and any material that the parties wish to put before the Tribunal: Re Queensland Timber Board  (1975) 24 FLR 205 at 208; Re QCMA 25 FLR 169

139               It was submitted for Medicines Australia that the condition which the ACCC imposed on its determination is largely irrelevant to the Tribunal’s consideration.  It is true, as Medicines Australia pointed out, that the Tribunal’s powers on review include the power to attach conditions to any authorisation which it may grant.  The necessity for or appropriateness of the ACCC’s condition is not a point of departure in the review process.  However the Tribunal may, in reviewing the determination, have regard to the ACCC condition and any alternative conditions proposed by Medicines Australia and may decide whether either of them is necessary or appropriate.  It may conclude that no condition is necessary or appropriate.  It may conclude that some condition other than those proposed by either the ACCC or Medicines Australia should be imposed.  That is not to say that it would be appropriate to impose, without prior notice, a condition whose content and practical implications had not been debated before the Tribunal.

The application for authorisation

140               The application for authorisation in each case was made by Medicines Australia.  Medicines Australia is an incorporated association.  Nothing was put to the Tribunal to suggest that it was a trading or financial corporation.  Nor was the extended application of the TPA involved.  The authorisation applications therefore could only be valid if made on behalf of corporations. 

141               The business of Medicines Australia was described in Application A90994 as:

Industry body representing pharmaceutical suppliers in Australia.

 

The relevant contract, arrangement or understanding was described in that application as “Medicines Australia Code of Conduct 15th Edition” and its parties as:

Current and future members of Medicines Australia Inc.

 

Under the heading “Name and Address (where known) of parties and other persons on whose behalf application is made” the following appeared:

 

Current and future members of Medicines Australia Inc.

 

A similar form was followed for Application A90995 and for A90996. 

142               The membership of Medicines Australia comprises both firms and corporations.  The Tribunal accepts that the authorisation applications were made on behalf of the corporate members of Medicines Australia.  Their continuing agreement to be bound by the Objects and Rules of the association and thereby to be bound by the Code, would constitute participation in the contract, arrangement or understanding represented by the terms of the Code and the conduct involved in its implementation. 

143               The Tribunal accepts that the authorisation applications were properly before the ACCC and that the review applications are properly before the Tribunal.

The evidence before the Tribunal

144               Medicines Australia called the following witnesses:

1.         Deborah Jane Monk, the Director, Scientific and Technical Affairs of Medicines Australia.

2.         Kenneth Williams, an Oncologist and member of the Medicines Australia Appeals Committee.

3.         Harry Michael Nespolon, a general practitioner and member of the Medicines Australia Code Committee.

4.         John Paul Seale, clinical pharmacologist and member of the Medicines Australia Code Committee.

5.         Gary Jonathan Phillips, Director of Pharmaxis Ltd.


In addition Medicines Australia relied upon the affidavit of Stephen Ackland, a medical oncologist, which was received subject to certain conceded objections.  Dr Ackland was not cross-examined on his affidavit.  The ACCC called one witness, David Alexander Henry, a Professor of Clinical Pharmacology.  It also relied upon the affidavit of Dr Ian Haines, a medical oncologist which was received subject to objections which were conceded.  Dr Haines was not cross-examined. 

145               Statements of each of the witnesses affirmed before the Tribunal were tendered as their evidence-in-chief.  Each of the witnesses called before the Tribunal was then cross-examined (not including Drs Ackland and Haines).  A variety of documentary exhibits were also before the Tribunal.  It is convenient to outline the evidence of each of the witnesses called.

Evidence of Deborah Jane Monk – on the administration of the Code by Medicines Australia

146               Deborah Monk is a clinical pharmacist.  She has worked for Medicines Australia since July 1989.  She reports to the Chief Executive Officer.  Since October 2003 she has led a team known as the Code Secretariat.  The other members are Ms Heather Jones, the Manager, Marketing Strategies and Code of Conduct Secretary and Ms Nerida Inglis, the Administration Officer.  Ms Monk described her responsibilities as:

(a)        ensuring the Code is reviewed regularly to reflect the professional and societal expectations of ethical conduct by pharmaceutical companies;

(b)        overseeing the administration of the Code complaints and appeals process;

(c)        overseeing the monitoring of company activities as required by the Code and the communication of the outcome of those reviews to members;

(d)        organising educational activities relating to the Code for members, non-member companies and other stakeholders to encourage awareness and compliance;

(e)        managing the process of applying for authorisation of the Code by the ACCC when required. 

In 2006 at least 60% of her time up to October was spent on Code-related issues.  A similar percentage of her time was spent on Code-related issues in 2005 and about 40% of her time in 2004.  

147               Ms Monk described the administration of the Code.  Early in 2006 Ms Jones had prepared a Code of Conduct Procedures Manual setting out the role of the Secretariat and procedures in relation to the committees, including selection and tenure of members, the complaints process and Code reports.  The manual was a response to a recommendation to the Medicines Australia Board from a Review of Governance Issues Pertaining to the Code.  The review was undertaken by Board members, Mr Lilley and Ms Mann.  The manual was ratified by the Board in anticipation of Edition 15 of the Code coming into effect.  It is used by the Secretariat.   

148               Ms Monk described the procedure for member company complaints.  The guidelines in Appendix 1 to the Code require inter-company “dialogue” before the lodgment of such complaints.  Inter-company complaints will not be accepted unless it has been clearly demonstrated that dialogue has taken place between the complainant and the respondent and that despite every effort resolution of the matter has not been achievable. 

149               Changes made to Appendix 1 in Edition 15 require the involvement, in the dialogue, of the most senior executive responsible for the prescription medicines business in each company.  The complaint must be endorsed by the complainant company’s representative.  The purpose of the amendment was to ensure that senior executives know about the complaint.  Companies are required to document the position of each party after dialogue.  This includes evidence of any offers made by the respondent company for resolution and of the complainant’s willingness to accept such offers. Evidence of any corrective action is required.  Medicines Australia provides a mediation facility. Sometimes a Medicines Australia employee will meet with either a complainant or a respondent before a complaint is lodged to explain an aspect of the Code in more detail or, after a decision of the Code Committee, to attempt to better explain the decision. 

150               There was no formal mechanism by which Medicines Australia can become aware that a complaint had been resolved through inter-company dialogue.  Sometimes Ms Monk  becomes aware informally of such a resolution.  She could not recall ever having seen an instance of corrective advertising resulting from inter-company dialogue. Neither Medicines Australia nor the general public were involved in “successful” outcomes.  She accepted the fairly obvious proposition that the purpose of the guidelines condition in Appendix 1 is “to encourage and indeed facilitate inter-company resolution of complaints about promotional material”. 

151               The emphasis on “dialogue” in relation to complaints by members of the pharmaceutical industry against each other indicates a preference for private resolution over public exposure of matters that may have a public interest dimension.  The want of transparency in private resolution of complaints may conceal concessions made by competitors in the interests of avoiding internecine strife including retaliatory complaints.  Private resolution may also be motivated by a desire to avoid exposure which could reflect upon the industry as a whole.  That is not to say that the Tribunal finds that any private resolution has in fact been influenced by such considerations.  It is sufficient to observe that the process leaves open that risk.  In making that observation, the Tribunal accepts that private dispute resolution is well established, not least in the Australian commercial community.  Even after court proceedings have been commenced parties may be referred to confidential mediation by a court or engage in private negotiations to try to settle their differences.  Such resolutions may result in a discontinuance of the proceedings or consent orders underpinned by agreements which may never enter the public arena.  In that respect the criticism of inter-company “dialogue” is a criticism which can be levelled at private dispute resolution generally.  The arguments underpinning such criticism were laid out more than 20 years ago in an article by Professor Owen Fiss of Yale University entitled “Against Settlement”: Fiss O (1984) 93 Yale Law Journal 1073.

152               Company complaints about promotional material must be supported by specific information including copies of the alleged contravening material, identification of the section of the Code alleged to have been breached, an explanation of the alleged breach, supporting data and evidence to support the complaint. The complaint is required to set out alleged consequences of the breach with regards to healthcare professionals and/or consumers.  

153               Where a complaint comes from a consumer or otherwise from outside the industry,  the Code Secretariat may assist in its preparation and provide information on the Code.  In practice Ms Monk and Ms Jones are available to complainants both inside and outside the industry by telephone and email should they wish to discuss a potential complaint before submitting it in writing.  It is extremely unusual for a complaint to be rejected.  The Code Committee, however, will not rehear a complaint unless there is an allegation that material found to contravene the Code has not been withdrawn or an activity has not ceased.

154               Under Edition 15 of the Code Medicines Australia proposes a panel of independent facilitators to assist non-industry complainants.  The appointments will be based upon experience in dispute resolution, knowledge of, or the ability to quickly gain familiarity with the Code and knowledge and understanding of the pharmaceutical industry.  Expertise and experience in trade practices law and litigation will also be a criterion, as will a limited potential for conflicts of interest. 

155               Medicines Australia has also prepared a brochure entitled “Information for Members of the General Public” in anticipation of Edition 15 coming into effect.   The brochure provides information in relation to the Code, the roles of Medicines Australia, the complaints handling process and how to make a complaint, including the role of independent facilitators.  The brochure was prepared at the suggestion of the Consumers’ Health Forum that such a document would assist and encourage greater numbers of consumer complaints. 

156               In the financial years 2003-2004, 2004-2005 and 2005-2006 an increasing proportion of complaints were made by healthcare professionals and other non-industry complainants.  In 2003-2004, six complaints were made by healthcare professionals and 24 by member and non-member companies.  In 2004-2005, 11 complaints were made by healthcare professionals and 31 by member and non-member companies.  In 2005-2006 there were 11 complaints by healthcare professionals and 12 by member and non-member companies.

157               Sometimes the Code Committee receives complaints about the conduct of pharmaceutical companies who are not members of Medicines Australia.  In Ms Monk’s experience, non-members typically will participate in the Medicines Australia complaints process.  Where a complaint is made, the non-member is invited to have it heard by the Code Committee.  If the non-member accepts the invitation it also agrees to comply with the Committee determination as is provided for in s 11.5 of Edition 15.  Where a non-member refuses to have a matter considered by the Code Committee, Medicines Australia reserves the right to refer it to the TGA.  In 2003 a non-member company was directed by the Code Committee to print a corrective advertisement and pay a $5,000 fine.  It was reluctant to comply with the sanction.  The Medicines Australia Secretariat referred the matter to the TGA whose response was to instruct the company to comply, which ultimately it did.

158               There was a decrease in complaints from pharmaceutical companies in 2005-2006 while the number of complaints from healthcare professionals was constant.  The increase in  the proportion of complaints from healthcare professionals was attributable to the drop in industry complaints.  By far the greatest number of complaints related to promotional material.  In our opinion it is difficult to draw sensible conclusions about complaint trends given the small number of complaints made from year to year.  But we are satisfied that the great majority relate to promotional materials provided by pharmaceutical companies.

159               Ms Monk and other Secretariat members adopt the role of advisors to the Committee.  When a complaint is considered by the Committee, representatives of the respondent company and the complainant are not present.  The  Committee’s decision is made on the written complaint and the respondent company’s response.  The Chairman endeavours to find a majority decision and if it is not possible, the chairman can make a casting vote.  That is a very rare occurrence. 

160               Both the complainant and the respondent company must be informed of the outcome of the complaint (cl 11.1.2).   Ordinarily following a Code Committee meeting Ms Jones prepares a first draft of the minutes and sends them to Ms Monk to review.  She settles the draft which is circulated for comment to the Code Committee members at the meeting.  The minutes are quite detailed so that both complainant and respondent company will have a good understanding of the reasons for the Code Committee’s decisions.  A copy of the relevant extract of the minutes is provided to the complainant and the respondent company within ten working days of the meeting. Sometimes there is a delay of a day or two because the Secretariat has been waiting for comments from one or more Code Committee members.  A table showing the outcome of complaints by the Code Committee in the financial years 2003-2004 through to 2005-2006 is Annexure 2 to these reasons.     

161               Ms Monk described the appeal process.  Details of the outcome of appeals considered in financial years 2003-2004, 2004-2005 and 2005-2006 were also set out in a table. That appears as Annexure 3 to these reasons.  A further table showed that in the financial years from 2003/2004 to 2005/2006 respectively the average length of time to resolve complaints not subject to appeal was 30 days, 28 days and 29 days respectively.   The average length of time taken to resolve complaints subject to appeal was 72 days, 68 days and 61 days. 

162               In [6.143] of its final determination the ACCC observed that it is far more likely that the Code Committee will require a company to take corrective action than to impose a fine and that nearly all the fines imposed were at the lower end of the range.  It also commented that the Code of Conduct Annual Report indicated that some companies have been found to breach the Code on more than one occasion but that the penalties imposed do not appear to reflect that repeat offending.    

163               The maximum fines provided for under recent editions of the Code has increased.  In Edition 12 the maximum was $20,000 and a higher maximum of $30,000 applied in case of a repeat breach or breach repetition.  In Edition 13, adopted in September 2000, the maximum fine was increased to $50,000 and to $75,000 in case of a severe breach, repeat breach or breach repetition.  Under Editions 14 and 15 the maximum fine is $100,000 and $200,000 in case of a severe breach, repeat breach or breach repetition.  Unless a breach is determined to be a repeat breach or a breach repetition it is not considered appropriate to impose a higher sanction solely for the reason that the respondent company has previously breached the Code.  There were very few instances of repeat breaches or breach repetitions as defined in the Glossary.  Ms Monk gave two examples.  In one case a company called Servier continued to use at a trade display promotional material previously found in breach of the Code.  The sanction reported in the Code of Conduct Annual Report 2004, was a fine of $30,000.   The Report for 2006  deals with a repeat breach by Pfizer Australia Pty Ltd (Pfizer) under which it continued to use at trade displays and in doctors’ surgeries promotional materials previously found in breach of the Code.  In that case the Code Committee required withdrawal of the offending material and a  corrective letter.  It imposed a fine of $100,000.  The Committee also required that Pfizer advise it of revised internal procedures it would implement to ensure that the Committee’s decisions were taken seriously and actioned immediately to avoid future transgressions.  

164               Ms Monk understood from comments made by representatives of companies at Code Committee meetings that the sanction which attracts most attention within the industry is corrective advertising or corrective letters.  The Code Committee imposes that sanction more commonly than a fine both to ensure any incorrect messages are corrected and to increase compliance with the Code.  Ms Monk said that corrective action and the withdrawal of material have significant implications for the company involved including damage to its brand and reputation and the financial cost of placing corrective advertisements.  The Tribunal accepts that a requirement for corrective advertising or corrective letters can be a significant sanction depending upon the degree of specificity required in identification and acknowledgment of the breach which has occurred.  There may be reputational consequences affecting the brand of medicine in question and its distributor or manufacturer.  We are not convinced that the financial cost of placing corrective advertisements is a major consideration in the market for pharmaceutical medicines.

165               Ms Monk provided a table setting out the subject matter of complaints of breaches of the Code received by Medicines Australia in the years 2003-2004 through to and including 2005-2006.  A copy of that table is attached to these reasons as Annexure 4.   As appears from the table the vast majority of complaints relate to promotional and medical claims relating to medicines.  A very small number relate to involvement in educational meetings and associated hospitality, sponsorship or the relationship with healthcare professionals.  Ms Monk said that:

(a)        the vast majority of complaints and breaches found relate to section 1 of the Code, relating to promotional material;

 

(b)       the next largest number of breaches relate to section 9, relationship with the general public.  This includes breaches of the prohibition on direct to consumer advertising of prescription medicines;

 

(c)        although there were allegations of breaches in relation to the provision of entertainment and hospitality under both sections 6 and 10 of the Code, no breaches were found;

 

(d)       in 2005/2006 one breach was found in relation to the selection of venue for an education event.  This was conduct by a non-member, Baxter…; 

 

(e)        in 2003/2004 a breach of section 6 was found in relation to materials available from a trade display on which a qualifying statement about approval status in Australia was not sufficiently prominent.

 

166               The breach by Baxter Healthcare Pty Ltd (Baxter) referred to in subpar (d) above was considered at a meeting of the Code Committee held on 15 August 2005.  Abbot Australasia Pty Ltd (Abbot) had written to the Committee alleging in effect that Baxter had breached ss 6.2, 6.6, 10.1 and 10.2 of the Code by holding a dinner meeting of healthcare professionals  on a harbour cruise vessel in Auckland harbour.  Correspondence earlier exchanged between Abbot and Baxter indicated that the cruise, which included dinner, was provided by Baxter for delegates to the annual conference of the Australia and New Zealand College of Anaesthetists of which Baxter was a major sponsor.  It included an “educational component” which was “a slide presentation by a visiting anaesthetist”. 

167               The Committee found that the hospitality provided at the meeting appeared to be modest and appropriate for an evening educational function.  No breach of ss 6.2 or 10.2 was found.  It also found that no entertainment was provided.  The cruise did not constitute entertainment.  No breach of s 10.1 had occurred.  The Committee did find however that the selection of a harbour cruise venue was inappropriate and contrary to s 6.6 of the Code.  It imposed its sanction in the following terms:

The Committee resolved that Baxter should take immediate action to ensure that it does not provide or sponsor any other educational meetings at the same or a similar venue as the harbour cruise.

 

On the face of it, the material before the Committee was thin and would appear to have been untested.   No formal invitation had issued which could form part of the record of the event before the Committee.  The only evidence as to what occurred at the dinner was by way of testimonials, solicited by Baxter, from attendees and from the presenter.  The “sanction” imposed was barely a sanction at all.  It amounted to little more than a reprimand.

168               Ms Monk outlined the composition and function of the Monitoring Committee and then described the operation of the condition imposed by the ACCC upon the previous authorisation of Edition 14.  That condition obliged the Monitoring Committee to require each member firm or company to provide full details of all educational meetings and symposia as defined in ss 6, 7 and 10 of the Code held or sponsored by that company.  The details were to cover a defined three month period chosen at random by Medicines Australia and communicated to members after the period had ended.  If the Committee was not satisfied that the conduct of a member could withstand public or professional scrutiny or otherwise considered that it might breach the Code it was required by the ACCC condition to refer a report in relation to the meeting and the member company’s response to the Code Committee as a complainant.  The Monitoring Committee was required to provide a detailed report on its compliance with this condition as well as its other activities to Medicines Australia for publication on its website and in the Medicines Australia Annual Report. 

169               Over the last three years the Monitoring Committee has reviewed more than 4,700 educational meetings and symposia.  Of those, 1,287 took place in 2003, 1,373 in 2004 and 2,083 in 2005.  None was considered to be in breach of the Code requirements in relation to selection of venue or hospitality or entertainment offered.  The Monitoring Committee did not refer any meeting to the Code Committee.

170               Ms Monk was referred, in cross-examination, to meetings of the Monitoring Committee held on 16 August 2004, 28 September 2004 and 18 October 2004 and to material provided to the Committee in relation to educational events reviewed at those meetings.  The minutes recorded comments by members from time to time about the lack of information provided with respect to particular events.  The minutes of 18 October 2004 recorded a request by the Committee for additional information about an event conducted by Merck Sharp & Dohme concerning acute coronary syndrome and held at a top range Melbourne restaurant on 11 May 2004.  No agenda setting out the educational component of the meeting had been provided.  However in preparing materials for this Tribunal hearing the Secretariat became aware that minutes from meetings of the Monitoring Committee reviewing “educational events” in 2004 had not been sent to the relevant companies.  The request for further information about the Merck Sharp & Dohme event was never sent.  There were records of minutes sent out in 2005.  However there seems to have been no follow-up mechanism to determine whether information requested was provided.  Ms Monk did say that the position had been corrected with a standard operating procedure including a checklist.

171               The Tribunal found the evidence indicative of significant variation in the level and quality of information provided to the Monitoring Committee by members of Medicines Australia for the purpose of its reviews.  The volume of events reviewed was substantial.  There was no pre-screening of them by the Secretariat.  Members of the Secretariat did not flag those which might merit particular consideration.  There appear to have been a number of cases where the Committee could not have had sufficient information about the nature and duration of the educational component and the cost of the hospitality provided to enable it to make a considered judgment about the event against the criteria in the Code.  Given the volume of events and the nature of the Monitoring Committee process it is difficult to avoid the conclusion that it does not provide a particularly effective check on pharmaceutical company hospitality to healthcare professionals.  This is not to criticise those who give their time to the Committee.  It is a criticism of the system presently in place.

172               Copies of the Annual Code Committee Report for 2004, 2005 and 2006 were exhibited to Ms Monk’s affidavit.  The Annual Reports contain information relating to complaints including the names of respondent companies and the names of complainant unless suppressed on request where a non-industry complainant is involved. The Annual Report also includes information about the product, the conduct and/or the promotional material the subject of the complaint.  The decision of the Code Committee and, if applicable, the Appeals Committee, is set out together with sanctions imposed for breaches.  The total number of complaints received and total sanctions imposed are reported as are the total number of breaches found.  The report provides a record of attendance of independent organisations at Code Committee meetings, performance indicators with respect to the time taken to deal with complaints and activities undertaken to increase the awareness of healthcare professionals, agencies working for the industry and members of the general public of the Code.  In addition to its Annual Report, Medicines Australia presently publishes on its website every six months a report on the outcomes of all complaints finalised during the reporting period.

173               A Code review was initiated at the end of 2004.  The process involved the issue of invitations for submissions from consumer and professional and other organisations.  Medicines Australia conducted seminars in July 2005 to discuss proposed amendments with member and non-member companies and again in October 2005 to communicate final proposed changes.  The latter seminars also included advertising agencies which provide services to the industry. 

174               Section 10.6 of the Code (referred to earlier) was included in Edition 15 to set out the circumstances in which companies may seek the services of suitably qualified and experienced healthcare professionals to provide advice and guidance in the context of consultancy services or service on advisory boards.  It was added to the Code as a result of two complaints.  One related to roundtable meetings organised by Pfizer in relation to the drug Celebrex.  The Appeals Committee found Pfizer had not breached the Code because there was a grey area in relation to advisory boards.  The other complaint related to meetings held by AstraZeneca Pty Ltd (AstraZeneca) which were said to be advisory boards but were found instead to be for a promotional purpose in breach of ss 1.1 and 1.3 of the Code.  The Appeals Committee noted that advisory boards were not sufficiently defined in Edition 14 of the Code.  

175               The Code review threw up an inconsistency between the wording in s 10.2 that “any hospitality offered by companies to healthcare professionals should be simple, modest, secondary to the educational content and provided in an environment that enhances education and learning” on the one hand and the relevant explanatory note stating that “meals and any other hospitality provided by companies at an educational meeting should not differ to that expected at any professional business meeting and should reflect the professional standing of the audience”.  The wording of s 10.2 was amended to delete the words “simple” and “modest” and to replace them with words which in Edition 14 had appeared only in explanatory notes.  The terms of Edition 15 s 10.2 have been set out earlier.

176               The Galbally Review and the Australian Health Minister’s Advisory Council Working Party response to the recommendations of that Review were unanimously approved by the Council of Australian Governments on 28 June 2005.  One of the recommendations was that various provisions of State and Territory law relating to the supply of samples or starter packs be repealed and that the statute instead mandate compliance with the Medicines Australia Code provisions in that respect.  There are evidently differences between the legislative requirements in each State and Territory in relation to the distribution of samples of prescription only products.  Section 5 of the Code, which regulates the distribution of starter packs and the information to be included with starter packs, has been expanded in Edition 15.  That section was drafted with extensive industry and stakeholder consultation and negotiation with the National Coordinating Committee on Therapeutic Goods to achieve a highest common denominator. 

177               Medicines Australia has a Continuing Education Program (CEP) which sets out to educate representatives of pharmaceutical companies to a recognised industry standard in order to provide healthcare professionals with accurate and balanced information in an ethical manner that will enhance the quality use of medicines.  The CEP is offered through the Centre for Health Innovation and Solutions at the University of Queensland’s Faculty of Health Sciences.  Its core modules include study of the Code.  Certain classes of medical representatives are required under the Code to complete the CEP.

178               In a supplementary statement (X-2) Ms Monk referred to a change in the composition of the Monitoring Committee between Edition 14 and Edition 15.  That change involved the addition of a consumer representative as a permanent member of the Committee.  It resulted from comments made to the Code Review Panel by the Consumers’ Health Forum. 

179               The Monitoring Committee typically meets 10 or 11 times each year for a half day meeting.  Its sampling process requires the production of specific types of promotional material relating to 14 therapeutic categories.  Its protocol anticipates that in each year seven therapeutic groups will be reviewed so that every two years all therapeutic groups will be reviewed.  The members of Medicines Australia are required to submit promotional material relating to the nominated therapeutic categories. One review may be of printed advertisements for the particular category.  The next review may be of brand name reminders.  The Secretariat undertakes the preliminary review of the material and prepares a summary for the Monitoring Committee to consider.  The summary report and copies of the material are provided to members of the Monitoring Committee generally ten days before it holds its meeting.  The Secretariat does not vet or remove any material provided by member companies before it is sent to the Monitoring Committee.  Under Edition 15 of the Code the Monitoring Committee will review, as a minimum, three types of promotional material across three different therapeutic classes and three different types of promotional activities across all therapeutic classes.  The process under Edition 15 involves an assessment by the Monitoring Committee of a wider range of promotional and other activities than required by Edition 14.

180               If, following a review of submitted material or activities, the Monitoring Committee considers that a breach of the Code may have occurred the company in question is contacted in writing and asked to state whether the determination of the Monitoring Committee is correct and to provide a response.  That response is considered by the Committee which gives relevant advice on compliance with the Code.   If necessary, it can refer the matter to the Code Committee.

181               Subject to the comments we have made in the course of the review of Ms Monk’s evidence the Tribunal accepts it to the extent that it describes matters of fact, the procedures used within Medicines Australia in dealing with complaints and reviews and the operation of the committees established under the Code.  We accept also the figures which Ms Monk provided in tabular form.

Harry Michael Nespolon – a general practitioner on the Code Committee

182               Dr Nespolon is a general practitioner.  Since January 2006 he has been the nominee of the Royal Australian College of General Practitioners (RACGP) to the Medicines Australia Code Committee.  In that capacity he attended every Code Committee meeting in 2006.  He has extensive experience in general practice and is the principal of three medical practices in Sydney which he has been managing since 2003.   Between 1995 and 1998 he was the Director, Health Sciences and General Practice at the AMA’s federal office in Canberra.  During that time he also worked on a part-time basis in the Emergency Department at Calvary Hospital and at several northern Canberra general medical practices.  From 2001 to 2003 he worked as an Associate Management Consultant at AT Kearney Australia Limited.  He has served on major AMA committees including the Ethics Committee, the Council of General Practice and the Federal Council of the AMA. 

183               Dr Nespolon referred in his evidence to guidelines published by the RACGP in 1999 under the title “The Acceptance of Gifts”.  The guidelines are not binding on general practitioners.  The AMA has also developed a non-binding Code of Ethics.  Most general practitioners would be familiar with it or would have regard to it if faced with an ethical dilemma.  The Code of Ethics can be used by the relevant medical boards as a standard by which to judge a general practitioner’s behaviour.

184               Dr Nespolon receives about two invitations each week to educational events conducted by pharmaceutical companies, generally in the evening.  He is also invited approximately once a year to an interstate meeting.  The large number of invitations he receives to educational events are “a normal part of practice as a general practitioner”.  He only attends meetings if their topics are of particular interest to him.  He selects those which are relevant to his practice.  He prefers to learn about new medications rather than to attend presentations about those with which he is familiar.  He also has regard to the identity of the speakers.  He is not interested in the hospitality aspect.   Given the large number of invitations they receive, general practitioners require an event to be “attractive” before they will attend.  An event can be made attractive by having an interesting speaker or educational content sufficient to attract Continuing Professional Development (CPD) points.  In Dr Nespolon’s experience and opinion general practitioners have a strong preference for attending events with CPD points attached.  It is common for educational events conducted or sponsored by pharmaceutical companies to attract CPD points. 

185               In order for an event to attract CPD points, the relevant College must approve it under their CPD point allocation criteria.  Such criteria may include a requirement that attendees complete a pre and post event test to demonstrate that the event required a certain standard of learning.  The RACGP only approves such events if they fulfil the educational elements and learning processes under its guidelines.  The guidelines are available on its website.

186               Dr Nespolon referred to a proposition in the ACCC’s Statement of Facts, Issues and Contentions filed in the Tribunal on 29 September 2006.  Paragraph 77 of the statement said:

In addition to or instead of attending education events provided by pharmaceutical companies, healthcare professionals can inform themselves about prescription medicines by referring to text books for standard disease management, the Australian Medicines Handbook, product information provided by the TGA, information provided by the National Prescribing Service, relevant medical journal articles and agreed statements from Medical Colleges on protocols for treatment.

 

While agreeing generally with the statement he made the following observations:

(a)        Product Information is not provided by the TGA.  It is approved by the TGA and provided by pharmaceutical companies.  Product information is available through the privately published MIMS publication and can be accessed in hardcopy or online.  However it is not necessarily up to date. 

(b)        While textbooks can be used to inform general practitioners about prescription medicines, they are of their very nature out of date as soon as they are published and take several years to produce.  Dr Nespolon uses the Therapeutic Guidelines distributed by a Victorian based company which contain information regarding commonly used treatments for particular conditions.  These guidelines are as up to date as most published information.  There are different guidelines for different therapeutic areas.  Each area of medicine also has its own textbook. 

(c)        The Australian Medicines Handbook is a joint project for the Pharmaceutical Society of Australia, the RACGP and the Australasian Society of Clinical and Experimental Pharmacologists and Toxicologists (ASCEPT).  It is available in hardcopy or online. 

(d)        The National Prescribing Service (NPS) is funded by the Commonwealth Department of Health and Ageing and provides information and services to healthcare professionals and the community on the quality use of medicines.

(e)        The most current source of information regarding therapeutics are the medical journals, but these tend to be used by specialists because they usually deal with a very narrow or specific area of therapeutics.  Given the breadth of general practice it is unlikely that any general practitioner requires the depth of discussion in those articles. 

(f)         General practitioners regularly read monthly magazines such as the Australian Family Physician, which is produced by the RACGP, and Modern Medicine.  They sometimes include quizzes which, if completed by a general practitioner, may gain CPD points.

(g)        There are Agreed Statements or Guidelines produced from a variety of sources which provide information to general practitioners regarding new medications and treatment regimes.  An example is the National Health and Medical Research Council  (NHMRC) Clinical Guidelines. 

187               Each source of information, according to Dr Nespolon, has limitations related to its currency, its cost or potential bias.  The educational events tend to provide the best direct information about new drugs or recent research findings that may lead to a shift in the way that current therapies are used.  The speakers are generally local experts who are able to provide an Australian perspective which can sometimes be difficult to obtain given that most textbooks are written in the USA.  Often the speakers have attended the latest international meeting and are aware of new international developments in treatment.  The Tribunal accepts that while reference to literature is necessary for medical practitioners wishing to keep up to date in their discipline, there is a valuable benefit to be derived from listening to a well informed speaker on the latest developments in a particular area or the characteristics of a new drug.  Such presentations, where made in an interactive setting allowing opportunity for questions and discussion, are capable of delivering learning benefits which cannot be replicated by simply pursuing relevant literature.  The extent of the benefit will be diminished by the extent to which presenters are affected by any promotional agenda or bias in favour of the sponsor’s interests.

188               Dr Nespolon described educational events conducted or sponsored by pharmaceutical companies which he had attended over the last two years and found to be useful sources of information.  He gave three examples:

(1)        The first was an educational event held at the RSL Club in Dee Why about Implanon, a contraceptive rod inserted into the arm.  He learnt there how to insert and remove the contraceptive.  He attended a later update session.  He had to attend these events because a certificate was issued which demonstrated that he had learnt how to insert and remove the implant.  This was a requirement before his medical indemnity insurer would cover that procedure.  At the event  he attended in Dee Why a buffet style meal was provided.

(2)        The second event related to Lipidil, a new lipid lowering drug which is not part of the dominant statin class of lipid lowering medications.  The speaker at the event was a very well respected local specialist.  Dr Nespolon was interested to see how the new medication would fit into the treatment regime for the treatment of dyslipidaemias.  The function was held in a room at Balmoral Beach above the Bathers’ Pavilion.

(3)        The third event concerned an anti-depressant drug called Cipramil.  It was conducted on a weekend at a “retreat” style venue in the Dooralong Valley, about 2 hours north of Sydney.  He described it as an excellent program on the treatment and management of difficult to treat depression.  The program involved lectures from Friday afternoon to early Sunday afternoon and included talks by prominent psychiatrists.  All meals were provided on site. 


Each of the events described was relevant to Dr Nespolon’s practice.  He obtained CPD points for attending the Implanon and Cipramil events.  He said there had been changes in the educational events offered by the pharmaceutical industry.  There are not as many interstate trips offered by companies as there were 10 or 20 years ago.  The standard of hospitality provided at events has reduced.  He has personally noted reductions in the extravagance of hospitality at educational meetings and an increase in the amount of educational content. 

189               Dr Nespolon described his role on the Code Committee.  The procedures which he outlined accorded with those described by Ms Monk.  Like her, he noted that many of the complaints are lodged by pharmaceutical companies.  One of the advantages of the complaints procedure under the Code, is the facility it creates for all pharmaceutical firms whatever their size to seek to enforce the Code.  Smaller companies who may not have the resources to litigate against the larger companies are given a forum in which to review the conduct of the larger companies and to do so in a cost effective and timely manner.  The complaints process also provides individual consumers and healthcare professionals with an opportunity to complain at no financial cost.  Dr Nespolon mentioned a case in which a healthcare professional lodged a generic complaint about the conduct of almost every pharmaceutical company in Australia without requiring any resources other than his time and effort.

190               Dr Nespolon described his experience of complaints dealt with by the Code Committee in relation to promotional material and hospitality.  One case concerned a Bayer drug called Levitra which treats erectile dysfunction.  Bayer conducted a promotion which offered consumers a “Money Back Guarantee” in the event that Levitra was not effective.  The Code Committee determined that the promotion breached s 10.5 of the Code because it was such as to “bring discredit upon, or reduce confidence in the pharmaceutical industry”.  Dr Nespolon was also concerned that it could place undue pressure on general practitioners to prescribe the product and cause difficulties in the doctor/patient relationship.  Because of the dangers associated with prescribing the wrong medication for a patient, medicines should never be treated simply as consumer products.  Even medications within the same class are not necessarily substitutable for an individual patient.  He regarded the width of the criterion in s 10.5 of the Code (Edition 14) as a strength in that it allowed members of the Code Committee to assess a promotion against prevailing community standards.  In that case the Code Committee required Bayer to take immediate action to cease offering the “Money Back Guarantee” and its promotion to healthcare professionals in the form of advertisements, website displays and letters.  Bayer was also required to issue a corrective letter to all healthcare professionals who received the letters and publish a corrective advertisement in all health professional journals in which the advertisements about the “Money Back Guarantee” offer were placed.  No fine was imposed, although Dr Nespolon did not agree with that decision. 

191               The second complaint concerned hospitality provided to oncologists by Roche Products (Roche).  Roche had held a Haematology and Oncology Targeted Therapies meeting from 29 to 31 July 2005 and a further LyFE LyNE meeting following the Targeted Therapies meeting from 1 to 2 August 2005.  The Targeted Therapies meeting covered multiple tumour types and therapies across oncology and haematology.  The LyFE LyNE meeting was a program for Australian experts in lymphoma.  The conference dinner on the Saturday night for practitioners attending the Targeted Therapies meeting was at a Sydney restaurant, Guillaume at Bennelong.  The LyFE LyNE conference dinners were held at the Boathouse restaurant on the Sunday night and the Aria restaurant on the Monday night.  A majority of the Code Committee found that the hospitality offered breached ss 6.2 and 10.2 of the Code (Edition 14).  It was more extravagant than would usually be expected even at a meeting of international experts.  A breach of s 10.5 was also established on the basis that the hospitality may have brought the industry into disrepute.  A fine of $75,000 was imposed for the latter breach.  Dr Nespolon disagreed.  He regarded the educational component of the conference as of a very high standard and said that the hospitality offered to attend these reflected the fact that the symposium was attended by a number of high profile international experts.  He also noted the inconsistency between s 10.2 of Edition 14 which required hospitality to be “simple and modest” and the explanatory notes which said that the standard of hospitality should reflect that “expected at any professional business meeting and reflect the professional standing of the audience”.    

192               In cross-examination Dr Nespolon said that while his decision to attend an event might be influenced to some degree by the hospitality offered, it was not the most important part of the decision making process.  The much more important consideration was what he would be told about the drug or product that would make him want to prescribe it.  The fact that an event had CPD points attached to it would be an additional significant influence.  We accept the factual aspects of Dr Nespolon’s evidence including his description of sources of information and his experience of the utility of some educational events as providing information about newly released drugs and recent developments in the treatment of particular conditions.

John Paul Seale – a pharmacologist on the Code Committee

193               John Seale is Professor of Clinical Pharmacology at the University of Sydney.  He is also consultant physician in the Department of Respiratory Medicine at Royal Prince Albert Hospital and Deputy Director of the Woolcock Institute of Medical Research.  He has been a member of the Code Committee since October 2000.  He is the nominee to that Committee of ASCEPT.  Professor Ric Day is the other ASCEPT nominee on the Code Committee.  The two professors share responsibility for attending meetings.  They generally confer at the beginning of each year to determine which meetings each of them will attend.  By s 11.2 of the existing Code attendance of an ASCEPT nominee is necessary before a Code Committee meeting can proceed.  Professor Seale attended four meetings in 2005 and five in 2006. 

194               Professor Seale said that pharmaceutical companies tend to monitor each other closely especially when one company produces a drug in the same therapeutic class or for the same condition as another company.  He based that observation in large part on the number of complaints brought by pharmaceutical companies to the Code Committee against their competitors.  He has considered complaints relating to a wide range of promotional material including material distributed at trade displays, directly to general practitioners and physicians, and displayed on websites.  Material made available directly to consumers and information provided to general practitioners and physicians at educational events have also been the subject of complaints in his time on the Committee.

195               The Tribunal accepts Professor Seale’s claim that as a clinical pharmacologist he is equipped to consider whether promotional material is correctly based on the published clinical studies from which they claim their support.  He sees it as part of his role to make such assessments and to ensure that promotional claims reflect the available “body of evidence”.  By the term “body of evidence” he means the overall understanding of a disease and its treatment based on the canvassing of information which is accessible, including guidelines, publicly available information and what a well-informed physician in that area would understand about the disease and its treatment.  The analysis of promotional claims is his primary role as a member of the Code Committee.

196               Code Committee members generally have about two weekends in which to review relevant material relating to complaints to be dealt with at Code Committee meetings.  Meetings in 2006 were generally held on a Monday.  Professor Seale receives all relevant material on a Thursday two weekends before the meeting.  This provides him with an adequate opportunity to review and consider the material.  Where the complaint relates to claims made in promotional material he commonly receives copies of relevant clinical studies.  It is only rarely that he conducts his own research as the relevant material generally accompanies a complaint.  He has made his own inquiries where he has had a reservation about the nature of material contained in the clinical study relied upon to support a promotional claim.  By way of example, a complaint lodged by AstraZeneca alleged that GlaxoSmithKline (GSK), in promotional material for an asthma medication called Seretide, breached ss 1.1, 1.3 and 1.7 of the Code.  The complaint focussed on a claim, based on a particular study, that the GSK product was superior to Symbicort which is distributed by AstraZeneca.  The Code Committee found that GSK had breached the Code because the study cited did not compare the efficacy of the two drugs but examined two different treatment approaches.  Moreover the promotional material made a comparison between Symbicort and Seretide based on a dose of Symbicort which was not an approved indication in Australia.  It also omitted information acknowledging the different potency of Corticosteroids used in the two medicines.  The manner in which the Code Committee considered whether the promotional material relating to Seretide breached the Code were “… typical of the manner in which similar complaints have been dealt with”.

197               In January 2006 the membership of the Committee was expanded to include a member of the RACP.  Dr David Champion, who is the new RACP representative, previously represented the Arthritis Federation of Australia on the Committee.  Professor Seale referred to the significant assistance which he considered that members nominated by the RACP brought to the Committee in analysing claims made by pharmaceutical companies.  General practitioners on the Code Committee often discussed the impact that promotional material may have on them and whether it would have any influence on the way that general practitioners prescribe medication.  The Committee also includes a consumer representative whose input Professor Seale regarded as helpful in connection with consumer reactions to such things as introductory headings and “tag lines” on promotional flyers and also with respect to relationships between healthcare professionals and consumer organisations.  A TGA representative attends meetings as an observer and assists with information about the function of the TGA and any TGA related issue that might arise.

198               Professor Seale discussed consideration by the Code Committee of a complaint about hospitality offered by a pharmaceutical company.  On 20 June 2005 the Committee considered a complaint about an educational meeting organised by Biogen at the Flower Drum restaurant in Melbourne on 22 February 2005.  The meeting was held on a Tuesday evening.  The speaker was Dr Patrick Parcells, a physician from the US.  The topic concerned the evolution and future direction of treatments for multiple sclerosis.  Professor Seale described Dr Parcells as a recognised international expert in the field of multiple sclerosis treatments.

199               Biogen denied any breach.  It contended that the educational component of the meeting was over one hour with the invitees being senior consultant neurologists with a special interest in multiple sclerosis and a number of specialist nurses involved in working with patients with multiple sclerosis.  The Code Committee concluded, by majority, that no breach should be found.  Professor Seale was part of that majority.  In his opinion the hospitality was “clearly secondary to the educational content of the meeting”.  He cited the standing of the presenter and the invitees.  The event provided an opportunity for dialogue between an international expert and local physicians.  The invitation did not emphasise the venue.  There was debate about the detail of the hospitality provided.  The complainant company, Schering, asserted that Biogen had provided a 12 course dinner.  Biogen said it was a seven course dinner.  Biogen did not provide the Committee with details about the menu or the cost per attendee.  Professor Seale thought it was the Code Committee’s function to assess information before it.  It was the complainant’s responsibility to provide all relevant information to the Code Committee.  He considered the number of courses to be a peripheral issue.  In his view the hospitality provided to the attendees was commensurate with the professional standing of the participants.  Although the Code Committee found no breach, the venue caused it concern.  Biogen said it would not use the venue again.  The Code Committee also encouraged Biogen to provide greater detail in future invitations about the duration of the educational component.

200               The Tribunal considers that it may be a weakness in this area of the Committee’s consideration of complaints relating to hospitality that there appears to be no facility for the Secretariat to make its own inquiries or require the production of particular evidence from respondents.  The difficulty with treating the complaint process as purely adversarial in the way reflected in Professor Seale’s remarks is that inadequate consideration may be given to its public interest dimension. 

201               Professor Seale thought it appropriate for a pharmaceutical company to provide hospitality commensurate with the professional standing of the audience but also believed it important that there be some kind of balance.  Significantly, he expressed the opinion that “… pharmaceutical companies can influence practitioners in their prescribing practices”.

202               Professor Seale compared RACP guidelines with the Code.  The most recent guidelines for ethical relationships between physicians and industry published in 2006, say, in relation to hospitality (at [44.2]):

Hospitality is the provision of food and beverages by industry in association with a professional education meeting.  Entertainment is the provision by industry of tickets to cultural, sporting or artistic events ie with no associated professional education.  It is current practice nowadays for doctors to reject pharmaceutical company entertainment invitations, and this response is appropriate and expected.

 

For some doctors, hospitality provides an attractive and enjoyable context within which information about pharmaceutical products can be presented.  Information sessions may be held in the evening after a day’s work and it may be appropriate for them to be combined with provision of food and drink.  If the content of the meeting is of significant educational value the acceptance of such prerequisites might be considered acceptable.  The appearance of impropriety however, should be considered before accepting lavish dinners and entertainment, even if accompanied by a scientific presentation.

 

Food and drink may be offered by industry to make grand rounds or similar meetings within hospital settings more attractive.  Here too, although this practice seems innocuous it arouses concerns within the community, where it is recognised as a device to influence doctors by means other than argument and presentation of evidence.

 

It is recognised that judgement on these matters may sometimes be difficult.  In specific cases it may be helpful and appropriate to discuss issues that arise with colleagues, with institutional representatives, with the employing authority or an ethics committee.

 

Professor Seale saw the Code as playing a particularly important role in relation to the provision of hospitality by pharmaceutical companies.  In his opinion it was much more vigorously implemented than the RACP guidelines and codes. 

203               Professor Seale said that a lot of consideration, not always reflected in the minutes, goes into the financial and other penalties to be imposed by the Code Committee. In considering the size of a financial penalty the Code Committee may take into account the costs to the company incurred by non-financial penalties such as corrective advertisements or mail-outs to doctors.  He understood that it generally costs about $30,000 for a company to send out corrective advertisements. The Committee now has the aid of a document which outlines penalty criteria.  It has not greatly influenced the fines imposed but has facilitated the process of assessing and considering penalties. It is also of assistance to new members of the Code Committee when considering penalties.

204               Professor Seale gets involved in planning two or three educational meetings each year which are sponsored by pharmaceutical companies.  In these meetings he usually has a role either as a chairperson or as a speaker.  The organisation of such meetings begins with a representative of the company contacting Professor Seale and other specialist physicians to form a scientific program committee.  The committee then develops a scientific program and decides on relevant speakers.  Although a representative of the pharmaceutical company may attend meetings, it is Professor Seale’s experience that the sponsor does not play any role in developing or influencing the program and choice of speakers.  Generally a third party event company is responsible for organising the logistics of the educational event including venue and hospitality. 

205               When planning educational meetings and conferences Professor Seale said he has regard to the Code.  He gave as an example a conference called “Airways 2006” held on 11 and 12 August 2006 at Noosa Heads in Queensland.  It concerned lung disease and was sponsored by Boehringer.  About one year before the conference he convened a meeting with  specialists from Adelaide, Victoria and Queensland as well as a general practitioner.  That committee developed a program.  60 to 80 people attended the conference.  They arrived on Thursday evening and a dinner was held.  Educational sessions ran from 8.20am to 5pm on Friday and 8.15am to 4.30pm on the Saturday.  Two international speakers, one from California and one from London, attended the conference and each gave approximately three sessions.  Other sessions had three speakers who each presented.  Professor Seale chaired one of those sessions.  There were approximately 18 speakers overall.

206               Professor Seale rarely attends educational meetings in which he is not involved as an organiser.  He usually has detailed knowledge of recent developments in prescription medication so there is no additional information he would obtain by attending those events. 

207               Asked in cross-examination whether he thought pharmaceutical companies can influence practitioners in prescribing practices, Professor Seale initially said that the evidence is circumstantial.  He said “… there is a feeling out there that there may be some influence but the documentation has not been especially convincing”.  He agreed eventually, as he had said in his evidence-in-chief, that pharmaceutical companies can influence practitioners in their prescribing practices.  Asked whether he thought that one of the ways in which such influence could be exerted was through education events, he said:

It would come down to the nature of the educational event and what it was combined with and to illustrate that point, if it was a high quality educational event with very modest additional components to the event I don’t think it would.  On the other hand, if it was a very low key educational event with a major feature or focus on entertainment it may.  So it really depends upon the nature of the educational event and its quality and the nature of the entertainment and whether it is featured as a dominant feature or a minor feature of the event.

 

He acknowledged the importance, to public confidence in the industry and the medical profession, of avoiding a perception that healthcare professionals may be improperly swayed in their attitude to a particular product by the hospitality they are afforded by pharmaceutical companies. 

208               It was put to Professor Seale that Medicines Australia complaint statistics for 2004 indicated that in only a small proportion of cases in which withdrawal of promotional material was required, was there also a requirement for corrective advertising or letters.  He said corrective letters were required in cases in which the promotional material had been broadly distributed to general practitioners.  Where there had been “a small technical breach” such as using the wrong value for a statistical significance it would be deemed unnecessary to send a letter.  The Code Committee would really get concerned if there were some promotional material that had implications for prescribing a medication that might have some associated risks of wrong prescription.

209               The Tribunal accepts the factual and descriptive aspects of Professor Seale’s evidence and his description of Code Committee procedures as he has experienced them.  His evidence is, to a degree, supportive of the proposition that pharmaceutical companies can influence practitioners in their prescribing practices through educational events and that it is important to public confidence in the industry and the medical profession to avoid any perception that healthcare professionals may be improperly swayed by the benefits conferred on them by the pharmaceutical companies.

Kenneth Williams – an Appeals Committee member

210               Kenneth Williams is Deputy Director of the Department of Clinical Pharmacology and Toxicology at St Vincent’s Hospital in Sydney.  He manages the St Vincent’s Clinical Trials Centre which undertakes clinical trials of medicines under contract to pharmaceutical companies prior to their submission for registration by the TGA.  He is also an Associate Professor at the University of New South Wales and has held that office since 1995.  He has been a member of the Medicines Australia Appeals Committee since 2002.  He attends Appeal Committee meetings in his capacity as the “representative” of ASCEPT.  He is a council member of that Society and served three years as its national secretary.

211               Apart from the ASCEPT representative, the Committee includes a representative from a college or society for the therapeutic class of the product the subject of the appeal and a representative from the target audience to which the activity is directed.  He or she may be a representative from the AMA, the Australian Division of General Practitioners or the RACGP.  Representatives from the pharmaceutical industry also sit on the Appeals Committee.  A consumer representative has been added by Edition 15 of the Code.  Although that Edition has not yet been implemented, a representative of the Consumer Health Forum has attended most of the recent Appeals Committee meetings in which Professor Williams took part.

212               Professor Williams generally receives a package of documents relating to an appeal on which he will sit one or two weeks before the meeting.  Appeals about complaints relating to claims made by pharmaceutical companies are very common.  Such complaints are, in his experience, almost always lodged by other pharmaceutical companies.

213               Representatives of the appellant and the respondent generally attend the hearing.  The chairman explains the process and declares to the parties any potential conflicts of interest that individual committee members may have.  Each party is allowed to speak for up to 20 minutes.  Members of the Appeals Committee interrupt a presentation to clarify points but usually hold questions until after the presentation. 

214               Participants are allowed to bring an expert witness such as a specialist physician or statistician to make submissions in support of their cases.  On at least one occasion a legal representative attended but this is uncommon.  The Appeals Committee discusses the matter in the absence of company representatives.  The discussion usually takes about an hour but sometimes longer.  Where the Appeals Committee finds that the company has breached the Code it will consider the sanction.  In so doing it will first consider whether the breach amounts to a technical, minor, moderate or severe breach.  On occasion it is also necessary to determine whether the conduct has implications for patient’s safety. 

215               Professor Williams described the way in which the Appeals Committee goes about considering complaints relating to product claims by pharmaceutical companies’ in their  information or material.  Usually the relevant pharmaceutical company will argue that the claim is supported by a clinical study or studies.  Its contentions are referenced to published papers in the medical and scientific literature and to product information.  We accept that Professor Williams has, as he claimed, the training, study and experience to critically assess the studies said to support the claims made about the efficacy and/or the safety of  medications. 

216               Professor Williams sat on three particular appeals which he discussed in his evidence.  The first was by the Sanofi Aventis Group (Sanofi), which had been found to be in breach of the Code in relation to the promotion of Actonel, a prescription medicine for the prevention of osteoporosis.  The complainant was Merck Sharp & Dohme which markets an alternative drug, Fosamax.  In a detail aid issued by Sanofi it compared the efficacy of Actonel with Fosamax and another medicine, Nasal Calcitonin.  Merck Sharp & Dohme complained that the detail aid was in breach of the Code.  It was said to be inaccurate and unbalanced in its claims against Fosamax.  Sanofi cited double blind randomised control studies published in peer reviewed journals in 2004.  The Code Committee held that the detail aid was unbalanced and misleading and that the evidence upon which it was based was not of adequate quality to support the claims.  It required Sanofi to take immediate action to withdraw the document and not to distribute further promotional material containing the same claims and/or graphs.  It also required Sanofi to send a corrective letter to all Australian general practitioners and publish a half page corrective advertisement in Australian Doctor Weekly.  A fine of $50,000 was imposed. 

217               The Appeals Committee rejected the appeal.  Professor Williams regarded the principal paper relied upon by the appellant as “difficult to understand”.  He said general practitioners would find it hard to make sense of the paper.  The onus was on the company promoting a product to ensure that promotional claims were clear.  The Appeals Committee did however alter the sanctions imposed on Sanofi.  It decided it was not necessary for Sanofi to publish a corrective advertisement in any journal because it had not placed an advertisement in any journal.  It also directed Sanofi to send a corrective letter only to general practitioners who had been given the detail aid rather than to all general practitioners. It reduced the fine imposed from $50,000 to $20,000.  It regarded the breaches of the Code as moderate, namely “having no safety implications for patients but having a possible effect on how the medical professional would prescribe the product”.  Professor Williams said it is common for the Appeals Committee to reduce fines imposed by the Code Committee if the pharmaceutical company succeeds in part.

218               The second appeal was brought by Pfizer against findings by the Code Committee that “roundtable meetings” conducted by Pfizer in relation to the drug Celebrex contravened the Code.  The original complaint was from a healthcare professional.  The complaint related to the invitation to the meetings.  Medical practitioners attending them had received a payment of $500 for doing so.  The question was whether the meetings were genuine advisory board meetings or educational meetings.  While Professor Williams regarded it as usual for members of an advisory board to receive reimbursement for their professional advice and consultation it would not be appropriate for an educational or promotional event. 

219               The Code Committee found Pfizer had contravened s 10.4 of the Code (Edition 14).  The Appeals Committee held to the contrary.  Professor Williams’s recollection was that other members of the Appeals Committee were sympathetic to the submission made by Pfizer that the meetings were conducted against the background of concerns about Celebrex.  The concerns were raised because of the withdrawal of a related medicine, Rofecoxib which had been associated with myocardial infarcts causing death.  Pfizer argued that concern about the safety of Celebrex justified the large number of attendees.  Professor Williams said that the Appeals Committee found Pfizer had not breached the Code because the Code was not sufficiently clear on what constituted an advisory board and was persuaded by Pfizer that the roundtable meetings were more closely aligned with an advisory board than with the usual educational evening.  Pfizer had given the Appeals Committee more information about the content of the meetings than had been available to the Code Committee.  The fine of $50,000 originally imposed by the Code Committee was withdrawn.  Oddly, the Appeals Committee was nevertheless unhappy about the conduct of the meetings and, contrary to usual practice, required that the $5,000 bond deposited by Pfizer should not be refunded. 

220               The third appeal was by AstraZeneca against findings that it had breached the Code by running a series of Australia wide promotional meetings under the guise of advisory group meetings.  AstraZeneca described them as “State Advisory Board Meetings”.  Written invitations had been sent to respiratory physicians.  The invitations had contained the line “the Dawn of a New Era in Asthma Management”.  They also contained the sentence:

Having personally been witness to the scientific launch of the single therapy inhaler Symbicort at the Dawn of a New Era in Asthma Management, I hope that you may share my enthusiasm and look forward to your help and guidance in opening debate at a local level.

 

There were 64 attendees across Australia.  Each signed a confidentiality agreement and each was paid an honorarium for the “work undertaken”.  The Appeals Committee held that the meetings did not constitute genuine advisory board meetings but were promotional in nature.  Professor Williams agreed with that view.  He based his opinion on the number of meetings and the number of participants.  Ordinarily, it was uncommon for there to be more than approximately 10 members on a scientific advisory board.  Substantially more people attended the meetings in issue.  Professor Williams thought that the meetings were possibly part of a marketing activity to promote the use of Symbicort as a single inhaler therapy which was not an approved indication.  He was particularly assisted in his deliberations by comments made by the industry representatives on the Committee.

221               The Code Committee had found that the breaches by AstraZeneca were “severe”.  Committee members believed there were patient safety implications, especially for severe asthmatics.  The members of the Appeals Committee did not agree that there was any potential for patient harm although the meetings could influence physicians down the track and were a “priming” activity by AstraZeneca.  The Appeals Committee characterised the breaches as “moderate” rather than severe and reduced the fine imposed from $100,000 to $25,000.  It overturned the requirement for a corrective letter as it considered that such a letter would have the effect of reminding people of the meeting and thereby reinforce its potential effect.

222               In cross-examination Professor Williams discussed the approach to sanctions by the Appeals Committee.  He referred to a regular practice whereby corrective letters are required to be approved, at first instance, by the chairman and members of the Code Committee.  There appeared to be little information made available to the Appeals Committee to guide it in relation to pecuniary penalties.  In particular, he did not recall that the Appeals Committee received information about the size of the market or the amount of revenue that might be generated by a drug the subject of promotional activity in breach of the Code.

223               Professor Williams’ evidence indicated a conscientious approach to the functions of the Appeals Committee.  It appeared in cross-examination that the Appeals Committee may be hampered in making its judgments by the limited range of information available to it.  In particular it seems, as we observed in relation to the Code Committee process, that there is little in the way of an independent investigative facility on the part of the Committee or the Secretariat.  We accept his evidence as outlined.  We have not had regard to conclusionary statements about the merits of the Appeals Committee’s operation.

Gary Jonathan Phillips – a non-member company’s perspective on the Code

224               Mr Gary Phillips is the Commercial Director of Pharmaxis Limited (Pharmaxis), a role he has held since he joined that company in December 2003.  Pharmaxis is a small Australian specialist pharmaceutical company founded in 1998.  It carries out research, development and commercialisation of human therapeutic products dealing with chronic respiratory and auto immune diseases such as asthma, cystic fibrosus, multiple sclerosis and rheumatoid arthritis.  It has about 60 employees.   Mr Phillips is responsible for the commercial activities of Pharmaxis.  One of the qualifications he holds is the degree of Bachelor of Pharmacy with Honours from Nottingham University. 

225               Pharmaxis is not a member of Medicines Australia as there is a significant cost involved in being a member, both financially and in terms of executive involvement.   The company has only recently released its first product and up to that point had not done a great deal of marketing nor been particularly concerned about marketing by its competitors.  It is not necessary for Pharmaxis to be a member of Medicines Australia in order to make complaints under the Code.  Mr Phillips anticipates however that as Pharmaxis grows and launches further products it is likely to join Medicines Australia. 

226               Mr Phillips said that even though Pharmaxis is not a member of Medicines Australia, it sees the Code as setting a standard for the industry that it must comply with.  Indeed the marketing approval given to its current product, Aridol, by the TGA contained a condition requiring it to promote the product in compliance with the Code. 

227               To ensure an appropriate level of understanding about the Code within Pharmaxis the company retained MedScript Communications to run a training course in mid-2006 for its commercial, regulatory and compliance teams and various members of the clinical team.  Information obtained from that course has been used to devise internal compliance policies for promotion of Aridol in accordance with the Code. 

228               Mr Phillips spoke of the need for small companies like Pharmaxis to have a cost effective and rapid way to raise complaints if they are to be successful in the market place in competing with much larger pharmaceutical companies.  Such companies have far greater resources to invest in promotional activities than the companies such as Pharmaxis.  If Pharmaxis had concerns about the way in which its competitors were marketing their products a complaint under the Code would be the most effective way to seek to have the issue addressed.  As Pharmaxis’ investment priority is research and development, it is unlikely to devote time and money to pursuing a marketing claim against one of its competitors through the courts because of the cost involved unless it were a very serious breach. 

229               Mr Phillips referred to his previous experience with Novartis, a major pharmaceutical company with operations in a number of countries.  In Australia it operates through a subsidiary, Novartis Pharmaceuticals Australia Pty Ltd.  Mr Phillips was that company’s Pharmaceuticals Chief Executive Officer and Country President. The company was a member of Medicines Australia throughout his time with it.  Like all new members of the company he received training on the Code when he joined.  The company had its own internal approval system to ensure that all promotional materials and events complied with the Code.  Mr Phillips’ role within that system was to act as a final decision-maker should there be any disagreement within the company over any new promotional material or an event.  He also had responsibility to make direct representations to competitors if Novartis had reason to complain about their activities and to approve any proposal to make a complaint about a Novartis competitor to Medicines Australia under the Code.

230               The Tribunal considers that the Medicines Australia Code supported by conditions imposed on TGA marketing approvals is likely to lead to the establishment of internal compliance systems in pharmaceutical companies so that Code issues will be considered in devising promotional materials. 

231               In his evidence Mr Phillips referred to complaints brought to the Code Committee involving Novartis in the period he was with the company.

232               Mr Phillips said that sponsorship of educational events was a method commonly used by Novartis’ competitors in Australia.  In his time at Novartis he was concerned to ensure that it selected appropriate venues and hospitality for events that it sponsored and that it avoided extravagance and expense.  He was aware of Novartis’ obligations under the versions of the Code in place at the time.  He was aware from his own experience that it was necessary to provide a certain level of hospitality, commensurate with the standing in the community of healthcare professionals, otherwise the event would be poorly attended.  There was a balance to be achieved between encouraging attendance by providing suitable hospitality and avoiding the perception that healthcare professionals were being improperly swayed in their attitude to a particular product by the hospitality they were afforded by a pharmaceutical company thus damaging the image of the particular company and the industry as a whole.

233               Mr Phillips discussed the importance which he attached to the Code as providing a cheap and efficient mechanism for persons to complain about pharmaceutical companies who may have made incorrect claims about their products.  The fact that such complaints could be made by healthcare professionals and members of the general public in his opinion increased the accountability of pharmaceutical companies and the creditability and reputation of the industry.  He saw the “shaming” that occurs when a requirement to correct or withdraw promotional material was imposed as costly to a pharmaceutical company in terms of  reputation.

234               From  his industry experience Mr Phillips said that the level of competition between pharmaceutical companies operating in Australia means that each company monitors the promotional activities of its competitors closely.  This coupled with an easy to access complaints procedures results in a high level of scrutiny of promotional activities through the Code Committee. 

235               Mr Phillips did accept the proposition put to him by the Tribunal that there might be some mutual interest among pharmaceutical companies in not complaining about each other’s educational events for fear the complainant might provoke a backlash.  It was put to him that this area of complaint is different from that relating to misleading information or adverse comparative claims which can be immediate and damaging to a competitor.  He accepted the point although he said as a chief executive officer it was always his job to turn around a profitable company and it wasn’t in his interest to inflate the level of hospitality in educational events.  The latter answer, with respect, was not particularly convincing as there is nothing to suggest that the cost of even a lavish event would be a significant item in the overall expenses of the larger pharmaceutical companies. 

236               Subject to that qualification the Tribunal accepts the substance of Mr Phillips’ evidence as outlined in these reasons.

Stephen Ackland – a medical oncologist’s interaction with the pharmaceutical industry

237               The affidavit of Stephen Ackland was read in evidence without any cross examination and subject to conceded objections.  Professor Ackland is a medical oncologist.  He is senior staff specialist in Medical Oncology at the Newcastle Mater Misericordiae Hospital and a Conjoint Professor at the Faculty of Health at the University of Newcastle.  He is also a Consultant Medical Oncologist at Lingard Private Hospital and an Honorary  Consultant in the Department of Medical Oncology at the Royal Prince Albert Hospital in Sydney.  He is a former President of the Clinical Oncological Society of Australia and a former Chairman of the Medical Oncology Group of Australia.  In August 2006 he joined the International Affairs Committee of the American Society of Clinical Oncology for a three year term.  His evidence was substantially directed to responding to evidence by Dr Ian Haines who was called by the ACCC and whose evidence is referred to later in these reasons. 

238               Dr Ackland described the nature of medical oncology and the function of medical oncologists.  He discussed their involvement in clinical research trials and the treatment of patients.  Medical oncology is a relatively new speciality based on clinical evidence of the benefit of medical treatments for cancer.  It is common for most cancer centres and institutions to conduct clinical trials as part of a cooperative trials group.  Australia has ten national cancer cooperative groups.  Most of the centres which conduct clinical trials are members of one or more of those cooperative trial groups.  Clinical trial research falls into the categories of “contract research” or “investigator driven research”.  The former involves trials conducted for an organisation such as a pharmaceutical company.  The latter relates to studies driven by an individual or group of independent researchers such as medical oncologists. 

239               Dr Ackland’s experience with contract research is that a sponsoring pharmaceutical company will pay the participating cancer centre or institution an agreed amount generally as a reimbursement for costs incurred in conducting the trial.  He does not receive payment directly from pharmaceutical companies for the conduct of trials.  As far as he is aware medical oncologists in Australia do not receive such payments.  Pharmaceutical companies themselves cannot conduct clinical research trials because they do not have access to patients.  They are involved in drug discovery development and the process of undertaking studies in the laboratory. 

240               Dr Ackland referred to what he called “two premium international annual conferences for medical oncologists”.  One is the ASCO conference in the United States and the other is the ECCO/ESMO conference in Europe.  The ASCO conference is organised by the American Society of Clinical Oncologists and lasts for approximately four days.  The ECCO/ESMO conference is organised by the European Clinical Cancer Organisations and the European Society of Medical Oncologists.  A third significant conference is the San Antonio Breast Cancer Symposium typically held annually for three or four days.  It is common for pharmaceutical companies to organise evening meetings during the international conferences.  Delegates to the conferences decide whether to attend those meetings.  Occasionally he has attended them as they generally have high quality speakers discussing general topics usually in relation to pharmaceutical company products and can be of significant educational value. 

241               There are domestic conferences organised by professional associations in Australia, namely the Clinical Oncological Society of Australia (COSA) and the Medical Oncology Group of Australia (MOGA).  These annual scientific meetings may be sponsored by the pharmaceutical industry but so far as Dr Ackland knows, their agenda is determined independently of the industry.  He almost always attends the conferences conducted by COSA  and MOGA because he usually participates in them. 

242               Only a limited number of Australian based medical oncologists attend the major international conferences.  There is, however, a series of local events at which the papers presented at the international conferences are discussed by local oncologists.  The meetings are usually referred to as the Post ASCO, Post ESMO or Post San Antonio Breast Cancer Symposium Update.  They are dinner meetings commonly sponsored by one or more of the pharmaceutical companies.  Dr Ackland does not usually attend unless presenting a paper.  He is a relatively senior medical oncologist and either familiar with the relevant research or able critically to assess the presentation given at the international conference.  He considers it important for more junior oncologists to attend these updates as the presenters are typically senior medical oncologists able to listen and discuss with the junior oncologists the topics presented at the international conferences. 

243               Dr Ackland said that medical oncologists treat patients on the basis of evidence-based medicine which means evidence based on the results of peer reviewed and (usually) published clinical research trials.  In his experience, practitioners in the field inform themselves of research by:

(a)        reading articles in professional journals;

(b)        attending meetings and conferences;

(c)        being involved in the clinical trials process.


Guidelines are issued by the NHMRC relating to clinical practice and therapies for the treatment of various forms of cancer.  The clinical practice guidelines are designed to provide information to assist decision-making and are based on the best evidence available at the time of publication.  He regards them as a guide to appropriate practice.  In addition the Cancer Institute of New South Wales is introducing a Standard Cancer Treatment protocols program.  It is intended to develop evidence-based protocols for medical oncology and haematology to enable physicians and general practitioners to access complete treatment protocols, their supporting evidence and dose calculation.  As far as Dr Ackland knows, most medical oncologists practising in New South Wales have regard to the protocols.  They complement the guidelines.  They deal more prescriptively than the guidelines with the use of medications.  They include information relating to the dosage, frequency, cycles, cost and efficacy of the relevant medication, any indications for dose modification and key clinical trial support in the use of the medication.

244               Dr Ackland said that although there are clinical practice guidelines and protocols in place it is still important for a medical oncologist to keep up to date by reading relevant literature and attending international conferences and other educational events including those sponsored or conducted by pharmaceutical companies.  It is also important for them to participate in clinical research trials and meet with pharmaceutical industry representatives.  The treatment of cancer is a fast developing clinical service and guidelines and protocols can become quickly outdated. 

245               Dr Ackland described the relationships that medical oncologists can have with pharmaceutical companies.  Consultancy arrangements involve participation in advisory boards or committees for a fee.  Such boards or committees may provide advice about clinical trials, prepare agendas for educational events, advise pharmaceutical companies on the kinds of educational events registrars in hospitals would find useful in relation to particular medications and advise on how best to market or position a product having regard to existing treatments for a particular condition.  It is common for medical oncologists to attend educational events sponsored or conducted by pharmaceutical companies as speakers or chairpersons, or to listen to presenters and ask questions as appropriate.  These can be international or interstate events or evening meetings.  Medical presenters at pharmaceutical company events are commonly paid an honorarium or consultancy fee for their presentations.  In Dr Ackland’s experience the oncologist prepares his own power point or slide presentation.  The sponsoring company occasionally assist in improving presentation of the slides.  Occasionally the power point slides are provided to the oncologist by a pharmaceutical company on a background for that company. 

246               It is common for pharmaceutical companies to sponsor the attendance by medical oncologists at international conferences.  Such sponsorship involves reimbursement of the cost of the airfare and accommodation.  Dr Ackland’s attendance at the ASCO 2005 meeting was sponsored by a pharmaceutical company.  However he was not sponsored for his attendance at the ESMO Conference in September 2006.  From time to time he has received sponsorship to attend company sponsored events held overseas.  He was sponsored to attend an education meeting in Prague in early November 2006 regarding a rare cancer condition.

247               So far as it is outlined above, the evidence from Dr Ackland was not challenged.  It provided a useful overview of the way in which medical oncologists obtain their information and the nature of their interactions with pharmaceutical companies.  

Ian Edwin Haines – a medical oncologist concerned about pharmaceutical company benefits

248               Dr Haines, whose evidence was relied upon by the ACCC, is a medical oncologist who practices in Melbourne.  He is a visiting medical officer at the Medical Oncology Unit at the Alfred Hospital in Melbourne.  He is also a Fellow of the RACP.  Since 1991 he has been a lecturer in the Monash University Department of Medicine.  At the time of his statement sworn on 2 November 2006, Dr Haines was Principal Investigator for a comparative study organised by AstraZeneca relating to two new antibodies for lung cancer.  As Principal Investigator he would review tests and results for all patients recommended for the study and verify that they met eligibility criteria.  He was also responsible for ensuring that all applicable ethical and regulatory requirements were satisfied.  He received no remuneration from AstraZeneca for being the Principal Investigator.  He has been an investigator for other studies sponsored by pharmaceutical companies conducted at the Alfred or Cabrini Hospitals but does not, and never has, received remuneration from any pharmaceutical company for participating in such studies.  He informs himself about new drugs by reading articles in professional journals such as the Journal of Clinical Oncology.  There is an increasing number of articles in journals which contain extensive disclaimers relating to conflicts of interest. 

249               Dr Haines referred to his interaction with pharmaceutical representatives.  He identified three categories of sales representatives:

1.         primary sales representatives, who typically call on primary care physicians such as general practitioners, promoting mass-market products;

2.         speciality pharmaceutical sales representatives, who typically specialise in one therapeutic area and provide information on products within that area; and

3.         hospital or institutional representatives, who typically call upon specialists in university and medical centres. 


He has been visited by all three types of representatives in his academic and medical oncology roles but particularly by representatives in the third category.  He receives requests from approximately four to six representatives for visits each week but generally accepts visits from one or two.  At November 2006, all of his allocated appointments to meet pharmaceutical representatives were fully booked until March 2007.  The representatives provide him with printed information on their products and seek to emphasise their relative merits as against other products.  They typically offer gifts, such as pens, notepads and invitations to meetings.   Dr Haines regards it as important to meet representatives so that he can be continually informed about new products and any regulations which apply to them.  In his experience, pharmaceutical sales representatives are highly informed about their products.

250               Dr Haines referred to the current practice of pharmaceutical companies in targeting and sponsoring meetings within hospitals.  At the Cabrini Medical Centre, specialists practising in the area of breast cancer have meetings sponsored by a pharmaceutical company, typically Roche, which makes the product Herceptin used in treating early stage and metastatic breast cancer.  The meetings for specialists in the area of lymphoma cancer are also sponsored by various pharmaceutical companies.  Company sales representatives attend these meetings.  They provide practitioners with printed promotional material and stationery, including pens and notepads.  They also provide refreshments, including hot and cold finger foods and alcoholic and non-alcoholic drinks.

251               Dr Haines said that oncologists practising in the private sector in Melbourne meet four or six times a year.  Their meetings are sponsored by various pharmaceutical companies and take place at various venues including, for example, the Park Hyatt in Melbourne.  The sponsoring company pays for the food at those meetings, which typically includes a three course meal.  Inter-hospital meetings are held in Melbourne six to eight times per year.  They are sponsored by pharmaceutical companies and typically held at restaurants which Dr Haines considers to be expensive.  He attended a hospital meeting held at the Fenix Restaurant on 29 May 2006.  He paid $75 for the main course provided at the event.  When he commenced practice in 1983 hospital meetings were usually held on a Saturday morning in the hospital lecture theatre at which doctors would present and discuss topics among themselves.  In the period 1980 to 1999 simple food and beverages were provided by the host hospital.  Since about 2000 inter-hospital meetings have typically been held on a week night at restaurants and sponsored by pharmaceutical companies. 

252               When Dr Haines commenced practice as an oncologist in 1983 he frequently discussed oncology practice and treatment with other oncologists in an entirely open and honest manner.  He said:

In my experience, open and honest discussion of oncology practise and treatments no longer occurs in this matter.  Many oncologists known to me now have relationships with pharmaceutical companies.  At educational symposia and meetings which are sponsored by pharmaceutical companies, I have seldom recently heard an oncologist express an opinion contrary to the interests of the sponsoring pharmaceutical company. 

In the last four or five years he has not attended an educational event which has not been organised or sponsored by a pharmaceutical company. 

253               Dr Haines receives invitations to dinner meetings sponsored by pharmaceutical companies at the rate of about one a week.  The speaker at such meetings is typically a specialist considered to be a leader in his or her field of practice who enjoys peer respect.  An entrée and main course are served, a first talk is given, usually accompanied by a power point or slide presentation and then dessert is served.  A second talk is given after dessert, again usually accompanied by a power point or slide presentation.  The dinner meetings which Dr Haines has attended have generally been located at superior Melbourne restaurants, including Flower Drum, Fenix, Vue de Monde and Circa the Prince.  He produced copies of invitations to such meetings.

254               In 2006 Dr Haines began paying for his own meals at these functions because he had become increasingly concerned at the rising involvement of pharmaceutical companies in oncology “education”.  He felt his integrity and independence were being slowly eroded.  Attending dinner meetings at his own cost was one way in which he sought to maintain his independence.  He would decide whether or not to attend on the basis of the topic to be discussed and the presenter.  He accepted that the meetings can be educational.

255               In February 2006 Dr Haines went to a Post San Antonio Breast Cancer Conference meeting, which was sponsored by Sanofi, Roche and Novartis Pharmaceuticals.  He put questions to the presenting specialist about whether the appropriate length of treatment of breast cancer with Herceptin was 9 weeks based on a Finnish study or 52 weeks based on the HERA study.  He also asked a question about the relative merits of a Sanofi product called Docetaxel and another product Paclitaxel in early stage breast cancer having regard to the toxicity of Docetaxel.  He considered that both questions were answered dismissively.  On another occasion about three years ago he attended a dinner meeting sponsored by AstraZeneca.  The topic was the hormonal treatment of receptive pre-menopausal breast cancer.  The presenter spoke about the use of Zoladex, a drug produced by AstraZeneca, which is an expensive drug.  Dr Haines asked what was the advantage of using monthly injections to induce menopause compared to the less costly alternative of prophylactic oophorectomy.   The Chairman, who was a medical oncology colleague, responded with words to the effect “if you want to ask questions like that, perhaps you should pay for your own meal”.

256               Dr Haines regularly receives invitations to interstate educational weekends hosted by pharmaceutical companies.  Invitations received in the six months before he gave his evidence included Cairns, Port Douglas, the Gold Coast and Darling Harbour in Sydney.  They typically covered the doctor’s flights, accommodation and food.  He produced invitations to a selection of those weekends.  He does not attend weekend meetings because he considers most of them to be marketing exercises for the sponsoring pharmaceutical company’s products.  Many topics only involve products of the sponsoring pharmaceutical company and the presentations typically focus exclusively on their positive effects. Data favourable to other treatments for a disease are rarely presented at these meetings.  The presenters usually use power point slides which have been prepared by the sponsoring pharmaceutical company.  He said that presenters have usually done clinical studies for the sponsoring pharmaceutical company’s product and often appear to have a financial conflict of interest.

257               Dr Haines accepted sponsorship from Novartis to attend the ASCO conference in New Orleans in June 2004.  The sponsorship involved a business class airfare, which cost approximately $10,000, and accommodation for five days at the Hampton Inn which cost approximately $2,000.  Lunch and dinner for each day and excursions around New Orleans on the non-meeting day cost about $1,000.  When he was offered full sponsorship by Roche to attend the European Society of Haematology meeting on 15-18 June 2006 in Amsterdam, including business class airfare, accommodation and meeting registration, Dr Haines initially accepted but then declined.  He declined because he had become increasingly concerned that he was compromising his independence and integrity by accepting sponsorship to attend that kind of meeting.  He also declined an alternative sponsorship offer to an Expert Investigator Forum in Valencia, Spain from 6-8 October 2006. 

258               Dr Haines first became aware of the Medicines Australia Code when Medicines Australia wrote to the Age on 3 May 2006 in response to two articles in which his concerns about the marketing of new anti-cancer drugs were reported.  Before being involved in the preparation of the articles for the Age he had never heard of Medicines Australia or its Code.  He had never received any educational or promotional information relating to either.  He never discussed the Code with any of his colleagues within the specialised area of oncology or more generally within the medical profession.

259               Dr Haines’ evidence was essentially descriptive of his personal experience interacting with pharmaceutical companies.  In so far as it describes his experiences, the Tribunal accepts his evidence.  He also set out his own reactions and concerns in relationto some of those interactions particularly in relation to pharmaceutical company hospitality and travel sponsorship.  We regard his evidence as an accurate account of those concerns and the context in which they arose.  Further, we consider that they reflect a considered and realistic assessment of the risks associated with the acceptance by healthcare professionals of financial and other benefits from pharmaceutical companies.  We also regard it as a matter of some significance that he was not aware of the Medicines Australia Code until May 2006.  Widespread awareness by healthcare professionals of the existence of the Code is a necessary adjunct of its effectiveness to the extent that it relies upon healthcare professionals to draw to the attention of Medicines Australia breaches of its provisions relating both to promotion of pharmaceutical products, and the various ways in which benefits are offered to doctors who have responsibility for prescribing pharmaceutical company medicines.

David Alexander Henry – a pharmacologist’s research into the scale and effect of interactions between the industry and healthcare professionals

260               David Henry is Professor of Clinical Pharmacology at the School of Medicine and Public Health at the University of Newcastle and a Staff Specialist in General Medicine and Clinical Toxicology at Newcastle Mater Hospital in Waratah, New South Wales.  He prepared a report as an expert for the purposes of these proceedings at the request of the ACCC.  He has conducted research into relationships between the pharmaceutical industry and the medical profession in collaboration with academic and medical professionals working within Australia, representatives of consumer organisations and employees of Australian pharmaceutical companies.  His research was funded by the NHMRC.  It consisted of a series of surveys planned in collaboration with three reference groups comprising medical specialists, the pharmaceutical industry and consumers.  The main survey instrument provided the data on what he described as the full range of interactions between medical specialists and the industry, including visits, gifts, sponsored meetings, consultancies, advisory board memberships and research.  It led to three published papers in peer-reviewed journals.  A separate survey instrument was used to obtain details of relationships between medical organisations and the pharmaceutical industry.  This also led to a published paper.  An in-depth interview technique was used to elicit the opinions of medical specialists regarding gift and other relationships.  Another published paper emanated from that study.  Professor Henry also conducted an analysis of gifts received by medical specialists over a defined period.  This was done by asking them to place all gifts in a receptacle provided by the researcher.  The data are included in a paper soon to be published in the Journal of Bioethical  Enquiry. 

261               Professor Henry was asked to address a number of questions by the ACCC.  The questions and his answers to them are outlined below.  There were six questions in all. 

262               The first question asked Professor Henry to describe the current relationship between the medical profession and the pharmaceutical industry in Australia, particularly in respect of education, research and promotional and marketing activity.  He began by classifying the interactions between the pharmaceutical industry and the medical profession.  These occur through:

(a)        promotion of products to doctors through advertising and face-to-face representations;

(b)        gift relationships including the provision of promotional/educational items, drug samples, office gifts, personal gifts, clinical aids and invitations to meals, meetings and conferences;

(c)        consultancies and memberships of advisory boards;

(d)        educational sponsorships;

(e)        research sponsorships.


He outlined in more detail the ways in which each of these classes of interaction occur.  A number of elements of the relevant interactions have already been described in the preceding evidence.  It is sufficient to highlight certain aspects of the descriptive part of his evidence in this respect. 

263               One study conducted by Dr Henry involved 51 medical specialists from Sydney who were asked to collect gifts, offers, invitations and items received from pharmaceutical companies in an eight week period at the end of 2002.  The items received were categorised as promotional/educational, drug samples, clinical practice aids, office gifts, personal gifts and invitations.  They were assessed by reference to the Code.  The primary results of the study were that a large number and wide range of gifts and items were received by each of the participants in the survey.  The mean number was 42 per participant.  The mean number of promotional or educational items for each specialist was 21, of drug samples 8, of office gifts 5, of personal gifts 1, and of clinical aids 3.  The mean number of invitations to meals, meetings and conferences was three.  According to Professor Henry most gifts and items complied with the Code with a few breaches, including offers of entertainment, (sporting events and cabaret), items of high monetary value (in competitions with prizes unrelated to medicines), unbranded gifts and promotional documents described as journal articles.

264               The conclusion reached in the study was that medical specialists receive many gifts and items from pharmaceutical companies and a few that the researchers regarded as infringing the Code in force at the time of the study (Edition 13).  The findings were considered against changes since made to the Code and to the RACP guidelines, among others, concerning ethical relationships between physicians and the pharmaceutical industry.  The changes were said in large measure to be supported by the study although some necessary stricter standards were opposed.  The Tribunal notes that the assessment of whether a gift or benefit breaches the Code involves the application of broadly expressed language about which views might differ in particular cases. 

265               Professor Henry said that medical specialists have become increasingly involved in advisory boards or as consultants to pharmaceutical companies.  Some medical specialists may provide consultancy services to several companies, including the provision of advice about the likely uptake of particular products.  Specialists acting in an advisory capacity might also be involved in characterisation of relevant market sectors, discussion of perceived strengths and weaknesses of competitor products and assistance with the preparation of submissions to the Pharmaceutical Benefits Advisory Committee among others.  In a research survey of medical specialists, Professor Henry and others reported on a study in 2005 that in the previous year 23% of specialists surveyed had positions as members of advisory boards to Australian pharmaceutical companies.  Five per cent described themselves as paid consultants to those companies.  Professor Henry said that meetings of advisory boards are frequently held in upmarket hotels with all expenses and travel costs covered by the sponsoring company.  The majority of respondents reporting membership of advisory panels received a fee.  In over 80% of the cases it was less than $5,000.

266               Professor Henry then referred to educational sponsorship.  The pharmaceutical industry is extensively involved in the sponsorship of continuing medical education including through coverage of venue costs, food, educational materials and travel costs incurred by doctors and teachers in attending meetings.  In a research survey which he conducted, 16% of respondents reported acting as speakers about a specific pharmaceutical product and 16% recorded having some input into the creation of company sponsored educational material.  63% reported attending industry sponsored educational sessions. 

267               A study was carried out of the interaction between pharmaceutical companies and organisations that have responsibility for continuing medical education.  Questionnaires were administered to 63 medical organisations concerned with clinical practice, continuing medical education or professional accreditation or the political representation of medical professionals.  Replies were received from 29 organisations representing a response rate of 46%.  17 had received support from one or more pharmaceutical companies in the past financial year.  The support they received was predominantly for annual conferences with some allocation for continuing medical education, research, travel and library purchases.  The majority of organisations had an academic journal or newsletter and 10 accepted revenue from pharmaceutical company advertising.  Twenty had policies or guidelines covering their relationship with industry.   Professor Henry and his co-researchers reached the conclusion, on the basis of this study, that there is a high level of interaction between the pharmaceutical industry and medical organisations in Australia.  While most organisations have policies for guiding their relationship with industry, it was unclear whether these are effective in preventing conflicts of interest and maintaining public trust. 

268               A particular study conducted by Professor Henry sought to characterise research relationships between medical specialists and the pharmaceutical industry in Australia.  2,120 specialists were approached with a questionnaire survey.  823 responded.  Participation in pharmaceutical industry sponsored research was more commonly reported by those in salaried practice (49%) than those in private practice (33%).  216 of the specialists reported that industry had made initial contact.   117 had initiated contact with industry.  Of greatest concern to respondents were instances of delayed publication or non-publication of key negative findings.  This was reported by 6.7% and 5.1% of respondents respectively.  Concealment of results was reported by 2.2%.  Overall, according to Professor Henry’s assessment, 71 respondents, representing 8.6% had experienced at least one event that could represent breaches of research integrity.  The data indicated a high level of engagement in research between the pharmaceutical industry and medical specialists, including those in private practice. 

269               A further study concerned the extent to which pharmaceutical industry sponsorship of clinical research leads to the development of multiple ties between clinicians and the pharmaceutical industry.  A survey of medical specialists listed in the Medical Directory of Australia in 2002 and 2003 was conducted.  The questionnaire was mailed to 2,120 medical specialists.  Again, 823 responded.  This coincidence was not explained in the evidence.  338 reported involvement in industry sponsored research in the previous year.  They were more likely than others to have been offered industry sponsored items or activities valued at more than $500 and support for attending international conferences.   The strongest associations were for those who acted as paid consultants to industry and for membership on advisory boards.  There was a strong relationship between research collaboration and accumulation of industry ties.  The conclusion was that medical specialists who have research relationships with the pharmaceutical industry are much more likely to have multiple additional ties than those who do not have research relationships.  Medical specialists may form complex relationships with pharmaceutical companies.  They may attend and lecture at sponsored meetings.  They may be members of advisory boards and conduct clinical research on a company’s product.  In consequence they receive a range of benefits, including consultancy fees, research grants, gifts and sponsored travel to national and international meetings.  Professor Henry expressed the opinion that the complexity and multi layered nature of interactions between the medical profession and pharmaceutical industry has increased in the last decade.  Multiple ties and open-ended evolving relationships appear to predominate particularly among medical specialists.

270               The second question related to the beneficial or detrimental effects that may result from a relationship between the medical profession and the pharmaceutical industry in Australia.  Professor Henry claimed a number of well regarded studies have documented a consistent correlation between various types of promotional activities and increased prescribing by practitioners of the products of the promoting companies.  He did not think that this was a controversial proposition.  It was well accepted, both in the research literature and by the medical profession as a whole.  Uncertainty exists about the magnitude of the effect of different forms of promotion and there is a tendency for doctors to consider that they personally are resistant to the effects of promotion, while acknowledging the vulnerability of their colleagues. 

271               Professor Henry was also involved in a study carried out by way of in-depth interviews with 50 Australian medical specialists to explore how and why they interact with the pharmaceutical industry and to gain insight into their moral evaluation of the relationship and its consequences.  The data suggested a considerable variance in judgments by specialists of what constitutes appropriate industry largesse.  The relationships with the pharmaceutical industry have inherent tensions managed by different doctors in different ways.  Moral evaluation of a relationship and its consequences vary and the ethical concerns surrounding the relationship appear as an area of contest. 

272               Professor Henry said that promotional activity by pharmaceutical companies has effects other than a positive correlation with a practitioner’s prescribing practices.  Some doctors have responsibilities for teaching medical students and junior medical staff and non-specialist colleagues.  The information they impart to these individuals may be influenced by their association with pharmaceutical companies.  Ties with the pharmaceutical industry may divert a doctor’s time from other tasks.  They may influence research agendas in that the ready access to financial support for research of commercial interest to a company can diminish research activities in other areas without commercial support where competitive funding is difficult to access. His opinion was that these relationships have positive and negative effects.  It was widely agreed that doctors should be involved in research into new pharmaceutical products but that clinical trials and other forms of clinical research should be performed by expert clinicians not directly employed by the sponsoring companies.  Moreover, they should be under the guidance and supervision of scientific review boards and ethics committees. 

273               Professor Henry did not doubt that certain industry sponsored educational activities are of real value.  On some occasions he has found information provided at such events to be superficial and biased in favour of particular products.  He follows a personal rule that he will not accept entertainment sponsored by companies.  Although he accepts basic food he has on several occasions insisted on paying for his own meals, and on one occasion, for his own accommodation.  He believes that the industry is capable of producing high quality information about its products and is well positioned to provide comprehensive information to the medical profession.  In his conclusion, in answer to the second question, Professor Henry said:

In my opinion, it is clear that there are some benefits from relationships between the pharmaceutical industry and the medical profession, and indeed some degree of interaction is essential.  However the intense and complex nature of these relationships can have a number of important adverse effects, which in some cases are substantial.

274               The third and fourth questions put to Professor Henry sought his opinion about what, if any, is the normative role of self-regulation by the medical profession and the pharmaceutical industry and the normative role of effective enforcement of standards of self-regulation.  He reviewed the various bodies and institutions that set and enforce standards  applicable to medical practitioners.  Guidelines have changed over time with a general trend towards imposing more demanding standards on the relationships between medical practitioners and pharmaceutical companies.  Clearer limitation of activities such as gift giving, entertainment and support for travel to educational meetings and conferences has evolved.  This, he said, has been due to the negative perceptions created by press coverage of lavish dining and entertainment provided by pharmaceutical companies to doctors attending sponsored meetings.  He regarded the RACP guidelines as quite strict in setting norms excluding acceptance of almost all gifts from the pharmaceutical industry.  However, those guidelines only provide guidance and, in his experience, are often disregarded in practice.  There is no effective enforcement mechanism to implement them.  His observations of colleagues and data from surveys that he had conducted with colleagues, including in-depth interviews, indicated that a significant proportion of medical specialists are quite comfortable maintaining relatively close relationships with the pharmaceutical industry and that these relationships include activities discouraged by the current version of the RACP guidelines.

275               Questions 5 and 6 asked for Professor Henry’s opinion about benefits or detriments arising from self-regulation by the medical profession and the pharmaceutical industry in Australia generally and by reference to Editions 14 and 15 of the Code.  He was also asked to comment directly upon the proposed conditions 1 to 5 in the ACCC final determination in respect of Edition 15.   Professor Henry’s evidence in response to these questions was largely argumentative in character and offered value judgments of the kind that the Tribunal itself is required to undertake.  Significant parts of this evidence were objected to.  Elements not objected to contained statements about the desirability of some form of regulation of interactions between the pharmaceutical industry and the medical profession.  That is not a contentious proposition in these proceedings.

276               In relation to the ACCC’s proposed condition upon authorisation, Professor Henry expressed the opinion that data properly used can provide a monitoring system that will enable better management of key aspects of the complex relationships between the industry and the medical profession.  The full disclosure of the range and cost of activities would provide the industry collectively with an opportunity to question whether the expenditure represents value for money.  Accessible data could lead to a consensus among leading companies as to what constitutes a reasonable level of expenditure and whether money could be better spent in other ways.  Professional organisations, consumer groups and other interested parties would have an opportunity to review the data.  This may lead to suggestions about the ways in which the legitimate educational aims of companies could be more efficiently achieved.  On the negative side, a monitoring program will impose additional burdens on the staff of Medicines Australia who are required to collect and register the data.  He suggested, however, that the reporting data sets proposed by the ACCC are fairly simple and that the data should be readily available to pharmaceutical companies. 

277               Some of Professor Henry’s reasoning, leading to inferences from some of the studies he conducted, seemed to depend upon the application by analogy of extrapolations drawn from dose response measurements for the testing of drugs.  He accepted that these were being translated into a social science context out of a biological context.  He accepted also that he could not say that the application of the logic applicable to biological contexts into a social science context had been validated.  His approach does seem to have been informed by his acknowledged strong personal view that the Code should be tightened up to prevent the giving of any gifts to medical practitioners.  Some of the recommendations he has made depend upon an assumption that the Code has a moderating effect on behaviour and that to tighten it up would further moderate behaviour.

278                The Tribunal infers from the primary evidence and from Professor Henry’s evidence based upon the studies to which he referred that:

1.         Members of the medical profession and of the pharmaceutical industry interact in a variety of ways associated with the marketing of pharmaceutical products.  The conferring of benefits on practitioners is a significant element of that interaction.

2.         The conferring of benefits on doctors and the development of their relationships with pharmaceutical companies have the capacity to affect their professional judgment and prescribing practices and public discussion in relation to particular medications.

3.         Some medical practitioners have developed multiple ties to pharmaceutical companies which would increase the risks referred to in the preceding finding.


The external regulatory framework

279               The principal Commonwealth statute regulating the manufacture, promotion and supply of medicines and medical devices in Australia is the TG Act.  The TG Act is administered by the TGA which is part of the Commonwealth Department of Health and Aging.

280               The TG Act establishes a register known as the Australian Register of Therapeutic Goods (the Register) for the stated purpose of compiling information in relation to, and providing for evaluation of, therapeutic goods in use in humans (s 9A).  The Register contains three parts, one for registered goods, another for listed goods and a third for medical devices.  It is common ground that the TG Act requires that medicines must be listed or registered on the Register before they can be sold in Australia.  Registered medicines can only be supplied if they are accompanied by patient information (reg 9A).

281                Applications for registration or listing of therapeutic goods are made to the TGA.  The TGA issues a marketing approval letter to a pharmaceutical company when the company’s application for a particular prescription medicine to be listed or registered on the Register has been approved.  Typically marketing approval letters require that promotional material (other than Product Information) relating to the registered good must comply with the requirements of the Medicines Australia Code. There is a statutory requirement that advertising of registered goods to healthcare professionals must comply with the Therapeutic Goods Advertising Code (ss 42DM and 42DO).  The Therapeutic Goods Advertising Code is as gazetted by the Minister from time to time.  The first such Code was gazetted in 2003 pursuant to the Therapeutic Goods Amendment Act (No 1) 2003 (Cth).  Amendments have been gazetted from time to time since then.  Amendments to the Code may be recommended to the Minister from time to time by the Therapeutic Goods Advertising Code Council established under the Therapeutic Goods Regulations 1990 (Reg 42A). Although Medicines Australia is not represented on that Council it is entitled to nominate a person to attend its meetings as an observer (reg 42J(ca)).   Advertising of medicines directly to members of the public is generally prohibited (s 42AA).

282               The advertising of prescription only medicines to healthcare professionals is permitted by the TG Act provided that the advertising only refers to the approved uses of product approved in the Australian Register of Therapeutic Goods.  Part 5.1 of Chapter 5 of the Act, which deals with advertising and generic information, does not apply to advertisements directed at healthcare professionals (s 42AA).   The TG Act, the Regulations and the Therapeutic Goods Advertising Code are otherwise silent on the form and manner in which prescription medicines can be advertised and promoted to healthcare professionals.  Such promotion is, of course, governed by general provisions of the law relating to consumer protection including ss 52 and 53 of the TPA, which prohibit conduct by a corporation in trade or commerce which is misleading or deceptive or likely to mislead or deceive.  Similar provisions are found in State and Territory Fair Trading Acts.

283               In addition to the TG Act, the National Health Act 1953 (Cth) established the PBS in Pt VII.  When a medicine is “listed” under the PBS the medicine can be supplied for a fixed statutory charge by an approved pharmacist on presentation of a prescription written by an approved medical practitioner.  A similar scheme exists under the Veterans Entitlements Act 1986 (Cth) (Pt V).  That is the Repatriation Pharmaceutical Benefits Scheme (RPBS).  Eighty per cent of prescriptions dispensed in Australia relate to products listed on the PBS or the RPBS.  In addition to the Commonwealth laws referred to above, there is an array of State and Territory legislation.  That legislation does give effect to a Standard for Uniform Scheduling of Drugs and Poisons, published by the Australian Health Ministers’ Advisory Council and designed to achieve a national approach to the scheduling of substances and uniform labelling and packaging requirements.     

284               The Therapeutic Goods Advertising Code 2006 was replaced on 26 February 2007 by the Therapeutic Goods Advertising Code 2007.  The relevant amendment to the 2006 Code in the 2007 Code was the introduction of a prohibition against health professionals endorsing therapeutic products in advertisements directed to consumers.  This followed a recommendation to the Minister from the Therapeutic Goods Advertising Code Council.  The relevant amendment is reflected in cl 4(6) of the 2007 Code which provides:

Professional recommendation

 

(b)       advertisements must not contain or imply endorsement by:

 

            (i)         any government agency;

            (ii)        hospitals and other facilities providing healthcare services;

            (iii)        individual or groups of healthcare professionals, other than where the emphasis is on the availability, which may include the price of therapeutic goods through his/her retail business; or

            (iv)       by individuals, who are healthcare professionals by way of their representation in advertisements or academic qualifications and/or who are likely to be known as healthcare professionals by the reasonable person.

 

285               It is common ground  that other than the statutory framework referred to above there are no relevant statutory restrictions regulating the manner in which pharmaceutical companies may interact with healthcare professionals.  In particular there are no current statutory restrictions on the provision of hospitality, entertainment or gifts by pharmaceutical companies to healthcare professionals.  Nor are there statutory restrictions on the circumstances in which pharmaceutical companies can retain healthcare professionals to  provide advice and guidance.

286               In December 2003 the Governments of Australia and New Zealand signed an agreement to establish a joint scheme for the regulation of therapeutic products.  It is  proposed that the TGA and its New Zealand counterpart, Medsafe, will be replaced in late 2007 by ANZTPA.  It is intended by the Australian Government that legislation which will form the basis of the regulation of therapeutic products by the proposed joint Therapeutics Authority will operate at a high level in a similar way to the existing Act and its regulations.  Advertising of prescription medicines to healthcare professionals will continue to be regulated by the Code which will be significantly more prescriptive than the legislation to be enacted.  It is intended that there should be a new Commonwealth Therapeutic Products Act to include the operating framework for the joint Therapeutic Authority, and associated rules that will provide the details currently set out in the Act and Regulations. 

The relevant market

287               It is common ground that the relevant market for the purpose of assessing the current applications is the market in Australia for the supply of prescription medicines and products used under medical supervision as permitted under Australian law. 

288               Medicines Australia submitted that the market has the following characteristics.  The sale of prescription medicines is in large measure dependent upon the decisions of medical practitioners as to which medicines to prescribe.  This occurs because members of the public:

(a)        are prohibited by law from purchasing prescription medicines at all unless prescribed by a medical practitioner;

(b)        are necessarily reliant on the professional expertise and judgment of the prescribing medical practitioner; and

(c)        are, in any event, prohibited by law from receiving advertising about prescription medicines.

It is also a feature of the market that subject to those elements of specific and general Commonwealth and State statutes referred to above, there is no regulation under Commonwealth, State or Territory law of the ways in which prescription medicines can be advertised and promoted to medical practitioners.  It is also a feature of the market that because of the statutory regulation of the price paid by members of the public for most prescription medicines, decisions of medical practitioners as to which medicines to prescribe are unlikely to have an effect on their price. 


An overview of voluntary codes and their interaction with statutory regulation

289               It is useful to reflect briefly upon the different characteristics of voluntary codes and statutory regulatory systems.  Each taken by itself has its own strengths and weaknesses.  Taken together in a relationship sometimes described as “co-regulation”, in the best cases, each can support the other in the public interest.   

290               The history of voluntary codes dates back to the nineteenth century.  They were a well established phenomenon by the middle of the twentieth century.  They have been used for a variety of purposes, not all concerned with consumer protection.  The Monopolies Commission in England in the 1950s and 1960s accepted that industry codes setting down non-binding conditions of trading could be a convenient way of achieving a “degree of common understanding and uniformity” provided that those in the relevant industry could observe them or not as they wished: Lord Wilberforce, Campbell and Elles, Restrictive Trade Practices and Monopolies (Sweet & Maxwell, London, 1966) at [630].

291               In their early work on the TPA, Donald and Heydon referred rather sceptically to industry self-regulation when it involved joint action to maintain standards of probity in advertising and of safety or efficiency in products sold.  They said:

This has not been successful as a general response to the problem.  First, self-interest and the difficulty of achieving agreement will ensure that ethical codes may tend to a lowest common denominator.

 

They referred then to the problem of potential contravention of s 45 if a firm were expelled from an association for breaching a code: Donald BG and Heydon JD, Trade Practices Law (Law Book Co, 1978) at 11.1.1.  Authorisation of course is intended to overcome concerns about contraventions of s 45 in the event that the ultimate sanction of expulsion is applied.

292               In 1978 the Trade Practices Tribunal discussed the benefits of a code in considering authorisation of an accreditation scheme contained in the rules of the Media Council of Australia.  The Tribunal observed that the promotion of standards of honesty, fairness and responsibility in advertising is clearly in the public interest.  They accepted that benefits to the public cited by the applicants for authorisation resulted from the establishment of and adherence to the relevant codes and standards resulting from the accreditation system.  The benefits identified were:

.           the codes and standards covered areas which are not covered by legislation;

.           they enabled immediate action to be taken to stop contravening advertisements without court proceedings.  Legislative codes could only be enforced by court proceedings which are much more time-consuming and costly.

.           they enabled a common standard to be applied by all media proprietors to a particular advertisement.  Under a legislative code different interpretations were likely by different media proprietors in the application of the code to particular advertisements.

.           they enabled standards of advertising to be maintained and improved.  Under legislative codes, standards would tend to drop to the minimum standard permissible under the law.

.           they enabled advertisements in areas which experience had shown need special safeguards (eg slimming treatments) to be cleared before publication.  This procedure was more beneficial to the public than a prosecution under a legislative code against an advertiser long after the advertisement had been published.

.           they enabled advertisements such as advertisements for proprietary medicines to be required to be substantiated before the advertisement was published and for the claims made for the product to be evaluated by an independent medical expert.  Under a legislative code, the fate of a prosecution might depend upon the evaluation by a court of competing medical opinions;

.           they were conducive to the achievement of uniform standards of advertising throughout Australia. 


The Tribunal regarded these benefits as collectively constituting “… an important and substantial benefit to the public resulting from the accreditation system”. Re Herald and Weekly Times Ltd 17 ALR 281 at 310.   It may be noted that many of these benefits are of general application in the case of effective codes co-existing with a legislative system of regulation.    See also the discussion by the Tribunal in Re Media Council of Australia 88 FLR 1 particularly that commencing at p 33.

293               In their 1982 text: Advertising Regulation (Law Book Co, 1982) Barnes and Blakeney discussed the state of Advertising Self-Regulation in Australia at that time.  They referred to “a multiplicity of voluntary codes” then governing advertising practices.  A number of codes were summarised including the APMA Code.  Until 1976 the advertising of medicines was regulated by a Code Relating to Ethical Advertising established for that purpose by the National Medical Media Council (NMMC).  The Council was set up in 1973 by the publishers of major medical journals in Australia concerned about the possibility of government regulation.  The code adopted by the NMMC was said to set out “standards intended to maintain the high reputation of medical publications, prevent the admission to the Council of any undesirable publications and to permit Council to reprimand and/or expel a member should it not maintain those standards”.  The Council set up a liaison committee with the AMA, APMA and the Australian Association of National Advertisers.  The committee formulated the code.  The body responsible for monitoring compliance was an Advertising Approval Authority which examined advertisements before their publication.  In 1976 APMA announced it was adopting the NMMC Code as its own.  The NMMC then discontinued its approvals system (Barnes and Blakeney op cit 14.3.3-14.3.4).

294               Barnes and Blakeney in evaluating advertising self-regulation observed that the most persuasive argument in favour of it is that it works more effectively, efficiently, expeditiously and less expensively than regulation by government agencies.  On the other hand, they pointed to the criticisms mounted by the opponents of self-regulation at the time about the lack of sanctions in most schemes and the non-mandatory nature of membership of the self disciplinary umbrella organisations.  They commented:

Often the evaluation of industry self-regulation is very much a reflection of a commentator’s political philosophy more than anything else.


The authors made the general observation, with which we agree, that:

Unquestionably, the greatest contribution which can be made by voluntary schemes of regulation is the promulgation of standards to deal with areas of conduct beyond the scope of legal regulation. 

 

They referred to the preoccupation of the law with matters of deception and falsity and its inadequacy to grapple with problems of psychological persuasion, ethics and morality. 

295               In 1988 the Trade Practices Commission reported on self-regulation.  This Report has been described as providing the impetus for a reassessment of the role of codes of conduct in Australian industry.  As Professor Neil Gunningham observed in a recent text on voluntary codes:

Australia first considered developing a manual on the appropriate uses, design and implementation of codes of conduct in 1989.  From this original concept, the Guide to Codes of Conduct gradually evolved in the early 1990s.  Draft guidelines were developed and distributed to industry informally.  The Commission then consulted business and consumer representative bodies for comment and input.  At this stage, further reflection went into the design of the Guide, which was then formally released in October 1996.

 

Gunningham N, “Codes of Practice: The Australian Experience” in Webb K (ed) Voluntary Codes: Private Governance, the Public Interest and Innovation  (Carleton Research Unit for Innovation, 2004, Ch 12) at 317.

 

296               In 1994 the Australian Law Reform Commission (ALRC) published its Report No 68 “Compliance with the Trade Practices Act 1974”.  It discussed codes of conduct at [3.7] to [3.10].  It described “co-regulation” as having considerable potential as an alternative to further government regulation.  It characterised codes of conduct developed by industry with the assistance of government and other groups such as consumers as “a form of co-regulation”.  It accepted that codes alone cannot prevent all market failure or consumer complaints.  It also accepted the benefits of effective co-regulation through codes of conduct as:

.           they may provide a more cost effective alternative to government regulation;

.           they can be more industry specific then government regulation;

.           an industry with some form of “ownership” of a code will often be more committed to making it work;

.           addressing systemic complaints about an industry in a code can act as a form of industry quality control;

.           an effective code may improve an industry’s image;

.           codes can be more effective than legislation and more readily changed to reflect the dynamics of the market place;

.           appropriately designed and administered industry codes can give the public access to a quick, informal means of complaint handling and redress.

297               The ALRC also pointed out how codes of conduct are not appropriate in all situations:

.           a code may contain anti-competitive practices which do not serve the interests of consumers;

.           a code may be inadequately enforced if an industry is unwilling to discipline itself, or is biased in its administration of the code;

.           voluntary codes may be unsuitable where industry-wide compliance is required but not all industry participants have adopted the code;

.           there may be no meaningful consumer input into the formulation of codes if there is an imbalance in bargaining power and knowledge between the industry and consumers;

.           the informal drafting and language of codes can make contraventions difficult to prove;

.           codes are vulnerable to competitive pressures which force the players in a market to cut corners and evade their obligations under the code.

ALRC Report No 68 [3.8] and [3.9].

298               The ALRC made recommendations about the role of the Trade Practices Commission in the development of codes of conduct and in the course of so doing made the following observation about the authorisation process ( at [3.12]):

Where a code is linked to a TPC authorisation … there is an implicit sanction that a breach of the code could lead to the authorisation being revoked.  However, as this sanction affects the entire industry, it is not an effective mechanism for dealing with the occasional contravener.

 

The logic of that proposition is elusive.  In any event it seems to have no application when the Code provides for its own enforcement and the imposition of sanctions for its breach.

 

299               A developing interest by government in supporting and fostering industry-based codes of conduct was reflected in subsequent events including the release by the Ministerial Council on Consumer Affairs in October 1996 of a guide to fair trading codes of conduct: Fair Trading Codes of Conduct: Why Have Them, How to Prepare Them. (A Guide prepared by the Commonwealth, State and Territory Consumer Affairs Agencies, October 1996).  The  Minister for Small Business and Consumer Affairs hosted a Symposium on Codes in Melbourne on 22 November 1996 bringing together industry, consumers and government representatives to examine various approaches to codes.  In a Prime Ministerial Statement on 24 March 1997, responding to the Small Business Deregulation Task Force, the Prime Minister said that governments should consider industry self-regulation as one of the first regulatory options and develop guidelines on the circumstances when self-regulation would be appropriate: More Time for Business (Statement by the Prime Minister, the Hon John Howard MP, 24 March 1997) at 77-78.

300               In June 1996 a reference was given to the House of Representatives Standing Committee on Industry, Science and Technology to examine business conduct issues arising out of commercial dealings between firms.  It was required to report, among other things, on the possible application of voluntary codes of conduct and dispute resolution mechanisms.  It reported in May 1997.  In September 1997 the Commonwealth Government responded to the report.  It supported effective self-regulation but also announced that the TPA would be amended to allow industry developed codes or relevant provisions of such codes to be prescribed as either mandatory or voluntary codes with enforceable provisions. 

301               In an announcement made in March 1998 the Minister for Customs and Consumer Affairs set out a Codes of Conduct – Policy Framework.  He stated:

High quality codes of conduct can provide consumers with accessible and independent dispute resolution mechanisms.  Dispute schemes increase consumers’ access to justice by fulfilling a need for cost-free, accessible and effective resolution of disputes. 

 

He referred to a paper released by his predecessor in August 1997 entitled “Benchmarks for Industry-Based Customer Dispute Resolution Schemes”.  The Policy Framework described codes of conduct as “one element of a possible range of regulatory mechanisms”.  These range from no regulation through self regulation to quasi-regulation, co-regulation and then legislation.  The first principle of the policy was a general presumption that competitive market forces would deliver greater choice and benefits to consumers.  Existing regulations were to be examined to see whether they were adequate to deal with market failure problems.  Before considering further regulation the government would consider non-regulatory alternatives that might be appropriate.  Considering regulatory measures the government’s actions would be consistent with the objectives of National Competition Policy.  Principle 3 in the Policy Framework stated:

 

Effective voluntary codes of conduct are the preferred method of intervention.


Factors relevant to the assessment of effective codes of conduct were said to include:

.           nature of the industry concerned;

.           existence and coverage of an industry association;

.           type of standards existing or proposed which are aimed at addressing the problem;

.           existence of supporting mechanisms for those standards;

.           commitment of the industry to self-regulation; and

.           willingness of the code administrators to sanction non-compliance.

 

302               The term “co-regulation” in the Policy Framework appeared to describe the circumstance in which industry develops and administers a code and government provides the ability to enforce it by giving it legislative backing in some way.  For the purposes of this discussion, the Tribunal takes a broader view of co-regulation as including the mechanism described in the Policy Framework but extending to cases in which the voluntary code complements statutory regulation. 

303               Support for industry codes was provided by the introduction of Pt IVB of the TPA in 1998.  Part IVB comprises s 51ACA to 51AE and provides for regulations to be made to designate industry codes as mandatory or voluntary.  There is a general definition of applicable industry code which refers to the prescribed provisions of any mandatory industry code relating to the industry and the prescribed provisions of any voluntary industry code that binds a corporation which is a participant in the industry (s 51ACA(1)).  Section 51AD states that a corporation must not, in trade or commerce, contravene an applicable industry code.  Section 51AE provides for the making of regulations relating to industry codes.  Mandatory codes prescribed under these provisions are the Franchising Code, Oilcode, which regulates the conduct of suppliers, distributors and retailers in the downstream petroleum retail industry and the Horticulture Code which regulates trading of horticulture produce in the horticulture produce industry.  No voluntary industry codes have been prescribed.  These provisions do not apply to the Medicines Australia Code.  However their existence and their public policy setting indicates a strong public interest as perceived by government over a number of years in the establishment of effective voluntary industry codes as a substitute for or complement to statutory regulation. 

304               A Taskforce on Industry Self-Regulation was established by the Minister for Financial Services and Regulation in 1999.  It reported in August 2000.  Another report of significance was that of Wallace, Ironfield and Orr commissioned by the Commonwealth Treasury and published in May 2000 under the title “Analysis of Market Circumstances Where Industry Self-Regulation Is Likely To Be Most and Least Effective”.  Further guidance for self-regulation for industry was announced by the Australian Government in December 2000.  The ACCC itself has published guidelines for the development of effective voluntary industry codes of conduct.  The most recent version of the guidelines was published in February 2005.

305               A useful comparison of voluntary codes and statutory regulation and their interaction was undertaken by Webb K and  Morrison A in “The Law and Voluntary Codes: Examining the “Tangled Web”” in: Webb K (ed), op cit at Ch 5.  Voluntary codes and external regulation were compared in a number of respects including the creation of rules, their administration and the adjudication process.  Three tables included in the paper set out points of comparison.  They are reproduced as Annexures 5, 6 and 7 to this decision.  

306                After comparing so called “command and control” regulatory schemes and voluntary codes the authors  observed, relevantly to the present case, (at 118-119):

Clearly, the public organs of rule making, implementation and adjudication are powerful, credible, open, democratic and generally effective, although they tend to be formal, expensive and slow.  Voluntary code rule systems tend to have less visibility and credibility, less ability to deal with those who do not wish to join the program and reduced options for stimulating compliance, but they can be more flexible, less expensive and faster, avoid certain jurisdictional limitations attached to public organs, allow non-State parties the freedom to create their own rule structures, and be effective in harnessing the energies of non-State actors.

 

307               In the introduction to the text Professor Clayton Christensen of the Harvard Business School described new approaches or processes for developing products as typically enabling a larger population of less skilled people to do things previously performed by specialists in less convenient centralised settings. Webb and Morrison in their paper applied that general comment to the way in which codes can work (at 119):

As with the introduction of personal computers into a world of mainframe devices, voluntary codes open up the possibility of societal rule development and implementation to a much wider group of players than do conventional  public law organs such as legislatures and the courts.  Non-governmental organizations, firms and multistakeholder groups can establish and operate their own rule systems and engage in “norm conversations” without need for a government intermediary.  These voluntary code rule systems are not a replacement for those of the State, and indeed they operate within a broader State legal framework.  Seen in this light, voluntary rule systems are an addition to conventional legal processes, with concomitant increased, enriched possibilities for effective norm development and implementation.

 

The Tribunal agrees with these general observations which inform its assessment of the Code, for the purposes of authorisation, as part of a co-regulatory system rather than as a set of domestic rules isolated from any statutory context.

308               The Tribunal accepts that there is strong public policy support for effective voluntary codes  and that such codes can deliver public benefit especially where they complement and extend beyond the reach of statutory regulation in dealing with market failures.

 

The future without the Code

309               It is necessary to consider the future without the Code in order to aid in the identification of benefits and detriments flowing from it in a future in which it exists.  This does not require the hypothesis of a variety of alternative or lesser codes. 

310               Absent the Code, there would be no voluntary mechanism within the industry for industry members to enforce, as against each other, standards of conduct in relation to the matters which it covers.  Those matters include promotional claims about pharmaceutical medicines, the conduct and training of pharmaceutical representatives, the use of product starter packs, the involvement of pharmaceutical companies in educational symposia, congresses and satellite meetings conducted by, or for, healthcare professionals and the sponsorship by pharmaceutical companies of healthcare professionals and of particular research.  Nor would there be a mechanism for governing other relationships between pharmaceutical companies and healthcare professionals such as appointment to company advisory boards.  There would be no requirement, as there presently is, for the adoption by pharmaceutical companies of internal compliance procedures in relation to any of those matters.  Nor would there be any mechanism for reporting to the public of misleading claims in promotional information (other than such claims as come to the attention of external regulators).   

311               The RACP Guidelines are guidelines only.  There was no evidence that they are applied by a substantial number of medical practitioners.  Professor Henry’s observation was that they are often disregarded in practice.  There is no mechanism for their enforcement.

312               Should the TGA wish to condition its marketing approvals for pharmaceutical products  on compliance with Code-type standards it would, in the absence of the Code, have to formulate and enunciate such standards for itself.  Under the TG Act advertising of  prescription only medicines would continue to be limited to healthcare professionals.  However, concerns about misleading or deceptive advertising of such medicines would have to be dealt with under the general law such as the provisions of the TPA or State and Territory Fair Trading Acts.  Alternatively they might be dealt with by the TGA as constituting breaches of conditions of its marketing approval.  Enforcement action in relation to breaches of the general law requires investigation by the relevant enforcement agency.  Consequential legal action is likely to be time consuming and expensive.  In so saying the Tribunal accepts that statutory enforcement agencies may implement administratively, as an aspect of their prosecutorial discretion, a system of administrative warnings or resolutions dependent upon agreement as to appropriate corrective action.  The Tribunal also accepts that it is open to enforcement agencies to reach agreement with transgressors with a view to seeking consent dispositions in the courts.

313               Absent a voluntary code the external regulatory framework is the principal and probably the only mechanism for enforcement of those matters with which it deals.  The Tribunal accepts the submission by Medicines Australia, that absent the Code, there is a real likelihood that promotion of pharmaceutical products would become more aggressive with some companies or their representatives testing regulatory boundaries.  As Professor Henry pointed out some presently push the boundaries of the Code.  In so saying the Tribunal recognises that pharmaceutical companies promoting their products to healthcare professionals are communicating with a highly educated audience.  Overreaching claimsmay be counterproductive.  Misleading or deceptive claims or claims which make comparisons in favour of a product being promoted and adversely to a rival product are likely to attract the active attention of competitors.  Such may be the subject of complaint to Commonwealth or State regulatory bodies. 

314               Absent the Code there is no external regulatory system in place to constrain the conferring of benefits on healthcare professionals by pharmaceutical companies.  While a culture of restraint and sensitivity to public criticism may moderate the development of such practices there is a real chance that, absent any mechanism for their limitation some companies would break out of that culture. It may also be that the conferring of benefits will take new and more subtle forms.  The record of the Code thus far indicates a relatively low level of complaint to the Code Committee about such matters.  This, we think, reflects the reality that the conferring of benefits on healthcare professionals, in the ways described in the evidence, does not pose the kind of competitive threat to actors in the market posed by promotional claims about products.  Despite some evidence to the contrary we are not satisfied that the costs of hospitality or the other kinds of benefit described would constitute a significant proportion of the expenses of pharmaceutical companies.  A table of expenditure in relation to education event related hospitality provided in 2004 and 2005was in evidence before the Tribunal and is Annexure 8 to these reasons.  Absent the Code, there is virtually no opportunity for any independent scrutiny of such practices.  There is no formal mechanism by which egregious cases of lavish hospitality would come to public attention saveto a limited extent, through the Annual Reports of the Code and Appeals Committees.

315               In our opinion there is a significant detriment associated with the unrestricted development of non-arms length relationships between pharmaceutical companies and healthcare professionals and particularly those relationships which involve the receipt of benefits by healthcare professionals.  The detriment lies in the effect that such conduct may have upon the prescribing practices of healthcare professionals directly influenced by it or by the views of professional opinion leaders who have links to particular companies.  If the prescribing practices of healthcare professionals are influenced directly or indirectly by sympathies for particular products because of benefits derived from or links to the manufacturer or distributor of those products, patient care may be compromised.  Patients in need of treatment will not necessarily be provided with that which is best for them.  In an indirect sense there is also an anti-competitive detriment to the extent that key decisions in the relevant market may be affected by factors extraneous to the quality of the product and its cost.   It is speculative to suppose that absent the Code this regulatory space will be filled by legislation.  Even if such a likelihood exists the timeframe within which it may occur is uncertain.  There is no evidentiary basis upon which the Tribunal can estimate a timeframe or the likelihood of changes occurring within it.

316               The ACCC argued that in the future without the Code, the conduct of pharmaceutical companies in the relevant market would be regulated by instruments other than the Code.  It submitted that the conduct of pharmaceutical companies in advertising and promoting pharmaceutical products to healthcare professionals and the public would continue to be regulated by existing legislation. 

317               The ACCC also submitted that it is possible that the pharmaceutical industry or the medical profession would enhance existing codes or guidelines that regulate the behaviour of participants in the relevant market or would develop new codes or guidelines.  Existing instruments which could be amended to accommodate that change include the Guidelines produced by the RACP and those of the AMA. Alternative regulatory-contractual schemes might be recommended.  The Tribunal accepts that such possibilities exist but the assessment of their probability and the times within which they are likely to occur is speculative and unsupported by evidence.

318               The ACCC submitted that, absent the Code, various individual schemes might be implemented to regulate certain areas.  Under current practices matters relating to non-members are referred to the TGA, ANZTPA or the ACCC in the event of refusal to comply with a direction of Medicines Australia.  In the ACCC’s counterfactual this practice could be extended to all companies.  The ACCC observed that the counterfactual regulatory optionmay have some force given non-members deference to the TGA.  While we accept that this possibility may have some substance in relation to promotional materials, given the interest of competitors in policing each other’s conduct, the same interest does not seem to be reflected in the area of benefits conferred on healthcare professionals and their links to particular companies in the industry. 

319               The ACCC contended that despite current practices, inter-company disputes can be effectively and more publicly agitated through the courts.  The Tribunal accepts that competitor action in relation to promotional materials may be taken through the courts under existing general legislation.  That mechanism is an important aspect of the co-regulation effected by a voluntary code and the regulatory statutes.  But there is no evidence that the incidence of enforcement through the courts, absent the Code, would be likely to approach the volume of matters now dealt with through the Code and its processes.  Nor could it compete with those processes in terms of the timeframe within which they can be resolved and the low cost of proceeding in that way.

320               We accept the ACCC’s submission, in respect of starter packs, that, in the counterfactual, companies could be required to undertake as a condition of their licences to comply with standards imposed expressly in terms equivalent to s 5 of the Code.

321               The ACCC submitted that, because pharmaceutical companies are currently required to comply with the Code through the TGA marketing approval letter, the continued existence of the Code is the basis of the proposed repeal of State and Territory legislation which was considered in the Galbally Report.  Given community concern about the pharmaceutical industry there would, in the absence of the Code, either be a replacement code or corresponding measures introduced by governments.  Measures introduced by governments require administrative structures for their enforcement and ultimately provision for curial remedies.  The timeframe and nature of legislative responses is speculative.  The concept of a “replacement code” lacks detail.  It conveys the notion of a family of possible alternative codes along a spectrum of greater or lesser resemblance to the existing Code.  This rather undercuts the counterfactual premise. 

322               The ACCC also referred to a memorandum entitled “ACCC Communications Plan” which was commissioned by Medicines Australia from Parker & Partners, an Australian public affairs advisory company.  The memorandum was dated 10 August 2006.  Its stated purpose was “to provide a recommended communications strategy in the context of a possible decision by Medicines Australia to not comply with conditions set out by the Australian Competition and Consumer Commission (ACCC) as part of their authorisation of the Code of Conduct”.   The consultants advised that following such an announcement Medicines Australia would be subjected to significant criticism by a broad cross section of stakeholders including consumer groups, media and commentators, medical opponents and politicians.  They would argue that Medicines Australia was against transparency, had something to hide, would not accept the umpire’s decision and should be subject to mandatory regulation.  The consultants advised that there would be calls for compulsory regulation of the industry. 

323               The consultants outlined a campaign strategy and certain key messages which included the following:

.           Medicines Australia is committed to a strengthened Code of Conduct;

.           The updated Code includes enhanced rules on the relationship between the industry and doctors, and additional provisions on transparency;

.           Medicines Australia is committed to transparency, and the updated Code is the toughest of any in Australia;

.           The conditions set by the ACCC would impose on the industry significant costs to manage the red-tape and this would in no way benefit the patients who are our number one priority; and

.           While Medicines Australia is not able to comply with the ACCC’s conditions, we are committed to introducing Edition 15 of the Code.

 

324               The obvious difficulty with this campaign proposal is that it would seem to require Medicines Australia to forego the protection afforded by authorisation.  The ACCC nevertheless relied upon the statements in the memorandum as consistent first, with the genuine possibility of a counterfactual in which the Code is replaced by government regulation and second, a willingness within Medicines Australia to implement the Code subject to the conditions in a conditional future.  We have already expressed the view that the extent and nature of government regulation is a matter of speculation and insufficiently certain or precise to be useful in this kind of analysis.  The second point made by the ACCC, in relation to the memorandum, appears to be inconsistent with the premise upon which the counterfactual operates. 

The future with the Code - anti-competitive detriment

325               The ACCC in its closing submissions identified third line forcing in the Code as a source of anti-competitive detriment.  Under ss 4.12-4.14 of the Code all company  representatives are required to have completed or be currently undertaking an endorsed Medicines Australia program for representatives.  All representatives entering the Australian prescription pharmaceutical industry for the first time must enrol in the Code component of an endorsed program within the first six months of employment and must complete it within two years.  That requirement also applies to any person who is directly involved in the development, review and approval of promotional materials and educational materials for the general public or has direct interaction with healthcare professionals.  The Guidelines state that the requirement does not apply to third party contractors such as advertising agencies although they are also encouraged to undertake the Code component.  The ACCC pointed out that third line forcing is a per se contravention of ss 47(6) and/or (7) of the Act.  The Tribunal, it said, can assume that an ex facie anti-competitive detriment arises from the operation of ss 4.13 and 4.14 of the Code in the relevant market.

326               The Tribunal accepts that conduct in contravention of the third line forcing prohibition is to be regarded presumptively as contrary to public policy if, for no other reason, than the fact of the prohibition.  On the other hand, the legislature has also recognised, by making provision for authorisation of such conduct, that there may be circumstances in which it is sufficiently beneficial that it should be allowed.  On the face of it a requirement that representatives of association members who are dealing with consumers should undertake education in the Code which the association has established, does not seem to fall within the mischief to which s 47 is directed.  Where a code is otherwise capable of being authorised on public benefit grounds the putative anti-competitive detriment associated with the mandatory training of company representatives may be something of a make-weight.  While it is possible that external providers could compete for the provision of such training courses for company representatives considerations of consistency and efficiency support the conclusion that those responsible for the formulation and administration of the Code are likely to be in the best position to provide effective education to employees of member companies. 

327               The ACCC referred to Ch 5 of the Code which governs the supply of product starter packs.  Section 5.1.1 specifies those who may prescribe starter packs while s 5.1.2 specifies those who may be supplied with them.  The ACCC accepted that these provisions reflect current statutory requirements or impose additional requirements not amounting to significant restraints on the competitive conduct by member pharmaceutical companies in the market for the supply of prescription medicines.  The Tribunal agrees with that view.

328               In relation to conduct which might fall within s 45 of the TPA, the ACCC identified various provisions of the Code which it said have as their direct purpose and their intended effect the lessening of competition between pharmaceutical companies.  They were as follows:

1.         Sections 2.1-2.3: the use of product information.

2.         Sections 3.1-3.13: the use of promotional material, across the entire range of promotional activities;

3.         Sections 6.1-6.8: the conduct of educational symposia, congresses and satellite meetings.

4.         Section 7.1: sponsorship of medical professionals.

5.         Sections 8.1-8.2: research activities.

6.         Section 10: relations with healthcare providers.


The ACCC submitted that each of these restrictions, once contractually binding, would impose a limit on the ability of companies freely to compete with each other.  Medicines Australia itself said of the Code that it creates “a level playing field” between pharmaceutical companies.  The ACCC submitted that the administration and enforcement of the Code exacerbate these sources of anti-competitive detriment.

329               The ACCC here seemed to use the concept of anti-competitive detriment to refer to all anti-competitive effects.  The requirement that certain types of promotional material must include or be accompanied by product information, abridged product information or minimum product information, that it must be easy to read and not use fine print may be said in a strict sense to restrict a company’s ability, in the marketing of its products, to do otherwise.  Even if that restriction could be characterised as anti-competitive it could hardly be characterised as a detriment.  The ACCC submitted that the administration and enforcement of the Code exacerbate these sources of anti-competitive detriment.  The way in which this is said to occur appears to relate principally to the inter-company dialogue requirement.  The ACCC submitted that the process promotes a potentially anti-competitive form of consensual communication instead of self-regulation.  Given that companies make the majority of complaints and utilise the complaint process of the Code only when their discussions break down, such discussions, it was submitted, could be a way to avoid, through mutual understanding, the provisions of the Code.  The ACCC pointed out that companies are criticised by the Code Committee for failing to resolve breaches consensually.  They have incentives to police each others promotional and advertising activities.  Similarly, it was said, they have incentives to agree to avoid compliance. 

330               The ACCC submitted that in its terms the Code may have some but not a significant effect upon competition between member pharmaceutical companies in the relevant market.  There is, however, the potential that in its operation it might exacerbate such harm and entail other public or anti-competitive detriments. 

331               Absent the Code a pharmaceutical company with a concern about promotional claims made by a competitor could bring those claims to the attention of a regulator if they contravened the law or take its own legal action.  As an alternative or prior step the complainant company could write to its competitor threatening action unless the relevant promotional claims were withdrawn or modified.  There is nothing inherently anti-competitive in one competitor company drawing to the attention of another conduct which is in breach of the law and requiring it to take corrective action.  There is no greater anti-competitive detriment associated with such conduct in connection with the enforcement of the Code. Communication between companies to informally enforce prohibitions on misleading advertising might be thought to enhance competition by supporting the dissemination into the market of accurate information and discouraging the dissemination of that which is misleading or deceptive, incomplete or not properly based.  It could be argued that the Code could be more transparent if it imposed a positive obligation on member companies to report to the Code Committee any contravention of the Code of which they became aware.  That might make a better code in terms of its transparency and the deterrent to contravention to which it would give rise.  Associated with that, however, would be a higher volume of formal complaints, a greater workload on the Code and Appeals Committees and possibly a less thorough and efficient consideration of complaints than would otherwise exist.  It is reasonable to suppose, although we have no evidence of this proposition, that the most egregious conduct in contravention of the Code is less likely to be resolved by inter-company dialogue.

332               In connection with the provisions of the Code relating to the provision of benefits to healthcare professionals the Tribunal has already observed that there is a significantly lower volume of complaints relating to that class of contravention and perhaps less incentive for companies to make such complaints. 

333               Overall the Tribunal is satisfied that in the future with the Code, as proposed by Medicines Australia, there is little in the way of significant anti-competitive detriment.  The restrictions imposed by the Code do not strike at the heart of competitive conduct as to price and quality and lawful communication of the benefits and characteristics of pharmaceutical products to appropriately qualified healthcare professionals.  

The future with the Code – public benefits and entailed public detriments

334               Medicines Australia argued that substantial public benefits flow from the Code.  The substantive provisions of the Code:

(a)        reflect existing legislation and in so doing provide a public benefit through increasing awareness of these provisions within a specific industry context;

(b)        prescribe standards of behaviour not governed by existing legislation; and

(c)        contain general standards for industry behaviour not otherwise specifically addressed in the Code.

These were the kinds of benefits recognised in Re Media Council of Australia 88 FLR 1.

335               Medicines Australia pointed to evidence that member companies take seriously compliance with the Code and sanctions imposed for breach by the Code Committee or the Appeals Committee.  Contraventions of the Code are said to be infrequent.  In connection with benefits conferred on healthcare professionals, Professor Henry assessed that the bulk of benefits provided by pharmaceutical companies to healthcare professionals complied with the Code in force at the time of his study. This was of course an evaluative judgment but was made by a person who was something of a benefit sceptic and not likely to take a generous approach to the application of the Code provisions.  

336               Medicines Australia also pointed out that the Code has become increasingly prescriptive and the conduct of pharmaceutical companies modified accordingly and referred to the evidence of Dr Nespolon.  Specifically, it pointed to the consumer safety benefit associated with s 5 of the Code regulating starter packs.  It noted that existing State legislation is less prescriptive than the Code and, in any event, is soon to be repealed as a result of the recommendations of the Galbally Report.

337               As to consumer information, the Code in s 9 contains standards to be applied by pharmaceutical companies in their dealings with the general public and complements the general prohibition against promoting prescription medicines directly to the public contained in the TG Act (s 42C).  Such provisions of the Code, regularly enforced as a result of complaints, were said to protect the public from being exposed to the inappropriate provision of information regarding prescription medicines while ensuring that educational material was made available from a source well placed to provide it. 

338               In relation to promotional claims made to healthcare professionals, Medicines Australia submitted that the Code and its interpretation by the relevant Committees imposes strict standards on the promotional claims that can be made.  This provides a clear public benefit by ensuring healthcare professionals have up to date and accurate information in relation to medicines prescribed by them.  It pointed out that s 1 of the Code specifies a general standard regarding the responsibility of companies to ensure that all promotional and medical claims are balanced, accurate and fully supported by product information or other relevant literature.  The evidence of Seale and Williams was referred to in this respect. 

339               Sections 2 and 3 of the Code were said to create a regime under which pharmaceutical companies can determine with ease and a high degree of specificity how they may present their promotional claims.  Many of those provisions are considerably more prescriptive than the requirements of the TG Act.  One example given was the requirement that all promotional claims be based on product information filed with the TGA.  Another example was the Code’s specification of the content and layout of Abridged and Minimum Product Information and the circumstances in which each type of product information could be used.  The specification of circumstances in which abstracts and poster presentations may be used to support claims in promotional material was also cited as an example of the prescriptive rules of the Code in this area. 

340               The ACCC accepted that promotion of consumer protection through the regulation of provision of information is a public benefit.  However such promotion is already subject to the TG Act, the TPA, relevant State and Territory drugs, labelling and packaging legislation and fair trading legislation.  While it accepted that there is a benefit in contractually enforcing a statutory obligation, it submitted that the benefit is small because, in the absence of the Code, the legislative obligations continue to apply.  Moreover the benefit results only if the Code is effectively enforced. 

341               As to the provisions of the Code regulating starter packs, the ACCC said that this could result in a public benefit by increasing public safety particularly in the event of the anticipated repeal of comparable State/Territory legislation.  In the event that the Code was not authorised however, it would be unlikely that the legislative amendments would take effect.  The benefit as between factual and counterfactual was said to be small. 

342               We consider that the ACCC in its submissions relating to the public benefit attaching to provisions of the Code dealing with promotional claims, somewhat undervalued those benefits.  Its assessment, reflected in its submissions to the Tribunal, did not, in our respectful opinion, adequately value the benefits associated with a Code regulatory arrangement where both Code and legislation apply.  There are limits to the coverage of legislation.  The Code has a potentially wider coverage.  Moreover, there are transaction costs associated with the investigations and other administrative and judicial processes necessary for the enforcement of statutory regulation.  Those costs and limits on the resources available to government agencies limit the extent of enforcement coverage.

343               Medicines Australia made submissions about the provisions of the Code relating to  benefits conferred by pharmaceutical companies on healthcare professionals.  It was this issue which was really at the centre of debate before the Tribunal.   Medicines Australia accepted that prescribing practices can potentially be influenced by the provision of such benefits.  That proposition is one which was supported by the evidence of Professor Henry and is one which the Tribunal accepts.  Medicines Australia went on to argue however that any influence which exists does not necessarily lead to consumer harm.  In the Tribunal’s opinion, that contention depends upon the width of the concept of “harm”.  It is not controversial to say that the influence on prescribing practices which results from the provision of benefits by pharmaceutical companies will not necessarily result in injury to consumers.  As already discussed, however, it is difficult to see how the provision of benefits to a healthcare professional by a pharmaceutical company can ever be a legitimate consideration or influence in patient decision-making by that professional.  Any irrelevant consideration or influence of that kind affecting such decision-making has the potential to result in positive harm or, more likely, less than optimal treatment choices.

344               Medicines Australia argued that where a healthcare professional is influenced to prescribe a new and effective medicine there can be no consumer harm. It was also submitted  that where a healthcare professional is influenced to prescribe one medicine over another substitutable medicine no consumer harm occurs.  Reliance was placed on Dr Nespolon’s evidence.  It was accepted that consumer harm would arise where a healthcare professional was influenced to prescribe a medication rather than first exploring an alternative form of health management.  For this reason, it was said, the Code regulates the conduct of pharmaceutical companies that may have the potential to affect inappropriate prescribing behaviour. 

345               In our opinion the relevant harm that is properly addressed by restrictions on the provision of benefits to healthcare professionals is the impact of such benefits upon the integrity of their decision-making processes with respect to their patients.   A similar effect may occur where opinion leaders in the profession, influenced by their links with pharmaceutical companies, express views favourable to those with whom they have such links.  To this extent the Code’s restrictions upon the provision of benefits to healthcare professionals seem to be based upon an underlying principle of avoidance of harm to the consumer.  That principle would tolerate the right decision even if it were made for the wrong reasons.  In our opinion, unless strictly limited and audited, the provision of financial benefits directly to healthcare professionals by pharmaceutical companies, whether it be by way of hospitality, the cost of travel and accommodation at conferences, sitting fees for advisory committees and other forms of benefit that have been described in the evidence, risks distortion of the medical decision-making processes of healthcare professionals.  It may also influence the views of opinion leaders in the field.  It is difficult to accept that pharmaceutical companies would go to the effort of providing such benefits if they did not think there was likely to be a positive return.

346               Medicines Australia said it is a fundamental principle of the Code that the offer of financial or material benefits to healthcare professionals to influence them in their prescribing practices is prohibited.  It relied upon s 10 of the Code in that respect.  There was said to be a clear public benefit arising from such a prohibition, the purpose of which is to ensure that healthcare professionals are not inappropriately influenced and that pharmaceutical industry and medical professions are not brought into disrepute.  The Code, it was said, describes in detail the circumstances in which it may be appropriate for a healthcare professional to be renumerated by a pharmaceutical company.  The Code and the Guidelines also impose a range of restrictions on the provision by pharmaceutical companies of gifts and other benefits. 

347               Medicines Australia pointed to the limitations imposed by the Code on the provision of hospitality and travel by pharmaceutical companies to healthcare professionals.  It referred to the evidence that healthcare professionals consider education events held, or sponsored by, pharmaceutical companies to be of considerable assistance in their practices.  Many such events are in fact accredited by professional bodies such as the RACGP and the RACP.  Hospitality was said to be an inevitable accompaniment of educational events. 

348               Medicines Australia submitted that the extent to which hospitality associated with educational events influences prescribing practices is not clear.  Studies on the question were said to be based on out of date data principally relating to the period when Edition 13 of the Code was in force.  They were said to contain methodological flaws and to be inconclusive.  The Code was said to set a standard as to the level of hospitality that was permissible.  Practitioners might hold a range of views but agreed that it was difficult to draw a line about what was appropriate.  This appeared from the evidence of Professor Henry and Dr Nespolon.  The Code did draw a line in relation to entertainment which has been prohibited since the introduction of Edition 14 (s 10.1), and payment for travel which cannot be extended to family or travelling companions and is limited to certain classes of travel (s 10.3).

349               The ACCC accepted that those parts of the Code which regulate the provision of benefits to healthcare professionals have the potential to provide public benefit as:

1.         There is no existing legislation which regulates that activity.

2.         Evidence suggests that doctors prescribing habits are influenced by the provision of benefits by pharmaceutical companies.

3.         There is ongoing community concern about the provision of benefits to healthcare professionals by pharmaceutical companies.

350               The ACCC said that the extent to which the propounded benefit would result from the Code depended upon whether the Code was, and was seen to be, effective in regulating the conduct of member companies.  The ACCC referred to Re Media Council of Australia 88 FLR 1 in which the former Trade Practices Tribunal enunciated certain principles in relation to Codes of Ethics.  The ACCC particularly emphasised the principles that:

.           rules which reflect views which most Australians would probably endorse are essentially in the public interest, provided the system for their formulation, interpretation and enforcement work properly and effectively;

.           rules which are uncertain, ambiguous, internally inconsistent or which, on their face, are unable to work properly in the public interest, should not be authorised.


The ACCC submitted that a code purporting to regulate the conduct of its members but not effectively enforced would create an appearance of accountability and an attendant potential for public detriment.  It relied upon Professor Henry’s contentions in this respect.  Such an appearance, it was submitted, may generate public detriment as it gives undue confidence to the public that their healthcare practitioner has not been the recipient of inappropriate hospitality.  It was also submitted that such appearance would avoid scrutiny that might otherwise be directed to the industry and could prevent or delay the introduction of more effective voluntary or statutory regulation.

351               The ACCC submitted that the Code does not effectively regulate and could not be seen to effectively regulate the provision of hospitality and other benefits by member companies to healthcare professionals.  Under Edition 14 of the Code, since 2003/04 more than 4,700 invitations were provided to the Monitoring Committee by member companies pursuant to the monitoring condition of the authorisations.  Despite raising concerns about a number of invitations reviewed in the years 2003/04 and 2004/05 the Monitoring Committee did not refer any invitations to the Code Committee for consideration as a breach of the Code.  It was submitted that despite the existence of the Code there appeared to be hospitality provided to healthcare professionals which could be considered contrary to its letter and spirit because of the extravagance of the hospitality or the fact that it was not secondary to educational content at the relevant event.  It was said to be at least questionable whether the choice of some venues could successfully withstand public and professional scrutiny and conform to professional and community standards of ethics and good taste.  Where there is an appearance of accountability, whatever public benefits may be secured where self-regulation achieves its purpose, these must be discounted for the likely instances in which it does not. 

352               The ACCC referred in particular to the Levitra complaints discussed in the Medicines Australia submissions.  In that matter, the Code Committee found a severe breach of the Code under s 10.5 but did not impose the maximum fine.  Another example cited was the complaint lodged by Schering with the Code Committee alleging that an educational meeting organised by Biogen at the Flower Drum restaurant in Melbourne breached the Code.  The Committee noted that Biogen had not provided supporting evidence such as a menu, the cost per attendee or a copy of the presentation given at the meeting.  Because it had insufficient information to establish a breach, the Committee found no breach of the Code by Biogen. 

353               The ACCC went on to submit that it was uncontroversial that various types of benefits have the potential to distort doctors’ prescribing practices and that pharmaceutical companies’ sponsorship of events and education is pervasive.  We accept those contentions.  We also accept the submission that where the Code is not effectively enforced an appearance of accountability has the potential to detrimentally distort professional dialogues.  This may radiate beyond the doctor’s relationship with a patient to research and educational activities.  These contentions came out of the evidence of Professor Henry.

354               Medicines Australia in answer to the ACCC submission about the “appearance and accountability and related detriments” noted that the submission was apparently based upon the evidence of Professor Henry.  It submitted however that he had conceded that, unlike the RACP professional guidelines, the Code was for the most part observed.  The studies conducted by his team in 2002 in relation to Edition 13 of the Code were said to have generally supported this.   Medicines Australia also submitted that the evidence did not demonstrate any systemic failure of the Code such as would warrant the conclusion of “detriment through complacency” which the ACCC sought to have drawn.  The fact that breaches occur and are dealt with did not mean that a system of regulation was ineffective. 

355               The Tribunal accepts that absent the Code there would be no equivalent effective regulation of the conferral of benefits by pharmaceutical companies upon healthcare professionals.  To some extent the Code provisions may reflect a greater consciousness in the industry of public suspicion of non-armslength relationships between pharmaceutical companies and healthcare professionals.  The existence of Code provisions restricting the provision of such benefits and the existence of an enforcement mechanism through which complaints can be and are made, is a public benefit in two respects:

1.         It is likely to give rise to a degree of restraint in the conferral of benefits upon healthcare professionals and, to that extent, to mitigate the detriment or potential for detriment associated with the provision of such benefits.

2.         It will enhance a degree of public confidence that such conduct does not go unscrutinised and that there is a mechanism by which it can be reviewed.


The latter benefit is to be discounted to the extent that the application of the very generally expressed restrictions in the Code is less than transparent.  It may also be discounted by the lack of any real competitive incentive on the part of pharmaceutical companies to make complaints about the provision of such benefits by their competitors to healthcare professionals.

356               The review process by the Monitoring Committee does provide a kind of audit process.  Given the limited materials available to the Monitoring Committee however, the audit process has a degree of superficiality about it.

357               The ACCC contention that there is a false impression of accountability in relation to the provision of benefits to healthcare professionals, created by the Code in its proposed form, is a submission about public perception of the Code process.  Beyond the observation we have already made about the impact of apparent accountability on professional dialogues, there is no evidence to support such a public perception.  The contention by the ACCC in this respect is essentially argumentative.

358               While the Tribunal accepts that there is a likelihood of public detriment resulting from the provision of benefits to healthcare professionals by pharmaceutical companies, that is a detriment which exists without the Code.  The imposition of some degree of restriction upon those benefits, increased over recent years, is a public benefit.  The Tribunal does not accord great weight to the asserted false appearance of accountability for which the ACCC contends. 

Whether the public benefit is sufficient to justify authorisation

359               The Tribunal is satisfied that the public benefit derived from the Code allowing for its identified deficiencies and weaknesses, outweighs the low level of anti-competitive detriment, if any, flowing from the CodeIn respect of theexclusionary provisions and exclusive dealing, the public benefitis sufficient to support the conclusion, in the language of s 90(8) thatauthorisation of that conduct should be allowed.  The Tribunal is satisfied that the condition proposed by the ACCC is not necessary in order to allow authorisation to be granted according to the tests laid down in the Act.  The question remains whether that or some other condition should be imposed as an incident of the Tribunal’s discretion to authorise or refuse authorisation notwithstanding that the public benefit tests aresatisfied.

Whether a condition should be imposed as a matter of discretion  

360               The Tribunal considers that this is a case in which it is appropriate, if theauthorisations areto be granted, to impose conditions to provide an incentive to compliance with the Code provisions relating tothe conferring of benefits on doctors. That incentive is best secured by a combination of internal review and evaluation of such benefits and their accessibility to public scrutiny. In our opinion the existing enforcement mechanism, so far as it relates to these provisions, is weak.  It is also open to lenient interpretation.There is little in the way of any real deterrent to contravention or incentive to compliance.  There seems to be little incentive or enthusiasm for companies to complain about one another in this area.

361               The practice of pharmaceutical companies conferring benefits upon healthcare professionals carries with it a risk that prescribing decisions may be affected or influenced by considerations not relevant to patient welfare.  It also carries with it a risk of reduced public confidence in the industry and the profession.  So far as such practices may affect prescribing decisions there is a species of market failure because such influences are unrelated to product quality or patient welfare.

362               The imposition of a condition designed to enhance compliance with and enforcement of the relevant provisions of the Code is consistent with the objects of the Act set out at s 2:

… to enhance the welfare of Australians through the promotion of competition and fair trading and provisions for consumer protection.

 

It is also consistent with the statutory scheme for authorisation from which the existence of a net public benefit is necessary to enliven the ACCC’s discretion (and that of the Tribunal).

363               The costs associated with the imposition of a condition such as that proposed by the ACCC have not been quantified.  We are satisfied that there would be some administrative cost involved in the companies preparing records of the kind proposed by the ACCC.  We are, however, prepared to take notice that such records could be produced, at least in part, as an incident of ordinary budgeting, accounting and internal corporate reporting practices.  We do not consider that such burdens are unreasonable having regard to the benefit likely to be derived from the condition.

364               A further difficulty raised on behalf of Medicines Australia is that the publication of occasions of hospitality provided to healthcare professionals with costs and venues included may lead to sensationalised or misleading reporting of entirely legitimate events.  The capacity to withstand public and professional scrutiny is one of the criteria adopted within the Code itself.  There is a risk that public scrutiny may be misinformed.  However, provided that benefits conferred on healthcare professionals remain within the kinds of limits that properly mark them as incidental to the educational purpose of the relevant event, Medicines Australia and its members should be quite capable of making their public case in support of them.

365               Authorisation without the proposed condition could all too readily be viewed as an official approval given to a less than rigorous approach to enforcement in this important area.  It is true that the matter only falls for consideration because authorisation is sought.  There is no obligation on Medicines Australia or its members to regulate each others conduct in this respect.  But if a part of the regulation (in this case ss 6, 7 and 10)for which authorisation is sought on public benefit grounds is likely to be ineffective without some additional enforcement mechanism the Tribunal may decline, in the exercise of its discretion, to give its approval to that ineffective part of the Code.

366               In our opinion there is a real risk that absent any requirement for regular reporting and public disclosure of the kind proposed in the ACCC condition some companies will test the boundaries and offer inappropriate benefits to healthcare professionals.  Making public the nature, frequency and scale of benefits conferred will impose its own compliance constraint that companies conferring the benefit will have to be in a position to explain and justify it in public as well as to the Code Committee should a complaint be made.

367               It is also appropriate to recall the words of the Tribunal in 1987 in Re Media Council of Australia 88 FLR 1 in discussing the potentially harmful effects of an ineffective Code in an area of conduct not externally regulated.  The Tribunal discussed what it called “undue permissiveness” and observed (at 37):

A finding of detriment refers to an outcome that would be worse than the alternative market-based system.  Do the rules, insofar as they may be found to give rise to undue permissiveness, do anything more than give the stamp of approval to decisions that would be made anyway by individual advertisers, agencies and media operators?

 

We think they may do more than this.  The very existence of industry-wide Codes and practices can mould the attitudes of advertisers, agencies and media operators as to what is neither offensive nor harmful.  Conceivably … the existence of certain Codes or rules could be characterised as “window-dressing” or “lip-service”.  The very existence of ineffectual Codes could serve to make firms (advertisers, agencies and the media) less responsible than they otherwise would be and governments less prone to legislate for controls in the public interest.  Again, repeated interpretation and application of a Code rule which permits publication of particular offensive and harmful references conveys institutional approval to such practices and advertising.  This could eliminate the application of independent scrutiny and judgment by individual advertisers, agencies and media operators which would otherwise take place.  Finally, it is possible that the very formulation of rules may divert the attention of participants to the narrow and technical commands of the Codes rather than to their spirit.

 

While that observation was made in the context of a benefit analysis it is also relevant to the exercise of the discretion and the imposition of a condition designed to enhance the effectiveness of a Code in an area in which it may be seen as wanting.

368               Medicines Australia proposed an alternative condition to that imposed by the ACCC.  The Medicines Australia condition is in the following terms:

1.         Medicines Australia is to appoint an independent Educational Event Auditor who is a person of high standing in the provision of enterprise risk services and governance assessments.

 

2.         Medicines Australia is to require each member company to:

 

            (a)        complete a table as set out at Attachment A with respect to each educational event falling within section 6, 7 or 10 of the Code that it holds or sponsors;

            (b)        maintain such completed tables within its records;

            (c)        make such completed tables available for inspection upon request at any time by the Educational Event Auditor; and

            (d)        if so requested by the Educational Event Auditor, provide to the Educational Event Auditor in respect of any event which is the subject of a completed table copies of costing information together with the invitation, agenda and materials presented or provided to attendees.

 

4.(sic)  If the Educational Event Auditor considers that a member company has not complied with section 6, 7 or 10 of the Code, the Educational Event Auditor is to report the matter to the Code of Conduct Committee to be dealt with as a complaint.

 

5.         The Educational Event Auditor is to provide an annual report on its auditing activities which is to be published on the Medicines Australia website.  The annual report must:

 

            a)         specify the number or educational events in respect of which the Educational Event Auditor sought further information and the number of complaints referred to the Code of Conduct Committee by the Educational Event Auditor;  

            b)         summarise the findings of the Code of Conduct Committee and the Appeals Committee in respect of complaints referred by the Educational Event Auditor;

            c)         comment on the nature of the education provided at the events the subject of its audit;

            d)         outline best practice recommendations for member companies having regard to the Educational Event Auditor’s review.

 

369               We are of the opinion that the proposed condition would not give rise to a sufficient incentive for restraint in the conferring of benefits and compliance with ss 6, 7 and 10 of the Code.  Public scrutiny of the hospitality and other benefits provided by pharmaceutical companies is more likely to lead to self imposed restraint by pharmaceutical companies than the institutional arrangements proposed by Medicines Australia.  In that respect a mechanism along the lines of that proposed by the ACCC would, in our opinion, be effective and justified as conditioning the exercise of the discretion to authorise.  We would, however, slightly moderate the level of detail required in the reporting form proposed by the ACCC and the wording of its condition.

370               The reporting condition proposed does not involve a wholesale rewriting of the Code.  Indeed it does not even cover the full range of benefits conferred upon healthcare professionals that might fall within ss 6, 7 and 10.  The condition does not cover general sponsorship of healthcare professional organisations.  It does not cover cases in which healthcare professionals may be remunerated for their participation in advisory committees.  Nor does it cover direct gifts to healthcare professionals which are not connected with any educational event.  A more wide-ranging condition might have been imposed but no such condition was debated before the Tribunal.  The mandated reporting of the full range of benefits which pharmaceutical companies appear to confer upon healthcare professionals may raise practical issues of administration and costs as well as de minimis cutoffs.  It might well be said there is little public benefit to be gained by requiring the reporting of gifts such as calendars, biros bearing company logos or desk pads.  The proposed condition is imposed having regard to the evidence and issues and the competing formulations debated before the Tribunal.

371               The present form of the conditions proposed by both the ACCC and Medicines Australia confronts a legal difficulty.  Medicines Australia cannot under its Objects and Rules simply require its members to remit reports of the kind contemplated by those conditions.  The requirement imposed by either condition would have to be incorporated as a term of the Code itself and adopted by the members in accordance with the Objects and Rules. 

372               In order to minimisefurther delay, we are prepared to grant the authorisations sought in respect ofEdition 15 of the Code upon condition that it is amended within a period of three months to incorporate terms which have the substantive effect of the condition imposed by the ACCC.

373               The Tribunal will affirm the ACCC’s determination of 26 July 2006 but vary the condition imposed to read as follows:

1.         The Code of Conduct is varied within three months of this determination to include the requirement that each member company report to Medicines Australia all educational meetings and symposia as defined in ss 6, 7 and 10 of the Code held or sponsored by that company:

 

            (a)        by completing the table set out at Attachment A for each month of the financial year;

 

            (b)        by providing a copy of the completed table for two six month periods every year (July to December; January to June) to Medicines Australia within 14 days of each of the six month period.

 

2          The Code is further amended to provide that:

 

            (c)        Medicines Australia will make publicly available on its website the completed table provided by each member company within three months of the end of each six month period;

 

            (d)        The Monitoring Committee will, at the end of each financial year conduct a review of the information provided by the members for three months selected by it at random for the preceding 12 month period.

 

3          The Monitoring Committee will be empowered in any case to request  information concerning a particular event such as a copy of the invitation to the meeting and a copy of any printed material provided to attendees.

 

4          Where the Monitoring Committee is not satisfied that the conduct of the member company with regard to the meeting would withstand public or professional scrutiny (or otherwise considers that it may breach the Code of Conduct), it will refer a report about the meeting and the member company’s response to the Code of Conduct Committee which, after giving notice to the member company, may deal with it as though it were a complaint.

 

5          The Monitoring Committee shall also provide a detailed report on its other activities to Medicines Australia for publication in the Code of Conduct Annual Report.  This report shall also list any cases forwarded to the Code of Conduct Committee as a complaint setting out the name of the member company and the date it was referred.

 

The form of Attachment A which is the summary report to be provided by member companies will be varied in the terms set out in the Tribunal’s Determination at the commencement of these reasons.

374                The Tribunal is also of the view that, given the substantial review that has been undertaken of the Code, the period of five years sought by Medicines Australia was appropriate.  This will give adequate time for assessment of the effectiveness of the amended Code and of the working of the condition.    If renewal of the authorisation is sought or an amended version of the Code proposed at the end of that term, there will be a substantial basis upon which to assess both its public benefit and the conditions, if any, that should attach to any future determination. 

I certify that the preceding three hundred and seventy four (374) numbered paragraphs are a true copy of the Reasons for Determination of the Tribunal.



Associate:

Dated:         27 June 2007


Counsel for Medicines Australia Inc:

Mr S Gageler SC with Mr AI Tonking

 

 

Solicitor for Medicines Australia Inc

Allens  Arthur Robinson

 

 

Counsel for the Australian Competition and Consumer Commission:

Mr A Robertson SC with Ms R Higgins

 

 

Solicitor for the Australian Competition and Consumer Commission:

Australian Government Solicitor

 

 

Dates of Hearing:

27, 28, 29, November and 1 December 2006

 

 

Date of Determination:

27 June 2007

 


Annexure 1

Summary of the Medicines Australia Code as set out in paragraphs 3.5 to 3.90 of the ACCC Final Determination and as Reworked by Medicines Australia

 

3.3       The Code includes explanatory notes which elaborate on the provisions of the Code.  It is also supported by Guidelines, which are designed to be read in conjunction with the Code.  Authorisation was not sought for the Guidelines, although a copy was provided to the ACCC.  The Guidelines are intended to provide guidance to both pharmaceutical companies and to the Code of Conduct Committee that is responsible for considering alleged breaches.


3.4       Unless otherwise indicated, the provisions outlined below are found in the Code.  Terms which are underlined (eg starter pack) are defined in the Code’s glossary.


Provision of information about prescription medicines

 

Nature and availability of information and clams

 

3.5       The onus is on companies, their employees and advisors to ensure that the content of all promotional and medical claims is balanced, accurate, correct and fully supported.  The Code requires that claims must be capable of substantiation and describes the level of substantiating data required.[1]


3.6       All information, claims and graphical representations provided to healthcare professionals or the general public must be current and not be misleading.[2]  Promotional material must be clearly distinguishable as such,[3] and conform to generally accepted standards of good taste.[4]


3.7       Products that have not been approved for registration by the TGA must not be promoted.[5]


Product information

 

3.8       Certain types of promotional material must include or be accompanied by product information, abridged product information or minimum product information.[6]  There are specified requirements for each category of information,[7] but all must facilitate easy reading,[8] conform to minimum typeface sizes[9] and contain specific information.[10]


Promotional material


3.9       All promotional material that is not a brand name reminder must include a clear and prominent statement drawing the reader’s attention to any PBS listing, and restrictions or non-availability through the PBS.[11]


3.10     There are provisions setting out the specific requirements for:[12]


            .           Journal advertising (including primary, secondary and short advertisements)


            .           Reference manual advertising


            .           Printed promotional material, whether handed directly to a healthcare professional or transmitted by other means


            .           Mailings

 

            .           audiovisual promotional material


            .           computer promotional material (eg promotional material such as software programs used by company representatives during interchanges with healthcare professionals)


            .           use ofthe internet and


            .           restricted access television advertising


3.11     Company commissioned articles (also known as advertorials) must be clearly identified as such.  They must conform to the provisions in section 1 of the Code.  Where they contain promotional claims, the article must comply with the requirements for a primary advertisement (or a secondary advertisement if a primary advertisement appears elsewhere in the publication).[13]


Advertising in electronic prescribing software packages[14]

 

3.12     An advertisement in an electronic prescribing software package must comply with certain requirements, depending on whether it is a primary or short advertisement.  A company cannot negotiate or accept any offer from a software manufacturer that results in the preferential presentation of its own product over a competitor’s.


3.13     In addition, companies must ensure that no advertisements are placed with clinical tools or patient education materials that may be used for consultation or discussion with a patient.[15]


Trade displays at educational meetings etc[16]

 

3.14     Trade displays at educational symposia, congresses and satellite meetings must be directed only to healthcare professionals and meet certain requirements.  These include that promotional material available from the trade display must conform with the requirements of Section 3 of the Code and product information for products being promoted must be available at the stand.  Starter packs must not be available for collection from unattended stands.


Provision of benefits to healthcare professionals

 

3.15     Financial or material benefits must not be offered to healthcare professionals to influence them in their prescribing or dispensing of pharmaceutical products.[17]


3.16     There is a blanket prohibition on companies providing items or services to employees or family members of healthcare professionals.[18]  A similar prohibition applies to items or services provided to healthcare professionals unless they are sanctioned by the Code, such as:


            .           Brand name reminders[19] (items designed to remind healthcare professionals of the existence of a product) must include certain information about the product.  They should be of token value (less than $20[20]), and only be relevant to the working environment of a healthcare professional (eg mugs, pens, boxes of tissues).  Items that are more likely to be used in the home or for recreational activities (eg beach towels) are unacceptable.[21]


            .           Competitions must meet certain criteria, including that they must be based entirely on medical knowledge or the acquisition of medical knowledge; questions must be designed to increase medical knowledge, prizes must be relevant to the practice of medicine or pharmacy, and have [sic] be of low monetary value.[22]  The Guidelines recommend the maximum values for a prize as $500 for an individual prize (or $5,000 if an educational item), with the total value of the prize pool for competitions associated with a particular product limited to $50,000 per calendar year.[23]


            .           involvement in educational symposia, congresses and satellite meetings.


            .           Sponsorship of activities involving healthcare professionals (see 3.21 below).


            .           Hospitality (see 3.17 below)


            .           Medical educational material[24]

 

Hospitality[25]


3.17     Any hospitality provided by companies to healthcare professionals must be secondary to the educational purpose of the meeting.  The venue and location at which hospitality is provided must be conducive to education and learning and not chosen for its leisure or recreational facilities.[26]


3.18     Meals provided at educational meetings should not be extravagant or exceed standards which would meet professional and community scrutiny.[27]


3.19     No entertainment should be provided,[28] although an exception to this is that educational meetings of two or more day’s duration may include a modest opportunity (no more than half a day[29]) for unstructured and individual recreational activities at the delegate’s own expense.[30]  A company must not subsidise or pay for the costs of family or companions of attendees at educational meetings.


Travel[31]

 

3.20     Companies may subsidise healthcare professionals’ travel and accommodation costs to attend educational meetings etc provided that the meeting is directly related to the healthcare professional’s area of expertise.  Companies must not subsidise or pay for family members’ or travel companion’s travel costs.


Sponsorship[32]


3.21     This must meet certain requirements, including that companies must develop guidelines on how they award sponsorship to healthcare professionals.


3.22     There are also specific requirements for companies sponsoring a healthcare professional to provide support for medical practice activities.[33]  These are activities undertaken within a medical practice which are sponsored by a pharmaceutical company.  Examples may include a diabetes nurse educator, a practice nurse who conducts ambulatory blood pressure monitoring, or a nurse or other qualified health professional who reviews patient medical records and advises doctors on quality use of medicines, clinical monitoring or follow up.[34] These services must not be offered or provided conditional upon any obligation to prescribe a particular product.


Consultants and advisory boards[35]

 

3.23     Companies may seek the services of suitably qualified and experienced healthcare professionals to provide advice and guidance on a range of matters.  Such professionals can be offered remuneration and reimbursement for reasonable travel, accommodation and meal expenses incurred.


3.24     All relationships between companies and consultants and advisory board members must meet certain criteria, including:


            .           A legitimate need for the services must have been identified in advance of requesting them.  A document summarising the purpose, objectives, justification and size/number of the advisory boards must be prepared and available for scrutiny should a complaint be lodged.[36]  There must also be a written contractual agreement outlining the nature and duration of the services to be provided.


            .           The number of healthcare professionals retained should not be greater than the number reasonably necessary to achieve the identified purpose.  The Guidelines recommend 8-12 would be appropriate.[37]  The formulation of multiple advisory boards for a single product must be justifiable.


            .           Meetings must be held in Australia and conform with the venue requirements in section 6, except in certain circumstances – when meetings are held in conjunction with international scientific meetings or when Australian healthcare professionals are members of an international advisory board organized by the parent company.


            .           Interactions must not include entertainment, nor should companies subsidise or pay for the costs of family or companions of consultant or advisory board members.


Relationship with health consumer organisations[38]

 

3.25     Companies may enter into relationships with health consumer organisations.  When entering into such a relationship, they should consider the principles set out in Working Together – A Guide to Relationships between Health consumer Organisations and Pharmaceutical Companies.

 

Company representatives[39]

 

3.26     Company representatives should ensure that their visits do not cause inconvenience to healthcare professionals.  They must not use any deception to obtain an appointment, or pay a fee to gain access to a healthcare professional, although the provision of a meal (which complies with the requirements of section 10) would not be a breach.[40]


Education of company representatives[41]


3.27     All company representatives are required to have completed or be currently undertaking an endorsed Medicines Australia program for representatives (the endorsed program).  All representatives entering the Australian prescription pharmaceutical industry for the first time must enrol in the Code of Conduct component of the endorsed program within the first six months of employment, and must complete the full program within two years.


3.28     Any person who is directly involved in the development, review and approval of promotional materials and educational material for the general public, or has direct interaction with healthcare professionals must similarly complete the Code of Conduct component of the endorsed program within the first twelve months of commencement of employment.[42]The Guidelines state that this requirement does not apply to third party contractors (such as advertising agencies) although they are also encouraged to undertake the Code of Conduct component.[43]


Research[44]


3.29     These provisions apply whether the research is carried out directly by a company or by an organisation acting under its direction.  Companies must ensure that private legislation is complied with.


3.30     The provisions relate to the conduct of post-marketing surveillance studies and market research but do not apply to evaluations being carried out under the approval of a human research ethics committee in a hospital or clinical trials of products approved for registration.


Post marketing surveillance (PMS) studies[45]

 

3.31     PMS studies are defined as research intended to generate data on safety parameters of a product that has been approved for registration.  They should have scientific or medical merit and objectivity and not be designed or conducted as a promotional exercise.  The involvement of medical representatives is limited to identifying healthcare professionals to participate in the study, which must be otherwise managed by the company’s medical department.


3.32     PMS studies must have a formal protocol, a requirement for data collection and generation of a report.  Companies intending to undertake a PMS study must advise ADRAC[46] of their intention.


3.33     No starter packs or free trade packs should be distributed as part of the study, and any payment to the medical profession must be commensurate with the work involved and not based on the number of prescriptions written.


Market research[47]

 

3.34     The Guidelines state that this section is primarily directed at research conducted with healthcare professionals, but recognises that market research may also be undertaken with members of the general public on occasion.[48]


3.35     The sole purpose of market research must be to collect data and not a means to promote or reward healthcare professionals.  Promotion should not be represented as market research or research of any type.


3.36     Any payment (whether cash or voucher in lieu of cash) must be kept to a minimum and should not exceed a level commensurate with the work involved.  If a voucher is provided to a healthcare professional, it must be valid only to obtain an item that is directly relevant to the practice of medicine or pharmacy. A donation to a registered charity in lieu of cash payment is acceptable if the amount remains commensurate with the work undertaken.[49]


Product starter packs[50]

 

Supply


3.37     A starter packis defined as a quantity of a product supplied without cost to medical practitioners, dentists and hospital pharmacists.[51]


3.38     Starter packs can only be supplied by representatives employed by the holder of a manufacturer or wholesale dealer’s licence or by authorised company representatives (including agents working under a contract to, but not directly employed by, the holder of a manufacturer’s licence or wholesale dealer’s licence).  They can only be supplied to authorised healthcare professionals at their request, and only if he/she has legal authority to prescribe the product.[52]


3.39     The maximum quantity supplied must be at the healthcare professional’s discretion and should reflect his/her needs until the next visit by the company representative.  The company representative must not supply starter packs without a signed request from an authorised person.


3.40     Leaving starter packs with a receptionist for the attention of a healthcare professional without a signed request is a breach of the Code.


3.41     The Code also describes requirements for the labelling of starter packs and ensuring the security of starter packs whilst in the company representative’s possession.


Size, labelling, storage, records to be kept etc

 

3.42     The size of starter packs should not exceed 1/3 of the PBS primary quantity for each strength of a product, except where this is practical such as ear or eye drops.  For non-PBS products, starter packs should be no larger than 1/3 of the smallest trade pack.


3.43     Labelling of all starter packs must comply with the current Therapeutic Goods Order on labelling.  In addition, the representative should supply labels for the medical practitioner to label the starter pack with certain details for a specific patient, including their name and dosage instructions.  The specified fields may alternatively be pre-printed on the product label.


3.44     Representatives must take adequate precautions to ensure the security of starter packs in their possession.  The Code sets out the way they must be transported and stored, including when they are in a vehicle and when they are sent by mail.


3.45     On request, companies must promptly accept the return of starter packs.  They must be disposed of in an environmentally sound manner according to the requirements in each state and territory.


3.46     Company representatives must keep records of every sample received or supplied.  Companies must keep all records of the request, supply, return and disposal of starter packs for at least three years in a way that they are available for inspection by the appropriate authorities.


Product Familiarisation Programs (PFPs)

 

3.47     Product Familiarisation Programs (PFPs) are defined as programs run by a company with the aim of allowing the medical profession to evaluate and become familiar with a product.  Under a PFP a company may make starter packs available to doctors for up to 10 patients to allow them to prescribe the product without cost to the patient whilst gaining an understanding from their own experience of the efficacy and side effects of the new medicine.


3.48     Companies should develop a rationale for each PFP which describes the clinical rational for the program, the total number of patients to be enrolled and the duration which the medicine will be provided to each patient, based on a clinical rationale. 


3.49     A PFP may only be initiated in the first twelve months following first supply after registration,  or the approval of a new indication and the enrolment period must not exceed 6 months.


3.50     Companies should not offer any monetary or other type of reward to healthcare professionals, their families and/or employees for taking part in PFPs.


3.51     The company will provide an information document for the healthcare professional to give to the patient which explains that the medication will be provided under the PFP for a fixed period, after which it may only be available on a private prescription if it is not reimbursed under the PBS.


3.52     No individual patient data may be collected, although aggregated data on a healthcare professional’s experience with the product may be. 


Relationship with the general public

 

3.53     Companies cannot promote prescription products to the general public (including on the internet[53]), but may provide them with educational material.


Medicine delivery devices

 

3.54     Promotion of a medicine delivery device to the general public is permitted in restricted circumstances.  A medicine delivery device which is used for the administration of a prescription medicine, including Schedule 3 medicines that are predominantly prescribed by a medical practitioner, is permitted if it is:[54]


            .           distributed independently from the active ingredient


            .           not branded with the name of particular medicine and


            .           listed with the TGA as a device.


Media Statements[55]


3.55     A media release to the lay media will be allowed if the product has been registered for use in Australia and the medical profession has been supplied with the appropriate information.  The media release may include the product’s brand name, the Australian approved name and must indicate any PBS listings.  It must also be accompanied by a copy of the current consumer medicine information.  The media release must not include any material that could be considered promotional or comparative with other products.


3.56     Companies are always responsible for all material prepared for them by the agencies they engage.



General Media Articles[56]

 

3.57     Companies should not attempt to encourage the publication of general media articles with the aim of promoting their products, but may offer to provide educational material or review copy to ensure accuracy.


 

 

 

Patient Support Programs[57]


3.58     Companies may arrange or become involved in Patient Support Programs, which are programs for patients already prescribed a prescription-only medicine, with the aim of improving compliance by patients (eg by reminding them to take their medicine) and positive health outcomes.  They usually involve providing educational materials for consumers which are provided by the healthcare professional who prescribes the medicine.[58]


Administration of the Code[59]

 

3.59     The administration of the Code is supervised by the Code of Conduct Committee (the Code Committee), responsible to the Medicines Australia board.


Membership of the Code Committee

 

3.60     The following are members of the Code Committee:


            Full membership           Chairman (lawyer with trade practices experience selected from a panel of five)

                                                .  One representative from each of the AMA, RACGP, ADGP, ASCEPT and the TGA

                                                .  A specialist nominated by the Royal Australasian College of Physicians (RACP)

                                                A consumer representative nominated by the CHF

                                                Three Medicines Australia company Association Representatives

                                                Two Medicines Australia member company Medical/Scientific Directors

            Observers                    Maximum of two employees of Medicines Australia

            (no voting rights)              member companies

                                                One observer nominated by Medicines Australia


3.61     The Explanatory Notes set out the procedures by which the members are appointed.  There is a process set out for ensuring that members of the Code Committee hearing a complaint do not have a conflict of interest.[60]


Referral of complaints

 

3.62     Upon commencement of the Australia New Zealand Therapeutic Authority (ANZTPA), complaints about advertisements for prescription medicines directed to members of the general public that are submitted to Medicines Australia will be referred to the Central Complaints Panel. Complaints about advertisements for prescription medicines directed to healthcare practitioners will also be referred to the Central Complaints Panel if they involve matters of serious public health and safety. [61]  Medicines Australia may also refer complaints against members who are also members of the Australian Self-Medication Industry (ASMI) to that association for consideration under its Code having regard to the category of product and the target audience for the promotion subject to complaint.[62]


Complaint handling procedure

 

3.63     The Code sets out the procedure for dealing with an alleged breach of the Code by members.  If a complaint is received about a non-member, it can either be dealt with under the Code (if the non-member agrees), or Medicines Australia can (but is not obliged to) forward the complaint to the TGA or the ACCC (if it relates to a possible breach of the TPA).[63]


3.64     Appendix 1 sets out guidelines to try and resolve the complaint prior to a formal complaint being lodged with Medicines Australia.


3.65     Where a complainant is external to the industry, Medicines Australia may provide assistance, including providing access to an independent facilitator to assist them in submitting their complaint.  However, it first encourages the complainant to contact the company that is the subject of the complaint (the subject company) either individually or through the independent facilitator.


3.66     Medicines Australia will not to [sic] accept anonymous complaints.  If an individual or healthcare professional wishes have his/her identify protected, the Medicines Australia Secretariat will work with that person to ensure that his/her concerns are addressed.


3.67     Where a complaint is made by another company (whether or not a member), the complainant company must seek to resolve the complaint through inter-company dialogue before Medicines Australia will accept the complaint.  The procedures for engaging in inter-company dialogue are set out in Appendix 1.  The only exception to this requirement is when there is an allegation of a repeat breach.[64]


3.68     The main stages of the complaint handling procedure are:


            .           The complaint is received, and acknowledged in writing.  The information that must be included with the complaint is set out in Appendix 1.


            .           The subject company is invited to comment on the complaint.  It should provide certain information, the requirements of which is set out in Appendix 1.


            .           The subject company and complainant then provide the information necessary to fully investigate the complaint.  This is provided to the Code Committee, along with any explanation provided by the subject company.  The Code Committee can also make any further inquiries if necessary or desirable.  It then makes a determination on whether or not there has been a breach of the Code.


            .           If the Code Committee finds that the company breached the Code, the subject company will be notified within two working days of what section it has been found to breach and the sanction that has been imposed.  Within 10 working days of the meeting, the CEO will provide the subject company and the complainant with copies of the extracts of the minutes, including a full explanation of the decision and the form of any sanction to be imposed.


            .           If the Committee does not find a breach, the parties will be informed of this and supplied with the minutes within 10 working days.


            .           The full reasons for the decision will be supplied to the subject company and the complainant within 10 working days.


3.69     All findings and/or sanctions shall remain confidential and not be released to any third parties until after the subject company and the complainant have exhausted all appeals procedures and the outcome of any appeal is known.


3.70     If the Code Committee requires a company to cease or withdraw a promotional activity, the company must comply with the ruling at once pending any appeal against the decision of the Code Committee pursuant to the Rules.  The promotional activity in question cannot be reactivated before the appeals process has been concluded.


3.71     The Code Committee may refer questions on the interpretation of the Code to the Medicines Australia Board for determination.


Frivolous and vexatious complaints[65]

 

3.72     Where a company lodges a complaint that the Committee considers to be frivolous or vexatious, the Committee may request the complainant member to show cause why the Committee should not impose upon it a fine of a maximum of $200,000 for abuse of the Code.


Sanctions[66]

 

3.73     The Code Committee can impose any of a range of sanctions for a breach, including that the subject company:


            .           take immediate action to discontinue or modify any practice constituting a breach of the Code


            .           issue retraction statements, including corrective letters and advertising (this is generally required for moderate or severe breaches).  If corrective action is not taken within 30 days, the Code Committee can impose a $50,000 fine.[67]


            .           pay a fine as determined by the Code Committee.  Broadly, this can be up to $100,000, or $200,000 for a repeat breach.


3.74     The Code Committee can also recommend that the Medicines Australia Board suspends or expels a member.


Appeals[68]

 

3.75     The subject company can appeal the Code Committee’s decision that there was a breach, and/or the sanction imposed.  The complainant can also appeal the decision.


3.76     When a subject company or an industry complainant lodges an appeal, they must lodge a bond of $20,000 with Medicines Australia.  This requirement does not apply to non-industry complainants.  The bond is used to defray the costs of the Code and Appeals Committee meetings and contribute to Code education programs.


3.77     An administration charge of $6,000 will automatically be deducted from this.  The Appeals Committee then has the discretion to refund all, part or none of the remaining $14,000 if the findings/sanctions are changed/lifted.


3.78     The following are members of the Appeals Committee:


            .           Chairman (lawyer with trade practices experience selected from a panel and must not have chaired the Code Committee at which the original complaint was heard)

            .           One representative from the College and/or Society from the therapeutic class of the product subject to appeal, the target audience to which the activity was directed (eg AMA, RACGP, ADGP)

            .           A representative of ASCEPT (must not have a conflict of interest with the subject product/company)

            .           A consumer representative nominated by the Consumers’ Health Forum of Australia (CHF)[69]

            .           Two Medicines Australia company Association Representatives

            .           One Medicines Australia member company Medical/Scientific Director


3.79     The Chair and the members from the industry and college/society must not have sat on the Code Committee that heard the original complaint.[70]


3.80     The Appeals Committee has the power to affirm, set aside or vary the findings and/or any sanction imposed by the Code Committee if it is persuaded that the Code Committee’s findings involved an error.


3.81     The Code sets out the procedure that will be followed when an appeal is lodged.  Broadly, this allows both parties to prepare written submissions and also make oral submissions before the Appeals Committee.


3.82     The Appeals Committee has the discretion to receive new evidence, but otherwise shall determine the appeal on the evidence before the Code Committee and that provided by the parties’ submissions.  It may refer questions on the interpretation of the Code to the Medicines Australia Board for determination.


3.83     There is a process set out for ensuring that members of the Appeals Committee hearing a complaint do not have a conflict of interest.[71]


Monitoring[72]

 

3.84     The Medicines Australia Monitoring Committee (Monitoring Committee) will monitor selected promotional material and activities of member companies on a regular basis.  It will review different therapeutic classes[73] and types of promotional material each year.  Medicines Australia states that it intends that the Monitoring Committee will each year undertake as a minimum:


            .           the review of one type of promotional material in three different therapeutic classes and

            .           a review of three different promotional activities covered by the Code across all therapeutic classes, which would include the review of company sponsored educational meetings and symposia.[74]


3.85     Member companies will be required to submit copies of the selected type of promotional material (eg printed advertisements, audio-visual material) used over the past three months for the product under review.


3.84     If the Monitoring Committee considers a breach of the Code may have occurred, it may (after contacting the subject company seeking an explanation) either provide advice on compliance with the Code or refer the matter to the Code Committee as a complaint.


3.87     The Monitoring Committee will contribute a report to the Medicines Australia Code of Conduct annual report.  This will include the therapeutic categories and type of promotional activities reviewed, the number of items reviewed, the number and type of breaches detected and the number of Code complaints generated.


3.88     The following are members of the Monitoring Committee:


            Permanent                    Chairman – consultant with industry experience in

            members                         marketing and knowledge of the Code (selected from a panel of three)

                                                One representative from each of RACGP and the AMA

                                                .  A consumer representative nominated by the CHF[75]


            Rotating                        One representative from the college and/or society

            Members                      from the therapeutic class being reviewed

                                                One Medicines Australia member company Medical Director and one Medicines Australia member company Marketing Director, neither of which have a conflict of interest in the therapeutic class


            Advisors                       Medicines Australia Code Secretary

                                                Medicines Australia officer responsible for scientific and technical affairs


3.89     There is a process set out for ensuring that members of the Monitoring Committee hearing a complaint do not have a conflict of interest.[76]


3.90     The Code provides that the operations of the Monitoring Committee will be reviewed on a regular basis.[77]


Enforcement of the Code[78]

 

Reporting of breaches

 

3.91     Medicines Australia issues an annual report on the activities of the Code, Appeals and Monitoring Committees.  It contains information such as the complaints received and the decisions made by the Code and Appeals Committees, and the time taken to deal with complaints.[79]  Under Edition 15, Medicines Australia will also publish on its website a quarterly report on the outcomes of all complaints finalised during the reporting period.[80]


3.92     Where complaints relate to activities directed towards the general public, information about the complaints are made available on the Medicines Australia website.



Annexure 2

 

Results of consideration of complaints by Code Committee

1.1       Financial Year  2003-2004

Complaints finalised from 2002-20031

Number

Percentage

Breach

2

29%

Partial Breach

2

29%

No Breach

1

14%

Appeals

 

 

Appeals not upheld – breach confirmed

2

100%

Total complaints finalised from 2002-2003

7

 

 

Complaints received in 2003-2004

Number

Percentage

Breach

9

25%

Partial Breach

8

22%

No Breach

11

30%

Complaints not finalised in reporting period

2

6%

Complaints Withdrawn

6

17%

Total new complaints in 2003-2004

36

100%

 

 

 

Complaints finalised from 2002-2003 refers to complaints received prior to the end of financial year 2002-2003 and either not considered by the Code Committee (because the date of the Code Committee meeting following receipt of the complaint was after 30 June 2003), or considered by the Code Committee but not finalised before the end of the financial year.  Complaints are deemed finalised once the subject company has received the Code Committee minutes and either no appeal is lodged, within 5 working days, or an appeal is completed.


1.1          Financial Year  2004-2005

Complaints finalised from 2003-20042

Number

Percentage

Breach

2

100%

Partial Breach

0

0%

No Breach

0

0%

Appeals

 

 

Appeals not upheld – breach confirmed

1

50%

Appeal partially upheld – some aspects confirmed

1

50%

Total complaints finalised from 2003-2004

4

 

 

Complaints received in 2004-2005

Number

Percentage

Breach

18

35%

Partial Breach

16

31%

No Breach

10

20%

Complaints not finalised in reporting period

3

6%

Complaints Withdrawn

4

8%

Total new complaints in 2004-2005

51

100%



2  See footnote 1 above


1.1       Financial Year  2005-2006

Complaints finalised from 2004-20053

Number

Percentage

Breach

1

33%

Partial Breach

1

33%

No Breach

1

33%

Appeals

0

 

Total complaints finalised from 2004-2005

3

 

 

Complaints received in 2005-2006

Number

Percentage

Breach

6

22%

Partial Breach

3

11%

No Breach

9

34%

Complaints not heard*

2

7%

Complaints not finalised in reporting period

7

26%

Complaints withdrawn

0

0%

Total new complaints in 2005-2006

27

100%

Complaints same as an earlier complaint and no further action required by the complainant.

3  See footnote 1 above


Annexure 3

 

Results of consideration of appeals by Appeals Committee

 

Decision

2003-2004

Number

2003-2004

Percentage

2004-2005

Number

2004-2005

Percentage

2005-2006

Number

2005-2006

Percentage

Appeal not upheld – breach confirmed

4

80%

7

64%

3

100%

Appeal partially upheld – some aspects confirmed

1

20%

3

27%

-

-

Appeal upheld – no breach

-

-

1

9%

-

-




Annexure 4

 

Comparison of alleged versus actual breaches of the Code

 

Code Section

2003 – 2004

2004 - 2005

2005 - 2006


Alleged

Actual

Alleged

Actual

Alleged

Actual

1 Promotional and medical claims

70

41

95

60

44

23

3 Promotional

Material

4

4

6

6

9

5

4 Conduct of medical representatives

6

1

4

0

2

0

5 Starter packs

3

2

0

0

0

0

6 Involvement in educational meetings

1

1

1

0

4

1

6.2 Hospitality

1

0

2

0

0

0

7 Sponsorship

3

0

2

0

0

0

8 Research

0

0

4

0

0

0

9 Relationship with the general public

25

5

27

14

15

3

10 Relationship with healthcare professionals

0

0

2

0

1

1

10.1 Entertainment

0

0

0

0

1

0

10.2 Hospitality

0

0

2

0

2

0

10.4 Remuneration for services provided

0

0

2

1

0

0

10.5 Discredit to the industry

4

1

5

0

0

0

 


Annexure 5

Rule Creation: Comparison of Regulatory and Voluntary Code Regimes from  Webb K and Morrison M, The Law and Voluntary Codes: Examining the “Tangled Web”

Characteristics

Regulatory Regimes

Voluntary Codes

Rule-making institutions

Pre-established by State: well-known, highly credible.  State controls process, access.

May be newly established: less credible, at least at outset.  Government, business or non-governmental organizations can create.

Visibility of process

Generally high, particularly in the democratically elected rule-making organs of State.

Generally lower, but not necessarily so.

Cost

High, but usually spread across society.

Lower, but borne by a smaller group.

Development process

Difficult: highly formal, expensive, democratic (in primary rule-making bodies).  Theoretically open to all.

Possibly easier: less formal, less expensive.  May not be open to all.

Ability make amendments

Difficult (see above).

Easier (see above).

Sanctions that can be attached

Can include coercive and liberty-depriving sanctions, including imprisonment.

Primarily market-based.  May be tort and contractual liability implications.

Scope of application

Can be imposed on free riders.  Not based on contractual consent.

Difficulty with free riders.  Based on contractual consent.

Constraints on rule development/implementation

Considerable: constitutional and procedural

Few: may apply across national and provincial boundaries.

Likelihood of rules being developed through the process

Political process makes outcomes difficult to predict.

Closed, limited process may make outcomes easier to predict.

Likelihood of rigorous obligations being developed

High: obligations developed by parties other than those who will be directly affected, less chance for bias to affect obligations being developed.

Low: obligations often developed by parties whose interests are directly affected, greater chance for bias to affect obligations being developed.



Annexure 6

Rule Administration: Comparison of Regulatory and Voluntary Codes Regimes

 from  Webb K and Morrison M, The Law and Voluntary Codes: Examining the “Tangled Web”

Characteristics

Public Laws

Voluntary Codes

Institutions of rule administration

Primarily pre-established institutions.

May use newly developed institutions or existing bodies.

Visibility of rule implementation process

High: public reporting requirements.

Lower: can have procedures to ensure visibility such as public reporting requirements.

Cost

High: due to need to adhere to due process considerations and transparency obligations, but cost spread across society.

Lower: may be lesser concerns with transparency but cost borne by a small group.

Accountability

High: scrutiny by Auditor General, responsible ultimately to Minister/ Parliament.

Lower: depends on reporting requirements; the market, public and media are important.

Constraints on rule administration

Considerable: constitutional and procedural.

Few: varies by institution.

Credibility

High.

Tends to be lower.

Investigation and inspection capabilities

Subject to constitutional constraints: may have extensive powers.

Subject to consent of parties: may have extensive powers.

Sanctions for non-cooperation in administration of rules

May include coercive measures.

May be more limited: consensual system.

Formality

Normally high.

Variable.

Likelihood of rules being followed

High: in a law abiding society few wish to be seen in violation.

Lower: pressure to comply is derived primarily from peers and market perceptions.



Annexure 7

 

Adjudication: Comparison of Regulatory and Voluntary Code Regimes

from  Webb K and Morrison M, The Law and Voluntary Codes: Examining the “Tangled Web”

Characteristics

Public Laws

Voluntary Codes

Institutions of rule adjudication

Both pre-established (courts) and new (eg regulatory tribunals).

Primarily newly established bodies, indirectly supported by courts.

Authoritativeness of determinations

High.

Variable.

Ability to enforce judgments

High: can draw on State-approved coercion.

Variable: limited ability to use coercive force; can use market-based sanctions.

Structure of adjudication

Tends to be centralized.

Variable centralization.

Application

Wide: applies to all parties, can compel attendance, impose penalties on parties who do not attend.

Variable: dependent ultimately on consent; difficulty applying sanctions to those who do not wish to participate.

Cost

High: spread across society.

Variable: borne by a small group.

Formality

Tends to be high.

Variable: may be formal or informal.

Credibility

High.

Variable.

Visibility

High.

Variable.

Constraints

Considerable: constitutional and procedural.

Variable.



Annexure 8

Summary of Cost Information in Relation to Hospitality

Provided by Pharmaceutical Companies to Healthcare Professionals

 

Source

Venue

Event

Pharmaceutical Company

Cost Information

RB 2-125

Flower Drum

Education event “Evolution and Future Direction of MS Treatment” held at the Flower Drum Restaurant, Melbourne – 22 February 2005

Biogen

Email of 13.9.05 states total cost of hospitality was $7,847.40, includes $6,036 for meals ($138 per head for full service) and $1838 for beverages.

RB 2-144

Bennalong Restaurant

HOTT conference dinner held at Bennalong Restaurant, Sydney, on 30 July 2005.

Roche

The set menu meal was $150 per person and the preselected wine was charged at $50 per person.

RB 2-144

The Boathouse

LyFE LyNE conference dinner held at Boathouse, Sydney on 1 August 2005

Roche

The set menu meal was $85 per person and the preselected wine was charge (sic) at $50 per person.

RB2-144

Aria

LyFE LyNE conference dinner held at Aria, Sydney on 2 August 2005.

Roche

The set menu meal was $150 per person and the preselected wine was charged at $50 per person.

RB 4-404

Bacash

Event held at Bacash Restaurant, South Yarra, Vic on 5 April 2004 re: the product Kaletra.

Abbott

Average cost per head $189

RB 4-404

Pavilion on Hyde Park

Event held at Pavilion on Hyde Park on 7 April 2004 re: the product Kaletra

Abbott

Average cost per head was $130.


RB4-404

Chifley on George St

Event held at Chifley on George Street, Brisbane on 6 April 2004 re: “Myths and realities of HIV Therapy”

Abbott

Average cost per head was $107




Letter from Mallesons Stephen Jaques to AGS dated 17 November 2006

Fenix

Educational event on ‘Advances in Colorectal Therapy’ held on 6 May 2004.

Pfizer

Cost per head was $90.82.  Total cost of the hospitality was $2,270.50.

Letter from Mallesons Stephen Jaques to AGS dated 17 November 2006

Vue De Monde

Educational event on ‘Dietary Factors and Gastro Oesophageal Reflux Diesis’ held on 29 April 2004.

Pfizer

Cost per head was $118.39.  Total cost of the hospitality was $4143.50

Letter from Mallesons Stephen Jaques to AGS dated 17 November 2006

Ayers House, Adelaide

Educational event on ‘Hypertension Education Resource’. 18 May 2005

Pfizer

Cost per head $90.63.  Total cost $1,942.00.

Letter from Mallesons Stephen Jaques to AGS dated 17 November 2006

Bacash, South Yarra

Educational event ‘The Coxibs: Where to Now?” Held on 4 May 2005

Pfizer

Cost per head $78.08.  Total cost $1,952.00.

Letter from Mallesons Stephen Jaques to AGS dated 17 November 2006

Yahachi,

Perth

Educational event on ‘Fat, Happy and Sexy’ held on 25 May 2005

Pfizer

Cost per head $96.00.  Total cost $2,15.00 (sic)

Letter from Mallesons Stephen Jaques to AGS dated 17 November 2006

Ottoman, Canberra

Educational event on ‘Intra-articular injections module’ held on 28 April 2004

Pfizer

Cost per head $78.00.  Total cost $1,982.07.

Letter from Mallesons Stephen Jaques to AGS dated 17 November 2006

Matilda Bay Perth

Education event on ‘Women’s Mental Health’ held on 8 June 2004

Pfizer

Cost per head $51.00.  Total cost $3,245.00.

RB 2-322

Matteos Ristorante, Melbourne

Educational event on ‘Interactive presentation and workshop on the identification of Early Heart Failure and its management of patients’ held on 19 May 2004.

Roche

$85.71 per head.  Total cost $1,800.

RB 2-322

Olivettos, Qld

Educational even on ‘Hepatisi (sic) C Nurses Network’ held on 20 May 2004.

Roche

Cost per head $55.80. Total cost $669.70

RB 2-323

The Old Swan Brewery, WA

Educational event on ‘Understanding and Managing the Co-morbidities of Obesity’ held on 27 April 2004.

Roche

Cost per head $78.80.  Total cost $2,680.  Room hire $300

RB 2-323

Frasers Restaurant, WA

Educational event on ‘Presentation and workshop on the identification of Early Heart Failure and its management of patients’ held on 17 May 2005.

Roche

Cost per head $71.53.  Total cost $1000.  Room hire $250.

RB 2-280

Matteos Ristorante, Melbourne

Education event on ‘Coronary artery disease’ held on 10 May 2005

Bayer

Cost of food per head - $75.00

Cost of beverages - $25.00

RB 2-280

Jacques Reymond, Melbourne

Education event on ‘Reassessing treatment for respiratory tact [sic]  infections’ held on 5 May 2005

Bayer

Cost per head - $110

RB 2-280

Swan Brewery, WA

Education event on ‘Coronary artery disease’ held on 19 April 2005

Bayer

Cost of food per head $55.

Cost of beverages per head $33.00.  Room hire $500

RB 2-288

Lenzerheide restaurant. Adelaide

Educational event ‘Emerging evidence of vascular inflammation in coronary artery disease’ held on 29 June 2004.

BMS

Cost per head $77.89.  Total cost $1,713.50.  22 people attended.

RB 2-288


Chloes Restaurant, Adelaide

Education event ‘Autumn update on Cardiovascular trend and treatments’ held on 22 April 2004.

BMS

Cost per head $92.64.  Total cost $1,389.60.  15 people attended.

RB 2-288

The Manse

Educational event ‘Fireside Chat – Discuss current trends and treatments in Cardiovascular diseases’ held on 23 June 2004.

BMS

Cost per head $97.67.  Total cost $1,758.00.  18 people attended.

RB 2-295

Bacash

Educational event “Doctors Infectious Disease Meeting” held on 22 June [2005]

GSK

$65 per head for food;

$37.72 per head for drinks.


 





[1]  Section 1.1.

[2]  Section 1.3.

[3]  Section 1.10.

[4]  Section 1.4.

[5]  Section 1.3.1.

[6]  Section 2.

[7] Section s 2.1 – 2.4.

[8]  Explanatory notes, section 2.

[9]  Sections 2.1.1, 2.2.1, 2.3.1.

[10]  Sections 2.1.2-3, 2.2.2-2.2.3, 2.3.2.

[11]  Section 3.

[12]  See sections 3.1, 3.2, 3.3 (amended), 3.4, 3.6, 3.7, 3.8, 3.10.

[13]  Section 3.1.4 (amended).

[14]  Section 3.9.

[15]  Section 3.9.1 (new).

[16]  Section 6.1.

[17]  Section 10.

[18]  Section 3.11.

[19]  Section 3.12.

[20]  Guidelines, p 19.

[21]  Explanatory note, section 3.12.  The requirement that they be relevant to the working environment is new.

[22]  Section 3.13.

[23]  Guidelines, p 20-21.

[24]  Section 10.4.

[25]  Section 6.2 (in respect of involvement in educational symposia, congresses etc) and 10.2 (more generally).

[26]  Section 10.2.

[27]  Section 6.2.2.

[28]  Sections 6.2.2, 10.1.

[29]  Explanatory note, section 10.1.

[30]  Section 10.1.

[31]  Sections 6.8 (in respect of involvement in educational symposia etc) and 10.3 (generally).

[32]  Section 7.

[33]   Section 7.1.5 (new).

[34]  Medicines Australia, 8 March 2006, p15.

[35]  Section 10.6 (new).

[36]  Explanatory note, section 10.6.1.

[37]  Guidelines, p41.

[38]  Section 9.9 (new).

[39]  Section 4.

[40]  Explanatory note, section 4.11.

[41]  Sections 4.12-4.14.

[42]  Section 4.14 (new).

[43]  Guidelines, p26.

[44]  Section 8.

[45]  Section 8.1.

[46]  The Adverse Drug Reactions Advisory Committee of the Australian Drug Evaluation Committee.

[47]  Section 8.2

[48]  Guidelines, p34.

[49]  Explanatory note, section 8.2.2.

[50]  Section 5.

[51]  Glossary.

[52]  Code of Conduct Guidelines (Guidelines), p27.

[53]  Section 9.6.

[54]  Explanatory note, section 9.4 (amended).

[55]  Sections 92.-9.4.

[56]  Section 9.3

[57]  Section 9.8.

[58]  Medicines Australia 8 March 2006, p15.

[59]  Section 11.

[60]  Section 11.3 (new).

[61]  Section 11.6 (new).

[62]  Section 11.7.

[63]  Section 11.5.

[64]  New section.

[65]  Section 12.3

[66]  Section 12.

[67]  Section 12.1.2 (new).

[68]  Section 13.

[69]  Section 13.2 (new addition to membership).

[70]  Explanatory note, section 13.2.

[71]  Section 13.3 (new).

[72]  Section 14.

[73]  See Explanatory note, section 14.1 for the list of therapeutic classes.

[74]  Medicines Australia, 4 May 2006, p2.

[75]  New addition to membership.

[76]  Section 14.3 (new).

[77]  Section 14.6.

[78]  The data in this section are sourced from the Medicines Australia Code of Conduct Annual Reports 2002-03, 2003-04, 2004-05 and Code Outcomes, July – December 2005, all downloaded from Medicines Australia’s website: http://www.medicinesaustralia.com.au.

[79]  Section 16.1.

[80]  Section 16.2 (amended – previously published six-monthly).