In defence of the Cialis and Viagra he was accused of passing off as “natural health” remedies, Yan (Andy) Zhang claimed he took one of the products himself — “almost daily.”
The owner of four Lower Mainland sex shops said he had “no adverse reaction” to the medicine that he sold as a “reliable traditional herbal formula” called “Harmony.”
But the disguised erectile dysfunction drugs did earn Zhang a stiff penalty this week when a B.C. Provincial Court judge slapped his company with a $1-million fine in a landmark decision for advertising, packaging and selling a drug in a false, misleading or deceptive manner.
According to Judge Bonnie Craig, the case is precedent-setting — “the first known decision in Canada involving the sentencing of a corporation for this offence.”
‘”The vulnerability of consumers … is exacerbated by the fact that customers who suffered adverse reactions would not know that they had consumed the prescription drug … and would be unable to advise their doctors of this information,” Craig wrote.
“Without this vital information, proper treatment would be complicated.”
Harmony and Passion Fem
The fine comes after a lengthy set of proceedings that saw Zhang defend his company — MFH International Enterprise Incorporated — at trial before hiring one of B.C.’s best known lawyers to represent him at sentencing.
The company was found guilty last summer of three counts under the Food and Drugs Act after Craig determined that, despite Zhang’s claim that he didn’t know the products were actually prescription drugs, he failed to exercise due diligence to avoid committing an offence.
The allegations revolved around two products sold at MFH’s adult entertainment stores in Richmond, Vancouver and Burnaby.
Health Canada granted MFH a licence to sell Harmony as a natural health product in 2013. According to court documents, the application form “contained no indication that the product was to be used for a sexual health purpose.”
But randomly selected samples of the product seized from the stores in 2021 contained approximately three times the recommended dose of the prescription drug tadalafil — better known as Cialis.
Passion Fem — which MFH said it bought from another supplier — was advertised in a poster in MFH’s stores as a “100% natural” product that “boosts sex drive” and “helps female libido.”
But testing found Passion Fem contained significant quantities of sildenafil — better known as Viagra, a drug “not approved for use as a sexual health product by women.”
“Women are not able to get a prescription for sildenafil, and physicians would advise women not to use sildenafil,” Craig wrote.
‘This was a ludicrous suggestion’
At trial, Craig wrote that she did not find Zhang to be a “credible, reliable, or forthright witness.”
“His testimony was inconsistent at times; internally inconsistent, and inconsistent with the other evidence in the case,” the judge wrote.
“He was often evasive in cross-examination and tended to give rambling, self-serving responses that did not answer the question.”
According to Craig’s finding of guilt, Zhang attempted to lay blame for the “licencing, production, labelling and packaging” of Harmony on a colleague he accused of suggesting the development of the product.
She rejected his contention that a packaging facility may have placed the Cialis in the Harmony pills, “intentionally or unintentionally, when it packaged the Harmony into blister packs.”
“This was a ludicrous suggestion,” Craig wrote.
“As for the chance of unintentional contamination, given the concentrations of tadalafil found in the Harmony of three times the usual dosage, this suggestion was unreasonable.”
‘The higher end of the culpability spectrum’
At sentencing, the Crown sought a fine of $1.75 million along with two years of probation.
MFH claimed a fine between $370,000 and $550,000 made more sense — arguing that the company’s culpability fell in the “mid-range on the scale” for sentencing.
But the judge agreed with the Crown’s contention that MFH was at “the higher end of the culpability spectrum.”
“MFH sold these products at prices well-above what is typically charged for a natural health product. MFH was able to charge these prices because of the undisclosed prescription drugs,” the judge wrote.
“It was able to sell the products without the cost of going through the regulatory rigors required to sell prescription drugs legally, with prior Health Canada approvals and through a licenced pharmacist.”
Although the judge said the net profit MFH stood to make on the disguised drugs was not clear, she said “it was significant.”
Had the company sold all the Harmony from the batch produced in 2020 alone — sold at $139.99 per 10-capsule pack — “it stood to earn a gross profit of $816,141.70.”
‘A Michelin star restaurant’
Zhang argued that a massive fine would bankrupt his company. But the judge noted that MFH was owed $1.8 million by Beijing Duck Restaurant Ltd., a company owned by Zhang’s wife.
“The financial viability of MFH does not appear to be as dire as that claimed by Mr. Zhang,” Craig wrote.
“Mr. Zhang agreed at the sentencing hearing that this is a Michelin star restaurant.”
While the defence and the Crown attempted to come up with ways to calculate a proper penalty, the judge said the lack of precedent made their suggestions “somewhat arbitrary.”
“At a minimum, the fine should not be lower than MFH’s anticipated profits,” she said.
In addition to the monetary penalty, the company also has to publish a public notice warning that exposure to Harmony and Passion Fem “can cause serious adverse health consequences or death.”
