Australian company ordered to pay $10 million for unacceptable advertising claims: TGA uses its power to penalise inappropriate online advertisement and sale of therapeutic goods

With increased internet penetration, the development of a myriad of mobile/ online applications for the delivery of digital health services that are expected to transform the way in which health care is provided and experienced, and the exponential growth in the number of e-commerce businesses vying for a share in the online retail space, there can be little doubt that the health care landscape is undergoing rapid change.

However, as one Australian business has discovered, claims made in relation to therapeutic goods on digital platforms can come under close scrutiny by the Australian Therapeutic Goods Administration (TGA) and the failure to comply with regulatory requirements applicable to therapeutic goods has the potential to attract very substantial penalties.  In a decision handed down by the Federal Court [2019 FCA 1107], Justice Jagot found Peptide Clinics Pty Ltd (Peptide Clinics) (now in liquidation) had contravened several provisions of the Therapeutic Goods Act 1989 (Cth) (TG Act), including making claims that breached the Therapeutic Goods Advertising Code.  Justice Jagot has ordered Peptide Clinics to pay a pecuniary penalty to the Commonwealth of $10 million in respect of the contraventions.

Online sale and advertising of Peptides and Peptide Treatments

Peptide Clinics operated an online retail business through its company website and Instagram and Facebook social media accounts, through which it sold products that were described as “Peptides” or “Peptide Treatments”.  Peptides are short chains of amino acids that are the building blocks for the formation of proteins, and can be used to stimulate growth hormones in the body.  The peptides advertised and sold by Peptide Clinics were found to be Schedule 4 substances under the current Poisons Standard, and therefore could only be supplied on prescription.

The company’s website and social media accounts also contained information published by Peptide Clinics that asserted a number of purported benefits of the Peptides and Peptide Treatments offered for sale, including anti-ageing, body building, body fat and weight loss, injury repair, tanning, heart health, mood regulation (including reducing anxiety and depression), libido/sexual function enhancement, preventing sleeplessness, bone health and optimising health and fitness goals.

Consumers were able to purchase the Peptides and Peptide Treatments through the completion of an online “Medical Questionnaire” available on Peptide Clinic’s website, which the website said would be reviewed by a “medical professional” within 24 hours.  The consumer would then be given access to a part of the website not available to the general public where they could purchase the Peptides and Peptide Treatments (Back End Purchasing Method).

Following correspondence from the TGA expressing concerns about the online advertisements and the Back End Purchasing Method, Peptide Clinics revised the process for purchasing the Peptides and Peptide Treatments such that once the consumer submitted the Medical Questionnaire, they were prompted to select a date and time for a telephone consultation with a medical practitioner (Consultation Purchasing Method).

Evidence produced by the TGA in the proceeding established that during the telephone consultation the consumer would speak to a medical practitioner or a person purporting to be a medical practitioner.  The consumer would be asked about their previous use of peptides and the reason for wanting to use peptides.  Although no physical examination occurred during this consultation process, the medical practitioner or purported medical practitioner would then recommend certain of Peptide Clinics’ peptide products or treatments for use, depending on the consumer’s goals.  Following the consultation, the consumer would be contacted by a representative of Peptide Clinics who then provided information about the products that had been recommended to them and advised the consumer that they may purchase the products via the website.

Advertising claims found to be misleading and in breach of Advertising Code

Justice Jagot accepted the evidence of the TGA’s experts, which indicated that there was no medical justification for using the Peptides and Peptide Treatments to treat the conditions advertised by Peptide Clinics, and that the risks of taking such substances for those conditions were “completely unacceptable”.  Furthermore, it was found that the scientific information published on Peptide Clinics’ website was “not balanced”, “substantially misleading” and in some important instances, “contradict[ed] key public health messages”.

In light of the evidence, the Court found that Peptide Clinics had contravened the TG Act by:

  • making representations that referred to serious forms of cardiovascular disease and diseases of joint and bone, being diseases, conditions, ailments or defects that are specified under the TG Act as subject to “restricted representations” which Peptide Clinics had not obtained TGA approval to make;
  • making representations that referred to anxiety and depression, which are mental illnesses that are specified under the TG Act as subject to “prohibited representations” which Peptide Clinics had not obtained TGA permission to make;
  • breaching the Advertising Code through its advertisements that contained –
    • claims that were likely to mislead, directly or by implication or through emphasis, comparisons, contrasts or omissions;
    • claims, statements and implications that the advertised products were safe or alternatively, could not case harm, when in fact they were not safe and could cause harm. There was also evidence that following treatment, several customers reported experiencing adverse effects to which Peptide Clinics’ response was wholly inadequate;
    • claims that expressly or impliedly encouraged the use of substances or goods containing substances for uses that were inappropriate; and
    • scientific information that was presented in an inaccurate, imbalanced and misleading manner.

Exceptions under section 42AA of the TG Act do not apply

 On the facts accepted by Justice Jagot, Her Honour considered that the exceptions to the application of the prohibitions under the TG Act relating to ‘restricted representations’ and ‘prohibited representations’ and the application of the Advertising Code created under section 42AA of the TG Act did not apply.  Those exceptions may for example, arise when the advertisements are directed exclusively to specified classes of people, including most relevantly to this matter, medical practitioners, or when the advice or information is given directly to a patient by a medical practitioner in the course of treatment of that patient.

The advertisements that appeared on Peptide Clinics’ website and social media accounts were generally accessible by the public and it was clear that no medical practitioners were involved at all.

The Court found that both the Back End Purchasing Method and the Consultation Purchasing Method also did not qualify as involving the provision of advice from a medical practitioner.  It was found that there was no direct contact between the customer and the medical practitioner in the case of the Back End Purchasing Method and that in case of both the Back End Purchasing Method and the Consultation Purchasing Method that “the persons to whom the information was given were not Peptide Clinics’ or the medical practitioners’ ‘patients’ in fact or at law… because the relationship lacks the elemental features of a doctor/patient relationship”.  In coming to this view, Justice Jagot took into account the following factors:

  • the identity of the medical practitioner was not known to the customer;
  • the medical practitioner did not satisfy the minimum requirements for conducting a patient consultation and clinical examination of the customer; and
  • any advice or information given could not be said to have been given in the course of treatment of the customer because the medical practitioners involved did not take a fully informed medical history, did not provide the customer with all current treatment options, did not inform the customer of all the risks and benefits of each treatment option, did not follow up the management process of the customer’s condition, and generally fell short of the minimum standards expected of a doctor when treating a patient in respect of a medical condition.

Other relevant considerations

In determining the appropriate penalty to apply, Justice Jagot accepted that the object of the imposition of a civil penalty is deterrence, and as such, the penalty imposed cannot be regarded as a mere cost of doing business.  The Judge also accepted that even if a company is in liquidation, it may still be appropriate to order that it pay penalties “as a measure of the Court’s disapproval of the contraventions and as a measure of the seriousness in which they are regarded”, and further, that there is a significant public interest in the Court making declarations of contravening conduct on the public record in aid of deterrence, since such declarations cannot be defeated by the fact that the company is in liquidation and unable to pay the penalties.

It was found that Peptide Clinics’ contraventions involved several serious breaches of the TG Act, and that the company’s business practice of involving doctors was designed to give the business “the veneer of medical legitimacy”.  The Court also noted that despite the TGA having given Peptide Clinics “every opportunity to address its concerns and correct its conduct”, Peptide Clinics failed to do so.  Moreover, it was suggested that Peptide Clinics engaged in “obstructionist” conduct by refusing to provide information requested by the TGA, by failing to act promptly and appropriately when the contraventions of the TG Act were brought to its attention and that it had no intention of complying with its obligations under the TG Act unless it was forced to do so.

While it appears from the facts of this case that the conduct of Peptide Clinics before it came under scrutiny by the TGA, during the investigation period and during the course of the proceeding may have been particularly egregious such as to warrant the imposition of the $10 million penalty, the case nonetheless serves to show the TGA’s preparedness to pursue court proceedings and seek significant penalties against companies making advertising claims that contravene the TG Act and the Advertising Code.

About the Author

Veg Tran
Veg is a Special Counsel in the Sydney IP - Dispute Resolution team. When she is not satisfying her addiction to "true crime" television shows and following the NHL hockey season, Veg enjoys pursuing her morbid curiosity in patent law. Armed with her formative training in biotechnology, Veg dedicates many of her working hours reviewing gruesome patent specifications and advising clients in a wide range of life science sectors.
View all posts by Veg Tran