Second Circuit Declares Off-Label Promotion Ban Unconstitutional: Implications For False Claims Act Defendants

On December 3, 2012, the United States Court of Appeals for the Second Circuit held that the First Amendment protects pharmaceutical companies who truthfully promote the lawful, off-label use of prescription drugs from criminal prosecution in United States v. Caronia, __ F. 3d ___, 2012 WL 5992141 (2d Cir. Dec. 3, 2012). This decision has attracted widespread attention from the government, the FDA, and the pharmaceutical industry, prompting questions as to whether Caronia could be the beginning of the end of the FDA's prohibition on off-label promotion.

The constitutional and regulatory implications of Caronia are significant and it is unclear how this decision will affect civil liability under the False Claims Act ("FCA"),1 one of the primary tools used by the government to penalize off-label promotion. This Client Alert analyzes the potential FCA implications of Caronia, assessing how this decision may affect defenses available to companies accused of violating the FCA for alleged off-label marketing.

Case Background

Alfred Caronia was a sales representative for Jazz Pharmaceutical (formerly Orphan Medical, Inc.), which manufactures Xyrem, a powerful nervous system depressant. In 2002 and 2005, the FDA approved Xyrem to treat various conditions associated with narcolepsy. Xyrem also demonstrated effectiveness for other indications, which were not approved by the FDA.

As part of an investigation of Orphan for off-label promotion begun in 2005, the government taped two conversations between Caronia and physicians, in which he plainly promoted the use of Xyrem for unapproved indications. The government brought criminal charges against Caronia and a physician in 2007 for marketing a "misbranded" drug in violation of the Food Drug & Cosmetic Act ("FDCA") and for conspiracy to market a misbranded drug, arising out of the defendants' off-label promotion. At trial the government did not contest the truthfulness of the information Caronia shared with the physician. The jury convicted Caronia of conspiracy to introduce a misbranded drug into interstate commerce and Caronia appealed to the Second Circuit, arguing that the government prosecuted him directly for his truthful speech in violation of his First Amendment rights.

A divided panel of the Second Circuit agreed. Judge Chin, writing for the majority, reasoned that the FDCA does not expressly criminalize off-label promotion and references "promotion" only as evidence of a drug's intended use. As the court...