Regulatory Oversight or Lack of Foresight? Implications for Product Recall Policies and Procedures

Lynne Eagle, Lawrence C. Rose,Philip J. Kitchen and Jacinta Hawkins

Regulatory Oversight or Lackof Foresight? Implications for ProductRecall Policies and Procedures

ABSTRACT. The regulatory effectiveness, the impact on industry and consumers of

product withdrawal and the associated wider issues relating to crisis management rep-

resent an under-researched area. The authors describe the mid-2003 government-ordered

withdrawal of almost 2,000 complementary and alternative medicines, across multiple

brand names, in Australia and New Zealand. The report is based on an examination of

the media coverage of the event and on interviews with key informants in manufacturing

and retailing and the regulatory system. This massive, multi-brand recall provides an

opportunity to examine the effectiveness and efficiency of the management of a cross-

border withdrawal from regulatory and consumer policy perspectives and makes

recommendations for the management of future recall events.

The regulatory effectiveness, the impact of product withdrawal on

industry and consumers and the associated wider issues relating to

crisis management represent an under-researched area. The objective

of this paper is to provide a critical review of the government-enforced

withdrawal in 2003 of almost 2,000 complementary and alternative

medicine (CAM) products from the Australian and New Zealand

market. This massive, multi-brand recall provides an opportunity to

examine the effectiveness and efficiency of the management of a cross-

border withdrawal from regulatory and consumer policy perspectives

and to make recommendations for the management of future recall

events.

The withdrawals centred on evidence of substandard manufac-

turing processes by Sydney-based Pan Pharmaceuticals (Pan), a

company listed on the Australian Stock Exchange (ASX). Pan was

Australasia’s largest manufacturer of herbal, vitamin, and

nutritional supplements, supplying some 70% of the Australian

Journal of Consumer Policy (2005) 28:433–460 � Springer 2005

DOI 10.1007/s10603-005-3314-8

complementary medicines market. It also manufactured a range of

over-the-counter (OTC) medications, including painkillers with

paracetamol and codeine ingredients, together with travel sickness

products, antihistamine, and pseudoephedrine based products

(Ansley & MacBrayne, 2003). Two separate government regulatory

bodies, the Therapeutic Goods Administration (TGA) in Australia

and the NZ Food Safety Authority (NZFSA) in New Zealand,

oversaw the withdrawals and were responsible for communication

with the public.

Pruitt and Peterson (1986, p. 114) describe a typical product recall

as follows: ‘‘In practice the majority of recalls occur when the items in

question are determined to represent significant substandard product

quality or to be unusually hazardous.’’ Thus the Pan recalls appear

typical, though the uniqueness of this recall was the impact felt across

a wide range of companies due to products being contract manufac-

tured by Pan.

Reviews of events of this magnitude are not reported in the aca-

demic or practitioner literature. Most product recalls are restricted to

only a few individual products, usually within one single brand name.

Tylenol, while a significant recall, involved only a single brand. It is the

impact on multiple brand names and the associated negative publicity

regarding the category as a whole in this event that had the potential

to affect the entire CAM product category.

REGULATORY REGIMES IN AUSTRALIA AND NEW ZEALAND

All products that are sold on the Australian market for which any

therapeutic claim of any kind is made are regulated by the Australian

Therapeutics Goods Administration. This organization is a unit of the

Federal Department of Health and Ageing and is responsible for

administering the provisions of legislation relating to therapeutic-

claim products. This includes maintaining a Register of Therapeutic

Goods and ‘‘a range of assessment and monitoring activities to ensure

therapeutic goods available in Australia are of an acceptable stan-

dard’’ (TGA, 2003). The system is largely dependent on self-reports

from the organizations provided during pre-announced site visits ra-

ther than on independent quality control assessments or unannounced

inspections. The system is thus similar to the accommodatory and

cooperative-based approach used in many European countries rather

Lynne Eagle et al.434

than the adversarial approach used in the USA (Wiktorowicz, 2003),

although the relative merits of these two philosophies appear to have

not been systematically evaluated.

In New Zealand, Medsafe (NZ Medicines and Medical Devices

Safety Authority) is a business unit of the NZMinistry of Health and is

responsible for the regulation of all therapeutic products in New Zea-

land, including the administration of key legislation. As such, it per-

forms similar functions to the Australian TGA. In New Zealand,

however, only three of the initial list of 219 products recalled by the

TGA were classified as medicines, bringing them under the ambit of

Medsafe. These wereMintec, a product used for the relief of symptoms

of irritable bowel syndrome, and two forms of No-Doze. After con-

sultation between the distributor and Medsafe, the distributor (Wilson

Consumer Products), wholesalers, and retailers were notified in writing

of the withdrawal and advertisements were placed in newspapers

alerting consumers to the withdrawal (Medsafe, 2003).

The remaining products came under the ambit of the NZ Food

Safety Authority, a government unit accountable to the Minister of

Health. NZFSA is the New Zealand controlling authority for imports

and exports of food and food related products. It was established in

July 2002 with the intention

to administer legislation covering food for sale on the domestic market, primarily pro-

cessing of animal products and official assurances related to their export, exports of

plant products and the controls surrounding registration and use of agricultural

compounds and veterinary medicines (NZFSA, 2003).

This relatively new body combined elements from part of the Ministry

of Health with a unit from the Ministry of Agriculture and Fisheries

but had no experience in large scale product withdrawal management.

We suspect this may be true of many government institutions around

the world.

Trans-Tasman (i.e., Australia–New Zealand) harmonization of

therapeutic product regulations had been under discussion for several

months prior to the Pan product recalls and a discussion document

entitled ‘‘Complementary and Alternative Medicine: Current Policy

Issues in New Zealand and Selected Countries’’ had been made

available with a closing date for submissions of 30 June 2003 (Ministry

of Health, 2003). The problems encountered in the recalls lead to

polarized views on the merits of Trans-Tasman harmonization being

reported in the media, with numerous suggestions that a review of the

Product Recall 435

existing system was needed and deficiencies addressed before any

further movement towards a joint regulatory system was pursued

(Daily Post, 2003).

THE RECALL DRAMA

Problems appear to have surfaced as early as January 2003, when 87

Australian consumers reported, via their medical practitioners,

adverse reactions, primarily hallucinations, to the Pan travel sickness

product, Travacalm. Australian medical practitioners must report

adverse reactions to therapeutic products to the TGA’s Adverse Drug

Reaction Unit (Needham & Sexton, 2003). Nineteen of the reactions

were sufficiently serious to warrant hospitalization (New Zealand

Herald, 2003). One observer wryly noted that reports of the halluci-

nations making air travellers want to jump out of planes was poten-

tially serious for airlines already struggling with low passenger

numbers (Tourelle, 2003).

The number and severity of the reactions led the TGA to undertake

a three-month audit of the company’s quality control standards, with

the TGA announcing at the completion of the audit that they had

found systematic and deliberate manipulation of quality control test

data. The audit included two unannounced on-site visits to the Pan

manufacturing facility (Burton, 2003); visits reported as being marked

by non-cooperation, the need for police to assist in seizing computer

records, and allegations of computer reformatting and document

shredding (Needham & Sexton, 2003).

The TGA then placed a condition on Pan’s manufacturing license

that prohibited the manufacture of any products requiring ‘‘unifor-

mity of content’’ (TGA, 2003). A subsequent unannounced audit visit

on February 24 was stalled by Pan on the grounds of the absence of a

key manager and the audit eventually began on April 7. Subsequently,

the TGA sought advice from the Australian Government Solicitor; a

medical committee drafted a report, which was presented to the full

Pan board on April 24. At this point, although the chief executive and

company founder Jim Selim had been in regular contact with the TGA

regarding the audit visits, Needham and Sexton (2003) report that the

non-executive directors claimed no knowledge of any problems

beyond the Travacalm recall, and it appeared that neither they nor the


Australian Stock Exchange (ASX) had been informed about the

restriction placed on the manufacturing license.

The TGA-sponsored report was finalized on April 28, and an order

suspending Pan’s manufacturing license for 6 months was issued that

day (Needham & Sexton, 2003; The Australian, 2003a). The marketers

of Travacalm, Key Pharmaceuticals, subsequently claimed that quality

assurance documentation supplied by Pan appeared to have been

falsified (Needham, 2003).

Deficiencies in product quality identified during the TGA audits

were subsequently reported to include (Mazzocchi, 2003; New Zealand

Herald, 2003; TGA, 2003; The Australian, 2003a):

• Substitution of ingredients

• Manipulation of quality control test results

• Substandard manufacturing processes

• Failure to test raw ingredients

• Failure to clean manufacturing equipment between batches, poten-

tially contaminating products

• 270 imported raw materials not having passed proper quarantine

checks

• Failure to provide evidence that imported ingredients had been

tested for potential pathogens, viruses, or bacteria

• Overall poor hygiene and sanitation.

The TGA’s powers enabled them to issue a blanket warning on

April 28, reported in the Australian consumer media the following day

(Harris, 2003), for consumers to stop taking vitamin and nutrition

supplements, over-the-counter painkillers, and cold and flu products,

until the list of products produced under contract by Pan but mar-

keted under a range of other brand names was finalized (Bay of Plenty

Times, 2003a).

The New Zealand Health Ministry, however, initially stressed

that product withdrawals were being sought voluntarily as dietary

supplements and complementary medicines were, unlike Australia, not

registered in New Zealand and were classified as foods (Southland

Times, 2003a). Thus, no New Zealand register of these products

existed and New Zealand government agencies were therefore forced

to wait until the TGA released the official Australian list of affected

products before taking action.

The initial recall notifications did not proceed smoothly, as the

initial TGA lists supplied information to the marketplace organized by

Product Recall 437

license number rather than brand names (Manawatu Evening Stan-

dard, 2003a). Later recalls encountered problems with duplication of

products previously recalled (Stock, 2003) and omission of some

brands from recall lists, resulting in a recall notice featuring only the

omitted brand, an event that appeared to single out that particular

brand (Nelson Evening Mail, 2003a).

Concerns regarding the quality control reputation of the company

increased in early May as background on the company and its chief

executive came to light. For example, it was revealed in the media in

both Australia and New Zealand that the company, under the name of

Pan Laboratories, had been convicted on 13 counts of supply and

export fraud in 1996. Although Pan was initially fined A$280,000, the

conviction was appealed and overturned on a technicality (Needham

& Sexton, 2003).

Further adverse publicity occurred in early May when it was

reported that police were investigating the theft, from Pan, of one

million cold tablets that could potentially be converted into ampheta-

mines with a street value estimated to be in tens of millions of dollars

(Mercer, Porter, & Marriner, 2003). Almost as an afterthought to this

report, it was also reported that the chief executive officer had resigned

in early May. At the same time, Loff and McKelvie (2003) reported:

On May 8, Pan terminated the services of its general manager, John Brennan, after

share register records revealed that Brennan, his wife, and other members of his

family sold their shares in Pan just over a week after an audit by the TGA in Febru-

ary.

An admission from the, by then, former CEO of Pan Pharmaceu-

ticals regarding the substitution of ingredients was reported on August

27, accompanied by a claim that the substitution had been undertaken

at the request of distributors. This claim was strongly denied by the

distributing organizations (Sexton, 2003a). With regard to the

Travacalm product, it was revealed that the active ingredient varied

from 0% to 700% of the stated dose (Houlton, 2003).

Potential criminal charges for alleged drug counterfeiting are

underway (Sydney Morning Herald, 2005; The Australian, 2003b,

2003c, 2003d), in addition to litigation for negligence. With the

placement of the company into receivership and the subsequent sale of

the business and its assets, damages claims from companies affected by

the product withdrawal and civil action from customers adversely

affected by the original Travacalm product problems may need to be


reassessed, along with the A$17 million in costs claimed by the TGA

to cover the costs of implementing and overseeing the recall process

(Sexton, 2003b).

Critics of the harmonization agenda asserted that the recall illus-

trated the ineffectiveness of TGA’s quality control monitoring and

suggested that compliance costs for New Zealand companies would be

high if the Australian system was introduced (MacDonald, 2003a).

Indeed, should the TGA move to independent quality control assess-

ments, the compliance cost for Australian companies would also

increase substantially. The NZ Charter of Health Practitioners, rep-

resenting 8,500 alternative health professionals, was critical of the

delay of four months between the emergence of problems with the

Travacalm product and the issuing of the initial Australian product

recall notices (Nelson Evening Mail, 2003b).

Others described the recall as a ‘‘huge overreaction’’ (Mole, 2003).

The media recorded numerous calls by industry spokespeople and

individual companies for the government regulatory agencies to prove

that the recalled products constituted a real health risk (Law, 2003).

Given that there is no universal test for all possible product contam-

inants, far less a universal test of ingredient consistency, providing

such proof is impracticable, if not impossible. This latter point divides

the industry and appears to remain a source of considerable bitterness

among some of the brand controllers. It raises the question of what

level of proof of actual, vs. potential, harm should be required before a

product withdrawal is mandated, particularly in view of the potential

burden such actions impose on third parties such as retailers.

Criticism of the handling of the recall extended to assertions that it

was being used to gain endorsement for the proposed Trans-Tasman

Therapeutic Goods Agency (Napp, 2003). The New Zealand Medical

Association (NZMA) and the Ministry of Health took the contrary

view, stressing that a register of all products and a quality audit system

would have allowed identification of suspect products and the issuing

of recall notices and warnings to have occurred more swiftly (Garner,

2003).

The handling of folic acid products recalls, by both the TGA and

NZFSA, was particularly criticized. On May 5, 11 folic acid products

manufactured by Pan were recalled, accompanied by a statement that

pregnant women were not being advised to stop taking folic acid, only

the specific products listed (NZFSA, 2003). However, this was two

days after extensive criticism had been made in mass media in both

Product Recall 439

Australia and New Zealand that the TGA ‘‘had known for two years

that some folic acid supplements delivered insufficient vitamin to

prevent spina bifida in unborn children, but it has issued no warnings

to pregnant women’’ (Robothan, Marriner, & Stevenson, 2003, p. 1).

They note that a TGA spokesperson conceded that the organization

had been aware of problems since at least October 2001, but that ‘‘to

have gone out publicly would have caused massive public concern ...

what we had to do was shore up the situation so that people pregnant

or about to be pregnant were not at risk’’ (Robothan et al., 2003, p. 2).

The question must again be asked regarding the level of proof required

to initiate a product withdrawal.

The following day, the headline in at least one major newspaper was

‘‘Women warned off folic acid’’ (Alley, 2003). The next day, the day of

the first New Zealand recall, another large newspaper ran the headline

‘‘Bin Folic Acid, mums-to-be told’’ (Waikato Times, 2003) and the

following day another newspaper ran with ‘‘Women urged to take

folic acid’’ (Brooker, 2003). Given the media coverage of the pur-

ported cover-up, and the subsequent conflicting advice, it is hardly

surprising that some of the calls fielded by the companies interviewed

were from people who were distressed. Brooker (2003) notes that

‘‘about 2000 calls, many of them about folic acid products’’ had been

received by the NZFSA helpline by May 6.

The fragility of the links between a largely unregulated industry and

regulatory bodies was further highlighted when Stevenson (2003)

reported that one company using Pan to manufacture their product,

Mayne Health, had previously stopped selling a Pan-produced herbal

product used to reduce the symptoms of menopause due to inconsis-

tent levels of key ingredients, but that the TGA had not been advised

of the problem.

MEDIA COVERAGE AND STAKEHOLDER PERCEPTIONS

In this section, media coverage of the recall event in the Australian and

New Zealand media is reported in tandem with an analysis of in-depth

interviews with affected stakeholders – producers, retailers and the

New Zealand government regulatory agency – about their perceptions

of the course of events. The media coverage data were sourced from a

commercial monitoring service that provided copies of all advertising


and editorial relating to the recall event, and subsequent debate, in all

main media.

The in-depth interview technique allowed the researchers to enter

into a dialogue that revealed far more than the significant impact

reported in the media. Thus the real impact of the crisis on key

organizations at each stage of the recall could be determined. Con-

siderably more detail was obtained by the use of this methodology

than would have been possible via conventional quantitative tech-

niques such as questionnaires. This was important in terms of the

focus on ‘‘discovery rather than verification’’ (Ambert, Adler, Adler, &

Detzner, 1995, p. 880).

There are over 400 companies active in this sector in the New

Zealand market alone, many with narrow product ranges and tiny

market shares. Therefore it was decided to focus on the major brands

in the market. We report in depth interviews with:

One large company not directly affected at all in either Australia or

New Zealand (Company A), headquartered in Australia with a large

New Zealand subsidiary; no New Zealand manufacturing capability.

One large company with no withdrawals in New Zealand and only

one minor product withdrawal in Australia (Company B), headquar-

tered in New Zealand, with a relatively minor presence in Australia;

substantial New Zealand manufacturing capacity.

Two medium sized companies directly affected, losing 33%

(Company C) and 40% (Company D) of their product lines, respec-

tively. Company C has a minor presence in Australia and minimal

independent production capacity. Company D is headquartered in

New Zealand but has a strong Australian presence; substantial new

manufacturing capacity had been opened in New Zealand just prior to

the crisis.

In addition to the company representatives, one large retail health

food store chain and two large chemist chains were also interviewed.

Furthermore, we report on an interview with a senior manager within

the New Zealand government regulatory agency responsible for

overseeing the product recall.

One large multi-brand company that was severely impacted by the

withdrawal events declined to be interviewed and representatives from

two major supermarket chains, while willing to take part in the

interviews, declined to comment on the impact of the product

withdrawals on their sector.

Product Recall 441

Pan Pharmaceuticals

Holstein (2000) reviews company actions in landmark USA product

recalls such as the 1982 Tylenol recall and the 2000 recall of Bridge-

stone tyres; faults with the latter became evident on Ford Explorer

utility vehicles. He suggests that reluctance to face problems and deal

proactively with them destroyed the brand image of Firestone, while

public honesty and proactive stances saw Ford and, earlier, Johnson &

Johnson (manufacturers of Tylenol) weather short-term downturns

but emerge in the longer term with brand equity intact.

Pan’s stance throughout the recall was defiant and unrepentant,

with senior management acknowledging deficiencies in production,

but refusing to apologize (ABC, 2003a; Southland Times, 2003b), in

spite of the reported TGA findings that problems were both sys-

tematic and deliberate (Burton, 2003; Jackson, 2003). Claims verged

on the bizarre, including one that hallucinations were a normal side

effect of taking medication (The Australian, 2003d), that the TGA’s

actions were unfair, and that (Egyptian-born) Selim was being vic-

timized for being an Arab (ABC, 2003a, 2003b; The Australian,

2003e).

From a public relations perspective, the role of the media in

lessening potential negative impact in relation to a product recall crisis

by reporting that a company is acting in a socially responsible way

seems to have been ignored by Pan as was the potential impact of the

event on the company worth, let alone the chance of long-term sur-

vival or the impact on the industry as a whole.

For example, Pruitt and Peterson (1986, p. 113) predict that

information assimilated by the market at the time of the recall announcement may

not be a reflection of the true, final information content of the recall since press

releases announcing product recalls rarely provide details of the company’s estimates

of the actual costs of the recall. Earnings forecast by analysts may be revised due to

the recall, but it may be several days before revised estimates are published.

Pan’s shares were suspended from the Stock Exchange relatively

rapidly. The company issued a press statement and placed information

on its website on April 29 (Panlabs, 2003a). However, the Australian

Securities & Investment Commission has investigated allegations that

there was a time delay of several hours between the suspension of

Pan’s manufacturing license and the suspension of its shares from the

Stock Exchange (The Australian, 2003f).


The likely financial impact on the company was evident by May 7,

when it was reported that Pan shares, having traded at A$2.15 in early

2002 (giving a value of US$254 million at its peak), had still been

worth US$111 million when traded at $1.20 per share immediately

prior to the recall (Business Review Weekly, 2003). It was also

reported that the chief executive officer, with a 53.8% stake in the

company, had been advised that the six-month ban on manufacturing

would not be lifted unless he severed his ties with the company. It was

further reported that the CEO’s shares were likely to be sold for less

than US$20 million (Sexton, 2003e, 2003f, 2003g, 2003h, 2003i, 2003j).

On 22 May, the company was placed in administration (Business

Review Weekly, 2003) and administrators appointed (Panlabs, 2003b).

By mid-June, its plant was advertised for sale (Pharmacy Today,

2003a). By August, claims against the company were reported as

having topped A$160 million (Hendery, 2003), with the Mayne Group

alone lodging a claim for A$45 million, including direct costs of

A$25 million (Dominion Post, 2003; Pharmacy Today, 2003b). By 1

September, creditors were reported as lodging $A175 million in claims

(ABC, 2003b).

From early August, media coverage almost ceased, with informa-

tion being available primarily through websites, supplemented by

occasional reports such as that posted on TVNZ’s Teletext site on

August 29 to the effect that the audit by the TGA had ‘‘revealed that

Pan Pharmaceuticals was distributing drugs containing metal and

cross-contaminating antibiotics for animals with drugs for humans’’

(Television New Zealand, 2003) and claiming that the TGA report was

a vindication of the recall.

From early September, however, media coverage resumed, focusing

this time on the merits of a proposed rescue plan vs. liquidation or

bankruptcy. This was followed by extensive accounts of acrimonious

debate over the eventual decision to liquidate the company, an event

that finally occurred in early October 2003 (see, for example, Sexton,

2003e, 2003f, 2003g, 2003h, 2003i, 2003j). This was followed by an

announcement from the liquidator that the latest TGA audit of the

Pan factory had shown sufficient improvements to allow for partial

re-licensing, for the production of soft gel capsule products (Panlabs,

2003c). The sale was achieved in late November 2003, for A$20 mil-

lion, the value of its tangible assets only less than one tenth of its

previous book value (Sexton, 2003j).

Product Recall 443

Companies Sourcing Product From Pan Pharmaceuticals

Boedecker, Morgan, and Saviers (1998, p. 128) propose that

when the firm learns of a product’s dangerous propensities after its introduction, the

options available to the firm are limited and differ in scope and effectiveness: do noth-

ing, warn current and future customers, or recall the product. Rare is the situation in

which a company would take no action to respond to recently discovered shortcom-

ings. Even if the problem creates minor risks to consumers, a series of incidents could

lower consumer perceptions of the product and thereby reduce future sales.

Companies caught in the recall through having sourced product

from Pan varied in their reactions. The National Nutritional Foods

Association President was reported as announcing that ‘‘the comple-

mentary medicines industry would wait till there was proof of risk

before taking products from sale’’ (Napp, 2003). This was in marked

contrast to the proactive stance taken by some retail chains as shown in

a later section.

Red Seal received an additional knock to its brand image, being

singled out with 26 products specifically listed for immediate with-

drawal and 11 advised as not to be taken as a precautionary step.

However, this separate notification was simply due to an omission of

the Red Seal products from the official withdrawal lists (Nelson

Evening Mail, 2003a). This was followed by the confusing and con-

tradictory warnings regarding folic acid supplements noted in the

previous section. As the recall crisis reached the end of its second

week, somewhat emotive claims were made on behalf of both com-

panies distributing products and retailers of businesses facing financial

ruin and suggestions that the recall had dealt a major blow to the

industry (Mole, 2003). Others put a more positive interpretation on

the situation, suggesting that it gave retailers a chance to review

treatment options with their patients, thus working towards restoring

confidence in the CAM sector (Didsbury, 2003). Retailers were also

reported as being confident of obtaining refunds from suppliers (Is-

erles, 2003).

It was also reported that affected companies were exploring a range

of legal options against regulators for acting without proof of poten-

tial harm, in addition to legal claims against Pan itself (Collett, 2003a).

Some companies were affected in terms of having multiple brands

caught in the recall. For example, the Mayne Group, a large health

conglomerate controlled the following brands, all of which were

contract manufactured by Pan: Natures Own, Bio Organics, Cenovis,


Vitelle, Cholest-off, Natural Nutrition, Natural Alternative, Golden

Glow.

The brand fragmentation required separate resources to be placed

behind each brand and prevented the economies of scale that were

possible for companies marketing product ranges under a single um-

brella brand. The brand proliferation may also have added to con-

sumer confusion regarding the extent of the recall event. However, in

addition to potential damage to brand equity, companies such as the

Mayne Group faced a far more pragmatic problem, that of obtaining

replacement stock and ongoing production facilities (The Australian,

2003g). These problems will have been exacerbated by the subsequent

closure of their first choice of replacement manufacturer, Soul Patti-

son, in September 2003 on the grounds of its factory being in a

‘‘disgraceful state of repair’’ (Videnieks, 2003, p. 1).

While it was reported that shares of the Mayne group initially lifted

immediately after the first product recall announcement (The

Australian, 2003h), it was later reported that both the Mayne Group

and Australian Pharmaceutical Industries (API), another large health

conglomerate and owner of Soul Pattison, had dropped sharply

(Pharmacy Today, 2003b). This occurred before the closure of the

Soul Pattison manufacturing plant.

In August 2003, Nutra-Life announced that the recall had affected

sales by 35% and cost the company A$7 million in recall costs, with

small numbers of staff in both Australia and New Zealand being made

redundant (Hendery, 2003; Pharmacy Today, 2003a).

Companies Not Associated with Pan Pharmaceuticals

Two large companies, Blackmores and Healtheries, were not reliant on

Pan for production. Blackmores had never contracted Pan to

manufacture products for them; Healtheries had only ever contracted

Pan to produce one minor product, which was available only in the

Australian market. Both companies distanced themselves publicly

from Pan as early as April 30, and called for the swift identification of

products available in New Zealand ‘‘so that reputable companies were

not tarnished with the Pan Pharmaceuticals brush’’ (Ansley & Mac-

Brayne, 2003). Roche Consumer Products also stated publicly that

none of their products were made by Pan (Bay of Plenty Times,

2003b).

Product Recall 445

Blackmores’ share price was reported as having jumped 11–14%

within a few days of the initial product recall (Daily News, 2003;

Sydney Morning Herald, 2003). However, they continued to issue

media statements through the recall period expressing concern that the

overall complementary medicines industry had been brought into

disrepute by the actions of Pan (The Press, 2003b). In September 2003,

Blackmores announced a 21.5% increase in full year net profits on the

back of a 16.2% sales rise in Australia after the Pan recall. The in-

creased sales were affected by the expenditure of several millions of

dollars in marketing communication after the recall in order to fully

inform customers of Blackmores’ position and to restore confidence in

the brand as well as in the overall category (The Australian, 2003h).

Retailers

Major retailers such as Health 2000 moved to remove stock as soon as

the initial Ministry of Health request for voluntary assistance was

made, with the CEO of Nutra-Life Health and Fitness stating that

there is no evidence that these medicines are unsafe, but it is only by removing them

that we can return the confidence to our consumers and uphold the interests of our

brands and industry (Greymouth Evening Star, 2003).

These companies, together with suppliers Healtheries and Nature’s

Sunshine, ran advertisements commencing on May 2 to advise

customers of the actions taken.

Retailers reported varying customer responses. Some stores

reported being ‘‘run-off their feet’’ dealing with worried customers,

and labelled the recall a disaster that would not only have a major

impact on sales in the short-term, but would also have a longer term

impact on public confidence (Woodward, 2003). Some retailers at-

tempted to defend the image of the industry by declaring that many

customers had turned to complementary medicine when conventional

medicine had failed them (Bay of Plenty Times, 2003b). Such brave

assertions were not helped by a linked editorial in the same edition

revealing the extent of cross-contamination problems and the major

lack of sterile production environments within the Pan Manufacturing

complex (Bay of Plenty Times, 2003c).

Conflicting views emerged with the industry National Nutritional

Foods Association’s claims of major devastation, countered by claims

from one retail chain of short-term rather than long-term impact.


Others, with minimal Pan stock, reported market gains as competitors

pulled affected products from shelves (GR, 2003). By May 17, losses

were beginning to be quantified, with Collett (2003b) reporting New

Zealand’s biggest health store chain, Health 2000, as having lost 17–

18% of sales. In July, claims were made in the media that retail sales

had returned to levels near to those achieved before the recall, but that

sales levels were flat rather than growing rapidly as they had done

prior to the recall publicity (The Press, 2003a).

In July, a recall of what appeared to be 150 further products

actually concerned products already recalled and destroyed. While the

confusion was caused by a mix up in batch numbers, industry

spokespeople were quick to voice their concerns about further damage

to the industry, as well as to sharply criticize regulators for not

ensuring the information was correct before going public with the

recall notices (Stock, 2003).

In the latter part of the recall period, confusion as to what had or

had not been recalled was evident. Three hundred and fifty products

were recalled in July, in Australia only, by The Mayne Group after the

products had accidentally been returned to shelves after the initial

recall (The Australian, 2003i). This will have undoubtedly have added

to consumer confusion regarding which products were affected. Esti-

mates were provided that Australasian health shops retail sales were

down by 19%, with lost revenue estimated at A$57 million and re-

funds costing A$22 million; 650 retail jobs had been lost and job

numbers were down in the supply and wholesaling sector by 24%. It

was predicted that the recovery period would take 18 months (Sexton,

2003h).

Pharmacies may also have suffered in terms of consumer trust and

confidence. Many retail chemists carry and promote both conven-

tional and complementary/alternative medicines. Sexton (2003h)

observes that carrying products without proven medical benefits may,

in the light of the events surrounding the product recall, have ad-

versely impacted on consumer perceptions of pharmacies. It is

interesting to note that it was the individual votes of a group of

Australian pharmacists that gave the administrator of the company

sufficient support to pass the motion for liquidation (Sexton, 2003i,

2003j).

Product Recall 447

Impacts as Perceived by Company Representatives

While there are two informal (voluntary) industry associations, all

company representatives suggested that these were regarded as inef-

fectual in most policy areas and were unable to bring a somewhat

fragmented industry together and present a united position to regu-

lators, media, or to the public. Company C suggested that a united

voice would have been more effective in dealing with the major issues,

suggesting that the ‘‘industry fell apart under divide-and-conquer

tactics.’’ Both associations were contacted for comment but declined

to participate in the study.

All companies were critical of the initial confusion and lack of

decisive action by the New Zealand regulator, stressing that it was

almost 2 weeks from the initial suspension of Pan’s manufacturing

license to the clarification of exactly which products were to be recalled

in New Zealand. Most heard of the initial suspension via the media or

via their Australian offices or industry contacts and not via any official

contact from regulatory bodies.

There was agreement during the interviews, albeit reluctant, that the

New Zealand regulators could not have taken any other course of

action once the TGA issued their recalls. There was also agreement

that, because of the problems shown in regard to the lack of consistent

acceptable manufacturing standards, Trans-Tasman regulatory har-

monization was now inevitable. Both Company A and D have sub-

sequently publicly endorsed the move towards coordinated regulation

between Australia and New Zealand (MacDonald, 2003a). There was,

however, considerable concern at the prospect of this move consti-

tuting an uncritical adoption of the Australian system, which was

universally felt to be less than ideal.

The issue of whether the scale of the recall was necessary remains a

contentious one within the industry. Company C in particular called

for proof that any of the recalled products were in fact a real, rather

than a possible, danger, and whether any evidence of contamination

had been found within any of the recalled product. The perceived

failure of the regulatory bodies to provide any evidence of this has

created considerable bitterness within the industry.

A point made in the media (Campbell, 2003; Law, 2003), and in the

interviews with the affected brand managers (especially Company C),

was that the recall was triggered by problems with a pharmaceutical

rather than a dietary supplement product. The implicit extension of


this argument appears to be that the dietary supplement products were

not unsafe. As such, it is a red herring and adds an unnecessary layer

of complexity to the event. The problem related to a systemic failure of

manufacturing quality standards and therefore this reasoning does not

seem to take into account the inability of the manufacturer to ensure

consistency of the level of the active ingredient in the affected product.

The implications of this, along with the other serious product quality

control deficiencies identified in the manufacturing plant, do not seem

to have been recognized by some sectors of the industry.

All companies noted that consumers, while confused as to what the

extent of the problem and potential health dangers might be, were

largely calm and matter-of-fact regarding whether they should con-

tinue taking the products and whether they should go to their doctors.

Companies C and D received a very small number of ‘‘distressed’’ and

‘‘hysterical’’ calls from consumers (for example, in relation to folic

acid: ‘‘You have killed our baby’’).

While all companies set up crisis teams with prepared scripts for

staff fielding inquiries, both companies C and D conceded that, in

hindsight, a professionally staffed call centre should have been estab-

lished. Only Company A ran mass media (newspaper and radio)

advertising as part of an integrated communications programme in

New Zealand; television was seen as too expensive. The remaining

three were advised by PR consultants not to undertake mass media

activity, as this would be seen as a knee-jerk reaction. Company A’s

activity became the focus of a complaint to the Advertising Standards

Authority in relation to the following copy in the newspaper adver-

tising (ASA, 2003, Complaint 03/126):

Our natural health products

are scientifically tested

contain the highest quality ingredients

are completely safe

The claim of ‘‘completely safe’’ was challenged. In the ASA delib-

erations, the wording was acknowledged as a technical breach of

Principles 2 and 3 of the Code for Therapeutic Advertising but, given

the ‘‘exceptional circumstances’’ and the guarantee that the advertising

would not be repeated, the complaint was not upheld (ASA, 2003, p. 3).

Product Recall 449

The NZFSA’s handling of the consumer notification of the

withdrawal appears to have been the only factor to unify the industry,

in disapprobation of their slowness in clarifying action to be taken,

lack of provision of clear advice to consumers, and the accuracy of

some material published in newspapers. As noted earlier, no New

Zealand register of these products existed and New Zealand govern-

ment agencies were powerless to act until the TGA released the official

Australian list of affected products. Corbett (2003, p. 22) suggests that

‘‘what’s not so well known though, is that under current regulations,

Health Minister Annette King could initially only call for a voluntary

withdrawal of products from the market.’’ Further, he stresses that the

current legislation allows the Ministry of Health to act only when

problems occur rather than taking any proactive stance.

While Corbett (2003) notes criticism of the withdrawal process,

including delays and confusion in clarifying which products were af-

fected, he suggests that the blame for this lay largely with the quality

and lack of timeliness in obtaining information from the TGA. He

points out that, once the official lists were provided by the TGA, the

Ministry of Health acted swiftly.

There are, however, areas in which the official recall material caused

unnecessary confusion. Natures Way was faced with a unique problem

in the initial stages of the recall as Australian Natures Way products

were sourced from Pan, whereas New Zealand Natures Way products

were sourced from the USA. The New Zealand product were not,

therefore, subject to recall, but the company faced contamination from

the official withdrawal notifications originating in Australia (see, for

example, Bay of Plenty Times, 2003b). The confusion created over the

status of Natures Way products led to at least one frustrated retailer

publicly stressing the distinction.

Consumer Relations

An area of concern, which appears to have been largely unexplored is

how effective the recall notifications were in reaching consumers, let

alone in achieving return or disposal of the recalled stock. Felcher

(2003, p. 174) observes that ‘‘once a product is recalled, communi-

cating the recall news to consumers is a hit-and-miss affair.’’ Many

authorities are unable to determine whether the message has reached

consumers or how much defective product remains in the market.

Given the problems identified with Pan’s manufacturing and quality


control procedures, it is of concern that there appears to have been no

attempt by regulators to determine how much affected stock had been

returned or destroyed by consumers, as opposed to that recalled from

retailers and distributors. Pruitt and Peterson (1986) suggest that

average successful consumer recall rates range from 20% to 30%. Yet,

no data are available that allow an estimation of stock disposed of by

consumers or of the quantity of stock that may have remained in the

market.

Criticisms of the effectiveness of the New Zealand media coverage

of the product withdrawal notification emerged by May 10. Two

provinces were cited as examples of areas where the penetration of

large daily papers carrying the product withdrawal notifications were

substantially less than that offered by the local papers (Macdonald,

2003b; Manawatu Evening Standard, 2003b).

Even more concerning are reports from countries other than

Australia and New Zealand. As late as May 6, the Federation of

Malaysian Consumers Association were reported in the press as

claiming that some pharmacies were still selling Pan-produced prod-

ucts that had been ordered to be recalled. Some retail areas appeared

unaware of the recall (New Straits Times, 2003).

An extensive search was conducted of all major newspaper and

business journal databases together with Dow Jones’s Global Factiva

news retrieval service, which were accessed to see if any other recall-

related articles appeared between 28 April to 30 June. The only pub-

licity we have been able to locate in the United Kingdom regarding the

impact of the product withdrawal was a statement on the UK Foods

Standards website dated 20 June 2003 in which affected brands are

listed and a link provided to the Australian TGA website, and a small

item in the British Medical Journal dated 3 May 2003 entitled

‘‘Australia suspends license of complementary medicine giant’’ (British

Medical Journal, 2003). No evidence of a systematic consumer-ori-

ented publicity campaign was located.

In Canada, a statement dated 25 June 2003 appears on the website

of Health Canada, again with links back to the Australian TGA

website. In the USA, the only publicity located is a small report in the

Chicago Tribune’s on-line edition (2003). It must be stressed that while

as many sources as possible were searched, access to all print media

from countries other than Australia and New Zealand was not pos-

sible. It appears however that consumer communication in other

Product Recall 451

countries into which Pan-produced product was imported has not

been extensive.

The Health Canada (2003) website notes that ‘‘the following

countries have imported Pan Pharmaceutical products: Brazil, Czech

Republic, Hong Kong, Indonesia, Ireland, Kuwait, Lebanon,

Malaysia, New Zealand, People’s Republic of China, Philippines,

Singapore, South Africa, Taiwan, Thailand, United Kingdom (UK),

United States of America (USA), Vietnam.’’ It must be of concern that

there appears to have been little or no attempt across these countries

to ensure adequate consumer notification.

IMPLICATIONS FOR REGULATORY AGENCIES

The handling of the recall of folic acid products by both the TGA and

NZFSA was severely criticized by the company representatives inter-

viewed. This is not the only instance in which consumer confusion may

have occurred as a result of conflicting or incorrect advice. Company

C noted that, 2 months after the initial recalls, a final recall list was

released by NZFSA ‘‘with totally incorrect batch numbers.’’ In addi-

tion, the lack of communication with industry over queries, and public

comments that were perceived as ‘‘a slight on the total industry’’

(Company D) added to the unanimous perception of those interviewed

that the regulators themselves were overwhelmed by the magnitude of

the problem.

As seen here, a series of major product withdrawals of the

magnitude of the Pan crisis will strain the resources not just of the

companies directly affected, but also of the regulatory bodies charged

with overseeing the withdrawal process. The recall placed significant

pressure on the TGA, with hundreds of thousands of inquiries through

call centres and via the TGA website. TGA cited website traffic in-

creases from a pre-event average of 500 visits per day to 75,000 on

April 29, the day after the first recall was announced. Phone inquiries

rose to 150,000 on April 29, then 170,000 on April 30. The call centre

moved to 24-hour-a-day coverage, 7 days a week, with 160 staff. In

addition, the website, reported as the centre of the TGA communi-

cation strategy, also required a substantial investment of time and

resources by additional technical staff (Murray, 2003).

Perhaps unsurprisingly, the Australian TGA’s powers were

strengthened in late May 2003 to incorporate, as a criminal offence,


failure to observe the benchmark measure of good manufacturing

practice (Sexton, 2003d). These new powers, coupled with a more

aggressive investigative stance by the TGA, resulted, as mentioned

earlier, in the closure of a second health product manufacturer, Soul

Pattison, in September 2003 on the grounds of its factory being in a

‘‘disgraceful state of repair’’ (Videnieks, 2003, p. 1). Under the

strengthened TGA powers, such scenarios have the potential to result

in criminal charges (Sexton, 2003d).

The TGA itself is now to undergo a major audit of its policing of

the alternative health products sector, with the Pan-linked product

withdrawals being a case study within the audit. Among specific

aspects of TGA’s operations to be reviewed is the reported routine

notification of the intention to conduct on-site audits, as, unremark-

ably, Pan had not been subject to an unannounced audit for nine years

prior to the actions commenced by the TGA in January 2003 in re-

sponse to the Travacalm product problems (Sexton, 2003c).

The TGA was severely criticized, not just by defiant Pan

Pharmaceutical executives, but also by other organizations caught up

in the withdrawal requirements. While parts of the 30-page official

TGA report on their audit of Pan Pharmaceuticals that led to the

withdrawal of Pan’s manufacturing license and to the product with-

drawals themselves have been leaked to the media, the full report has

still not been officially released. The ABC (2003c) notes growing calls

for the Australian Federal government to release the report, but to

date these requests have been declined on the basis of commercial

sensitivity. The closure of the Soul Pattison manufacturing plant

suggests, however, that there is a need for far closer scrutiny of

manufacturing standards and quality control, perhaps even sporadic

random and unannounced visits to test quality standards.

It is evident that there was no ability to undertake a coordinated

response across the two regulatory bodies in the Australasian region

involved in the recall activity. In fact, given the current ‘‘state of play’’

at the time this scandal occurred, such regulatory uniformity was not

possible. This contributed to a lack of uniformity in the approach

taken by the various affected companies and brands. Further, all

parties were totally unprepared for a recall event of such magnitude

and complexity; thus confusion and time delays occurred due to lack

of harmonization and lack of resources to efficiently administer the

recall. These shortcomings are all too evident in the research findings

reported in this report and raise significant issues for the future

Product Recall 453

development of consumer protection policies, not just within the

countries most directly affected by this event.

There are also wider issues relating to the potential impact on con-

sumers and the impact as companies both directly and indirectly

affected by the events. There are, undoubtedly, lessons to be learned

from the Pan disaster. Regulators must examine how private infor-

mation gets into the public domain in an accurate and timely way; then

how product recall processes can be managed over time in a coherent

fashion domestically and internationally. Firstly, there is a need to

more ably take into consideration consumer attitudes, beliefs, and

behaviour in product areas such as CAM. Secondly, there is a stark

need to provide crisis management support to the retailers who con-

stitute the interface between recalled brands and concerned consumers.

Yet, there are even greater concerns from a public policy perspective.

The issue of social responsibility has long been a hallmark of acceptable

multinational behaviour worldwide. Certainly, it figures strongly on

corporate websites and corporate literature. There is a concern that

rhetoric may, in many cases, be more important than production

practices as seen in this multi-brand event.

THE NEED FOR PRODUCT RECALL SYSTEMS THAT CROSS NATIONAL

BORDERS

Of final and telling concern are the difficulties and the complexities

faced by any national government or its representatives given rogue

behaviour of a multinational/international firm. This is particularly

relevant in the pharmaceutical sector where drug counterfeiting is an

increasing problem internationally (Matthew, 2003). We question

whether global and multinational firms need a global/multinational

authority to monitor their behaviour and provide consistent and

timely information to the marketplace. In the context of pharmaceu-

ticals, this would involve ‘‘an international system of adverse event

reporting and post market surveillance to protect the public interest’’

(Wiktorowicz, 2003, p. 46).

The logistics of multi-country regulatory harmonization or product

recall would undoubtedly be extremely difficult and the compliance

costs substantial; however Barnes (2003) indicates that investigations

into regulatory harmonization are underway within the European

Union. The Pan saga suggests that an investigation into the challenges

of wider cross-country regulatory harmonization and of multi-country


product withdrawals is warranted. A note of caution is provided by

Wiktorowicz (2003) who observes that harmonization leads to the

adoption of the least stringent standards of the parties involved.

The 2004 European Directive on traditional herbal medicinal

products requires harmonization of herbal medicinal product regu-

lations across European Union member states and provides a number

of product safety, efficacy, and quality standard provisions (European

Union, 2004). Within individual member countries, action is under

way to review the impact of the Directive and to examine issues re-

lated to its implementation (MHRA, 2005). The industry itself ap-

pears to be ambivalent regarding the balance between assuring public

safety and compliance costs (Herb Society, 2005). This latter orga-

nization notes the lack of quality control with regard to products

imported from outside the EU (as were those manufactured by Pan).

The question of what consumer protection mechanisms are desirable

vs. what are actually achievable across national borders must remain

an area in which considerable more research and development is

needed.

Even if all products imported into regions such as the EU were to be

subject to the same quality standards as those manufactured within the

EU, issues still remain regarding assuring consistency of these prod-

ucts over time. As we have previously noted, there is no universal test

for consistency – or for potential contaminants. Thus there remain

considerable obstacles to achieving the intent of consumer protection

policy initiatives such as Directive 2004/24/EC.

Certainly, the Pan disaster shows, in startling relief, the inconsisten-

cies of a global marketplace wherein actual monitoring of multi-

national business practice is poorly carried out by national, not

international or global, monitoring public authorities. It is perfectly

possible that had the production facilities of Pan been located say in a

third world country, then Pan would still have been trading and

products may still have been distributed globally. While regulators

may be able to ban importation from a particular source, in the

absence of proactive (but expensive) extensive on-going product test-

ing at the importation point, it may not be possible to discover whe-

ther an identified substandard manufacturer simply re-emerges in a

different guise and whether quality standards fluctuate over time. As

noted earlier, a gap remains between desirable and achievable public

policy interventions in this area.

Product Recall 455

REFERENCES

ABC (2003a). Pan Pharmaceuticals calls for inquiry into TGA. ABC News Online, 25

August 2003. http://www.abc.net.au.news. Accessed 3 September 2003.

ABC (2003b). Pan Pharmaceuticals creditors choose liquidation over rescue plan. ABC

News Online, 1 September 2003. http://www.abc.net.au.news. Accessed 3 September

2003.

ABC (2003c). Growing calls for release of audit report on Pan Pharmaceuticals. ABC

News Online, 29 August 2003. http://www.abc.net.au.news. Accessed 3 September

2003.

Alley, O. (2003). Women warned off folic acid. Sunday Star Times, 4 May, p. A2.

Ambert, A.-M., Adler, P. A., Adler, P., & Detzner, D. F. (1995). Understanding and

evaluating qualitative research. Journal of Marriage and Family, 57, 879–893.

Ansley, G., & MacBrayne, R. (2003). Pills ‘‘debacle’’ but NZ left in dark. New Zealand

Herald, 30 April. Clipping supplied (without page number) by Press Cutting Bureau.

ASA (Advertising Standards Authority) (2003). www.asa.co.nz. Accessed 1 September

2003.

Barnes, J. (2003). Quality, efficacy and safety of complementary medicines: Fashions,

facts and the future. Part 1. Regulation and quality. British Journal of Clinical

Pharmacology, 55, 226–233.

Bay of Plenty Times (2003a). No vitamin warning despite health risk. 1 May. Clipping

supplied (without page number) by Press Cutting Bureau.

Bay of Plenty Times (2003b). Pan list of recalls grows daily. 5 May. Clipping supplied

(without page number) by Press Cutting Bureau.

Bay of Plenty Times (2003c). Pill workers swept floor powder into machines. 5 May.

Clipping supplied (without page number) by Press Cutting Bureau.

Boedecker, K. A., Morgan, F. W., & Saviers, A. B. (1998). Continuing duty to warn:

Public policy and managerial views. Journal of Public Policy & Marketing, 17, 127–

131.

British Medical Journal, (2003). Australia suspends license of complementary medicines

giant. 326(7396), 948.

Brooker, M. (2003). Women urged to take folic acid. The Press, 6 May, p. 6.

Burton, R. (2003). Complementary medicines industry in crisis after recall of 1,546

products. British Medical Journal, 326(7397), 1001.

Business Review Weekly (2003). The un-health sector. 25(17), 16–18.

Campbell, K. (2003). Pan products recall. The Nelson Evening Mail, 3 May. Clipping


Chicago Tribune (2003). Health products recall has industry consumers in a panic in

Australia. 3 May, electronic edition. http://web7epnet.com. Accessed 5 September

2003.

Collett, G. (2003a). Natural health firms’ survival may lie in legal remedy. The Press, 17

May. Clipping supplied (without page number) by Press Cutting Bureau.

Collett, G. (2003b). Pan fried. The Press, 17 May, p. D3.

Corbett, J. (2003). Bitter pill. GR (formerly Grocers’ review), July, 22–23.

Daily News (2003). Recall ‘‘shatters Kiwi confidence.’’ 7 May. Clipping supplied


Daily Post (2003). New Zealanders surprised and confused over Pan product recall. 7


Didsbury, D. (2003). Silver lining in recall of medicines. Rodney Times, 13 May. Clipping



Dominion Post (2003). Mayne counts cost of Pan recall. 31 May. Clipping supplied


European Union (2004). Directive 2004/24/EC of the European Parliament and of the

council. Official Journal of the European Union, 30 April.

Felcher, E. M. (2003). Product recalls: Gaping holes in the nation’s product safety net.

Journal of Consumer Affairs, 37, 170–179.

Garner, T. (2003). NZ Recall on 642 health products. New Zealand Herald, 3 May,

electronic edition. http://dnew.knowledge-basket.co.nz. Accessed 1 September 2003.

GR (formerly Grocers’ Review) (2003). Pan scandal hazardous for health industry. June,

p. 6.

Greymouth Evening Star (2003). Health products scare widens. 1 May. Clipping


Harris, T. (2003). Lives at risk as contaminated vitamins spark recall. The Australian, 29

April, on-line edition. http://web7.epnet.com/citations.asp. Accessed 3 September

2003.

Health Canada (2003). Official website: www.hc-sc.gc.ca/english/. Accessed 9 October

2003.

Hendery, S. (2003). Customers still taking the pills. New Zealand Herald, 7 August, on-

line edition. http://dnews.knowledge-basket.co.nz. Accessed 9 October 2003.

Herb Society (2005). A Guide to the EU Traditional Herbal Medicines Directive. http://

www.herbsociety.co.uk/legislation.htm. Accessed 25 July 2005.

Holstein, W. J., (2000). Guarding the brand is job 1. U.S. News & World Report, 129(1),

64–66.

Houlton, S. (2003). Pan Pharma in the doghouse. Pharmaceutical Executive, 23(6), 26.

Iserles, T. (2003). Risky products gone from shelves. The Horowhenua Mail, 8 May.


Jackson, S. (2003). Adjusting the story with a spot of DIY spinning. The Australian, 28

August, on-line edition. http://web7epnet.com.citation.asp. Accessed 3 September

2003.

Law, R. (2003). No evidence of danger in dietary supplements. New Zealand Herald,

December 11, electronic edition. http://dnew.knowledge-basket.co.nz. Accessed 3

February 2004.

Loff, B., & McKelvie, H. (2003). Australia shaken by complementary medicines recall.

The Lancet, 361(9370), 17 p. 1710. May.

MacDonald, N. (2003a). Health pill deal angers industry. The Dominion Post, 9

December, p. 7.

MacDonald, N. (2003b). Scott slams coverage of Pan recall. Marlborough Express, 15


Manawatu Evening Standard (2003a). Positive response fails to dispel confusion. 2 May.


Manawatu Evening Standard (2003b). Pan list bypasses Manawatu. 10 May. Clipping


Matthew, B. (2003). A world of fakes. US News and World Report, 135(1), 1.

Mazzocchi, J. (2003). Pan Pharmaceuticals posed alarming risk to public health. ABC

News Online, 29 August. http://www.abc.net.au.news. Accessed 3 September 2003.

Medsafe (2003).Medicines in New Zealand manufactured by Pan Pharmaceuticals. http://

www.medsafe.govt.nz/hot/panmed.htm. Accessed 2 September 2003.

Mercer, N., Porter, J., & Marriner, C. (2003). Case of the missing cold tablets sends

another shiver through drug company. Sydney Morning Herald, 2 May, electronic

edition. http://www.smh.com.au/articles. Accessed 9 October 2003.

Product Recall 457

MHRA (Medicines and Healthcare products Regulatory Agency) (2005). Licensing of

medicines: Policy on herbal medicines. http://medicines.mhra.gov.uk/ourwork/licens-

ingmeds/herbalmeds/herbalmeds.htm. Accessed 21 July 2005.

Ministry of Health (2003). Consultation on way forward for complementary and

alternative medicines. Press release, 16 April. http://www.moh.gov/nz.

Mole, C. (2003). Health product recall a ‘‘huge over-reaction.’’ Ashburton Guardian, 13

May, p. 1.

Murray, D. (2003). Drug recall watchdog on E-overload. The Australian, 6 May, on-line

edition. http://web7epnet.com.citation.asp. Accessed 3 September 2003.

Napp, B. (2003). NZ stops short of blanket warning, The Dominion Post, 1 May, p. 1.

Needham, K. (2003). Safety assurances on travel sickness tablets alleged to have been

falsified. Sydney Morning Herald, 3 May, on-line edition. http://www.smh.com.au.

Accessed 9 October 2003.

Needham, K., & Sexton, E. (2003). It’s enough to make you sick. Sydney Morning

Herald, 3 May, on-line edition. http://www.smh.com.au. Accessed 9 October 2003.

Nelson Evening Mail (2003a). Red Seal products omitted from Pan list. 5 May. Clipping


Nelson Evening Mail (2003b). More products added to banned Pan list. 7 May. Clipping


New Straits Times-Management Times (2003). Fomca: Recalled drugs still sold. May 6,

electronic edition. http://web7.epnet.com/citation. Accessed 3 September 2003.

New Zealand Herald (2003). Vitamin recall Australia’s largest ever. 29 April, electronic

edition. http:// knowledge-basket.co.nz. Accessed 1 September 2003.

NZFSA (New Zealand Food Safety Authority) (2003). Website listing all media releases

and official product withdrawal notices. http://www.nzfsa.govt.nz. Accessed 28

August 2003.

Panlabs (2003a). Pan requests suspension of shares. Statement dated 29 April on Pan

Pharmaceuticals website: http://www.panlabs.com.au. Accessed 3 September 2003.

Panlabs (2003b). Appointment of voluntary administrator. Statement dated 22 May on

Pan Pharmaceuticals website: http://www.panlabs.com.au. Accessed 3 September

2003.

Panlabs (2003c). Sale of business and assets opportunity. Statement dated 7 October on

Pan Pharmaceuticals website: http://www.panlabs.com.au. Accessed 2 November

2003.

Pharmacy Today (2003a). Nutra-Life to shed staff. August, on-line edition. http://

mags.knowledge-basket.co.nz/mags/030-01.html. Accessed 1 October 2003.

Pharmacy Today (2003b). Rejected drugs veil lifted. July, on-line edition. http://

mags.knowledge-basket.co.nz/mags/030-01.html. Accessed 1 October 2003.

Pruitt, S. W., & Peterson, D. R. (1986). Security price reactions around product recall

announcements. Journal of Financial Research, 9(2), 113–122.

Robotham, J., Marriner, C., & Stevenson, A. (2003). Cover-up over pills puts babies in

danger. Sydney Morning Herald, 3 May, electronic edition. http://www.smh.com.au/

articles. Accessed 9 October 2003.

Sexton, J. (2003a). Pan founder admits substituting ingredients. The Australian, 27


2003.

Sexton, J. (2003b). Pan faces $17 million in ad costs. The Australian, 18 June, on-line


Sexton, J. (2003c). Drug watchdog faces major audit. The Australian, 26 July, on-line



Sexton, J. (2003d). Filth in drugs plant sparks criminal probe. The Australian, 18

September, on-line edition. http://web7epnet.com.citation.asp. Accessed 18 Septem-

ber 2003.

Sexton, J. (2003e). Pan boss cries foul while sitting on scathing report. The Australian, 29


2003.

Sexton, J. (2003f). Backflip on push for Pan liquidation. The Australian, 9 September,

on-line edition. http://web7epnet.com.citation.asp. Accessed 3 September 2003.

Sexton, J. (2003g). Workers counted out of deal. The Australian, 2 September, on-line


Sexton, J. (2003h). Pan fiasco has alternative health businesses ailing. The Australian, 26

July, on-line edition. http://web7epnet.com.citation.asp. Accessed 3 September 2003.

Sexton, J. (2003i). Fury and farce over Pan’s liquidation. The Australian, 24 September,

on-line edition. http://web7epnet.com.citation.asp. Accessed 3 September 2003.

Sexton, J. (2003j). Last-ditch $20m bid buys Pan. The Australian, 25 November, on-line

edition, p. 4. http://web7epnet.com.citation.asp. Accessed 3 September 2003.

Southland Times (2003a). No apology from pharmaceutical firm. 1 May. Clipping


Southland Times (2003b). Pan drug scandal worsens. 1 May. Clipping supplied (without

page number) by Press Cutting Bureau.

Stevenson, A. (2003). Remedy off shelves after earlier study. Sydney Morning Herald, 3

May, on-line edition. http://www.smh.com.au/articles. Accessed 3 September 2003.

Stock, R. (2003). Reputations needlessly down the Pan. Sunday Star Business, 20 July,

electronic edition. http://dnews.knowledge-basket.co.nz. Accessed 4 February 2004.

Sydney Morning Herald (2003). Blackmores shares soar but Mayne faces $20m hit. 29

April, electronic edition. http://www.smh.com.au/articles. Accessed 28 August 2003.

Sydney Morning Herald (2005). Regulatory shakeup for drug groups. 7 June, electronic

edition. http://www.smh.com.au/articles. Accessed 14 June 2005.

Television New Zealand Teletext (2003). Pan audit reveals health risk, p. 126.

TGA (Therapeutic Goods Administration) (2003). Website listing all media releases and

official product withdrawal notices. http://www.tga.gov.au. Accessed 1 September

2003.

The Australian (2003a). Pan’s catalogue of deceit. August 29, on-line edition. http://

web7epnet.com.citation.asp. Accessed 3 September 2003.

The Australian (2003b). Banned drugs still on shelves – Disease, safety fears hit

alternative medicine and wheat industries. April 30, on-line edition. http://web7ep-

net.com.citation.asp. Accessed 3 September 2003.

The Australian (2003c). Pan duo face jail over fake medicine. 3 May, on-line edition.

http://web7epnet.com.citation.asp. Accessed 3 September 2003.

The Australian (2003d). Hallucinations on school trip: The vitamin recall. April 30, on-

line edition. http://web7epnet.com.citation.asp. Accessed 3 September 2003.

The Australian (2003e). Victimized for being Arab boss. May 5, on-line edition. http://


The Australian (2003f). ASIC probes Pan Stop delay. April 30, on-line edition, p. 21.


The Australian (2003g). Mayne’s cure for pandemic. 1 May, on-line edition. http://


The Australian (2003h). Pan’s pain is Blackmores’ gain. September 12, on-line edition.


The Australian (2003i). Sale of Pan products sparks a new recall. July 9, on-line edition.


Product Recall 459

The Press (2003a). NZ dietary supplement company critical of Pan. 1 May. Clipping


The Press (2003b). Products of Pan panned. 29 April, p. 1.

Tourelle, G. (2003). Calm-pill needed after a rocky week. Daily News, 5 May. Clipping


Videnieks, M. (2003). Another vitamin factory closed. The Australian, September 10, on-

line edition. http://web7epnet.com.citation.asp. Accessed 28 September 2003.

Waikato Times (2003). Bin folic acid, mum-to-be told. 5 May, p. 2.

Wiktorowicz, M. E. (2003). Emergent patterns in the regulation of pharmaceuticals:

Institutions and interests in the United States, Canada, Britain and France. Journal

of Health Politics, Policy and Law, 28, 615–658.

Woodward, R. (2003). Pan scandal fallout clears Tauranga shelves. Bay of Plenty Times,

2 May, p. 1.

THE AUTHORS

Lynne Eagle is Professor of Marketing, Middlesex University Business School, The

Burroughs Hendon, London NW4 4BT, England; Fax: +020-8411-5357; E-mail:

[email protected].

Lawrence C. Rose is Head of Department and Professor of Finance, Department of

Commerce, Massey University (Auckland), Private Bag 102-904 North Shore Mail

Centre, New Zealand; Fax: +64-9-441-8177; E-mail: [email protected].

Philip J. Kitchen is Professor of Strategic Marketing, The Business School, University

of Hull, Hull, UK HU6 7RX; Fax: +44-0-1482-466637; E-mail: [email protected].

Jacinta Hawkins is an Assistant Lecturer, Department of Commerce, Massey Uni-

versity (Auckland), Private Bag 102-904 North Shore Mail Centre, New Zealand; Fax:

+64-9-441-8177; E-mail: [email protected].


Regulatory Oversight or Lack of Foresight? Implications for Product Recall Policies and Procedures

Documents