The End of Off-Label Prosecutions? The Second Circuit Rules That a Pharmaceutical Sales Representative’s Criminal Conviction for Off-Label Promotion Violates the First Amendment

December 4, 2012

In an opinion with potentially far-reaching ramifications for pharmaceutical and medical device manufacturers, a split panel of the Second Circuit Court of Appeals held on December 3, 2012, that the First Amendment precludes Alfred Caronia’s conviction for conspiring to introduce a misbranded drug into interstate commerce in violation of the Federal Food, Drug, and Cosmetic Act (FDCA) because his off-label promotion was constitutionally protected speech.[1]

The case, United States v. Caronia, erects–at least for the time being–new First Amendment barriers to criminal prosecutions predicated on off-label promotion, and could affect ongoing enforcement actions, the government’s regulatory priorities, and future theories of liability in FDCA and False Claims Act (FCA) litigation.  But while the panel’s ruling portends significant change in the enforcement landscape, further appeal is all but certain, and manufacturers would be wise to tread carefully in considering any changes to their promotional policies.

A.   Captured on Tape:  Caronia Pitches Off-Label Uses

In 2009, a federal jury in the Eastern District of New York convicted Caronia, a former sales representative for Orphan Medical, Inc., of conspiring to market a misbranded drug for his role in promoting Xyrem off-label–that is, for uses not included in the product’s FDA-approved labeling.[2]  The government’s case against Caronia centered on two recorded conversations:  one in which he told a physician (who, unknown to Caronia, was cooperating with government investigators) about various off-label uses for Xyrem; and one in which he introduced the same physician to Dr. Peter Gleason, a paid consultant for Orphan, who spoke about an off-label use of Xyrem.[3]  On appeal, Caronia argued principally that “the First Amendment does not permit the government to prohibit and criminalize a pharmaceutical manufacturer’s truthful and non-misleading promotion of an FDA-approved drug to physicians for off-label use where such use is not itself illegal and others are permitted to engage in such speech.”[4]

B.   Prosecuted for Promotional Speech or Speech Used as Evidence of Intent?

Judge Chin, writing for the majority, first rejected the government’s contention that it permissibly used Caronia’s speech as evidence of his intent that the doctor prescribe Xyrem for unapproved uses.  Whereas Wisconsin v. Mitchell might permit this evidentiary use of Caronia’s speech–the majority left this question open[5]–the majority concluded from the trial record that the government in fact prosecuted Caronia “for mere off-label promotion.”[6]  Significantly, this meant that the government’s case against Caronia was premised on “[s]peech in aid of pharmaceutical marketing,” a category of speech that the Supreme Court, in Sorrell v. IMS Health, Inc., recognized as a “form of expression protected by the Free Speech Clause of the First Amendment.”[7]

This conclusion prompted a vigorous dissent from Judge Livingston, who (echoing Justice Breyer’s dissent in Sorrell) criticized the majority for “call[ing] into question the very foundations of our century-old system of drug regulation.”[8]  Judge Livingston described the central role of “intended use” in the history of food and drug law,[9] explaining that the First Amendment does not prohibit the evidentiary use of speech to establish the elements of a crime or to prove motive or intent.[10]  She disagreed with the majority that Caronia’s conviction was based only on his speech, pointing out the jury instructions adequately encompassed the other necessary elements of a conspiracy to market a misbranded drug.[11]

C.   The FDCA Misbranding Provisions No Longer Prohibit Off-Label Promotion?

Having concluded that the prosecution of Caronia was based on his off-label promotional speech, the majority analyzed whether the government’s interpretation and application of the FDCA’s misbranding provisions “to prohibit off-label promotion by pharmaceutical manufacturers” ran afoul of the First Amendment.[12]  Guided by the Supreme Court’s analysis in Sorrell, the majority first decided that the government’s understanding of those provisions “imposes content- and speaker-based restrictions on speech subject to heightened scrutiny.”[13]  Like the Sorrell Court, the majority declined to specify precisely what level of scrutiny was required, holding instead that the government’s reading of the provisions could not survive even under the “intermediate standard” for restrictions on commercial speech set forth in Central Hudson Gas & Electric Corp. v. Public Service Commission.[14]

Proceeding through Central Hudson‘s four-prong test, the majority determined that off-label promotion (1) concerns lawful activity and (2) is not “in and of itself false or misleading.”[15]  The majority concluded, however, that the government’s construction of the FDCA did not pass muster under Central Hudson’s third prong, determining that because off-label use remains lawful, a prohibition on disseminating truthful information about off-label usage does not directly advance the government’s stated interests in preserving the integrity of the FDA drug approval process or reducing patient exposure to off-label drugs.[16]  The majority also decided that the restrictions on speech were not “narrowly tailored,” in violation of Central Hudson’s fourth prong, finding that the government’s “conclusory assertions” regarding the lack of other adequate options to achieve its objectives were “insufficient” to overcome the objection that “more limited and targeted restrictions on speech” could serve the government’s interests “equally well.”[17]

Accordingly, to avoid an impermissible infringement on protected First Amendment speech, the majority construed the FDCA “as not prohibiting and criminalizing the truthful off-label promotion of FDA-approved prescription drugs” and held that “the government cannot prosecute pharmaceutical manufacturers and their representatives under the FDCA for speech promoting the lawful, off-label use of an FDA-approved drug.”[18]

Judge Livingston, in dissent, questioned the majority’s application of Central Hudson, contending that the government’s interpretation of the FDCA’s misbranding provision survived constitutional scrutiny.  Whereas the majority deemed the prohibition on off-label marketing “paternalistic[],”[19] Judge Livingston saw it as “a necessary tool for the effective functioning of a regulatory system that the Supreme Court has endorsed as legitimate” (i.e., the premarket approval process for drugs),[20] and “the least restrictive way of advancing the government’s interests” at that.[21]  The dissent wondered “how the majority’s reasoning would ever allow speech to support a conviction” for misbranding,[22] and warned that the majority’s reasoning would permit a manufacturer to promote “any substance that may legally sold for some purpose . . . for any purpose–so long as the manufacturer’s statements are merely unsubstantiated, rather than demonstrably false or misleading.”[23]

D.   Business as Usual, or a New Balance of Power? 

The Second Circuit’s decision is quite significant, and it may someday be seen as a landmark ruling expanding the bounds of permissible promotional activities.  Nevertheless, pharmaceutical and medical device companies would do well to view Caronia with optimistic caution for the time being.  The government is almost certain to appeal the panel’s ruling, likely by seeking rehearing en banc before appealing to a Supreme Court that may be perceived as hospitable to the expansion of First Amendment speech rights.  Either way, it may be some time before the ruling is truly final, and the scope of the ultimate holding may vary from the panel’s decision.

In the meantime, the potential ramifications of Caronia for regulated life sciences companies are plentiful.  The decision may well have a significant impact in the following areas, among others:

  • Ongoing government investigations involving allegations of off-label promotion (including cases in which companies have publicly disclosed, but not yet finalized, agreements reached under the pre-Caronia understanding of the FDCA to resolve these investigations);
  • The government’s ability to use the civil False Claims Act to enforce against off-label promotion;
  • The risk calculus for companies defending or seeking to resolve off-label investigations;
  • The government’s investigative and evidentiary focus in enforcement actions, especially with respect to attempts to show that promotional claims that may not be fully substantiated were in fact false or misleading;
  • The government’s allocation of a greater share of its resources to investigating and prosecuting cases in areas that have traditionally fallen within FDA’s enforcement jurisdiction, such as manufacturing and adverse event reporting, and in pursuing completely new theories of FCA liability;[24]
  • Certain manufacturer obligations under Corporate Integrity Agreements entered into under a pre-Caronia understanding of the FDCA; and
  • Manufacturers’ internal analyses of whether, and when, it would be prudent for them to alter their promotional policies and compliance programs.

Although the extent of Caronia‘s ultimate impact remains uncertain, at the very least, the case foreshadows significant change in the regulatory environment.  The opinion certainly offers a great deal for pharmaceutical and medical device manufacturers to consider.

   [1]   United States v. Caronia, No. 09-5006-cr (2nd Cir. Dec. 3, 2012).

   [2]   Id., slip op. at 23–24.

   [3]   Id. at 14–16.

   [4]   Id. at 25.

   [5]   Id. at 32 n.10.

   [6]   Id. at 26–31 (applying Mitchell, 508 U.S. 476, 489 (1993), which authorizes “the use of speech to establish . . . intent”).

   [7]   Id. at 31 (quoting Sorrell, 131 S. Ct. 2653, 2659 (2011)).

   [8]   Id., diss. op. at 1; cf. 131 S. Ct. at 2685.

   [9]   Caronia., diss. op. at 3–5.

  [10]   Id. at 6 (citing Mitchell, 508 U.S. at 489 (1993)).

  [11]   Id. at 8.

  [12]   Id., slip op. at 31-33.

  [13]   Id. at 39.

  [14]   Id. at 37 (discussing Sorrell), 39, 42–51 (applying Central Hudson, 447 U.S. 557, 563–64 (1980)).

  [15]   Id. at 42.

  [16]   Id. at 44–47.

  [17]   Id. at 48–51.

  [18]   Id. at 51.

  [19]   Id. at 44.

  [20]   Id., diss. op. at 23.  While Caronia only addresses promotion of drugs, its holding applies with equal (if not greater) force to promotion of medical devices.  See 21 U.S.C. § 396.

  [21]   Caronia, diss. op. at 24.

  [22]   Id. at 8.

  [23]   Id. at 22.

  [24]   See, e.g., Department of Justice Press Release, GlaxoSmithKline to Plead Guilty & Pay $750 Million to Resolve Criminal and Civil Liability Regarding Manufacturing Deficiencies at Puerto Rico Plant (Oct. 26, 2010); Complaint, United States ex rel. James Allen v. Guidant LLC et al, Civil No. 11-22 (D. Minn. Jan. 27, 2011).  See also United States’ Statement of Interest, United States ex rel David Provuncher v. Angioscore, Inc., Civil No. 09-12176 (D. Mass. Dec. 27, 2011) and United States’ Statement of Interest, United States ex rel Arlene Tessitore v. GlaxoSmithKline PLC et al, Civil No. 08-11775 (D. Mass. Oct. 21, 2011) (FCA liability based on adverse event reporting); United States’ Amicus Curiae Brief, United States ex rel Amphastar Pharm. v. Aventis Pharma S.A. et al, No. 09-0023 (C.D. Cal. Mar. 29, 2012) (FCA liability based on antitrust claims arising out of interactions with the Patent and Trademark Office).

Gibson, Dunn & Crutcher lawyers are available to assist in addressing any questions you may have regarding these issues.  Please contact the Gibson Dunn lawyer with whom you work or any of the following:

Stephen C. Payne – Washington, D.C. (202-887-3693, [email protected])
Steven J. Tave – Washington, D.C. (202-887-3641, [email protected])
John D.W. Partridge – Denver (303-298-5931, [email protected])

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