On December 3, 2012, the United States Court of Appeals for the Second Circuit vacated the conviction of Alfred Caronia (“Caronia”), who had been tried and convicted of participating in an unlawful conspiracy to introduce a misbranded drug into interstate commerce in violation of the U.S. Food, Drug and Cosmetic Act (the “FDCA”).1  In its 2-1 decision, the Second Circuit held that the government’s prosecution of Caronia for engaging in truthful promotion of an approved drug, albeit for off-label uses, violated Caronia’s right of free speech under the First Amendment. 

In the wake of Caronia, many commentators questioned whether the government’s efforts to prosecute the off-label marketing of drugs would be substantially impaired.  Recognizing the potential for such impairment, the government appears to have modified its approach to off-label enforcement.  Based on a Statement of Interest filed recently by the U.S. Attorney for the Southern District of New York in the Cestra v. Cephalon False Claims Act (“FCA”) case, the government’s new strategy will be to argue that commercial speech regarding off-label usages is being introduced simply as evidence of fraud or misbranding, and not to prove that the speech itself violated the FDCA or the FCA. 

The government’s Statement of Interest in Cestra serves as a cautionary note.  While compliance professionals may have viewed Caronia as a welcome development, they must remain vigilant in their efforts to ensure appropriate marketing practices.

Overview of United States v. Caronia

In March 2005, Caronia was hired by Orphan Medical, Inc. (“Orphan”) as a Special Sales Consultant to promote the prescription drug Xyrem.  In July 2005, Caronia began participating in Orphan’s “speaker program” for Xyrem, which enlisted practicing physicians to promote the drug to other physicians.  Several months later, a government cooperator posing as a physician interested in Xyrem recorded his conversations with Caronia and one of the physicians hired by Orphan as a promotional speaker (Dr. Peter Gleason).  During these recorded conversations, Caronia and Gleason allegedly promoted Xyrem for unapproved or “off-label” indications and for use in unapproved patient populations.  Caronia was subsequently charged with and convicted of participating in an unlawful conspiracy to introduce Xyrem into interstate commerce when Xyrem was “misbranded” within the meaning of the U.S. Food, Drug and Cosmetic Act (the “FDCA”).

On appeal, Caronia argued that his conviction should be reversed because he had not misrepresented the safety or efficacy of Xyrem, and the government could not, consistent with the First Amendment, prohibit him from truthfully promoting the drug.  The government, on the other hand, argued that Caronia’s conviction did not implicate the First Amendment because Caronia was not prosecuted for engaging in protected speech.  Rather, the government asserted that Caronia’s promotional statements only served as evidence of the intent (or intended use) necessary to establish that “misbranding” had occurred. 

The Second Circuit rejected the government’s assertion that the First Amendment did not apply, holding that the government had in fact prosecuted Caronia for speech relating to off-label uses of Xyrem, and that the government had never sought to limit its use of evidence regarding such speech to the issue of intent.  The Court reasoned that the jury instructions that the district court provided to the jury, and the government’s summation, together gave the impression that off-label promotion itself was prohibited. 

The Second Circuit, however, sought to limit the application of its decision in Caronia:  

[o]ur conclusion is limited to FDA-approved drugs for which off-label use is not prohibited, and we do not hold, of course, that the FDA cannot regulate the marketing of prescription drugs.  We conclude simply 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.2

This language suggested Caronia did not limit the government’s ability to prosecute pharmaceutical companies and/or their representatives for, among other things, false or misleading (i.e., non-truthful) statements regarding approved drugs for off-label uses.

The Government’s Modified Approach To FDCA Off-Label Enforcement Following Caronia

The government appears to have taken a cue from the limiting language in Caronia and modified its approach to off-label promotion enforcement.  In announcing in January 2013 that the government would not pursue an appeal in Caronia, the FDA stated that the decision “does [not] find a conflict between the [FDCA’s] misbranding provisions and the First Amendment or call into question the validity of the [FDCA’s] drug approval framework.”3  One week later, the director of the FDA’s Office of Prescription Drug Promotion made similar public comments, and stated that Caronia did not challenge the government’s underlying enforcement theory that “the promotion of a drug for an unapproved use may be relied on as evidence that the unapproved use is an intended one, and a drug that lacks adequate directions for its intended uses is misbranded.”4

The Justice Department has already advanced this position in litigation post-Caronia.  The United States Attorney for the Southern District of New York recently filed a Statement of Interest in a civil False Claims Act (“FCA”) case in New York arguing that the FCA “does not on its face create liability for off-label promotion of a drug.”5  According to the government, the FCA prohibits conduct that knowingly causes the submission of false claims, such as claims for off-label treatments that are not “reasonable and necessary.”6  The government analogized to antitrust cases: “Just as the Government may prohibit price-fixing conspiracies under the antitrust laws even when speech is instrumental to the conspiracy, so may the Government prohibit companies from knowingly causing the submission of false claims even when speech is the means by which they cause the false claims to be submitted.”7

Applying this approach to criminal misbranding cases under the FDCA, the government will likely argue that it is relying on defendants’ statements regarding off-label indications only as evidence proving motive or an intent to misbrand, and that the government is not claiming that the truthful speech itself constitutes an FDCA violation (as Caronia found).  For instance, the government may focus its evidence gathering on both the defendants’ statements and organizational marketing plans, sales directives and compensation incentives to suggest that the organization possessed an intent to misbrand a drug.  Under this theory, the government would not be attempting to criminalize protected commercial speech, and therefore, the First Amendment would not be implicated. 

While the Second Circuit rejected a similar argument in Caronia, as explained above, it did so based upon the jury instructions and the government’s summation.  Going forward, the government is likely to be much more careful with the jury instructions it urges courts to adopt, and with the arguments it makes to juries.  The government is likely to inform the court explicitly that it is introducing defendants’ statements regarding off-label indications only as evidence of motive and intent to misbrand.

In addition, as the Ninth Circuit recognized in 2013, it would be unnecessary for the government to use this theory in cases where the off-label information disseminated was fraudulent or misleading, as only truthful statements enjoy First Amendment protection.8 Accordingly, taking a belt-and-suspenders approach, the government may also allege that the defendant’s communications regarding off-label usage were themselves false or fraudulent statements that lack First Amendment protection.

Implications of the Government’s Modified Approach in FCA Cases

The government appears to be further distinguishing Caronia by arguing that its holding is limited to FDCA cases and is inapplicable to FCA cases.  In the Cestra Statement of Interest, the government stated that the FCA “does not implicate the First Amendment concerns raised in Caronia.  The FCA does not prohibit speech; rather, it is a remedy for actions that cause the submission of a false claim for payment to the Government.”  The government argued that the “central question” under the FCA is whether the defendant’s marketing activities “caused the submission of false claims, i.e., claims for off-label uses that are not covered or reimbursable by federal health care programs.”  Thus, the government’s theory is that, even if Caronia prohibits FDCA claims based on marketing that consists solely of truthful commercial speech, these restrictions are irrelevant in FCA cases because that statute imposes liability solely for the act of submitting a false claim in connection with a federal healthcare program, regardless of whether truthful speech was a part of the act of submitting the false claim.

Implications for Compliance Professionals

Though compliance professionals may have viewed Caronia as a welcome development, they must remain vigilant in their efforts to ensure appropriate marketing practices.  Indeed, as the above discussion demonstrates, the government will continue to modify its approach to off-label enforcement in light of Caronia.  Accordingly, compliance officers in the life-science and health care industry should recognize that aggressive off-label enforcement will likely persist, and they should continue to take steps ensure their organizations properly market drugs and/or submit only accurate claims for reimbursement.  Such steps should include, among other controls, the adoption of off-label compliance policies, training of relevant personnel, compliance monitoring and auditing, and the establishment of an appropriate whistleblower program.