On December 3, 2012, the United States Court of Appeals for the Second Circuit overturned the conviction of a pharmaceutical sales representative convicted for misbranding in violation of the federal Food, Drug and Cosmetic Act (“FDCA”). The ruling in United States v. Caronia interprets the First Amendment broadly and in a manner which calls into question decades of FDA enforcement policy. The Second Circuit now protects from prosecution truthful, non-misleading statements about off-label uses for approved pharmaceutical drugs. The decision builds on last year’s Supreme Court ruling in Sorrell v. IMS Health, and will likely influence a similar appeal pending in the Ninth Circuit.
The Government’s Investigation and Conviction of Alfred Caronia
The prosecution of Alfred Caronia began with a government investigation of Orphan Medical, Inc. (“Orphan”) in 2005, which was triggered by a qui tam suit filed against the company by a different sales representative. During the investigation, Caronia was recorded on two occasions discussing off-label uses of Xyrem, a central nervous system depressant approved only for the treatment of certain categories of narcolepsy patients. On both occasions, Caronia was recorded speaking alongside Dr. Peter Gleason, a doctor that Caronia had engaged to participate in “speaker programs” intended to educate other physicians about Xyrem. These recordings clearly depict Caronia and Gleason describing the unapproved uses of Xyrem to treat off-label conditions including insomnia, fibromyalgia, and Parkinson’s.
In 2006, the government filed felony charges against Orphan, Dr. Gleason, Caronia, as well as David Tucker (a former Orphan sales manager) for conspiring to promote Xyrem for off-label uses, and thereby introducing a misbranded drug into interstate commerce in violation of the FDCA. In March 2007, David Tucker pleaded guilty to a single felony misbranding charge. Orphan pleaded guilty to felony charges in July 2007, and its parent company, Jazz Pharmaceuticals, Inc., agreed to pay $20 million and enter into a Corporate Integrity Agreement to resolve both criminal and civil charges. The government then filed a superseding indictment against Caronia and Gleason in July 2007, charging them with four felony counts, and then, in August 2008, reduced these charges to two misdemeanor conspiracy counts, charged by information, to which Dr. Gleason pleaded guilty, and against which Caronia proceeded to trial. The watered-down information charged “strict-liability” violations only — the government had stepped back from its prior obligation to prove wrongful intent on Caronia’s part. Count one charged conspiracy to introduce a misbranded drug into interstate commerce; count two the introduction of a misbranded drug into interstate commerce.
Caronia filed a motion to dismiss the superseding information in part on First Amendment grounds. The District Court denied his motion, concluding that the FDCA did not limit speech more than was necessary to achieve legitimate government objectives.
During the jury trial that ensued, the government argued repeatedly that Caronia had promoted and marketed Xyrem for off-label uses. At the close of the evidence, the trial judge instructed the jury that pharmaceutical representatives may not promote drugs for off-label uses. On November 30, 2009, the jury returned a verdict of guilty on count one, and acquitted on count two. Caronia appealed his conviction.
The Second Circuit Opinion
The Second Circuit first considered whether the government had prosecuted Caronia for “mere off-label promotion,” and found that it had. The Court noted that the government’s statements at trial and the jury instructions by the trial judge had focused on the act of off-label promotion as the crime. The Court rejected the government’s assertion (credited in the dissenting opinion) that it had offered evidence of promotion only to prove wrongful intent, and not to prove promotion by itself as a crime. In dismissing this interpretation of the record, the Court of Appeals noted that the government had cited promotion by Caronia more than 40 times during its summation and rebuttal. Viewed in this light, the Second Circuit construed the record as amounting to a prosecution and conviction of Caronia for speech alone, and not a prosecution and conviction for wrongful intent (which was no longer an element of the misdemeanor crimes charged).
The Court then turned to the question whether a prosecution for promotional speech only (and not for intentionally wrongful conduct) ran afoul of the First Amendment. The Second Circuit applied the Supreme Court’s 2011 opinion in Sorrell v. IMS Health, which held — after Caronia’s trial — that the state of Vermont could not prohibit the sale of prescription pattern information by pharmacies to drug companies. The Sorrell Court engaged in a two-step freedom of speech inquiry. The Supreme Court first considered whether the government regulation restricting the use of prescription pattern information was content- and speaker-based, and determined that it was. Under established First Amendment precedent, this would have normally required a court to assess as a second step whether the regulation was narrowly tailored to serve or promote a compelling government interest — a test referred to as “strict scrutiny.” But the Supreme Court found that it did not have to reach that question. Vermont’s regulation of prescription information, the Court held, failed to meet even a lower, “intermediate” level of scrutiny that applies to commercial speech — expression solely related to the economic interests of the speaker and its audience. This category of speech was only entitled to protection if the government regulation failed to meet a four-part test first enunciated by the Supreme Court in Central Hudson Gas & Electric Corp. v. Public Service Commission in 1980 (discussed below). The Court found that the Vermont regulation failed to meet even this lesser standard, and invalidated the statute.
Applying Sorrell to the promotional speech in which Caronia engaged, the Second Circuit concluded “that the government’s construction of the FDCA’s misbranding provisions imposes content- and speaker-based restrictions on speech subject to heightened scrutiny.” The Court then concluded that “the government cannot justify a criminal prohibition of off-label promotion even under Central Hudson’s less rigorous intermediate [scrutiny] test.” First, off-label speech concerned lawful activity and was not false or misleading. Second, while the government’s interests in drug safety and public health were substantial, the government’s application of the FDCA to prohibit off-label promotion did not directly advance those interests. Third, the prohibition of truthful promotional speech did not directly further the government’s goals because physicians can prescribe and patients can receive drugs for unapproved applications. Finally, the Court determined that the government’s interpretation of the FDCA — a “complete and criminal ban on off-label promotion by pharmaceutical manufacturers” — was not narrowly drawn to advance the government’s interests. The government could, for example, develop a warning or disclaimer system.
Impact to the Pharmaceutical and Biomedical Industries
Technically, the Second Circuit’s ruling only applies to conduct that takes place within that judicial circuit — the states of Vermont, Connecticut, and New York — hardly a sufficient geographical swath to give comfort to pharmaceutical and medical device manufacturers that operate on a national level. That said, the Circuit is highly regarded, and there is good reason to believe the Caronia opinion will influence other circuits to scrutinize with care federal prosecutions of truthful, non-misleading promotional conduct.
For example, the Ninth Circuit will shortly address another First Amendment challenge to the FDCA in U.S. v. Harkonen, though the facts there differ in material ways. Harkonen was the CEO of biotech manufacturer InterMune before he was convicted in 2009 for fraud stemming from his promotion of a lung-disease drug called Actimmune. His appeal centers around a news release that promoted the survival benefits of Actimmune, and the question whether it “expressed a scientific view” protected by the First Amendment. The government has taken the position that the First Amendment does not bar a “criminal prosecution of false statements with an intent to defraud” just because they “concern scientific matters.” The Ninth Circuit heard arguments last week and will decide the case in the coming weeks.
As of the date of this report, we do not yet know if the government will seek rehearing en banc for the Second Circuit’s Caronia ruling. In any event, the current opinion, as it stands, brings welcome relief to an industry beleaguered by years of government enforcement. For the moment, in the Second Circuit at least, truthful, non-misleading promotional speech does not violate the law.
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