On December 3, 2012, the Court of Appeals for the Second Circuit issued a landmark ruling in United States v. Caronia, No. 09-5006 (2d Cir. December 3, 2012) declaring that truthful, non-misleading off-label promotion is constitutionally-protected commercial speech. In a 2-1 ruling accompanied by a vigorous dissent, the Court vacated the conviction of former Orphan Medical, Inc., sales representative Alfred Caronia for conspiracy to introduce a misbranded drug into interstate commerce. The government alleged that, while Caronia was an Orphan sales rep, he promoted the drug Xyrem for off-label use. In appealing his misdemeanor conviction, Caronia argued that the First Amendment barred the government from convicting him for disseminating truthful and non-misleading information about an FDA-approved drug “where such use is not itself illegal and others are permitted to engage in such speech.” Op. at 25. The majority agreed, in effect “declin[ing] the government's invitation to construe the FDCA's misbranding provisions to criminalize the simple promotion of a drug's off-label use by pharmaceutical manufacturers and their representatives because such a construction . . . would run afoul of the First Amendment.” Op. at 33.

The majority dissected the often-unchallenged notion that off-label promotion, in and of itself, is illegal or renders a drug misbranded. It observed that neither the FDCA nor its implementing regulations expressly prohibit off-label promotion. Op. at 26. Instead, the regulatory scheme permits promotional speech to be used as evidence of a drug’s intended use. Yet despite the absence of a flat prohibition on off-label communication, Caronia argued on appeal that he was being prosecuted for having engaged in truthful, non-misleading speech. The government, by contrast, contended that his speech served to establish evidence of intent to introduce misbranded Xyrem into interstate commerce. The majority disagreed, finding that “the record makes clear that the government prosecuted Caronia for his off-label promotion.” Op. at 20.

The Court then analyzed the extent to which Caronia’s off-label promotional speech was protected by the First Amendment. In arriving at its conclusion that the speech was in fact protected, the Court relied on last year’s Supreme Court decision in Sorrell v. IMS Health, Inc., 131 S. Ct. 2653 (2011). In Sorrell, which also originated in the Second Circuit, the Supreme Court struck down a Vermont law prohibiting pharmaceutical companies from using prescribed-identifying information in their marketing efforts. The Second Circuit used Sorrell as a backdrop and concluded that the government’s prohibition of off-label communication was both content and speaker-based. It then moved to the next step of the analysis and asked whether the government had shown that the restrictions on speech were consistent with the First Amendment. Relying on the Supreme Court’s decision in Central Hudson Gas & Electric Corp. v. Public Service Commission of N.Y., 447 U.S. 557 (1980), the Second Circuit found that the government had satisfied only two of the four prongs necessary to show that commercial speech is not protected by the First Amendment. As part of that ruling, the majority concluded that there were less restrictive ways for the FDA to regulate the provision of information about off-label usage, citing in support an article by Sidley partner Coleen Klasmeier. Accordingly, the Court concluded 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.” Op. at 51.

A spirited dissent authored by Judge Livingston, who also dissented from the Second Circuit’s majority opinion in Sorrell, challenged the majority at almost every turn. Judge Livingston disagreed with the majority’s interpretation that Caronia was convicted for promoting Xyrem off-label, finding instead that “Caronia’s speech was used simply as evidence of Xyrem’s intended uses. . . .” Dissent at 7. Accordingly, she concluded that his “conviction does not run afoul of the First Amendment.” Id.

For now, the ruling applies only in the Second Circuit, which encompasses New York, Vermont, and Connecticut. It remains to be seen whether the United States will seek rehearing by the full Second Circuit or review by the Supreme Court. Regardless, the ruling has broad implications for pharmaceutical manufacturers at a time when DOJ is extracting record settlements in cases premised on allegations of off-label marketing. As the dissent noted, “the majority calls into question the very foundations of our century-old system of drug regulation.” Dissent at 1. Judge Livingston argued that if drug companies “were allowed to promote FDA-approved drugs for nonapproved uses, they would have little incentive to seek FDA. approval for those uses.” Id. at 21. As a result, Judge Livingston feared a scenario where “a drug manufacturer must be allowed to distribute a drug for any use so long as it is approved for one use.” Id. at 23. Under the majority’s view, it’s not clear how, in the Second Circuit, the government could enforce what has long been considered a bright-line rule against off-label promotion.

While the court’s ruling plainly forecloses criminal prosecution under the FDCA for providing truthful, non-misleading promotional information about off-label uses, the impact in civil FCA cases based on off-label promotion is less clear. The opinion appears to undercut any argument that communicating truthful, non-misleading promotional information about off-label uses is sufficient to render a claim “false or fraudulent.” But what if the off-label use is not covered by Medicare or Medicaid because it is not for a “medically accepted indication?” Does Caronia provide a First Amendment shield from FCA liability for engaging in off-label promotion of a drug that is not covered by federal healthcare programs for the off-label use? Can the government or a relator overcome Caronia in a civil FCA case by simply characterizing evidence of off-label promotion as evidence of intent to cause the submission of false claims? These and similar issues will no doubt be hotly contested in future off-label cases, and the impact of the Second Circuit’s ruling will no doubt continue to be explored on this blog and in other forums.