Pan bungle cost tops $122m

The Age

Saturday March 26, 2011

BY LOUISE HALL

THE cost of the federal government's botched handling ofnow-defunct complementary medicines manufacturer Pan Pharmaceuticals has topped $122.5 million following the settlement of a major class action yesterday.Federal Court Justice Geoffrey Flick approved a $67.5 million compensation package to be paid to 162 creditors, distributors and retailers who suffered loss and damage when Pan collapsed in 2003.The settlement ends an eight-year saga that began when the government's Therapeutic Goods Administration (TGA) suspended Pan's licence and urged a recall of all its products after excessive amounts of some ingredients were found in its Travacalm tablets.A Department of Health and Ageing spokeswoman said the payout "was a small proportion of the total claimed" and would be borne by the insurers, not the health budget.The industry put the cost of the recall at 1000 jobs and up to $450 million in lost revenue among suppliers, pharmacies, health food shops and others reliant on Pan products.The class action was co-ordinated by McLachlan Thorpe Partners and litigation funders IMF (Australia), who stand to receive about $24 million from the settlement and expect to make about $18 million profit."I think it's fair to say that the industry descended into a state of chaos from which it's never fully recovered," said McLachlan Thorpe partner Andrew Thorpe.In a joint statement, the parties said the settlement sum was made up of $32.5 million for the class members' alleged loss and damage, $30 million for interest on that amount, and $5 million for costs, and would be paid out in line with an agreed distribution scheme.Three other parties previously settled cases against the TGA in separate mediations. A second class action filed in NSW Supreme Court by the same group was also settled yesterday.The payout comes on top of $55 million awarded to the founder of Pan Pharmaceuticals, the late Jim Selim, in 2008.Mr Selim successfully sued the government, claiming the TGA had acted negligently and outside the limits of its statutory powers, and pursued a "vendetta" against him.Both settlements were negotiated without admissions of wrongdoing by the government, said Mr Thorpe, who also acted for Mr Selim. "But I think you can draw your own conclusions about the fact that the government has paid $67.5 million."The department's spokeswoman said none of the TGA staff involved had been found to have acted unlawfully or improperly.The class action was led by Pharm-a-Care Laboratories.

© 2011 The Age

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