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The Therapeutic Goods Advertising Code (No. 2) 2018 commences on 1 January 2019 - is your direct selling business prepared for the changes?
Date : 24 December 2018
Author/s : Tim Clarke, Cate Sendall, Despina Bouletos
Type : Focus Paper
 

 

Overview


A new Therapeutic Goods Advertising Code (No. 2) 2018 (new TGAC) will take effect from 1 January 2019. This will impact materially the way in which direct selling businesses may advertise their therapeutic goods.1  


This Focus Paper looks at some of the more significant changes and the Therapeutic Goods Administration’s (TGA) compliance and enforcement strategy for 2019. Many of the provisions in the new TGAC impose more stringent requirements than the corresponding provisions in the current Therapeutic Goods Advertising Code 2015 (old TGAC). Care must be taken by all businesses (including direct selling businesses) to ensure full compliance. This is particularly the case in respect of testimonials and weight management claims. The TGA has signalled that it will take a pragmatic approach to its enforcement and compliance activity during 2019. In any event, businesses should review their advertising and marketing activities as the new TGAC comes into force on 1 January 2019 and provide compliance training for their salesforce.


We understand that Direct Selling Australia is seeking clarification with the TGA as to how these changes will apply to independent sales people and generally to the direct selling channel.


Testimonials


Testimonials are used extensively in the direct selling industry. Under the old TGAC, testimonials are simply required to be documented, genuine, not misleading and illustrate only typical cases.2 


The new TGAC provides more detailed requirements.3 The person making the testimonial cannot have any involvement in the production, sale, supply or marketing of the goods. Accordingly, Distributors and Consultants must not make testimonials. The testimonial must also be typical of the results expected from use of the goods in accordance with their directions for use (or purpose) of the goods.  This may impact upon the use of, for example, dramatic before and after weight loss photos.


Testimonials must also disclose:

 

  • whether any valuable consideration has been given or will be given to the person providing the testimonial;
  • where another person takes the place in the advertisement of the person providing the testimonial; and
  • where the person providing the testimonial is an immediate family member of an individual involved in the production, sale, supply or marketing of goods. An ‘immediate family member’ of a person is that person’s parent, grandparent, spouse, de facto, child or ward. This is particularly relevant for Distributors and Consultants who should be made aware of this requirement.


Care must be taken in using social media (such as Facebook, Instagram and Twitter) to promote products through testimonials. To the extent that the supplier (or its agents, such as Consultants) post testimonials from, for example, their customers on social media, they are responsible for ensuring that the testimonials comply with the new TGAC requirements. If reasonable steps are not taken to block or remove an unsolicited testimonial, the failure to do so has the effect that the testimonial will be considered to have been ‘used’ in an advertisement.


Companies may wish to consider having a social media acceptable use policy which addresses the posting of testimonials. The policy would include guidelines to ensure testimonials are not misleading or deceptive and do not encourage excessive or inappropriate use of products.


In addition to the requirements under the TGAC, testimonials must always comply with the requirements of the Australian Consumer Law.


Endorsements


Some direct selling companies have medical or scientific advisory boards, which may include a range of consultants (who may or may not endorse the companies’ therapeutic goods).


The requirements under the old TGAC and the new TGAC are largely the same in respect of endorsements from:

 

  • a government agency, hospital, or healthcare facility;
  • an employee or contractor of one of the bodies above; or
  • a health practitioner, health professional, medical researcher or a group of any of these persons,

 

However, the new TGAC has different requirements in respect of the use of endorsements (whether express or implied) by any of the following:

 

  • an organisation representing the interests of healthcare consumers;
  • an organisation representing the interests of health practitioners, health professionals, or medical researchers;
  • an organisation which conducts or funds research into any disease condition, ailment or defect; or
  • an employee or contractor of any of these bodies.


Under the new TGAC, advertisements containing endorsements of this nature must include the name of the organisation, the nature of the endorsement and whether valuable consideration was received for the endorsement. Under the old TGAC, the fact that valuable consideration has been received does not need to be disclosed if the endorsement was based upon an objective assessment of available scientific data supporting the use of that product.


Direct selling companies should check whether changes are required to their websites and marketing collateral.


Weight Management


Often weight management products are direct selling companies’ bestselling products.


Under the old TGAC, advertisements containing claims for weight management are required to have an appropriate balance between the claims and references to a healthy energy-controlled diet and physical activity.


Under the new TGAC, the requirements are more stringent. Advertising for therapeutic goods that contain any weight management claim must:

 

  • balance the claims with the need for a health energy-controlled diet and physical activity;
  • not include any suggestion that the therapeutic goods will correct the effects of over-consumption of food or drink;4 and
  • not feature visually individuals or use individuals’ statistics or testimonials (i.e. before and after photos) unless the results achieved by those individuals would be expected to be typical of users of the goods.5  Atypical testimonials and statistics are not permitted.


This is significantly broader than the requirement under the old TGAC which states only that weight loss advertisements must balance any claims with the need for a healthy energy controlled diet and physical activity.


Weight management is defined to include any claim about:

 

  • weight loss;
  • weight control;
  • weight maintenance;
  • measurement reduction;
  • clothing size reduction; and/or
  • hunger suppression.


Whether a claim is a weight management claim depends on the presentation of the advertisement.


Scientific Information


Under the old TGAC, any scientific information in an advertisement is required to be presented in a manner that is accurate, balanced and not misleading. Scientific terminology must be appropriate, clearly communicated and able to be understood readily by the audience to whom it is directed.  Publication of research results must identify the researcher and financial sponsor of the research.


Similar requirements exist in the new TGAC; however, the new TGAC goes further by requiring any scientific or clinical representation to be consistent with the body of scientific or clinical evidence applicable to the relevant therapeutic goods. Further, where an advertisement contains a reference to scientific or clinical literature, whether express or implied (eg “clinically proven”), the advertisement must identify the researcher and financial sponsor if they know (or ought reasonably to have known) that information. Finally, the research must be referred to in such a way that consumers can locate it – accordingly, research which is confidential should not be cited.


Complementary Medicines6


Many direct selling companies include complementary medicines in their product portfolios.


Under the old TGAC, the advertising of complementary medicines was not expressly addressed.


Under the new TGAC, if an advertiser is relying on traditional evidence to support an advertised claim for a complementary medicine, the advertisement must state that it is “traditionally used” and refer to the applicable paradigm in a prominent manner (for example: "Traditionally used in Western herbal medicine to improve or enhance digestion").7 The disclosure must be displayed prominently or communicated in the relevant advertisements.


Paradigms include, for example, traditional Chinese medicine, Ayurvedic medicine and Western herbal medicine. For a single ingredient, an inappropriate claim under the new TGAC would be, for example, “Traditionally used to relieve sleeplessness and restlessness”.8  An appropriate claim, which complies with the new TGAC, would be “Traditionally used in Ayurvedic medicine to relieve sleeplessness. Traditionally used in Western herbal medicine to soothe restlessness”.9 In other words, each indication must be attributed appropriately to the relevant paradigm in the context of the claim. 


Complementary medicines are, generally, listed (or registered) on the Australian Register of Therapeutic Goods (ARTG). It remains a requirement that product claims must comply with the sponsor's relevant ARTG entry for the product as well as in the Therapeutic Goods Act 1989 and the Therapeutic Goods Regulations 1990.


Serious Disease


Under the old TGAC, advertisements for therapeutic goods are only permitted to refer to a serious disease, condition or ailment identified in Appendix 6 of the old TGAC, where prior approval has been obtained from the Secretary of the Department of Health. Relevant diseases and conditions are listed in Appendix 6.


Unlike the old TGAC, the new TGAC does not include a list of diseases and conditions for which advertising is restricted. Accordingly, there is a potentially larger pool of serious diseases about which representations are restricted. If businesses intend to refer to diseases which may be considered “serious”, caution should be exercised to ensure that prior approval for the use of a restricted representation is obtained from the Secretary of the Department of Health.


Vitamins and Minerals


Under the old TGAC, advertisements for minerals are not regulated.


Under the new TGAC, the requirements which apply to vitamins under the old TGAC will now apply to minerals. Advertisements for vitamin or mineral supplements must not claim or imply that the supplements are a substitute for good nutrition or a balanced diet; or are in any way superior to or more beneficial than dietary nutrients. The objective is that consumers should assess the value of these supplements in an appropriate nutritional context when considering whether to make their purchase. 


How will the new TGAC be enforced?


Stakeholders have asked the TGA about compliance actions that the TGA may take regarding advertising which is in place at 1 January 2019 which complies with the old TGAC, rather than the new TGAC. The TGA has stated that, when assessing advertisements for compliance, it takes into account a number of factors including the risk posed to public health and safety.  The TGA considers that, where an advertisement is published which does not comply with the new TGAC but would have complied with the old TGAC (in respect of, for example, testimonial disclosures and scientific citations), it is unlikely to pose a significant risk to public health. If a complaint is received:

 

  • in the first half of 2019 regarding a breach of this type, the TGA will simply send a reminder to the advertiser regarding obligations under the new TGAC (provided there is no other non-compliance).
  • in the second half of 2019, the TGA will seek information from the advertiser, such as details of the processes being applied to correct advertising and the date corrective action was commenced, before making a decision as to whether to use its enforcement discretion.


Further information about compliance and enforcement is available on the TGA’s website.10


Other Changes


The changes to the TGAC are part of a wider package of reforms to the regulatory framework relating to the promotion of therapeutic goods. Other relevant changes relating to the regulation of therapeutic goods which will affect direct selling businesses include:

 

  • increased sanctions for non-compliant advertising;
  • a streamlined complaints handling system which will now be handled by a single body, the TGA (and the abolition of the Therapeutic Goods Advertising Complaints Resolution Panel); and
  • from 1 July 2020, the abolition of the requirement for certain advertisements to be pre-approved in favour of a system of self-regulation.

Impact on Your Business


Each of the above changes in respect of the promotion of therapeutic goods is important and must be adhered to by direct selling businesses and their salesforce. Many of the provisions in the new TGAC impose requirements more stringent than those covered in the corresponding provisions in the old TGAC. Caution must be exercised by businesses to ensure full compliance. This is particularly the case in respect of testimonials and the use of before and after weight loss photos.


Businesses should review their advertising and marketing activities now to ensure compliance by 1 January 2019 and provide compliance training for their salesforce.


If you would like more information about the changes to the TGAC and/or how it affects your direct selling business, please do not hesitate to contact us.

 


1. These changes reflect the recommendations made by the Expert Panel Review of Medicines and Medical Devices Regulation in July 2015. New TGAC available at https://www.legislation.gov.au/Details/F2018L01524.

2. Therapeutic Goods Advertising Code 2015 (old TGAC), s 4(7), available at https://www.legislation.gov.au/Details/F2018C00596.

3. Therapeutic Goods Advertising Code (No. 2) 2018 (new TGAC), s17, available at https://www.legislation.gov.au/Details/F2018L00976.

4. New TGAC, s26

5. New TGAC, s26

6. Complementary medicines (also known as 'traditional' or 'alternative' medicines) include vitamin, mineral, herbal, aromatherapy and homoeopathic products. Complementary medicines may be either listed or registered, depending on their ingredients and the claims made.

7. New TGAC, s23

8. TGA, Therapeutic Goods Advertising Code 2018: Guidance on applying the Code when advertising therapeutic goods to the public (Guidance), Version 0.1, March 2018, page 30.

9. Guidance, p.30

10. https://www.tga.gov.au/therapeutic-goods-advertising-update-29-october-2018#compliance

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