When the Second Circuit issued its December 3, 2012 decision in United States v. Caronia, the opinion was proclaimed by many to signal a sea change in the prosecution of off-label promotion. Alfred Caronia, a former sales representative for the pharmaceutical company Orphan Medical, had been convicted at trial of conspiring to promote the drug Xyrem for uses not approved by the Food and Drug Administration (“FDA”). On appeal, Caronia advanced an argument that had been pursued by others for years, and had, in Caronia’s case, failed to persuade the district court: that the First Amendment protected his truthful promotion of a drug for indications not approved by the FDA. After over two years in which observers eagerly anticipated a ruling, the Second Circuit issued a two-to-one decision in which the majority vacated Caronia’s conviction on the ground that it impermissibly criminalized protected speech and violated his First Amendment rights.
The success of the First Amendment defense advanced in Caronia was the culmination of years of advocacy by various entities that had long sought to limit the government’s aggressive enforcement of the criminal misbranding statute, and in widespread commentary from the time, it appeared that the impact of the decision could hardly be overstated. Numerous articles published in the immediate aftermath of the Second Circuit’s decision labeled Caronia a “landmark” case, and suggested that the case would have wide implications for the FDA, pharmaceutical and device companies, individual sales representatives, and the physicians to whom they market their products. Other commentators suggested that, by limiting the government’s ability to utilize the misbranding statute, Caronia was a groundbreaking decision that called into doubt the core theory by which the Department of Justice had successfully pursued dozens of off-label marketing cases and recouped billions of dollars in criminal penalties and civil settlements. In fact, while noting some potential limits on the impact of the Caronia opinion, an article in the American Journal of Law and Medicine stated that the Second Circuit’s decision in Caronia “gives pharmaceutical companies yet another landmark First Amendment victory that has the potential to significantly change the way drugs are marketed in the United States.”
Nearly six months have passed since the Second Circuit’s decision, and the time appears ripe to begin to revisit these initial assessments of Caronia’s impact. To be sure, six months is far from sufficient time to determine whether Caronia will indeed alter the landscape in such a complex area of law. Other appellate courts have yet to rule on the types of arguments advanced in the Caronia case, the Department of Justice has not made transparent its thinking about Caronia, and the FDA may have successfully contained Caronia’s significance by declining to seek either en banc review or a writ of certiorari. And yet, when one begins to assess whether Caronia is indeed a landmark decision that has altered pharmaceutical marketing and limited the government’s enforcement efforts, two noteworthy considerations come to the fore.
First, a review of the published case law since December 3, 2012 shows only two decisions in which the Caronia case is cited. In 1-800-411-Pain Referral Service LLC v. Tollefson, a district court in Minnesota cited Caronia only to extent necessary to determine the level of scrutiny that should be applied to a First Amendment challenge to that state’s no-fault automobile insurance law. In Henson v. Wright Medical Technology, Inc. – the sole other case to cite Caronia – a district court in the Northern District of New York relied on Caronia for the proposition that “[p]harmaceutical manufacturers and their representatives can face misdemeanor charges for misbranding or felony charges for fraudulent misbranding” (which, in light of Caronia’s reversal of a misdemeanor misbranding charge, is no longer self-evident). In neither of these cases, nor in any published case, has a court adopted, rejected, or even considered Caronia’s core holdings.
Second, whereas one might reasonably have anticipated drug and device manufacturers to seize upon Caronia in order to resist the government’s long-standing attack against off-label marketing, such a development simply has not come to pass. In fact, on December 18, 2012, the biotechnology company Amgen pleaded guilty to illegally marketing the anti-anemia drug Aranesp for unapproved uses and agreed to pay $762 million in criminal penalties and civil settlements. Although the charge in the information against Amgen was a misdemeanor misbranding violation such that the First Amendment would have potentially been a viable defense, counsel for Amgen evidently decidedly to forego the argument as part of a negotiated resolution. More recently, in March 2013, Par Pharmaceutical Companies entered a guilty plea to misdemeanor misbranding of its AIDS drug Megace ES and agreed to pay $45 million in criminal penalties and a civil settlement. Moreover, in order to consummate the settlement with the government, Par agreed to abandon a declaratory judgment action in which it had asserted that truthful off-label promotion was protected by the First Amendment. Thus, while the Caronia decision might have seemed likely to embolden pharmaceutical companies in their pursuit of a First Amendment defense, Caronia in fact has not resulted in an upswing in corporate assertions of such a defense, nor halted the government’s long string of enforcement victories against the pharmaceutical industry.
What, then, is the reason for the less-than-striking impact that Caronia has held in corporate off-label cases? When it comes to investigations and prosecutions of pharmaceutical companies, why has Caronia not yet lived up to its billing as a “landmark” case that could significantly alter the way in which companies market their drugs? The decision undeniably provided pharmaceutical companies with a powerful new argument in defending against investigations and prosecutions for off-label promotion – but why has that argument not yet been openly invoked?
Part of the answer almost certainly lies in issues of timing. The final resolutions in the Amgen and Par cases were undoubtedly the results of extensive negotiations that had been going on for months before the Caronia decision. Indeed, in the case of Amgen in particular, the New York Times announced in October 2011 – more than a year before the Caronia decision – that Amgen had reached an agreement in principal to resolve the investigations that were then pending against it. As cases such as these move through the prosecutorial pipeline, and new cases emerge, it will be worth watching to see whether Caronia’s First Amendment defense begins to gain traction and find its way into the arguments of corporate defendants.
However, another explanation for Caronia’s as-yet limited impact in the corporate context stems from the realpolitik of corporate criminal investigations. Unlike individuals, corporations are not in the ideal position to vigorously advance a defense and wage battles against the Department of Justice that, if unsuccessful, might result in felony indictments. The result of such a no-holds-barred approach, including the invocation of a First Amendment defense, could bring the kind of corporate indictment that is a disaster for a corporation, as it decimates the stock price, alienates shareholders, and potentially could result in a conviction that would bring with it the mandatory exclusion from government programs. Given these potentially drastic outcomes, misdemeanor misbranding charges alleging truthful off-label promotion have long been a refuge for pharmaceutical corporations and the government alike, allowing the parties to step back from the brink and achieve a resolution to long-term investigations. Thus, while Caronia appears to provide a potent First Amendment defense for all entities and individuals in the off-label realm, the evidence thus far suggests that in the corporate context, the defense is one that may largely go unused.
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