Pan product recall offers lessons for all – May 2003
In brief: The recall of products by Pan Pharmaceuticals once again highlights the need for Australian suppliers and manufacturers to be aware of their consumer protection obligations. They also need to be prepared to handle a potential product recall. Partner Annette Hughes and articled clerk Vida Wongseelashote offer some guidelines.
- What is a product recall?
- What are the regulations and guidelines relevant to my product?
- When should a product recall be conducted?
- What should manufacturers do?
What is a product recall?
A product recall is a manufacturer's request for consumers or distributors to return goods for a refund, replacement, or some modification or repair. While there is no precise definition, any of the following actions may be considered to be a 'recall':
- advising consumers to return or dispose of a product in a certain way;
- inviting consumers to contact the company to arrange for replacement goods or parts;
- asking service agents to repair the goods when they are next presented by the consumer, without actually inviting consumers to return the goods; and
- going to consumers to conduct on-site repairs or replacements.
Product recalls may occur at any stage of production, and may require withdrawals from wholesale, retail and/or consumer levels.
Where a recall is conducted for quality reasons, there is no oversight by the authorities. However, where a product is recalled for a safety-related reason (that is, it may cause injury to a person), the Trade Practices legislation gives a range of powers to the Minister with responsibility for Consumer Affairs.
Most recalls are 'voluntary' recalls, initiated by a product maker or distributor, often after consultation with relevant regulatory authorities. Where consultation has not occurred in advance of the recall, the recalling company must promptly (generally within two days) notify the relevant governmental and regulatory authorities. However, in certain circumstances, including where goods posing imminent risk of injury are not voluntarily recalled, a mandatory recall may be initiated by the Minister.
Importantly, depending on the circumstances, there are steps short of a recall which may be more appropriate to protect consumers. These alternative steps include publication of a safety alert or warning, or a more limited recovery of goods that are still in the manufacturer's direct control. Depending on the circumstances, these steps may be taken without notification, but this is a decision that must be made carefully.
What are the regulations and guidelines relevant to my product?
There are several sources of relevant regulation or guidelines for product recalls. Manufacturers should be familiar with those applicable to their products. Relevant legislation, requirements or guidelines are provided by at least the following:
- the Trade Practices Act 1974 (Cth) (the TPA);
- State and Territory Fair Trading and Consumer Affairs legislation;
- the Therapeutic Goods Act 1989 (Cth) (for therapeutic goods including pharmaceuticals and medical devices);
- the Australia New Zealand Food Standards Code, promulgated by Food Standards Australia New Zealand (FSANZ) (specific to food products);
- the National Registration Authority Guidelines for the Recall of Agricultural and Veterinary Guidelines (see Agricultural and Veterinary Chemicals Code Act 1994 (Cth) and Agricultural and Veterinary Chemicals Code Regulations 1995 (Cth)) (for agricultural/veterinary products);
- the Department for Transport and Regional Services' voluntary code, titled Procedures for the Recall of Vehicles and Associated Products with Safety Related Defects (for motor vehicles); and
- State and Commonwealth health authorities may also require notification, in certain circumstances.
The Therapeutic Goods Administration
Following the Pan Pharmaceuticals recall, it is topical to discuss the regulations for therapeutic goods (eg medicines or medical devices).
The Therapeutic Goods Administration (TGA) is empowered under the Therapeutic Goods Act 1989 (Cth) (TG Act) to regulate all aspects of therapeutic goods, including their recall. Section 29A of the TG Act requires notification of the Secretary to the Commonwealth Department of Health and Aged Care of information that therapeutic goods may have an 'unintended harmful effect'. Such circumstances, of course, would also prompt a voluntary product recall. However, the Secretary has the power under s30 of the TG Act to order a mandatory recall of any goods where no voluntary recall is forthcoming and, for example:
- the Secretary considers that the goods pose an imminent risk of death, serious illness or injury;
- the quality, safety or efficacy of the goods is unacceptable;
- the goods may have been the subject of tampering (or a tampering threat); or
- the goods do not conform with an applicable standard or are not registered, listed or exempt from the Australian Register of Therapeutic Goods.
Most recalls instituted under the TG Act are voluntary recalls. The TGA has published a 'Uniform Recall Procedure for Therapeutic Goods' (the Procedure) to be followed in any recall of therapeutic goods (available at http://www.tga.health.gov.au/). The Procedure is recognised by the Consumer Affairs division of the Treasury as being appropriate for the specialised requirements of the recall of therapeutic goods, and so should be considered obligatory for safety-related recalls of such goods.
Like the TG Act, the TPA also contemplates a system of voluntary recalls, but empowers the Minister responsible for Consumer Affairs to order mandatory recalls in defined, safety-related circumstances when no voluntary recall has been conducted.
When should a product recall be conducted?
It is no simple task to determine whether to conduct a product recall. Often, the potential risk of harm may be so remote that a recall is unwarranted or some action short of a recall may be more appropriate (eg a safety alert or warning, limited withdrawal or recovery if goods have not yet progressed to the end consumer, or something similar). A recall may not be effective to prevent harm, that is, in products of extremely short shelf life, or where (as is often the case with tampering) the incident may be extremely isolated. Many factors must be carefully weighed.
Generally, there may be a risk of consumer injury sufficient to trigger consideration of a recall or some lesser appropriate step where any of the following occurs:
- a single, serious, consumer illness or injury caused by contamination of the products;
- two similar complaints of injury or illness associated with a product;
- discovery of a design or manufacturing flaw (including issues with raw materials), which could result in potential harm to consumers;
- discovery of a defect in labelling (for example, failure to list all ingredients, or unclear or absent warning of a hazard), which could result in potential harm to consumers; or
- discovery of outside interference or tampering with a product or receipt of a threat to tamper with a product.
What should manufacturers do?
Be prepared. Aside from adhering to good manufacturing process to minimise the risk to products, plans should be in place to aid recognition of such situations and to deal with them. Manufacturers should develop and put into place at least a consumer complaints-handling protocol, a quality-control monitoring protocol, and a product-recall plan that will enable them to identify potential recall situations early, and to deal with them quickly and effectively in difficult circumstances. Legal advisers and risk managers should be consulted when developing these procedures and plans.
A product recall plan should, for example, include protocols to:
- gather the product-recall team quickly, even at odd hours (after-hours contact details should be gathered and listed);
- gather all relevant information needed to inform the company's decision on whether to initiate a recall (this may include consultation with independent experts, eg product engineer, or medical expert, in some cases);
- gather all relevant information needed to identify the extent of any necessary recall, eg determine where in the chain of distribution are the affected lot numbers or batches of the relevant product;
- contact the relevant persons from both governmental or regulatory bodies (lists of contact details should be compiled);
- contact persons in the product's chain of distribution rapidly (to verify location of affected batches, initiate any needed recall);
- establish clear communication lines, including designation of persons to interact with the media and regulatory authorities, as well as advisers and experts, as needed;
- establish a central point for all communication and coordination of events relating to assessing the situation and, if necessary, proceeding with the recall; and
- recognise and deal with the extraordinary pressure placed on the company, its personnel, and its infrastructure, during a recall crisis.
Clearly, legal advice should be sought and the crisis management plan enacted as soon as a potential risk of consumer injury is identified.
Establishing product recall and crisis management plans and managing a product recall can be a costly and time-consuming exercise, but the cost of improper handling of a recall situation is potentially much higher and can have long-term, catastrophic effects. Recognising a potential recall situation early, and then managing it effectively will:
- protect as many consumers as possible from potential harm;
- minimise cost and inconvenience to the consumer;
- protect the company's reputation for high-quality goods and consumer protection;
- potentially reduce the cost of a recall by quick action to stop distribution of affected products that may not yet have reached consumers;
- reduce the risk or extent of civil or other liability; and
- help the company's chances of successfully relaunching the product.
For further information, please contact:
- Peter O'DonahooPartner,
Melbourne
Ph: +61 3 9613 8742
Peter.ODonahoo@aar.com.au
