Options for Sponsorship

THE HIDDEN RISKS OF GIVING CONTROL OVER YOUR TGA APPROVAL – AND YOUR BRAND – TO SOMEONE ELSE

In Australia, TGA sponsors hold legal responsibility for product registration, compliance, and crisis response—including recalls and public communications.

While appointing your distributor as sponsor may seem easy, it can compromise your control over approvals, confidentiality, and brand reputation—especially in the event of disputes, complaints, or litigation.

 

VIDEO SCRIPT

Today’s topic is looking at what options you have when you need a sponsor for your goods that need to be registered with the Therapeutic Goods Administration (TGA).

The most common options for sponsorship are:

1. arranging for your distributor to be your sponsor; or
2. establishing an Australian subsidiary to be your sponsor

New entrants to the Australian market are often attracted to the first option, giving their distributor the sponsorship. They think this will be simpler, less onerous and less expensive than setting up an Australian subsidiary.

Distributors are generally open to operating as product sponsors. That can make the distributor seem like the easiest choice for a sponsor. However, if you rely on your distributor to sponsor your product with the TGA, you’re counting on your distributor:

1. to do the right things to get TGA approval without avoidable delay
2. to deal with the TGA appropriately on an ongoing basis, including in the event of any adverse reaction, complaints or if a recall is ordered
3. to keep secret your valuable confidential information, such as your product’s composition and ingredients.

If your Australian distributor is to be your sponsor with the TGA, your distribution agreement should cover that sponsorship or better still you should have a separate sponsorship agreement which links back to your distribution agreement.

Everybody wants you and your distributor to have a long, successful and conflict-free relationship. That is most likely to happen when you have an agreement that prepares you both for every eventuality.

However, as lawyers, it’s our job to protect you from what might happen, including the worst case.

Arguably, the worst case is that your sponsor withdraws support for your product. From that moment, you’ll lose all your Australian sales until you can find a solution. For example, if you’re in a dispute with a distributor who is also your sponsor, you won’t be able to swap distributors or import your own product in Australia by yourself until:

1. the distributor agrees to work with you and the TGA to transfer the sponsorship to another entity, or
2. you arrange a new sponsorship with the TGA, which might mean going back to the beginning of the approval process

Even if your distribution agreement provides for transfer of sponsorship, once you’re in a dispute, actually getting the sponsorship transferred or restarting the sponsorship process can take months. Despite the terms of the distribution agreement, you may need to take steps to enforce the agreement against the distributor in order to compel them to transfer the sponsorship. And in that time, you won’t be able to sell any of your product in Australia. That potentially means a total loss of revenue from in the Australian market until the situation is resolved.

A distributor-sponsor is also in a powerful position in the event of a complaint, adverse reaction or recall. Complaints can be made by practitioners or members of the public. Also, your sponsor is expected to volunteer a report to the TGA of anything relevant that comes to the sponsor’s attention.

If the TGA receives a complaint, it will notify your sponsor, not you. Your sponsor will be required to correspond with the TGA regarding the complaint or adverse event, as well take as any corrective actions that need to be taken. Also, if you become party to litigation, your sponsor will need to notify the TGA.

In this communication with the TGA, it is your sponsor that will determine what is said, not you. This means:

• your distributor-sponsor might send information that you haven’t approved. You might not even know they’ve sent information to the TGA.

• the information your distributor-sponsor sends might not be correct because they don’t have your understanding of the scientific evidence and history of the product.

• your distributor-sponsor might convey information to the TGA in a way that’s not in your best interests, especially if there might also be litigation. (Anything said to the TGA by your distributor-sponsor can be used against you in litigation.)
• your distributor-sponsor is responsible for any negotiations with the TGA about extra wording that you’ll have to print on your packaging (e.g. additional warnings and contraindications)

Your sponsor’s interests in a litigation scenario aren’t the same as yours. What your distributor-sponsor says to the TGA and how they say it will inform the view the TGA takes about the safety of the product. It will also inform the view the TGA takes about what has to be done to warn users of the risks. In the worst case, the TGA can withdraw your product’s approval.

The damage from this might not be limited to your Australian business. What happens in Australia can flow on and affect your product registrations around the world.

There is also the question of public statements. Your distributor-sponsor will be responsible for making public statements and communicating with users, your customers. That means your distributor-sponsor has your brand reputation in its hands as well as your TGA approval.

As the maker of your product, you want to have control over what is said to the TGA and the public so that you can:

• have the best chance of maintaining approvals

• represent your interests in any negotiations with the TGA

• guard your options in any litigation

• manage your brand reputation

But, if you’re not the sponsor, you won’t have complete control over what is said (or the process). You might not have any control.

For this reason, it is well worth considering whether appointing your distributor as the sponsor of your product is the best option.

At Argyll Law we have over 30 years’ experience in helping companies outside Australia set up their businesses on the firmest footing.  If you need TGA sponsorship, we know how to set up your sponsorship in the way that gives you autonomy and protection.  That relationship continues with us providing ongoing advice and support on the ground in Australia.

Next time I’m going to talk about the second option to appoint a sponsor.