Ninth Circuit Off-Label Marketing Decision Suggests More Prosecutions Will Be Coming

The Ninth Circuit has reopened a door for off-label marketing prosecutions, and it is important to review your compliance and risk management programs in light of this recent decision. Last December, the pharmaceutical and medical device industries exhaled a sigh of relief in response to the influential Second Circuit's decision in United States v. Caronia, holding that truthful off-label marketing is a form of protected First Amendment speech that cannot form the basis for a criminal prosecution under 21 U.S.C. §333 of the Food, Drug and Cosmetic Act ("FDCA"). The Caronia decision followed the Supreme Court's decision in Sorrell v. IMS Health Inc., 131 S. Ct. 2653 (June 23, 2011), which held that a Vermont statute prohibiting pharmaceutical companies from engaging in truthful marketing activities offended the First Amendment. The question after Sorell and Caronia became, can the government still prosecute off-label marketing? On March 4, 2013 the Ninth Circuit said yes, albeit in an unpublished opinion.

In United States v. Harkonen, No. 11-10209 D.C. No. 3:08-cr-00164 MHP-1, the Ninth Circuit affirmed the wire fraud conviction of Scott Harkonen, former CEO of Intermune, for issuing a fraudulent press release touting the performance of the Company's drug Actimune in clinical trials. Harkonen challenged the conviction as an unconstitutional infringement of his First Amendment rights. Harkonen claimed that the press release was misleading but not fraudulent. According to the Court, however, "[a]t trial, nearly everybody actually involved in the [Actimune] clinical trial testified that the Press Release misrepresented [Actimune's] results." Opinion at 3. Indeed, "Harkonen himself was "very apologetic" about the Press Releases' misleading nature," the Court observed. Id. The court found ample evidence for the jury to conclude that the Press Release was misleading even if "literally true." Id., quoting United States v. Woods, 335 F.3d 993, 998 (9th Cir. 2003).

Relying on an early 20th century Supreme Court decision, American School of Magnetic Healing v. McAnnulty, 187 U.S. 94 (1902, Harkonen argued that his conviction should be reversed because "genuine debates over whether a given treatment caused a particular effect are outside the scope of the mail and wire fraud statutes." Id at 6. The Ninth Circuit rejected this argument holding that "McAnnulty does not categorically prohibit fraud prosecutions for statements about the efficacy of a...