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The Court of Appeals for the Second Circuit sent shockwaves through the pharmaceutical industry with its decision in United States v. Caronia. Alfred Caronia was a pharmaceutical sales representative convicted of a misdemeanor conspiracy to introduce a misbranded drug. When promoting Xyrem, a prescription narcolepsy drug, Caronia made comments to a doctor about various uses of the drug that had not been approved by the Food and Drug Administration. The government did not contest at trial the truthfulness of the comments to the doctor. Though it was, and is, lawful and common for doctors to prescribe medication “off-label” – one estimate says more than 21% of all prescriptions are off-label – and for doctors to talk about off-label uses in various meetings and conferences, it was considered unlawful ”misbranding” for pharmaceutical companies and their representatives to promote drugs for those uses.
The thrust of Caronia’s appeal, supported by pharmaceutical industry amici curiae, was that criminalizing truthful speech about the completely legal off-label use of prescription drugs infringed on Caronia’s First Amendment rights and actually hurt doctors and patients because those who were most informed about the drug – the manufacturers – could not discuss its beneficial uses or side effects without the threat of criminal prosecution. The Second Circuit agreed with Caronia and became the first court in the nation to hold that truthful and non-misleading off-label promotional speech is constitutionally protected under the First Amendment and, as a corollary, that off-label promotional speech would not constitute a criminal offense unless the speech was false or misleading.
Caronia is game-changing if it becomes prevailing law because, for decades, the prohibition on off-label speech shaped how pharmaceutical companies did business. Because making any promotional statement regarding the off-label use of a drug constituted, at the very least, a criminal misdemeanor offense, pharmaceutical companies spent millions of dollars annually on compliance and training programs to deter and detect off-label promotion by sales representatives. Companies spent billions more to settle allegations of off-label promotion with the government. One recent study showed that pharmaceutical companies paid $10.2 billion in civil and criminal fines between November 2010 and July 2012, mostly relating to off-label promotion allegations.
In addition to the very steep penalties for companies, individuals faced possible criminal liability for off-label speech. The threat of criminal prosecution was so powerful under the old regime because proving a misdemeanor crime was simple. Though a felony misbranding charge required that the statements be made with an “intent to defraud or mislead,” the misdemeanor standard was satisfied simply by making a promotional statement – any such statement – about the off-label use of a drug, even if that statement was completely truthful and not misleading. At the broadest reach of the law, under the responsible corporate officer, or Park, doctrine, the government could prosecute individual executives for off-label speech made by others in their company, even when the executive did not participate in or know about the conduct. While in practice the government limited its use of the doctrine to cases in which the executive allegedly had actual knowledge of the speech, the threat of the Park doctrine has been a powerful tool for prosecutors.
In sharp contrast with prior law, the court in Caronia made clear that the government can no longer prohibit and criminalize “truthful off-label promotion of FDA-approved prescription drugs.” This seemingly eliminates the distinction between misdemeanor and felony misbranding for pharmaceutical drugs: both now require proof that off-label promotional statements are either “false or misleading” or made with “an intent to defraud or mislead.”
Following Caronia, legal challenges based on similar arguments are certain to arise in other circuits, and the Department of Justice will have to evaluate its position on future off-label prosecutions. Of course, the Department may seek and be granted rehearing, especially since the Caronia decision was accompanied by a vigorous dissent, and the Second Circuit’s decision may ultimately be reviewed by the Supreme Court. Given Caronia’s broad implications for criminal liability, future felony and even misdemeanor off-label cases will not be as straight-forward as they have been in the recent past.
To read more from Jonathan Sack, please visit www.maglaw.com