TGA enforcement actions rise as Court orders the biggest Therapeutic Goods Act penalty yet

Therapeutic goods for use in humans (including medicines and medical devices) must be registered, listed or included on the ARTG before they can be imported into, exported from, manufactured or supplied in Australia (unless an appropriate exemption or exclusion applies). The ARTG is a fundamental public record of the therapeutic goods which can be legally supplied in Australia, supervised and managed by the Therapeutic Goods Administration (TGA). For sponsors that don’t meet the regulatory requirements, errors and omissions can be costly.

In penalty proceedings recently handed down in the Federal Court, Medtronic Australasia Pty Ltd has been ordered to pay a civil penalty of $22 million for supplying its Infuse Bone Graft Kit while it was not included on the ARTG. The penalty is the largest ever for contraventions of the Therapeutic Goods Act 1989 (Cth) (the TG Act). As the table below shows, the penalty is an outlier amongst TGA-issued infringement notices and Federal Court penalty proceedings for supply or advertisement of unapproved therapeutic goods since 2019, although big penalties are becoming more common.

The case of Medtronic

Device = Cage + Kit

From August 2005, a single Class III medical device, comprising the Kit, together with a metallic spinal fusion cage, was included on the ARTG as ARTG Entry 121164 (“Infuse Bone Graft/ LT-Cage – Graft kit, spinal fusion”). The intended purpose of that Device (comprising the Cage in combination with the Kit) was for use in spinal fusion procedures in skeletally mature patients with degenerative disc disease at one level from L4 to S1.

For a variety of good reasons, the Cage and Kit were packaged separately. Medtronic’s system allowed the components to be separately released.

The Cage component was withdrawn from supply due to lack of demand in around August 2018, but the Kit continued to be supplied in Australia until around January 2020 when questions were raised by the Department of Health with Medtronic (arising from questions about the intended purpose and supply under the Prostheses List).

While the ARTG entry for the Device did not permit the Kit to be supplied without the LT Cage, from a physical and mechanical point of view, the Kit could be used without the Cage to support spinal fusion.

According to the TGA’s August 2021 press release upon commencing the Federal Court proceeding, the TGA discovered that Medtronic had supplied the Kit without the Cage to a large number of hospitals, and the Kit was then used in some surgeries outside the Device’s intended purpose, for example procedures on children and procedures on the clavicle, hand, scapula, knee, leg, foot and jaw. There were no reports of injury or harm in relation to the use of the Kit.

On 19 September 2024, the Federal Court of Australia ordered Medtronic to pay $22 million in penalties for unlawfully supplying 16,267 units of the Kit to 109 hospitals between 1 September 2015 and 31 January 2020. The Court also ordered Medtronic to pay $1 million towards the TGA’s legal costs.

Factors relevant to the agreed contravention and size of the penalty

The proceeding was conducted on an agreed, rather than adversarial, basis, by way of a Statement of Agreed Facts and Admissions between the parties. Specifically:

• Medtronic agreed that, between 1 September 2015 and 31 January 2020, Medtronic supplied 16,267 units of the Kit to 109 hospitals;
• Medtronic admitted that each of those instances of supply was a supply of the Kit rather than supply of the ARTG included Device (comprising Cage + Kit), and therefore contravened the TG Act; and
• the parties agreed that, for the purposes of the imposition of a penalty only, the relevant provision contravened was section 19D(1) of the TG Act (ie. the contravention relating to therapeutic goods and not medical devices).

The parties also agreed on the size of the penalty. However, the Court was required to satisfy itself that the agreed civil penalty was appropriate. A range of factors relevant to penalty were considered, including those relating to public interest and deterrence. These included, critically:

• the Court’s determination that the contraventions were to be treated as separate contravening supplies (rather than a ‘single course of conduct’), meaning that the maximum penalty under the legislation was in the order of $162 billion;
• Medtronic received over $77 million in gross revenue from the supplies of the unregistered therapeutic good, and almost $9 million in net sales (excluding GST); and
• the TG Act’s purpose is to protect the public from harm from unregulated therapeutic goods, and these contraventions undermined the regulatory scheme. While there was no evidence that actual harm had been caused by the conduct or that Medtronic required specific deterrence, the contraventions were significant in number and a significant fine would have the benefit of general deterrence.

There was debate about which specific provision of the TG Act had been contravened and Medtronic and the TGA argued that it was not necessary to identify a specific provision. The Court rejected this argument, noting that identifying the specific contravention was a relevant factor for determining penalty. This is important as it means that companies who seek to resolve penalty proceedings with the TGA will need to admit to a specific contravention of the TG Act.

Protecting public health and safety remains the TGA’s priority

The significant penalty imposed upon Medtronic reinforces the central position of the ARTG and the processes which support inclusion of a therapeutic good (or specific therapeutic uses) before supply or advertisement to consumers. This is a critical area in which we continue to see the TGA’s focus on issuing infringement notices and pursuing penalties in Court, as shown through an analysis of recent penalty proceedings and substantial (>$100,000) infringement notices for advertisement and supply of unapproved therapeutic goods (shown in the table). This analysis, together with the Medtronic penalty, may signal a greater appetite within the TGA to pursue enforcement action consistent with its compliance and enforcement priorities.

In considering the “totality of the conduct” and the agreed $22 million penalty, the Court found that “the penalty is a suitable one on the basis of both general and specific deterrence, as well as reflecting the significance of the extent of the contraventions and the failures of compliance and regulatory processes within Medtronic”. In response to the penalty imposed on Medtronic, Professor Anthony Lawler, Deputy Secretary of the Department of Health and Aged Care and head of the TGA, said that “this significant penalty serves as a reminder to sponsors and others in the therapeutic goods industry to take their obligations seriously” and “The TGA’s highest priority is to protect the health and safety of the Australian public”.

Although there was no evidence that any patient was harmed by Medtronic’s actions, the Court found that the unlawful supply of the Kit caused harm “to the system of regulation of therapeutic goods in Australia, through the ongoing and numerous contraventions of the Act” – a system of regulation that aims to protect the public from unregulated therapeutic goods.