On 27 June 2007, the Australian Competition Tribunal handed down its judgment on the appeal by Medicines Australia against the ACCC's approval of the 15th edition of the Medicines Australia Code of Conduct. Medicines Australia had appealed against conditions imposed by the ACCC, requiring the disclosure by pharmaceutical companies of detailed information about the nature and extent of hospitality provided to health professionals at educational meetings and symposia.

Medicines Australia's appeal was entirely unsuccessful. The Tribunal has required Medicines Australia to amend the Code to insert provisions to substantially the same effect as the conditions imposed by the ACCC.

The Tribunal justified its decision on the grounds of the so-called "public benefit" test. The message was clear: in the Tribunal's view, benefits provided by pharmaceutical companies to healthcare professionals may affect their prescribing practices. Thus, such prescribing decisions may be "influenced by considerations not relevant to patient welfare". In the Tribunal's view, the Code is a mechanism which, although far from perfect, regulates and constrains the provision of benefits to healthcare professionals. The ACCC's conditions were said by the Tribunal to provide an appropriate incentive for compliance with the Code.

In this article we consider the reasoning behind the decision, and the implications for future marketing practices of pharmaceutical companies given the new disclosure rules.

The decision - in brief

The issue at the heart of the dispute between Medicines Australia and the ACCC was the imposition of the reporting conditions. While other issues were addressed, including the regulation of product information and the provision of starter packs to medical practitioners, these were side issues to the main dispute.

The conditions imposed on the approval, which the Tribunal has required Medicines Australia to incorporate into an amended version of the Code, require each member company to report to Medicines Australia with details about doctor-orientated functions and the associated budgets.1This information will be published on Medicines Australia's website and thus will be open to public scrutiny and constant monitoring by Medicines Australia.

Why reporting conditions?

The Tribunal's decision clearly seeks to increase the accountability of pharmaceutical companies and ensure that they are playing fair when it comes to entertaining and educating doctors.

The Tribunal decided that where appropriate, it could impose conditions to provide "an incentive to compliance [sic] with the Code provisions relating to the conferring of benefits on doctors". The Tribunal made it clear that it thought that, absent such an incentive, the Code lacked sufficient enforcement mechanisms. In particular 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 made it clear that in its view pharmaceutical companies could, by providing benefits to doctors, affect prescribing decisions and thus affect patient care. The Tribunal felt that while the provision of benefits to doctors would not necessarily lead to patient harm, it was difficult to comprehend how the provision of benefits can ever be a legitimate consideration or influence in patient decision-making by that professional. 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 informed the actual reauthorisation of the Code as well as the new conditions.

The Tribunal specifically justified the conditions based on their opinion 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."

By mandating the provision of previously undisclosed hospitality information, the Tribunal is putting down a strong marker that the provision of "inappropriate" benefits to health professionals is a practice which is against the public interest. In its view marketing in the pharmaceutical industry must be less entertainment-based, and more education-based. In theory, this should remove inappropriate "influences" on prescribing practices.

What does the decision mean for the industry?

The decision means that the budgets of pharmaceutical companies for doctor-orientated functions, and the conferral of benefits on doctors, will be subject to public scrutiny. It is clear that the Tribunal saw this as a mechanism for enforcing the Code's existing restrictions. It commented that the current enforcement mechanisms in relation to benefits for health professionals were "weak".

It was thought that public "scrutiny of the hospitality and other benefits provided by pharmaceutical companies is more likely to lead to self imposed restraint by pharmaceutical companies then the institutional arrangements proposed by Medicines Australia."

Whether enforcement is strengthened by way of the new reporting conditions will be watched with interest.

Impact on marketing practices

The reauthorisation of the 15th Edition of the Code is a timely reason for marketing teams in member companies to audit their current marketing techniques and practices in relation to the provision of hospitality and benefits. The fact that previously confidential information will now be open to public scrutiny represents the potential for a change in marketing culture.

In practice, marketing teams must be prepared to defend marketing initiatives which they regard as legitimate and spending which they regard as reasonable. Public scrutiny will naturally be more intense and subjective. Joe Public will not think the same way as those in the industry, and teams must therefore consider carefully the likely public and media reaction to the arguments in favour of a particular initiative.

It is important to remember that the Code, for better or worse, defines acceptable marketing practices as those which are "able to withstand public and professional scrutiny and conform to professional and community standards of ethics and good taste"2 The new conditions may have the effect of making this very much a real world test.

How to prepare for the new Code?

Marketing teams may wish to look at techniques that have worked in the past, and categorise those with the greatest educational content as against cost. This provides a useful opportunity to re-visit spending and the effectiveness of certain events.

The first year of the reporting requirements will be a learning process for marketing teams as to what is a "reasonable" amount to spend on events and what "appropriate" benefits to doctors are. The Tribunal did not discuss what it believes is appropriate and so the industry is left to set its own bench-mark, bearing in mind the "public scrutiny" test explained above.

Notably, the Tribunal emphasised the importance of educating doctors at pharmaceutical company organised seminars and conferences as long as such events were truly educational. Member companies who currently adopt innovative and cost-effective educative marketing techniques will already be one step ahead. The imposition of the disclosure rules, and the need to monitor spending on such events, may lead to an increase in online education and round-table forums, as opposed to residential conferences.

Against this background, it is worth bearing in mind that the reporting conditions do not attach to:

  • general sponsorship of healthcare professional organisations
  • those instances where healthcare professional may be remunerated for their participation in advisory committees
  • direct gifts to healthcare professional which are not connected with any education event; or
  • low value items such as calendars, biros, gimmicks and mouse pads bearing the company/ product logo.

From a relationship perspective, member companies may need to provide information to doctors about the Code so they understand any changes in marketing techniques and the reasons for the withdrawal of certain more extravagant benefits.

Looking forward, the reporting conditions will increase transparency. Perhaps they provide member companies with an opportunity to demonstrate the benefits of the educational events they provide for doctors and the ways in which they put doctors in a position to make better prescribing decisions.


1 The new conditions read as follows:

"3.1 The Code of Conduct is varied within three months of this determination to include the requirement that each member company report to Medicines Australia all educational meetings and symposia as defined in ss 6, 7 and 10 of the Code held or sponsored by that company:

(a) by completing the table set out at Attachment A to the Determination for each month of the financial year;

(b) by providing a copy of the completed table for two six month periods every year (July to December, January to June) to Medicines Australia within 14 days of the end of each six month period.

3.2 The Code is further amended to provide that:

(c) Medicines Australia will make publicly available on its website the completed table provided by each member company within three months of the end of each six month period;

(d) The Monitoring Committee will, at the end of each financial year conduct a review of the information provided by the members for three months selected by it at random for the preceding 12 month period.

3.3 The Monitoring Committee will be empowered in any case to request information concerning a particular event such as a copy of the invitation to the meeting and a copy of any printed material provided to attendees.

3.4 Where the Monitoring Committee considers that the conduct of the member company with regard to the meeting may breach the Code of Conduct, it will refer a report about the meeting and the member company's response to the Code of Conduct Committee which, after giving notice to the member company, may deal with it as though it were a complaint.

3.5 The Monitoring Committee shall also provide a detailed report on its other activities to Medicines Australia for publication in the Code of Conduct Annual Report. This report shall also list any cases forwarded to the Code of Conduct Committee under the preceding provisions setting out the name of the member company and the date it was referred."

The decision requires Medicines Australia to amend the Code within three months so the disclosure rules will have immediate effect from no later than 27 September 2007.

2 See, for example, sections 6.3, 6.4, 7.1.1 and 10 of the Code


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