In Landmark Decision, Second Circuit Reverses Conviction For Off-Label Promotion

On December 3, 2012, in United States v. Caronia, a three-judge panel of the Second Circuit reversed a drug salesperson’s conviction for conspiracy to introduce a misbranded drug into interstate commerce, a misdemeanor violation of the federal Food, Drug and Cosmetic Act (FDCA).  A majority of the court held on First Amendment grounds that the misbranding provisions of the FDCA do not “prohibit[] and criminaliz[e] the truthful off-label promotion of FDA-approved prescription drugs.”

Recent government fraud enforcement has heavily focused on pursuing criminal and civil penalties against those who promote off-label use of drugs and medical devices.  Notably, earlier this year, GlaxoSmithKline LLC (GSK) agreed to pay an unprecedented $3 billion to resolve criminal and civil allegations relating in part to unlawful promotion of prescription drugs.  The GSK settlement is only one recent example of a series of vigorous enforcement efforts undertaken by the government to obtain criminal fines, monetary settlements and False Claims Act-related penalties for illegal off-label promotion.  Given the impact that the Caronia decision could have on the government’s enforcement efforts, it may well be challenged by the government, either by a request for rehearing en banc before the Second Circuit or by a petition for certiorari to the Supreme Court.             

In Caronia, the court considered whether truthful off-label promotion can lead to criminal liability under the misbranding provisions of the FDCA.  Alfred Caronia, a pharmaceutical sales representative, was hired by a manufacturer to promote and sell its drug Xyrem.  The FDA approved Xyrem for marketing for two medical indications: (1) to treat narcolepsy patients experiencing cataplexy; and (2) to treat narcolepsy patients with excessive daytime sleepiness.  The FDA also required that a “black box” warning be placed on prescription labels because of Xyrem’s side effects.  The warning notified users that the safety and efficacy of the drug was not established for patients under sixteen.              

As part of a federal investigation into off-label promotion of Xyrem, the government tape-recorded two conversations in which Caronia told physicians of Xyrem’s demonstrated benefits for unapproved indications and unapproved subpopulations.  Caronia was ultimately charged with introducing, and conspiring to introduce, a misbranded drug into interstate commerce in violation of the FDCA.  After a ten-day trial, the jury found Caronia guilty of conspiracy to introduce a misbranded drug into interstate commerce.  Caronia appealed, arguing primarily that the FDCA’s misbranding provisions unconstitutionally restrict his speech.            

In its opinion, the Second Circuit ruled that in violation of his First Amendment rights, Caronia was prosecuted solely for promoting Xyrem for an off-label, but legal, use.  The court rejected the government’s argument that Caronia was not prosecuted for his off-label speech, but rather that his speech was used as evidence of intent that the drug be used for an unapproved indication or for an unapproved subpopulation.             

Relying heavily on the U.S. Supreme Court’s decision in Sorrell v. IMS Health, Inc., 131 S. Ct. 2653 (2011), the court held that the government’s construction of the misbranding provisions is subject to heightened scrutiny because it imposes content- and speaker-based restrictions (i.e., speech about on-label uses of a drug is permitted while speech about off-label uses is prohibited, and the restrictions apply only to certain speakers such as pharmaceutical manufacturers).  The court concluded that the speech-related restrictions do not pass constitutional muster because they fail to even meet the less stringent test applicable to First Amendment protection of commercial speech.

In contrast to other courts that have addressed similar issues, the Second Circuit held, for example, that the government’s construction of the FDCA’s misbranding provisions does not directly advance the two interests asserted by the government (i.e., preserving the efficacy and integrity of the FDA’s drug approval process and reducing patient exposure to unsafe and ineffective drugs).  The court also found that the FDCA’s prohibition of manufacturer off-label promotion was more extensive than necessary to achieve the government’s interests.  The court cited a number of less-restrictive yet, in its view, equally effective alternatives, including, but not limited to:  (1) the government could guide physicians and patients in differentiating between misleading and false promotion, exaggeration and embellishments, and truthful or non-misleading information; (2) the government could develop warning or disclaimer systems, or develop safety tiers within the off-label market; and (3) the government could create other limits, including ceilings or caps on off-label prescriptions.               

The court thus “decline[d] the government’s invitation to construe the FDCA’s misbranding provisions to criminalize the simple promotion of a drug’s off-label use by pharmaceutical manufacturers and their representatives because such a construction — and a conviction obtained under the government’s application of the FDCA — would run afoul of the First Amendment.”             

While this decision may be heralded as a significant victory for advocates of truthful commercial discourse about prevailing prescription practices, it may well be premature for manufacturers to modify compliance policies prohibiting off-label promotion based solely on the Caronia opinion.  In addition to the possibility of further judicial review, Caronia’s facts may be distinguishable from other misbranding cases.  The Second Circuit, for example, relied heavily on the fact that prior to the appeal, the government never even suggested that Caronia’s off-label promotion was evidence of his company’s intent to misbrand Xyrem.  Caronia, therefore, does not conclusively prevent criminal prosecution where the government uses off-label promotion merely as evidence of intent to misbrand a drug or device.           

This decision also leaves a number of questions unresolved.  While the Second Circuit interprets the FDCA to permit truthful off-label promotion of drugs and devices, this leads directly to the question:  What is truthful off-label promotion?  Not surprisingly, companies navigating this issue will find no existing FDA guidance.  If the decision stands, the FDA and government enforcement agencies may well narrowly define the bounds of truthful speech by sales representatives.            

The Second Circuit also indicated that a First Amendment defense may be more successful in cases involving criminal liability.  While the Second Circuit’s holding that the FDCA does not prohibit or criminalize truthful off-label promotion would seemingly apply to either criminal or civil/administrative liability under the FDCA, those criminally charged may receive a more welcoming reception to First Amendment arguments.  That said, the court’s decision characterized the government’s prohibition on off-label promotion as a content- and speaker-based restriction, which is automatically subject to heightened scrutiny even in civil proceedings.           

The Caronia decision may signal a sea change in both drug and device marketing and the industrial strength fraud prosecution that has developed around it.  It is likely premature, however, to ring the “death knell” for the government’s off-label enforcement program.  The regulated would be wise to wait for more judicial guidance before liberalizing their off-label marketing practices.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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