Med Tech Giant Handed Largest Penalty Ever Given Under the Therapeutic Goods Act

Secretary, Department of Health v Medtronic Australasia Pty Ltd [2024] FCA 1096

Background

On 19 September 2024, the Federal Court of Australia delivered judgment ordering Medtronic Australasia Pty Ltd (Medtronic) to pay $22 million in penalties following proceedings bought by the Department of Health in August 2021.

Key Issues

ARTG Listing and Contravening Supply of Goods

The Therapeutic Goods Act 1989 (Cth) (the Act) requires (bar some limited exemptions, approvals and authorities) that:

• companies register therapeutic goods and medical devices on the Australian Register of Therapeutic Goods (ARTG) in order to lawfully supply those goods and devices in Australia; and
• those approved goods and devices then be supplied in accordance with their ARTG registration.

Between 1 September 2015 and 31 January 2020 (the Relevant Period), Medtronic supplied over 16,000 units of the INFUSE® Bone Graft Kits (the Kit).  Medtronic had an ARTG registration for a composite product comprising two separately packaged parts: a metallic spinal fusion cage (the Cage) and the Kit.  Medtronic began supplying the Kit without the Cage, contravening the ARTG registration requirements.  Notably, there was significant clinical demand for the Kit by itself, but not for the Kit and the Cage together.  The Kit alone was never entered on the ARTG as a separate approved product.

Joint Statement of Agreed Facts and Admissions

The parties filed a Joint Statement of Agreed Facts and Admissions.  Medtronic admitted to the supply of 16,267 units of the Kit to 109 hospitals during the Relevant Period, and that each instance of supply of the Kit was a contravention of s 19D(1) of the Act.

Although the parties had initially advanced different views as to whether the Kit was a “medical device” or “therapeutic good” within the meaning of the Act, they ultimately agreed, for the purpose of these proceedings, that the Kit was a “therapeutic good” so that the Court could resolve the matter on an agreed basis.  Classification of the Kit as a “therapeutic good” enabled the Court to be satisfied of the specific section of the Act which Medtronic had contravened and to then impose a civil penalty.

Medtronic admitted to being aware as early as 2009 of concerns that the Kit and Cage were not being supplied together as required by the ARTG entry, and that the implementation of a Standard Operating Procedure to address this issue was not effectively followed.  Medtronic further acknowledged withdrawing the accompanying Cage from the Australian market in 2018 without properly considering or giving attention to the regulatory implications for the Kit.

Outcome

The Court accepted the jointly proposed penalty of $22 million, having considered the need for general deterrence, the harm done to the regulatory system, Medtronic’s cooperation and remedial actions, and the lack of evidence of specific harm caused by the contraventions.  This marks the largest penalty ever imposed for breaching the Act.  In addition to the $22 million penalty, Medtronic agreed to pay $1 million towards the Department of Health’s legal costs.

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