Pan Pharmaceuticals Debacle

The following is a true account of how a rogue bureaucracy, Australia's Therapeutic Goods Administration (TGA), can bring down a publicly listed company for no legitimate reason and get away with it. This event serves as a warning to all consumers that our health rights are under threat by such regulators and demonstrates the need for tighter regulations and accountability of the regulators themselves. No story more clearly illustrates why there is a need for consumer watchdogs and action groups to monitor the behaviour regulators worldwide to ensure that bureaucrats do not encroach on our freedom of choice and health freedom rights.

In January of 2003 it was reported that 19 people were admitted to hospital after suffering adverse reactions to the travel sickness drug, Travacalm, manufactured by Pan Pharmaceuticals. Pan was a privately owned and publicly listed company based in Sydney. Pan was one of the big players in the natural products industry that manufactured most of Australia’s and much of the world’s supplements.

On 20th January the TGA ordered a recall of the drug Travacalm, which had already been actioned by the company itself. On 30th January the TGA then performed an unannounced audit of the manufacturing company. The TGA's auditor told owner and CEO, Jim Selim, that he believed "a rogue analyst" had manipulated the test results of Travacalm. The analyst was subsequently fired.

If Pan were simply a drug company, they would have been given a report from the audit and if needed given the opportunity to make any necessary changes required by the regulator. But Pan also manufactured thousands of natural products that in Australia are referred to as Complimentary Medicines. This report was withheld from Pan and on 5th February the TGA banned Pan from manufacturing Travacalm.

Remember this was because it was claimed that 19 people had felt sick and dizzy and went to hospital for treatment after taking the drug. To put this into perspective: From 2000 it was known that Merck & Co’s arthritis drug Vioxx could render severe side effects. In fact between 2000-2004 an estimated 60,000 people died from taking the drug and over 100,000 suffered adverse reactions. The TGA in contrast did not withdraw Merck’s license to sell the drug in Australia neither did they withdraw the killer drug from the market.

However, in the interest of protecting public safety in Australia, on 28th April 2003 the TGA walked into Pan and announce they were suspending the company’s license to manufacture for six months and were recalling some of their natural products. Newspapers carried full-page lists of natural products recalled. The TGA initially identified 219 Pan products for recall. However, by May 2 this had expanded to 1369 products. It was reported that a total of 1600 were finally recalled under a Class-one recall. Class-one meaning of “imminent danger or death”.

There had been no official reports of adverse side effects or deaths from any of Pan’s natural products; neither had the TGA actually tested any of their products. Nevertheless they ordered a Class-one recall of all natural products manufactured by the company leading the general public to believe that if they took their vitamins and herbal supplements they might die.

Pharmaceutical Industry Untouched

The TGA publicly announced three times in less than a week during the Pan Debacle and recall, "there are no problems with prescription drugs obtained from your doctor", and "prescription drugs are not affected". This was unquestionably reassuring news for the pharmaceutical multinationals, who up to this point had been losing two thousand million Australian dollars per year in Australia alone to alternative health product sales. The rise in demand for safe natural health products is a worldwide trend that has steadily eroded market share for the drug giants.

What is clearly discriminatory action on behalf of the TGA is that prescription drugs manufactured by Pan were not recalled despite the startling fact that all were produced in the same allegedly "unclean" mixing machines as the 1,600 sum banned natural health products Pan manufactured. Surely if those allegations were true all products made from Pan's machines would have been recalled?

Further, and ironically, in 2004 the TGA finally ordered a Class 2 recall of Vioxx which meant “defects could cause illness”, when it was reported thousands of people were dying from taking the drug. Yet the TGA were claiming in this recall that the drug could not kill or disable anyone, which was an obvious and self evident falsehood that put the community at risk. The manufacturer of Vioxx have lost several class actions suites and currently have payouts to the tune of four million US dollars.

There is little doubt that the Pan recall was a deliberate and well planned and timed witch hunt that left an industry decimated.

Pan Pharmaceuticals Products Recalled Worldwide

The Pan recall involved over 34 countries where Pan’s products were sold. The European and American regulators did not find enough evidence of a Class-one threat to recall the products and left them on the market. The NZ Health Minister at the time, Annette King, made a phone call to the TGA and apparently found enough evidence in that phone call to order a Class-one recall of the products here when most other countries did not. The New Zealand Herald published the list signed by Minister King in Section H1 pg 8 Wednesday May 7th.

A few other south pacific countries ordered a recall as well but most found no evidence as the TGA has not conducted testing on any of the products they recalled, neither did they produce any reports of deaths or adverse side effects from any of the products recalled.

American corporate giant Wal-Mart had recently purchased a large number of products manufactured by Pan and ran their own independent tests. No problems were found in any of the products and they remained on the market.

Australia’s Health Minister Kay Patterson said the TGA “acted in a timely way, but in a way that gave natural justice to the company” and that the recall was appropriate, even though some of the banned products may be safe.

"That is the risk that you take but I think that is better than having people take over-the-counter medication that has not met the specifications," she said... "There was sufficient evidence, the TGA received legal advice, they went to their expert committee on Wednesday to put the evidence before them, to justify removing and taking a license away and that was put through an expert committee."

The sufficient evidence that Minister Patterson refers to was later refuted and found to be fabricated by the NSW Supreme Court toward the end of 2008.

Chaos

In reality the TGA created unnecessary chaos among consumers and retailers alike as the recall escalated into the largest recall of natural products in history. The recall has been labeled “the largest drug recall in history”. This is because Australia regulates its supplements and natural products in a similar fashion to drugs, calling them complimentary medicines.

As a result of the Pan recall, more than 1,000 people lost their jobs on both sides of the Tasman, shareholders lost tens of millions of dollars and hundreds of businesses went to the wall. Pan itself went under, Jim Selim filed for bankruptcy and on 15th of December that year Pan was sold in lightening speed by the liquidator to Sphere Pharmaceutical Laboratories Pty Limited, part of the Australian-owned pharmaceutical manufacturer, Tabco Pty Limited.

The TGA had routinely inspected the Australian supplement industry in the two years before it sent Pan to the wall, and did not suspend a single manufacturer’s license. After the TGA disposed of Pan, it systematically ran through other small Australian vitamin and supplement manufacturers in a frenzy of “inspections” and “regulatory activities”.

Dozens of manufacturers were driven out of business and over 12 Australian supplement companies “voluntarily” turned in their manufacturing licenses and went to the wall after TGA scoured through their business AGAIN. (All the manufacturers had already passed previous years’ rigorous TGA inspections - which the businesses have to pay for.) Those who could afford it just paid the money and did what was required of them to stay in business for the time being. Other manufacturers sold out for fire sale prices.

Following this obvious witch hunt, many natural product lines remain out of stock in Australia and many nutritional supplements have been permanently discontinued as have the smaller Australian companies that made them.

The natural products industry was in such disarray and fear for its survival, it was barely in a position to raise cohesive objections to the joint Agency Treaty signed later in the year by Minister King for NZ and Trish Worth for Australia. This Treaty was about setting up the trans-Tasman Agency called ANZTPA which would have expanded the TGA's regulatory jurisdiction into New Zealand. One is left with pondering the question was this a deliberate set up which implicated bureaucrats and politicians both sides of the Tasman?

Did Anyone Protest Against the TGA?

Senator Lyn Allison, Leader of the Australian Democrats raised concerns in the Senate at that time about what was playing out as a destructive over-reaction. She issued a press release stating, among other things, that "It was a pointless exercise targeting complementary medicines and it sent hundreds of small businesses broke, ......The Howard Government turned its back on the mess and just walked away..........1500 products were recalled, not because they caused adverse reactions, but because of speculation about inconsistent quality… The unprecedented recall had a devastating effect on small businesses and shook public confidence in complementary health... The very least those who have suffered deserve is an apology." Here is the full press release.

The rest of the industry either hid in fear of retaliation or met with brick walls of silence perpetuated by the media. There was no known consumer organised outcry even though consumers were wrongly frightened out of taking their supplements and now have to foot the bill as taxpayers for the TGA's malfeasance.

Legal Action Reveals TGA Lies and Malfeasance

Jim Selim was accused of a litany of charges brought by the Australian Securities and Investments Commission (ASIC), including breaching his manufacturing license. In the end only two counts made it to court. In April 2007 the NSW Supreme Court found Jim Selim innocent of charges filed against and stated the recall had been made illegally.

Jim Selim then launched civil action against the TGA as an agency of the Commonwealth for $141 million in damages. During the proceedings of the civil case it was revealed that the TGA committed several offenses for which it now faced a class action suite to the tune of a quarter of a billion dollars.

Rita McLachlan was second in command at the TGA at the time and was responsible for signing the document for license suspension and recall. She spent a grueling three days in the witness box under cross examination and agreed that she said nothing when misleading information was given to Prime Minister John Howard and Health Minister Kay Patterson about Pan. The TGA bureaucrat maintained she was doing her job and was concerned about public health, but even the judge hearing the case, Arthur Emmett, found it necessary on occasion to ask her to clarify her evidence, of which of course there was none.

Rita McLachlan is one of three TGA officials named in the current Class Action Suite against the Commonwealth and is accused of “intention to take dramatic action (including the suspension or cancellation of licenses) against Pan; and otherwise set out to keep secret that intention so as to ensure surprise, and to ensure that neither Pan nor sponsors would have any opportunity of preventing the action by correcting the TGA's mistakes or otherwise seeking relief available in law".

Terry Slater the General Manager of the TGA until July 29 2005 is also being sued and is accused of “intention to take dramatic action (including the suspension or cancellation of licenses) against Pan; and otherwise set out to keep secret that intention so as to ensure surprise. On 3 June, 2003 he misspoke when he said “We had advice that there was an imminent risk of death, serious illness or serious injury, we had to move immediately.”

Robert Tribe, Chief GMP Auditor for the TGA at the time and retired a year later, also gave evidence in the case and also is named in the Class Action Suite against the Commonwealth. It was brought up in court that Tribe gave evidence in the three criminal trials against Jim Selim for destroying computer data. After two aborted trials a jury was directed to acquit Selim. Tribe gave consistent evidence in the first two trials but changed it in the third.

Jim Selim's Barrister Justin Gleeson asked "Now, what explanation do you have, if any, for having given this evidence twice in a criminal trial against this gentleman (Selim) and then in the third trial admitting that it was just wrong?"

"I've really got no explanation for that," Tribe replied.

Dr. Fiona Cumming, Director of the office of complementary medicines for TGA gave evidence that she destroyed notes of an April 23rd meeting held by an expert advisory group, set up by the TGA to examine whether there was an "imminent risk" of Pan's products causing death, serious illness or serious injury to the public.

Dr. Cumming said she ordered the notes taken by the members to be shredded following the meeting. A recording of the group's discussion was discovered at the TGA office and tendered into court which revealed:

"We don't have much evidence, do we?" one member said.

"The products that are actually listed in the report, we're all satisfied that there's no imminent risk? We have consensus on that one?" said another.

The group would advise the TGA that there was no imminent risk, a statutory requirement before the government could suspend Pan's license without notice.

Friday 18th August 2008 a settlement was reached and Jim Selim was awarded fifty five million dollars in damages and legal fees to be paid by the Australian Government (taxpayer). This was after Rita MacLauchlan had completed her evidence and a discussion about the way in which the case was heading ensued between Judge Arthur Emmett and the lawyers. He urged the lawyers for the Commonwealth to consider their position before "very substantial further costs are incurred".

One interchange between Justice Emmett and the commonwealth's barrister, David Brogan, highlighted the potential outcome of the case.

"If Mr Selim succeeds, his damages are going to be huge, aren't they?" Justice Emmett said.

Mr Brogan replied: "Yes, your honour."

Justice Emmett: "And the reputations of several senior commonwealth officers are going to be completely destroyed."

Mr Brogan: "Yes."

Strangely enough, there is to be no inquiry into the TGA's illegal actions or why the taxpayer now has to bail the rogue regulator with such a large pay out, and no one has paid with their job.

Health Freedom New Zealand are most pleased we were able to halt our Government going into partnership with this criminally negligent regulator.

Questions Remain Unanswered

Who are these mysterious people who fell sick from taking Travacalm and if they really exist why haven't any of them been interviewed?
Did these sick people actually exist or was Jim Selim set up?
Were certain members of Pan's staff paid off to make bogus claims or sabotage his business?
Was Pan set up for sale to a competitor?
Was it a set up to bring down the natural health industry in order to railroad through a trans-Tasman agency called ANZTPA?

There is a strong argument to suggest that Australia's TGA is nothing short of a bureaucratic dictatorship. A dangerous preciedent has been set here and the only way the tide can be turned is by consumers demanding greater accountability. Since they essentially are footing the bill for the rogue regulators behaviour, consumers and constituents of Australia are well within their right to demand a public and open enquiry as well as accountability.

The Court transcripts of the case against the Commonwealth revealed the Judge himself saying that if the case continued it would lead to Government officials loosing their jobs and ruining their reputations. This was why a fast settlement was made. To date no inquiry... no one has been fired... no one has been held accountable. The Commonwealth now face a large class action suite against it including those individuals and companies who lost out during the debacle. This time the payout could be as much as a quarter of a billion dollars. And still the Australian Government changes nothing.

There is in place a regulator who can do this again to any corporation pharmaceutical or complimentary, unless the Australian consumers begin to take action. It won't happen within the industry as they have been successfully scared into silence, and understandably so. The power remains with the people - the very consumers the TGA claim to be protecting.