In each issue of Life Sciences Spotlight, partners in the DLA Piper Life Sciences team will assist in unravelling the legal aspects of a real-world Life Sciences dilemma using a hypothetical fact situation. In this issue, Andrew Ball, Elizabeth Ticehurst and Simone Mitchell discuss what internal obligations and potential legal risks may arise for Life Sciences companies when their sales representatives make certain misrepresentations during the course of promotion and marketing of pharmaceutical products.

FarmaPharma Pty Ltd (FP) has released a new pharmaceutical product indicated for the treatment of diabetes. As part of the marketing and promotion of this product, FP has employed a team of sales representatives to detail and promote the product to general practitioners. During a series of visits to general practitioners, one of FP's sales representatives makes a number of misrepresentations to general practitioners regarding the product. This includes false representations regarding the efficacy and side effects of the product.

FP wishes to terminate the sales representative as an example to its other employees. FP comes to you for advice regarding its internal obligations and potential legal risks. FP would also like advice on the types of training required to be undertaken by sales representatives and how to make training as effective as possible so that FP can avoid, as best it can, future problems.

Whether FP can validly dismiss the sales representative depends on the following factors:

  1. whether the company has any policies that cover representations to clients;
  2. whether the sales representative has been previously warned about making these kind of representations, or other misconduct; and
  3. the process that the company goes through to dismiss the sales representative.

The sales representative is likely covered by the Commercial Sales Award 2010. This award covers sales people who are "employed away from, or substantially away from, the employers' place of business" and are engaged in soliciting orders for or selling goods, or promoting the employer's products. The sales representative could also be covered by an enterprise agreement, if the employer has one.

Coverage by a modern award or an enterprise agreement means that the sales representative can make a claim for unfair dismissal, even if his or her salary exceeds the high income threshold (currently AU$129,300), as long as he or she has been employed for at least six months. If FP wishes to terminate the employee, the company needs to give careful consideration to the following elements of an unfair dismissal claim, to make sure that it can defend any claims by the employee.

Is there a valid reason to dismiss the sales representative?

The sales representative has potentially exposed FP to liability by making false representations about the product. However, this may not be sufficiently serious to constitute a "valid reason" for dismissal, unless the employee has been given training about how to describe the product, and specifically instructed not to deviate from the company's approved descriptions. The existence of a policy or code of conduct that covers representations about products will also be helpful to the company, as long as the employee has been made aware of the policy. If the employee has previously been warned about similar behaviour, this could also make the current conduct more serious, and is more likely to be a valid reason.

Proper process

FP should notify the sales representative of the misconduct (i.e. the false representations) and give him/her a chance to respond. If the sales person has a reasonable explanation for the conduct, FP should take that into account. If FP is considering dismissal of the employee, it should allow him/her to have a "support person" present at any meetings if the sales representative requests it.

Personal circumstances of the employee

The sales representative may have certain personal circumstances that mean it would be harsh to dismiss them, even if there is a valid reason and FP follows proper procedure. These could include if the employee has a long period of unblemished service prior to making the false representations; or if the employee has a disability or difficult family circumstances.

After considering all these factors, FP should weigh up the risk of the sales representative making a successful unfair dismissal claim. If the risk is high, FP may wish to consider issuing the employee with a formal warning and having him/her undergo additional training instead of dismissal.

In addition to ensuring the accuracy of all claims made in relation to a product, the Code requires that company representatives maintain a high standard of ethical conduct and professionalism in the discharge of their duties at all times.

Failure to ensure the accuracy of claims made by your sales representatives is a recipe for disaster. False and misleading claims made by individual sales representatives, even in circumstances where those claims are not condoned by a company, may lead to a complaint and the imposition of sanctions under the Code or may result in court proceedings alleging that the company has engaged in misleading and deceptive conduct under the Australian Consumer Law (ACL).

Consequently, companies need to ensure that they have in place a robust compliance program which ensures that all company representatives are aware of their duties and responsibilities under the Code as well as other laws which relate to the promotion of goods in Australia.

Section 6 of the Code specifies the types of qualifications and training that are required to be held or undertaken by company representatives. However, in practice, the requirements outlined in this section of the Code should not be considered a comprehensive training and compliance program which will be sufficient in all circumstances and for all representatives. The Code makes it clear that companies have responsibility to maintain high standards of on-going training for company representatives and this clearly indicates that further training may be required in certain circumstances.

The type of training which is required under the Code includes:

  • company representatives must possess sufficient medical and technical knowledge to present information on the company's products in a current, accurate and balanced manner and should be cognisant of all provisions of the Code. The endorsed Medicines Australia education program provides sufficient background to satisfy this requirement.
  • all medical representatives are required to have completed or be currently undertaking an endorsed Medicines Australia education program for medical representatives.
  • any person who is directly involved in the development, review and approval of promotional material and educational materials to the general public or has direct interactions with healthcare rofessionals for the purpose of promoting a prescription only product or providing medical or clinical education must complete the Code of Conduct component of the endorsed Medicines Australia educations program.
  • any person who is directly involved in the development, review and approval of promotional material and educational materials to the general public or has direct interactions with healthcare professionals for the purpose of promoting a prescription only product or providing medical or clinical education must also undertake training on a regular basis to ensure that they have sufficient knowledge to comply with the Australian privacy legislation and ACL to the extent relevant to their roles.

In addition to the training requirements set out in the Code, it may be that additional training is also appropriate to mitigate the risk that company representatives will engage in the inappropriate promotion of products and/ or services. For instance, it is almost always necessary to provide sales representatives with comprehensive training in relation to the product that they will be promoting, including, amongst other things, training on the Product Information and the product's safety and efficacy profile.

It is important for a company to be in a position to demonstrate that it has adequately trained its employees and agents. Although not a defence to a complaint made pursuant to the Code, in determining appropriate sanctions, the Code committee may refer to various matters including:

  • internal procedures for the development and approval of company activities and materials;
  • the circumstances in which the activity took place – and whether any explanation can be offered by the subject company;
  • any evidence that the breach related to an activity that was not sanctioned by the company's operating procedures or training of personnel; and
  • co-operation, acknowledgement of the offence and evidence of internal procedures implemented to avoid similar breaches in future.

In summary, FP should ensure that it meets not only the minimum training requirements specified in the Code but that its representatives have undergone adequate training in order to undertake their roles and responsibilities. Where the employee is a sales representative, FP should undertake adequate training so that the person will be able to speak knowledgeably and accurately about the new diabetes treatment they are promoting, competitor products and the disease state. In addition, FP should consider whether it should optimise any training program it has in place to ensure (as best it can) that future breaches are avoided, including:

  • implementing testing of company representative as well as training;
  • ensuring that each employee gets the training they need – this acknowledges the different roles and functions of employees;
  • ensuring consistency in training given;
  • ensuring that an appropriate person(s), with the requisite qualifications and technical expertise, delivers the training;
  • ensuring the company maintains a register of training that is regularly checked; andmonitors and observes sales representatives, particularly when the company has been put on notice of potential breaches.

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