On February 26, 2016, a jury in West Texas acquitted Minnesota-based medical device company Vascular Solutions, Inc., and its CEO, Howard Root, in a federal criminal case involving alleged FDA crimes. The indictment in the case charged Vascular Solutions and Mr. Root with misbranding and conspiracy based on allegations that Vascular Solutions marketed its Vari-Lase® device for off-label use and sought to conceal that activity from the FDA. The jury wholly rejected the government’s case and delivered a stunning defeat to the FDA and the Department of Justice (DOJ) by acquitting Vascular Solutions and Mr. Root on all counts.
This case is notable not only for its outcome, but also because it involved two of the hottest topics in criminal enforcement in the health care industry: the legality of off-label promotion, and DOJ’s new focus on bringing criminal charges against health care industry executives. The jury’s verdict was a significant setback for the government on both fronts.
Vascular Solutions’ and Mr. Root’s primary defense at trial was that the allegedly off-label use of the Vari-Lase was actually on-label, and that the government had mistakenly brought the case despite this fatal flaw. The Vari-Lase device is cleared by the FDA for the “treatment of varicose veins in the lower extremity,” which is a general statement of the product’s intended use. The government argued that despite this cleared general statement of intended use, the company could not lawfully promote Vari-Lase for the treatment of a specific type of varicose vein – namely, perforator veins. Vascular Solutions and Mr. Root maintained that FDA laws and regulations require only a general statement of intended use. To the extent the FDA prefers companies to obtain clearance for a specific intended use before promoting for that use, the preference derives from the FDA’s non-binding guidance and no law or regulation requires specific clearance. At trial, the government’s own FDA witness testified that the defendants’ interpretation of FDA law and guidance was accurate and that the Vari-Lase general statement of intended use covered the treatment of perforator veins. In other words, the government’s own FDA witness agreed that the allegedly off-label promotion was actually on-label. This testimony was devastating to the government’s case.
Notably, the trial court instructed the jury at the opening and close of trial that truthful off-label promotion is not a crime because such speech is protected by the First Amendment. This instruction marks the first time that the First Amendment protection for truthful off-label speech has been adopted by a court outside the Second Circuit, and it is a significant blow to the government’s ability to prosecute companies for off-label promotion. The court’s instructions are likely to be cited by other companies facing False Claims Act and criminal liability for off-label promotion in future cases.
The verdict also calls into question the strategy unveiled by the Department of Justice last September to bring more cases against corporate executives, through what is known as the “Yates Memo,” a memorandum outlining DOJ’s plan to prosecute individuals allegedly involved in corporate crimes. Mr. Root not only successfully rebutted the charges against him, he ran Vascular Solutions while under indictment and on trial, and benefitted from the support of the company’s board of directors. This case provides a roadmap for executives that have been similarly indicted or are threatened with indictment and may encourage other executives and corporate boards to reject government attempts to intimidate them into settlement through threats of individual liability.