The parties gave evidence to a Federal Court hearing and agreed on the settlement, which the court ratified.
Andrew Thorpe, the lawyer for former Pan owner, Jim Selim, called the settlement a “landmark” and said it opened the door to other suppliers and manufacturers that had been affected by the recalls and subsequent liquidation of Pan in 2005, to bring actions of their own.
'I believe there will be a great number of shareholders and significant number of customers of Pan and service providers who will now be looking to the Government to be compensated,” Thorpe said.
"I'm not aware of any other case in this country where the Government has accepted a claim against it for abuse of public office and paid such a large amount to a private individual. What it means is the Government has thrown in the towel; it's accepted responsibility for what happened to Pan."
Marcus Blackmore, executive chairman of supplements manufacturer, Blackmores, said his company lost 20 per cent of its customers in the first week of the recall, but had subsequently recovered.
"I understand at least one of the big class action law firms is looking to rustle up an action," he said. "I said at the time that the TGA had used a sledgehammer when a tack hammer would have done."
The initial recall was issued after about 100 adverse reactions to a Pan product called Travalcalm were registered with symptoms including psychotic episodes, hallucinations and blackouts.
The €178m company manufactured a large number of both pharmaceutical and nutraceutical products.
TGA spokesperson Virginia Dove told NutraIngredients.com it had taken “a commercial decision” as the case was “worth settling now”.
However, in a statement, TGA said it did not concede Pan owner, Jim Selim’s, allegations that it had acted negligently and outside its authority.
“The agreed settlement amount of $50 million plus legal costs is considerably less than the $234 million claimed,” TGA said. “The settlement involves a judgement for the claimant, but does not involve the Commonwealth conceding any of the specific allegations in the proceedings.”
Dove did not clarify why the TGA held this position and yet agreed to pay the settlement.
At the time of the recall Pan was worth more than $300m (€178m) on the Australian Stock Exchange
Selim said he would not use the pay-out to reignite Pan. He still faces criminal allegations brought against him by TGA for concealing information relating to the safety of Travalcalm.
The UK-based pan-European trade group, the Alliance for Natural Health (ANH), said the settlement was a “huge victory for the natural health sector” against what it called “one of the most restrictive regulators in the world”.
In the court testimony TGA was accused of mounting a witch hunt against Pan, which it first confronted in the mid-90s over contaminated products. That confrontation ended in the High Court. TGA lost.
The latest hearings revealed TGA had determined to “go for the jugular” of Pan after Travalcam was recalled due to the adverse events.
“(It’s) a very public humiliation to boot,” ANH said. “Having heard from the testimony of high level officials in the TGA about the levels they stooped to and the dirty tactics they employed to destroy Pan Pharmaceuticals, it really leaves a bad taste in one's mouth. It also raises once again the question: is this really all in the name of protecting consumer safety? Given that the settlement did not include a confidentiality clause, I'm sure we'll be hearing more about their distasteful methods in due course.”