Ninth Circuit Affirms Conviction in Harkonen, Rejects the Defendant’s “Off-Label” First Amendment Challenge

Dechert LLP

On March 4, 2013, a panel of the United States Court of Appeals for the Ninth Circuit issued its opinion in United States v. Harkonen,1 a case in which the CEO of a pharmaceutical company was prosecuted for transmitting allegedly false and misleading information about the effectiveness of one of the company’s products as an “off-label” treatment. The Ninth Circuit case attracted attention because one of the CEO’s defenses to the criminal charges was a First Amendment challenge – namely, that the statements that served as the factual basis for the charges brought against him were constitutionally protected speech about the off-label uses of a prescription medication. Oral argument in the case took place only days after a divided panel of the United States Court of Appeals for the Second Circuit issued its dramatic decision in United States v. Caronia,2 where that court held that neither drug companies nor their representatives could be criminally prosecuted for the truthful promotion of off-label uses. The Harkonen trial court had rejected the defendant’s First Amendment challenges to the legal sufficiency of the charges and a jury ultimately found him guilty of wire fraud. The Ninth Circuit affirmed the conviction in an unpublished per curiam opinion, and in the process also rejected the defendant’s First Amendment arguments. This DechertOnPoint focuses on the Ninth Circuit’s First Amendment reasoning and on what, if anything, this new appellate decision adds to the continuing debate over whether, and how much the First Amendment protects the marketing and promotion of prescription drugs for “off-label” uses.

The Charges Against Harkonen and Results at the Trial Level

W. Scott Harkonen was the CEO of InterMune, Inc., a California-based pharmaceutical company, from February 1998 through June 2003.3 In 2004, the United States Department of Justice began an investigation into allegations that InterMune had marketed and promoted the sale of its drug Actimmune for the treatment of idiopathic pulmonary fibrosis (IPF)4 – a rare and, ultimately, fatal disease affecting primarily middle-aged patients characterized by progressive scarring, or fibrosis, in the lungs. The FDA had approved Actimmune for the treatment of two other rare pediatric conditions (i.e. chronic granulomatous disease in 1990, and severe, malignant osteopetrosis in 2000), but the drug had never been approved for the treatment of IPF.5

In October 2000, InterMune launched a Phase III clinical trial to determine, among other things, whether Actimmune delayed or prevented the worsening of patients’ IPF.6 According to the district court that tried Harkonen’s case, the evidence at trial showed that by mid-August of 2002, InterMune was aware that the data from this Phase III trial failed to show that Actimmune was an effective treatment for IPF patients.7 In response to these findings, Harkonen instructed his staff to conduct additional analyses to find out whether Actimmune might be efficacious for certain subgroups of the IPF patient population.8 These additional analyses of subgroup data from the clinical trial suggested a statistically significant survival trend for “mild to moderate” IPF patients treated with the medication.9 Also that month, Harkonen and other InterMune representatives discussed these trials with FDA officials, who informed them that the data they had assembled would not be sufficient to gain FDA approval for an IPF indication and that further testing would be needed to determine what effect, if any, Actimmune had on IPF patient mortality.10

On August 28, 2002, InterMune issued a nationwide press release to announce the “results” of its Phase III trial. The press release, headlined “InterMune Announces Phase III Data Demonstrating Survival Benefit of Actimmune in IPF,” also claimed that the treatment “Reduces Mortality by 70% in Patients with Mild to Moderate Disease.”11 Harkonen’s indictment charged that this press release “contained materially false and misleading information regarding Actimmune and falsely portrayed the results of a GIPF-001 Phase III trial as establishing that Actimmune reduces mortality in patients with IPF.”12 Harkonen allegedly “wrote the headline and byline and controlled the content of the entire press release.”13

In March 2008, a grand jury issued a two-count indictment charging Harkonen with wire fraud and with “misbranding” in violation of the Food Drug and Cosmetic Act.14 The indictment survived Harkonen’s pre-trial motions to dismiss, and the case was tried to a jury, which acquitted Harkonen of misbranding but found him guilty of wire fraud.15

In his post-trial motions, among other things, Harkonen argued that the evidence in the trial record did not support his wire fraud conviction. After a detailed review of the record, the trial court concluded that the evidence supported the jury’s findings that the press release misrepresented the results of the Actimmune Phase III trial results, and that Harkonen published the release with knowledge of its falsity and with the requisite intent to defraud. In reaching this determination, the trial judge relied heavily on the testimony of biostatisticians (including a senior manager at InterMune), whose testimony in the court’s view provided ample support for finding that the Phase III trial results provided no support for the press release’s claims that Actimmune reduced IPF patient mortality.16

Having found the press release was false and that the defendant acted with fraudulent intent, the trial court declared that it “need not expend much energy discussing Harkonen’s arguments for dismissal on First Amendment grounds.”17 In the trial Judge’s view, the jury’s finding that Harkonen acted fraudulently marked the beginning and the end of any First Amendment inquiry: “[T]he First Amendment provides Harkonen with no defense from his conviction, as ‘it is well-settled that the First Amendment does not protect fraud.’”18 Harkonen was sentenced to three years’ probation and a $20,000 fine.19

The Ninth Circuit’s Opinion on Harkonen’s First Amendment Defense

Harkonen appealed his conviction to the Ninth Circuit,20 where a unanimous panel disposed of his challenges to the verdict per curiam in a brief unpublished opinion. Beginning with Harkonen’s First Amendment argument, the appellate court focused on two questions: first, whether there was sufficient evidence to support the jury’s verdict; and, second, whether the facts as found by the jury constituted the “core constitutional facts.” As the circuit court explained, “Constitutional facts determine ‘the core issue of whether the challenged speech is protected by the First Amendment.’" The panel concluded that, because the constitution does not protect false speech, “[T]he core constitutional issue in Harkonen’s case is whether the facts the jury found establish that the Press Release was fraudulent.”21

At least from its Opinion, the circuit court appeared to have little trouble affirming the jury’s finding that the press release was fraudulent. “At trial,” the appellate court observed, “nearly everybody actually involved in the [IPF Phase III] clinical trial testified that the Press Release misrepresented [the trial’s] results,” noting that the evidence showed that “even Harkonen himself was ‘very apologetic’ about the Press Release’s misleading nature.”22 The appellate court then determined, as did the trial court, that the evidence at trial supported the jury’s findings that Harkonen was aware that the release was misleading and that he acted with the specific intent to defraud. The court thus affirmed Harkonen’s conviction on the evidence, and turned to an examination of his First Amendment challenge.23

Harkonen also argued on appeal that the differences between his interpretation of the Phase III IPF trial results and the government’s interpretation of those results amounted to no more than differences of opinion on what the data showed, and that these differences could not serve as a legally valid basis for his wire fraud conviction. “[G]enuine debates over whether a given treatment caused a particular effect,” he argued, “are outside the scope of the mail and wire fraud statutes.”24 In making this argument, the defendant relied primarily on the United States Supreme Court’s opinion in American School of Magnetic Healing , et al. v. McAnnulty,25 a 1902 case involving a United States Postmaster’s refusal to deliver mail addressed to the petitioner American School. The Postmaster believed that the School – a “healing” business that took in money by mail for its “treatments” – was a fraud. The Supreme Court held that the Postmaster’s disagreements with the School’s treatment philosophy provided no legal justification for his decision to withhold its mail: “Unless the question may be reduced to one of fact, as distinguished from mere opinion, we think these statutes cannot be invoked for the purpose of stopping the delivery of mail matter.”26 Finding that the School’s views on healing were not provably false, the Court found that no fraud within the meaning of the law could be proven on the facts before it and it enjoined the Postmaster.27

The Ninth Circuit was “unpersuaded” by Harkonen’s proposed application of McAnnulty to his case for three reasons. It concluded, first, that McAnnulty did not “categorically prohibit fraud prosecutions for statements about the efficacy of a particular drug.” Second, it found the argument that Harkonen’s statements could be considered fraudulent “only if they were universally considered objectively false” to be inconsistent with the language and purpose of the wire fraud statute. Third, and most pointedly, the circuit court found no “genuine scientific debate” with regard to how the Actimmune Phase III trial results should have been interpreted. “Here,” the circuit court stated, “a jury found, beyond a reasonable doubt, that Harkonen issued the Press Release with the specific intent to defraud, and that finding is supported by the evidence presented at trial. We know of no case where, based on McAnnulty, a court disregarded a jury’s factual findings to overturn a criminal conviction, and we will not do so here.”28

All of Harkonen’s other objections to the verdict were rejected.29 Because of the way it framed the First Amendment issues (and also, in all likelihood, because the jury acquitted Harkonen on the misbranding charge), the Ninth Circuit did not reach the broader question that was addressed by the Second Circuit in Caronia, namely whether the First Amendment barred the government from prosecuting pharmaceutical manufacturers for the truthful promotion of off label uses. Indeed, Caronia is not even mentioned in the Ninth Circuit’s opinion.


The Ninth Circuit’s opinion in Harkonen adds little to the debate over the scope of constitutional protections for off-label promotion, primarily because given its evidentiary conclusions and its analysis of the relevant law, the circuit court did not have to reach these issues. In that sense, the situation before the Ninth Circuit in Harkonen was somewhat similar to the situation facing the Seventh Circuit in United States v. Caputo,30 another case involving allegations of off-label sales. In that case, the defendants to a misbranding and fraud prosecution manufactured two different medical sterilizing devices. The first of these sterilizers had been approved by the FDA for a limited number of uses, which all but destroyed the approved device’s market value. The second device – which had been sold abroad, but not in the United States – was never approved by the FDA.31

The Caputo defendants decided to sell the unapproved machine domestically as an FDA-approved device, which resulted in prosecutions and convictions.32 On appeal, they argued that their convictions should be overturned because the Food Drug and Cosmetic Act restricted promotional materials to those uses the FDA had approved in violation of the First Amendment.33 The Seventh Circuit found that it did not have to decide this larger constitutional question, however, because the Caputo defendants had no legal right to sell the unapproved product in the first place: “Unless the machine itself could be sold lawfully, there were no lawful off-label uses to promote. And the jury found, by its verdicts on both the fraud–on-the-United States count and the misbranded-device counts, that the [sterilizer device] could not be sold.”34 Thus, the Caputo defendants’ conduct put them beyond the reach of the free speech doctrines that are usually invoked in defense of truthful off-label marketing.35

The Ninth Circuit appears to have viewed the communications at issue in Harkonen in a similar vein. Once the court determined that the defendant’s speech was fraudulent, it concluded that it did not need to decide the off-label issue because “The First Amendment does not protect fraudulent speech.”36 However, unlike the Seventh Circuit in Caputo, whose opinion includes a lengthy discussion of the constitutional and other policy issues raised by off-label promotion in dicta,37 the Ninth Circuit panel in Harkonen chose not to use its opinion as an occasion to discuss these broader constitutional questions.

A question that could be raised if Harkonen seeks further appellate review is whether Harkonen’s interpretation of the Phase III data was sufficiently credible from a scientific standpoint to lift the representations in the August 2002 press release out of the realm of fraud, and into the realm of “opinion” that might protect the statements from prosecution as wire fraud. This could be the beginning of a species of post-Caronia cases involving allegedly misleading statements about the results of clinical trials, where a court and jury are called upon to decide whether a company’s interpretation of its clinical data was a defensible reading of a statistically ambiguous result, or whether its reading was so off the mark it should be considered evidence of the company’s fraudulent intent. The Ninth Circuit panel that decided Harkonen seemed comfortable with having a jury decide these difficult, and potentially confusing scientific issues despite their complexity. The trial court’s post-trial discussion of the scientific evidence showed just how complex this evidence was, and suggested how much work it must have taken for both sides to make their positions understandable to the court and a jury.38 In thinking about how to defend these actions in the future, companies will need to be in a position to defend the scientific and clinical bases for their public statements when confronted with the level of scrutiny InterMune faced in this case.

More than anything else, what the Harkonen opinion reinforces are the limitations on Caronia’s holding. The majority in Caronia made sure to emphasize that the First Amendment does not protect false or misleading representations about the effectiveness of an approved drug for unapproved uses.39 Read together, the opinions in Caputo, Caronia, and now Harkonen make clear that the federal courts are not inclined to allow the off-label First Amendment defense to shield communications or conduct they consider false, fraudulent or otherwise misleading, even as the questions surrounding the scope of the First Amendment’s protections for off-label promotion remain unresolved.


1 United States v. Harkonen, Nos. 11-10209, 11-10242 (9th Cir. March 4, 2013), 2013 WL 782354 (C.A. 9 (Cal)).

2 United States v. Caronia, 703 F.3d 149 (2d Cir. 2012).

3 United States v. Harkonen, 2009 WL 1578712, at *1 (N.D. Cal.). His tenure as a InterMune Board member extended until September 2003.

4 Id.

5 Id. at *2.

6 United States v. Harkonen, 2010 WL 2985257, at *1 (N.D. Cal.).

7 Id.; see also id. at *7 - *8.

8 Id. at *8.

9 Id. The trial court’s opinion on Harkonen’s post-trial motions spent a significant amount of time explaining why, in the court’s view, this “post-hoc subgroup analysis of study participants” could not reasonably be read to contradict the trial’s overall finding of inefficacy. See id. at *9 - *10.

10 Harkonen, 2009 WL 1578712, at *2.

11 Id.

12 Harkonen, 2010 WL 2985257, at *1.

13 Harkonen, 2009 WL 1578712, at *2.

14 Id. at *1.

15 Harkonen, 2010 WL 2985257, at *2.

16 Id. at *3 - *14.

17 Id. at *15.

18 Id. at *15 (citations omitted).

19 Harkonen, 2013 WL 782354, at *1.

20 The Government cross-appealed Harkonen’s sentence, but their arguments were rejected. Id. at *4.

21 Id. at *1.

22 Id.

23 Id. at *1-*2.

24 Id. at *2.

25 Amer. School of Magnetic Healing v. McAnnulty, 187 U.S. 94 (1902).

26 Id. at 106.

27 Id. at 107.

28 Harkonen, 2013 WL 782354, at *2-*3.

29 Id. at *3.

30 United States v. Caputo, 517 F.3d 935 (7th Cir.), cert. denied, 555 U.S. 819 (2008).

31 Id. at 936-38.

32 Id. at 937. The FDA apparently found out about the sales and warned the defendants to stop on several occasions, but they were ignored. Id. at 938.

33 Id. at 938.

34 Id. at 940.

35 Id.

36 Harkonen, 2013 WL 782354, at *1.

37 Caputo, 517 F.3d at 938-40.

38 See Harkonen, 2010 WL 2985257, at *3 - *14.

39 Caronia, 703 F.3d at 166 n.10 (“Of course, off-label promotion that is false or misleading is not entitled to First Amendment protection. . .a defendant may be prosecuted for untruthfully promoting the off-label use of an FDA-approved drug, e.g., making false or misleading statements about a drug”) (citations and other language omitted).


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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