Key Point

  • The Report shows a very low level of non-compliance with the Medicines Australia Code of Conduct.

On 28 March 2008, Medicines Australia set a global precedent for the pharmaceutical industry by publishing its first report on medical education events held or sponsored by its member companies. The report shows that, during the six months to 31 December 2007, there were 14,633 educational events for healthcare professionals held or sponsored by Medicines Australia's 42 member companies.

The requirement for reporting arises from the Australian Competition Tribunal's decision to affirm a condition on authorisation of the Medicines Australia Code of Conduct imposed by the Australian Competition and Consumer Commission. The condition requires companies to submit sponsored event reports twice yearly.

Of the 14,633 events held during the first six month reporting period, there were 52 events identified as potential breaches of the Code. These events have been referred to the Medicines Australia Code of Conduct Committee for investigation. Medicines Australia has said that the findings from the investigation will be made public.

Why the requirement for reporting?

The Code regulates three main categories of conduct in relation to the marketing of prescription medicines:

  • the provision of promotional information about prescription medicines;
  • the provision of benefits to healthcare professionals; and
  • other conduct, such as the supply, storage and handling of starter packs.

The Trade Practices Act 1974 (Cth) ("TPA") prohibits certain forms of anti-competitive agreements, including agreements between competitors which restrict who they can deal with and on what terms. Medicines Australia has always sought authorisation of each new edition of its Code under the TPA, lest the Code be said to amount to unlawful collusion by the industry.

On 30 November 2005, Medicines Australia sought authorisation from the ACCC of the 15th edition of the Code. On 26 July 2006, the ACCC decided to authorise that edition for a period of three years, subject to a condition requiring each member to report twice yearly to Medicines Australia all events held or sponsored by the member in relation to healthcare professionals1. Member companies were required to include the following information in their reports:

  • a description of the function, including the duration of the educational content delivered
  • details of the venue
  • information on the professional status of attendees
  • details of the hospitality provided, including the total cost of the hospitality
  • the number of attendees attending the function; and
  • the total cost of the function.

Such reports were to be made publicly available in tabular form by Medicines Australia on its website and reviewed by Medicines Australia through its Monitoring Committee.

The ACCC imposed the condition because it was concerned about the Code's effectiveness in regulating the conduct of pharmaceutical companies and the level of transparency surrounding the activities of pharmaceutical companies in relation to the provision of benefits to healthcare professionals.

The Tribunal's decision

On 15 August 2006, Medicines Australia lodged an application with the Australian Competition Tribunal for review of the ACCC's decision, in effect challenging the imposition of the condition by the ACCC.

Medicines Australia's application was unsuccessful. The Tribunal determined that Medicines Australia should amend the Code to insert provisions that substantially reflected the ACCC's condition.

The Tribunal's decision was based upon the "public benefit" test for authorisation of otherwise anti-competitive conduct. In reviewing the ACCC's decision, the Tribunal said that, by providing benefits to health care professionals, pharmaceutical companies could influence prescribing decisions and thus compromise patient care. The Tribunal reasoned that while the provision of benefits to healthcare professionals would not necessarily lead to patient harm, it was difficult to see how the provision of benefits could ever be a legitimate consideration or influence in patient decision-making. Therefore, "any irrelevant consideration or influence of that kind affecting such decision-making has the potential to result in positive harm or, more likely, less than optimal treatment choices". This was a major factor in the ACCC's decision to impose a condition on authorisation of the Code.

The Tribunal noted the Code's role in providing a mechanism to, among other things, regulate the provision of benefits to healthcare professionals. It said that, where appropriate, conditions could be imposed to provide "an incentive to compliance with the Code provisions relating to the conferring of benefits on doctors". The Tribunal made it clear that it thought that, without such an incentive, the Code lacked sufficient enforcement mechanisms. In particular, it noted that there is no obligation on companies to report breaches of the Code to Medicines Australia, and little incentive on companies to complain about the benefits provided to doctors by their competitors.

The Tribunal justified the imposed condition on authorisation on the basis that:

"the practice of pharmaceutical companies conferring benefits upon health care professionals carries with it a risk that prescribing decisions may be affected or influenced by considerations not relevant to patient welfare. It also carries with it a risk of reduced public confidence in the industry and the profession. So far as such practises may affect prescribing decision there is a species of market failure because such influences are unrelated to product quality or patient welfare."

The Tribunal's decision clearly seeks to increase the accountability of pharmaceutical companies and to expose the provision of benefits to healthcare professionals to public scrutiny. Its affirmation of the ACCC's decision to impose a condition requiring the disclosure of information about the provision of benefits to healthcare professionals reflects a view that the widespread provision of benefits to healthcare professionals is not in the public interest, and that the marketing of pharmaceuticals must be less entertainment-based and more education-based to remove inappropriate "influences" on prescribing practices.

Indeed, the ACCC's view was that the provision of benefits to healthcare professionals risks distortion of the medical decision-making processes of healthcare professionals and may also influence the views of opinion leaders in the field. The ACCC found it difficult to accept that pharmaceutical companies would provide such benefits if they did not think a positive return was likely.

The Report: Audit procedures

Medicines Australia engaged Deloitte Touche Tohmatsu to audit the reports of educational events provided by member companies. Audit procedures focused on sections of the Code relating to:

  • hospitality (sections 6.2 and 10.2 of the Code)
  • sponsorship (section 6.4 of the Code, section 7, excluding sections 7.1.2, 7.1.3 and 7.1.5)
  • venue selection (section 6.6 of the Code)
  • entertainment (section 10.1 of the Code); and
  • travel (section 10.3 of the Code).

When review procedures identified a potential breach of the Code, this was described as a "testing exception".

Key findings

Deloittes applied specified criteria to the data submitted by the companies to identify circumstances which, in its view, suggested there might be a breach. Of the 14,633 educational events reviewed, incomplete data were recorded in 3613 event reports. Although some initial teething problems are to be expected as industry adjusts to the new reporting requirements, the percentage of incomplete event reports (approximately 25 percent) was high and the question remains as to how many of these incomplete reports may relate to events in potential breach of the Code.

Financial testing exceptions

There were 36 testing exceptions recorded across eight companies involving events for which the hospitality cost was greater than the function cost. Similarly, there were 239 events across 33 companies where the total cost of the function less the total cost of hospitality exceeded an agreed threshold for non-sponsorship educational events. Overall, there were 749 educational events across 39 companies which exceeded thresholds for function cost and hospitality.

Non-financial testing exceptions

Of the non-financial testing exceptions, there were 939 events across 115 companies relating to venue; 358 events across 56 companies relating to restaurants and 9 events across three companies relating to international travel.

Outcome of the Report

Despite more than 2000 testing exceptions, only 52 events have been referred to the Committee for investigation regarding possible breaches of the Code. The findings of the Committee's investigations will be made public. Presumably, the usual sanctions will apply to companies found to be in breach of the Code.

Interestingly, the 52 events being investigated by the Committee represent only 0.4 percent of the total number of events reported. Given that this is the first time the reporting obligation has been in place, it represents a remarkably low incidence of referrals (especially when one considers that the referrals are in respect of suspected breaches only). One wonders whether the ACCC's assumptions about the industry are warranted.


1 Sponsored events involve the provision of travel and/or hospitality or entertainment (benefits) alongside product information and education.