In a highly significant and long-awaited ruling, the United States Court of Appeals for the Second Circuit has overturned the conviction of a pharmaceutical sales representative for promoting his company’s products for uses not approved by the Food and Drug Administration. Such so-called “off-label” promotion of prescription products has long been prohibited by FDA as a violation of the Federal Food, Drug, and Cosmetic Act under the theory that unapproved claims about a product make that product “misbranded.” However, FDA allows health care providers to use and prescribe a drug for any use – including uses not approved by the FDA. If the ruling is extended to other federal circuits, the government’s ability to regulate the marketing of prescription products could be broadly curtailed and manufacturers may have limited incentive to seek FDA approval for new uses of their prescription drugs and medical devices.

Pharmaceutical sales representative Alfred Caronia was convicted by a jury in 2009 for knowingly and intentionally conspiring with others to misbrand a prescription drug by marketing it for uses not approved by FDA. Caronia appealed the jury verdict, arguing that he was convicted solely for speech protected by the First Amendment to the Constitution.

In a 2-1 decision, the Court of Appeals agreed with Caronia. The majority held that the government had prosecuted Caronia for “his speech in aid of pharmaceutical marketing” and not for his intention to misbrand the drug. In reaching this conclusion, the majority cited the Supreme Court’s recent opinion in Sorrell v. IMS Health, Inc., 131 S. Ct. 2653 (2011), which overturned a Vermont law that restricted pharmaceutical companies from using prescribing data for marketing purposes because that was held to be protected speech as well.

The Court of Appeals went on to conclude that the FDA’s enforcement of the prohibition on truthful off-label claims is a content- and speaker-based restriction on speech subject to heightened scrutiny under the First Amendment, and that FDA could not meet its burden of minimizing speech restrictions as much as possible, even when there is a compelling government interest. The court noted that FDA might have sought alternative ways to “increase the safety of off-label drug use” without putting in place “excessive First Amendment restrictions.” It also emphasized that only truthful and not misleading speech about off-label uses is entitled to First Amendment protection; Caronia was not alleged to have made any false or misleading statements about the drug he was selling.

The dissenting judge on the panel noted that “(t)he majority calls into question the very foundations of our century-old system of drug regulation.” She asserted that the First Amendment has never prohibited the government from using speech as evidence of intent, and that Caronia’s off-label promotion of the drug was valid evidence of his intent to misbrand the drug in violation of the Act.

Neither FDA nor the Department of Justice has made the government’s appeal intentions clear, but given the broad ramifications of allowing drug companies and their employees to engage in off-label promotion, we anticipate that the Second Circuit ruling will be appealed to the Circuit’s full panel of judges and then possibly to the Supreme Court. For now, the ruling applies only in the Second Circuit (New York, Connecticut and Vermont), so pharmaceutical companies that market their drugs nationally likely will not change their marketing policies, although the government may forgo initiating any new off-label criminal prosecutions until the legal issues are resolved. In addition, as the Court of Appeals noted, physicians and pharmaceutical manufacturers can still be held accountable for off-label uses through medical malpractice and negligence theories of liability.

Arent Fox will continue to monitor developments on this issue, which has major implications for all pharmaceutical and medical device manufacturers.