BALDWINS • FoodLegal

Australian Lawyers and Consultants

Marketing Health Products in Australia

by Joe Lederman*, July 2004

Following the negotiation of the Australia-United States Free Trade Agreement (AUSFTA) and its recent passage through the U.S. Congress, there will be improved opportunities for U.S. manufacturers and distributors of health-related products and pharamaceuticals seeking entry into the Australian market. Of significance in the changes wrought by the AUSFTA is that pharmaceutical distributors will now be able to challenge the Australian approval process for their products under the review process introduced by the AUSFTA into Australia’s Pharmaceutical Benefits Scheme (‘PBS’), under which the Australian Federal government provides subsidisation of the cost to consumers of pharmaceutical products and medicines.

For those who want to consider entering the Australian market, this article provides an overview of the Australian regulatory system applicable to therapeutic products, functional foods and nutraceuticals.

Unlike the U.S., which has a single regulatory agency, namely the Food and Drug Administration (‘FDA’), Australia has 2 separate regulatory systems for pharmaceuticals and food, with separate agencies for each. In addition, the Federal health department, the health departments of the 6 Australian States and 2 Australian mainland territories and the Federal trade regulator, the Australian Consumer and Competition Commission (‘ACCC’), also monitor aspects of the advertising and labelling of both food and therapeutic products. The national Food Standards for Australia are developed through the bureaucracy and committee system of Food Standards Australia New Zealand (‘FSANZ’) which operates under the Federal Health Minister’s department.

Therapeutic products are regulated at the Federal level by the Therapeutic Goods Administration (‘TGA’) pursuant to the Federal Therapeutic Goods Act 1989. This governs all products sold as having a beneficial effect for health, including prescription medicines, therapeutic devices and complementary medicines. The Australia New Zealand Food Standards Code (‘ANZFSC’) contains the national food standards developed jointly between Australian Federal and State as well as New Zealand authorities. These standards are adopted into the law of each State and Territory by their respective Food Acts. All products are also subject to laws against misleading or deceptive conduct in the form of the Trade Practices Act 1974 (Cth) (‘TPA’), enforced by the ACCC as mentioned earlier and there are equivalent laws that are replicated under State and Territory Fair Trading Acts.

Approval and registration under the Therapeutic Goods Act 1989 is required to ensure that therapeutic goods are both safe and effective. There are three levels of approval under the Therapeutics Good Act 1989, which all involve pre-market assessment, licensing of manufacturers, and post-market vigilance. The approval levels from most stringent to least are: a) prescription drugs and devices, b) non-prescription drugs and low-risk devices, and c) complementary medicines. There are two levels of registration: registered goods, which are tested for both safety and efficacy, and listed goods, which are only tested for safety.

Pharamaceutical companies can also have prescription medicines approved by the Pharmaceutical Board Advisory Committee for subsidisation under the PBS. The PBS provides prescription drugs to consumers at a fixed price, which is usually only a fraction of the cost paid to the pharmaceutical supplier by the government. Since the Australian government is the sole purchaser of prescription drugs, it is able to negotiate a lower price than would otherwise be acceptable to pharmaceutical firms. However, the benefits for drug companies from the increased volume generated by PBS approval considerably outweigh the discount. Orphan drugs offer additional opportunities from this aspect also.

The basis for negotiation of drug prices by the government will be affected by the presence of generic competition on the market because the Pharmaceutical Benefits Pricing Authority will not pay more for any product than the price of its cheapest competitor. However, the AUSFTA is likely to improve the situation for American corporations in this regard because it strengthens their IP protection in Australia for patented pharmaceutical products. The AUSFTA will also now provide for increased transparency in the PBS approval process as well as a Medicines Working Group to be composed of U.S.A. and Australian officials to promote the pharmaceutical industry and delivery of pharmaceuticals.

An alternative route for marketing functional foods and nutraceutical products is to market and sell the products under the food regulatory system. As such, food must comply with the Food Acts and Fair Trading Acts of each State and Territory in which it is sold, including the Food Standards Code and Trade Practices Act provisions at a national level. However, going via the food regulatory route also restricts further the ability to make any health claims in labelling and advertising for the product.

Currently, health claims are absolutely prohibited on labels or advertising for food (with the exception of folate claims on specific foods). As a result, it is not possible to state that a food is good for your health, offers benefits for sufferers under a particular disease or condition, or has slimming effects. Nevertheless, it is still possible to make nutrition claims about the nutrient content of a product in certain circumstances, such as a statement that a product contains calcium or Vitamin C or that the product is “Lite” or “Low fat” or similar but always subject to various conditions set by the Food Standards Code. Although there is currently a proposal to amend the Food Standards Code to permit substantiated health claims, the standards development process has been slow and the new standard is not expected to be released until early 2006.

Since FSANZ is required to adopt a “whole of government approach” there are a number of avenues to propose amendments to the Food Standards Code depending on the type of food and the associated political considerations.

Meanwhile, the Trade Practices Act and equivalent legislation mentioned earlier must never be overlooked, especially because Australia’s trade regulator and consumer protector, the ACCC, has a brief to clamp down on improper health claims. The Trade Practices Act, which the ACCC enforces, covers a wide range of areas, but the most relevant is the prohibition of misleading and deceptive conduct in trade or commerce under Section 52 of the TPA including misleading claims regarding nutrition, health or country of origin. The “misleading and deceptive” provision is exceptionally broad and can be applied to any aspect of labelling or promotion of a product. Fines over A$1 million may be sought by the ACCC. In addition, if an ACCC prosecution is successful, a defendant company can be required to undertake corrective advertising and withdraw or re-label its products. There is considerable legal precedent in this area of law and our firm Baldwins Australian Lawyers (http://www.baldwins.com.au) has acted successfully in Federal Court cases to defend actions brought under Section 52.

*Joe Lederman is the senior partner of Baldwins Australian Lawyers and Consultants and the editor of the Food Law chapter for the LexisNexis Butterworths’ publication Halsburys Law of Australia. He also acts for numerous food companies including several multi-national corporations and has handled entries into the Australian market for a wide range of products.

For further information, contact Joe Lederman at BALDWINS, Australian Lawyers & Consultants.

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