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The False Claims Act: Off-Label Marketing and the First Amendment

193967_pill_bottles.jpgOff-label marketing cases under the False Claims Act have always been complex and difficult to bring. Unlike more straight forward cases involving $10,000 hammers or non-existent medical procedures, off-label marketing cases involve a complicated web of relationships. Such cases are usually brought against pharmaceutical manufacturers promoting the off-label use of drugs to physicians. However, the pharmaceutical companies do not seek any reimbursement directly from Medicare; rather, the physicians prescribe these drugs for off-label uses to their patients who then fill those prescriptions at pharmacies. It is those pharmacies that seek reimbursement from Medicare. However, the Government has continually taken the position, and Courts have agreed, that pharmaceutical companies can be found liable under the False Claims Act for improperly off-label marketing drugs and, as a result, causing false claims to be submitted by pharmacies and other drug purchasers. The theory behind such cases is that the Government considers off-label marketing by pharmaceutical companies to be illegal and were it aware that the physician prescribing the drug has been influenced by improper off-label marketing, it would never reimburse the pharmacy for the drug. Although these cases are complex, they are also extremely lucrative. Some of the largest healthcare recoveries under the False Claims Act have been against pharmaceutical companies for off-label marketing. See for example, Cephalon, GSK, Bayer, Forest, Pfizer, Abbott and Merck.

However, off-label marketing cases have rarely been tested in court and, when the Government has brought such cases, it has achieved mixed results. A recent decision in the criminal context in United States v. Caronia, 703 F.3d 149 (2d Cir. 2012) by the Second Circuit creates even more complications for the Government and for relators seeking to bring False Claims Act cases based on off-label marketing.

In Caronia, the Second Circuit held that the United States could not base a criminal conviction for misbranding under the U.S. Federal Food, Drug and Cosmetic Act (“FDCA”), 21 U.S.C. § 301 et seq. solely upon a drug rep promoting the drug for off-label uses. The court held that such a prosecution violated the First Amendment rights of the drug rep to free speech and it vacated his conviction as a result.

As the court noted, the FDCA prohibits misbranding “[t]he introduction or delivery for introduction into interstate commerce of any . . . drug . . . that is . . . misbranded.” 26 U.S.C. §331(a). FDA regulations promulgated pursuant to the FDCA provide that promoting drugs for an intended use which is off-label can be evidence of misbranding or conspiring to misbrand under the FDCA. Traditionally, the Government and relator’s counsel have taken the position that read together these regulations make promotion of off-label use by a pharmaceutical company illegal and a violation of the False Claims Act. The analysis in Caronia calls this traditional view of off-label promotion into question and suggests that it may under some circumstances violate the First Amendment. The problem which is recognized by the Second Circuit in Caronia is that while the Government takes the position that pharmaceutical companies cannot promote their drugs for uses not prescribed by the label (i.e., off-label uses), physicians are permitted to prescribe drugs off-label in their discretion for the benefit of their patients. Moreover, entities other than pharmaceutical companies such as other physicians are permitted to write articles and present symposiums concerning potential off-label uses of drugs. All of this is perfectly legal. As the Caronia court recognized, this creates a dichotomy between pharmaceutical companies and other speakers. When pharmaceutical companies speak about off-label uses for their drugs, it is illegal, but when physicians or other companies that do not manufacture the drugs speak about off-label uses of those drugs, it is legal. The Caronia court held that prosecuting a drug representative for promoting his company’s drugs for off-label uses (i.e., solely for his speech) violated his First Amendment rights to free speech and was, therefore, improper.

There are several lessons that can be learned from the Caronia decision. While that decision was based in the criminal context, those involved in civil False Claims Act cases should be aware of the possible implications of this holding. In particular, it is clear that in framing complaints, preparing instructions for the jury and prosecuting off-label marketing cases in the future, the Government and relator’s counsel must be careful to characterize evidence as to the speech of the defendants with regard to off-label promotion as mere evidence of an intent to misbrand or a conspiracy to misbrand and not as per se misbranding. It is also apparent that other evidence that does not involve speech which shows the pharmaceutical company and the individual defendant’s intent to misbrand may be essential to avoid the prohibitions established by the Caronia court. It is also important to point out that the Caronia court did not hold that off-label marketing based on false or misleading statements is legal. It may well be that courts will hold that misrepresenting facts and making false and misleading statements in order to induce physicians to prescribe off-label will continue to constitute illegal conduct both under criminal and civil statutes. In conclusion, we will have to wait for future decisions interpreting Caronia in the civil context before we will know how significant the holding in Caronia is for the success of future False Claims Act cases based on off-label marketing.