The Government Puts Forth Its Position Regarding the Application of Caronia to FCA Cases

Late last year, in a Statement of Interest filed in U.S. ex rel. Cestra v. Cephalon, Inc., No. 10-CIV-6457 (S.D.N.Y.), the Government for the first time stated its position regarding the applicability of U.S. v. Caronia, 703 F.3d 149 (2nd Cir. 2012) to off-label marketing False Claims Act (FCA) actions.

In the FCA context, a company or individual can violate the False Claims Act by engaging in off-label marketing which causes or induces physicians to prescribe drugs for non-FDA approved uses to Medicare and Medicaid patients.  Medicare and Medicaid will not pay for drugs that are prescribed for unapproved uses as a result of off-label marketing, and, therefore, claims for payment for such drugs are considered false.  Thus, through off-label marketing a person can cause the submission of a false or fraudulent claim.  See 31 U.S.C. § 3729(a)(1)(A).

Caronia involved off-label marketing as it relates to the crime of misbranding.  In Caronia, Alfred Caronia, a drug sales consultant, had been convicted of conspiracy to introduce misbranded drugs into interstate commerce.  Id. at 152, 155.  On appeal, Caronia argued “that he was convicted for his speech — for promoting an FDA-approved drug for off-label use — in violation of his right of free speech under the First Amendment.”  Id. at 152.  According to the Second Circuit, Caronia plainly “promoted the use of Xyrem”, a drug approved for narcolepsy, for unapproved indications and for use in unapproved subpopulations – i.e., patients under the age of sixteen.  Id. at 156.

The Food, Drug and Cosmetic Act (FDCA), expressly prohibits “the introduction or delivery of any . . . drug . . . that is . . . misbranded.”  Id. at 154 (quoting 21 U.S.C. § 331(a)).  One of the ways a drug can be misbranded is if “its labeling fails to bear ‘adequate directions for use”.  Id. (quoting 21 C.F.R. § 201.5).  Adequate directions for use are defined as “directions under which the lay [person] can use a drug safely and for the purposes for which it is intended.”  Id.  (quoting 21 C.F.R. § 201.5).  The intended use of a drug is defined “‘by reference to the objective intent of the persons legally responsible for the labeling of the drugs,’ which may be demonstrated by, among other evidence, ‘oral or written statements by such persons or their representatives.’”  Id. (quoting 21 C.F.R. § 201.128).  Although, the FDCA does not expressly prohibit off-label marketing, such promotional statements can constitute evidence of an intended use of a drug that the FDA has not approved.  See id. at 155.  The labeling of a drug does not contain adequate directions for use for non-FDA approved uses, and a drug is thus misbranded with regard to such use.  See id.

The Second Circuit, in a divided panel, vacated Caronia’s conviction, holding that he was impermissibly prosecuted for his truthful speech.  Id. at 162, 168.  Pointing to the conduct and arguments of the Government at trial, the primary thrust for the majority opinion was the belief that Caronia was actually prosecuted and convicted for off-label promotion itself and, therefore, his speech.  See id. at 161.  The dissent disagreed with the majority’s holding and stated that “Alfred Caronia was convicted of conspiring to introduce a prescription drug into interstate commerce with the intent that it be used in ways its labeling disclosed no described.  This intent was revealed . . . through his speech.”  Id. at 169 (Livingston, J., dissenting).  The dissent further noted that “the First Amendment has never prohibited the government from using speech as evidence of motive or intent.”  Id. (Livingston, J., dissenting).

In Cestra, the defendant filed a motion to dismiss, arguing, among other things, that its alleged off-label promotion with regard to FCA violations is protected speech under the First Amendment pursuant to Caronia.  Memorandum in Support of Motion to Dismiss Second Amended Complaint, at 14.  The Government, in its Statement of Interest, argued that an off-label promotion FCA case does not implicate the free speech concerns in Caronia because the FCA “does not on its face create liability for the off-label promotion of a drug.  Instead, the FCA prohibits conduct that knowingly causes the submission of false claims, such as claims for treatments that are not ‘reasonable and necessary.’”  Statement of Interest, at 5–6.  The Government further argued: “Just as the Government may prohibit price-fixing conspiracies under the anti-trust laws even when speech is instrumental to the conspiracy, so may the Government prohibits 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.”  Id. at 6–7.  The court has yet to rule on the motion to dismiss.

Hopefully, the Cestra court will decline to apply First Amendment protection to the off-label promotion at issue in the case.  Besides the obvious – that Caronia  is a criminal case rather than a civil case – Caronia is really a narrow opinion that appears to be based primarily on the way the Government conducted the trial.  As the dissent noted:

The majority unsurprisingly agrees that speech may be used as evidence of intent.  It even leaves open the possibility that speech may serve as evidence of intent to introduce a misbranded drug into interstate commerce.  The majority nonetheless concludes that in this particular case “the government clearly prosecuted Caronia for his words — for his speech” and not for conspiring to introduce a misbranded drug into interstate commerce.

Caronia, 703 F.3d at 172 (Livingston, J., dissenting) (emphasis added).  Were courts to start applying such free speech protection in off-label cases, it would allow pharmaceutical companies and their representatives to market and push drugs on physicians for non-approved uses with near impunity from civil liability, effectively closing the door on off-label marketing as a means of showing a violation of the FCA, absent false or misleading statements being made.  See id. at 164 (“[T]o warrant First Amendment protection, the speech in question must not be misleading and must concern lawful activity.”).


If you have an Off-Label Marketing case, or other False Claims Act case, please contact the Rabon Law Firm for a free consultation.

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