Ruling Could Hinder Enforcement Against Off-Label Drug Promotion

A ruling by a federal appeals court has dealt a blow to enforcement tactics used by the government to target pharmaceutical companies that market prescription drugs for unapproved uses.

The Second Circuit Court of Appeals ruled recently that drug companies and their sales representatives cannot be prosecuted under the Food, Drug, and Cosmetic Act (FDCA) for the truthful and non-misleading off-label promotion of pharmaceuticals.

“One major reason this case is so important is because it's the first federal appeals court in the nation to hold that truthful and non-misleading off-label promotional speech is constitutionally protected and lawful,” says Michael Buchanan, a partner with law firm Patterson Belknap. “That's a really significant development.”

Under the FDCA, a drug cannot be introduced into interstate commerce if its labeling is “false or misleading” or does not bear “adequate directions for use.” A drug that lacks such instructions is considered “misbranded” and constitutes a criminal offense.

Even though the FDCA does not expressly prohibit the “promotion” or “marketing” of drugs for off-label use—and even though physicians may prescribe drugs approved by the Food and Drug Administration for unapproved uses—the government has long taken the position that pharmaceutical companies and their representatives who practice such speech are committing misbranding.

Such enforcement actions have garnered billions of dollars in fines over the last few years. In July 2012, pharmaceutical giant GlaxoSmithKline, for example, paid the Justice Department a record $3 billion settlement—the largest healthcare fraud payout in U.S. history—in part stemming from the off-label promotion of several of its drugs. 

Johnson & Johnson also agreed last year to pay $181 million to resolve claims with 36 states and the District of Columbia over the off-label marketing of its anti-psychotic drugs Risperda and Invega.

For years, the pharmaceutical industry has argued that speaking truthfully and honestly to physicians about the off-label use of their products is lawful speech protected under the First Amendment. But no court has ever agreed with that proposition—until now. “This is a much-anticipated decision because the industry has been looking for clarity on this for some time,” says Greg Schwab, a partner with law firm Saul Ewing.

The case, United States v. Caronia, stems from the October 2008 conviction of Alfred Caronia, a former sales representative of Orphan Medical (now Jazz Pharmaceutical), who was charged with promoting Orphan Medical's narcolepsy drug Xyrem for various unapproved uses, including insomnia, fibromyalgia, and Parkinson's disease.

On appeal, Caronia argued that the conviction violated his First Amendment right to free speech. By a vote of 2-1, the Second Circuit agreed and vacated Caronia's conviction. In its decision, the majority panel rejected the government's contention that it had treated Caronia's off-label promotional speech merely as evidence to prove the drug had been misbranded—not that the speech itself resulted in his prosecution.

The court didn't buy it; the majority panel pointed out that not once during the trial did the government suggest that Caronia engaged in any form of misbranding other than the off-label promotion of Xyrem. “The record makes clear that the government prosecuted Caronia for his promotion and marketing efforts,” Judge Denny Chin wrote in his ruling.

The appeals court panel did not, however, address whether—or to what extent—the government can rely on promotional statements regarding off-label use as evidence of misbranding, leaving that issue open for debate.

“One major reason this case is so important is because it's the first federal appeals court in the nation to hold that truthful and non-misleading off-label promotional speech is constitutionally protected and lawful.”

—Michael Buchanan,

Partner,

Patterson Belknap

Citing U.S. Supreme Court precedent, the Second Circuit held that prohibiting the truthful, off-label promotion by pharmaceutical companies does not directly advance the government's goals of preserving the integrity of the FDA's drug approval process. To the contrary, allowing such protected speech “only furthers the public interest to ensure that decisions about the use of prescription drugs, including off-label usage, are intelligent and well-informed,” the court stated.

False or misleading off-label promotion, on the other hand, is not entitled to First Amendment protection, the court stressed. Thus, the ruling puts the onus on the government “to think hard about whether they're going to bring these misdemeanor cases anymore,” says Buchanan, “or does it, instead, want to focus its attention on cases where sales reps are providing false or misleading information to doctors?”

Some are concerned that the Second Circuit ruling could indeed undermine the FDA approval process. In a dissenting opinion, Judge Debra Ann Livingston warned that the majority's decision “calls into question the very foundations of our century-old system of drug regulation.”

Livingston argued the FDA has a strong interest in ensuring pharmaceutical companies seek approval for their products. “If drug manufacturers were allowed to promote FDA-approved drugs for non-approved uses, they would have little incentive to seek FDA approval for those uses,” Livingston wrote. “Prohibiting such promotion is, thus, one of the few mechanisms available to encourage participation in the approval process.”

James Spears, executive vice president and general counsel at the Pharmaceutical Research and Manufacturers of America, applauds the court's decision. “The Second Circuit's decision protects only truthful and non-misleading speech,” says Spears. “By encouraging regulators to focus on the truthfulness of these communications as opposed to searching for promotional intent behind a company's communication, we can develop clear standards that will reduce regulatory uncertainty and better ensure that physicians receive information critical to protecting patient health.”

Potential Implications

Even though the Caronia ruling technically applies only in the states of Vermont, Connecticut, and New York, the Second Circuit is an influential jurisdiction, so it's “highly likely,” Schwab says, that the ruling will influence other circuits.

SPEECH V. EVIDENCE OF INTENT

Below is an excerpt from U.S. v. Caronia explaining the reasons behind the ruling.

The government contends—and the dissent agrees—that the First Amendment is not implicated in this case. Specifically, the government argues that “[p]romoting an approved drug for off-label uses is not itself a prohibited

act under the FDCA” and “the promotion of off-label uses plays an evidentiary role in determining whether a drug is misbranded under 21 U.S.C. § 352(f)(1)." (Gov't Br. 51 (citing 21 U.S.C. § 331)). The government contends that Caronia was not prosecuted for his speech, but that Caronia's promotion of Xyrem for off-label use served merely as “evidence of intent,” or evidence that the “off-label uses were intended ones[] for which Xyrem's labeling failed to provide any directions.”

Even assuming the government can offer evidence of a defendant's off-label promotion to prove a drug's intended use and, thus, mislabeling for that intended use, that is not what happened in this case.

First, the government's contention that it did not prosecute Caronia for promoting the off-label use of an FDA-approved drug is belied by its conduct and arguments at trial …

… Second, the government's assertion now that it used Caronia's efforts to promote Xyrem for off-label use only as evidence of intent is simply not true. Even if the government could have used Caronia's speech as evidence of

intent, the district court record clearly shows that the government did not so limit its use of that evidence …

… Third, the government's summation and the district Court's instruction left the jury to understand that Caronia's speech was itself the proscribed conduct …

… Fourth, the government clearly prosecuted Caronia for his words—for his speech. A pharmaceutical representative's promotion of an FDA-approved drug's off-label use is speech …

Accordingly, we conclude that the government did

prosecute Caronia for his speech.

Source: U.S. v. Caronia.

Whether the decision will have broader implications on the Justice Department's civil enforcement actions under the False Claims Act is not yet clear. Given that Caronia was a criminal case under the FDCA, “It's unclear how the Caronia decision is going to spill over into the civil enforcement of the False Claims Act,” says Buchanan.

The Caronia decision, however, “will certainly encourage pharmaceutical companies to be more assertive about defending themselves in False Claims Act cases,” he says.  Where the theory of FCA liability relies on truthful and non-misleading off-label promotion, pharmaceutical companies may argue, as in Caronia, that they didn't engage in any false or fraudulent activity.

How Caronia will affect the ways in which pharmaceutical companies market and sell their prescription drugs also remains to be seen. Given that truthful and non-misleading off-label promotion is protected under the First Amendment only in the Second Circuit, the decision seems to create more questions than answers, say lawyers.

“What is a pharmaceutical or medical device company supposed to do in light of this decision? Are they supposed to employ certain tactics in the Second Circuit, where off-label promotion is permitted? If so, how could that work?” says Schwab.

Employing a national marketing scheme seems challenging enough, but now pharmaceutical companies have two different options, Schwab adds. “The industry is probably going to be cautious about this.”

Case Closed?

The FDA said it has decided not to seek a rehearing by the entire Second Circuit or the U.S. Supreme Court. “FDA does not believe that the Caronia decision will significantly affect the agency's enforcement of the drug misbranding provisions of the FDCA,” says Erica Jefferson, deputy director of the FDA Office of Public Affairs.

Adds Jefferson: “The decision does not strike down any provision of the FDCA or its implementing regulations, nor does it find a conflict between the Act's misbranding provisions and the First Amendment or call into question the validity of the Act's drug approval framework.”

Legal experts say the government's decision not to appeal isn't surprising. The government is “trying to do some damage control and confine the reach of that decision,” says Schwab.

“There's an old saying that bad facts make bad law,” says Buchanan. In Caronia, the government never tried to prove what Caronia said was false; they really did only try to prosecute the speech. “This probably isn't the right case to appeal,” he says.

A similar appeal, however, is pending in the Ninth Circuit, which is expected to address another First Amendment challenge to the FDCA in the coming weeks. That case, U.S. v. Harkonen, stems from the September 2009 conviction of W. Scott Harkonen, the former chief executive officer of biotech company InterMune.

In that case, Harkonen was charged with crafting a deceptive press release promoting the survival benefits of InterMune's lung disease drug Actimmune to boost sales. The question before the court is whether statements expressing a scientific view are protected by the First Amendment.

The Harkonen decision is one that the entire industry should pay close attention to in the coming months, “because whatever happens is going to be significant either way,” adds Schwab. “Stay tuned.”