On Monday, the Second Circuit Court of Appeals issued a split decision in U.S. v. Caronia, vacating the criminal conviction of a pharmaceutical sales representative who was found guilty of misbranding, in violation of the Food, Drug & Cosmetic Act (FDCA), because he had promoted the sleep medication Xyrem for off-label uses.  The government relied on taped conversations with physicians in bringing a criminal action.

The Food & Drug Administration (FDA) prohibits companies from off-label marketing, which is generally understood as the practice of promoting the prescription of pharmaceuticals for an unapproved indication, age group, dosage, or form of administration.  Once the FDA approves a drug, physicians are free to prescribe that drug as they wish.  While doctors may prescribe and patients may take drugs for unapproved or off-label uses, and private and government payors frequently reimburse such uses, pharmaceutical companies have been prohibited from promoting such uses directly to healthcare providers.  The current FDA rules restrict pharmaceutical manufacturers to marketing their drug for the FDA-approved marketing indication.

In vacating the conviction, a majority of the Second Circuit panel 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.”

In reaching its decision, the appeals court relied heavily on the recent Supreme Court decision in IMS v. Sorrell, No. 10-779 (2011), though it also applied the traditional Central Hudson factors (refresher here).  One of the most significant aspects of the decision is that it found the speech restriction violative of both the third and fourth prong of the Central Hudson test.  Historically, legal arguments concerning FDA speech restrictions have focused on prong four, which requires that a speech limitation not be more extensive than necessary to serve a substantial government interest.  Such arguments are set forth in Washington Legal Foundation, Pearson, Western States Medical, and the more recent Allergan and Par complaints (here and here).

The Second Circuit also found that the speech restrictions failed to advance the government interest asserted, in violation of Central Hudson’s third prong.  The majority determined that the speech restrictions didn’t adequately or materially advance the government’s stated interest in keeping people safe from off-label uses and in protecting the integrity of the drug review process.  Moreover, the court was clearly struck by the multiple and legal ways that drugs can be used off label, the key medical role off-label uses can play in patient care, and the government’s support of off-label uses in other contexts.  These new issues are potentially quite significant, as the court appeared to call into question the entire enterprise of off-label regulation.

The immediate reaction to the Caronia decision has been divided.  Some critics have suggested that the decision heralds a return to the days when hucksters could promote snake oil without restrictions (as the dissent noted, it is legal to sell arsenic, but not for all uses).  Others view the decision as vindication for free speech rights that were implicated by a regime that allowed everyone except the manufacturer of a drug to discuss the potential benefits of off-label uses.

(For additional insight from Faegre Baker Daniels partner Mike Giudicessi and counsel Ralph Hall, see this video from Faegre Baker Daniels Productions)

The decision is undoubtedly significant insofar as it implicates conduct that has formed the basis for a large number of high-profile False Claims Act settlements between pharmaceutical manufacturers and the Department of Justice, including this year’s landmark agreements with Abbott Laboratories and GlaxoSmithKline.

Although the Caronia decision is receiving a lot of attention, the ruling only changes the law in the states comprising the Second Circuit, which effectively limits its reach and import for day-to-day operations of drug companies.  There are additional potential limiting factors.  The facts of this particular case involved conduct that was uncomplicated by additional issues that frequently appear in off-label investigations, such as improper inducements or the suppression of negative risk information.  Moreover, the court appeared to leave open the possibility that the FDA could get at the same conduct, without running afoul of the First Amendment, by focusing on the distribution of a drug without adequate directions for the intended off-label use.  If a subtle shift of that kind is sufficient to preserve FDA enforcement, the impact of Caronia will be limited.

In terms of next steps, the government could seek en banc review by the Second Circuit.  Rather than risk eventual Supreme Court review – by a Court that has communicated a distaste for restrictions on commercial speech both in Sorrell and in the Citizens United decision – the FDA and Department of Justice may decide that they would prefer to leave this split decision as an arguable outlier while exploring potential legislative or regulatory solutions.

Regardless of the eventual outcome, the decision poses a meaningful challenge to FDA’s authority and can be read as a vindication, by at least two federal judges, of the pharmaceutical industry’s argument that it should be permitted to communicate truthful, non-misleading information about its products without restriction.  Although there has been some hype about the decision changing the rules for off-label promotion, the impact will likely be more muted.  Certainly it would not seem prudent to alter marketing and promotion policies and practices based on this opinion.