CHAPTER §7.02 Area of Government Interest: Off-Label Promotion

• Jurisdiction: United States

§7.02 Area of Government Interest: Off-Label Promotion

This section covers briefly the statutory framework governing off-label promotion but also provides the context of case studies involving notable settlements to offer insight into actual enforcement activities targeting promotional practices in the pharmaceutical industry.

Marketing of drugs for indications other than those approved by the FDA is termed "off-label promotion." Although physicians are permitted to prescribe drugs off-label, pharmaceutical companies are generally prohibited from actively promoting off-label uses of drugs. Off-label promotion can lead to civil and criminal exposure and significant fines under the False Claims Act and Food, Drug, and Cosmetic Act ("FDCA").

Since 1999, when the U.S. Attorney's Office for the Northern District of California reached a criminal settlement with Genentech relating to promotional activities for its growth hormone Protropin, the DOJ and FDA have increasingly focused on off-label sales of pharmaceutical products. Initially an investigative theory that accompanied other theories such as the Anti-Kickback Statute that were more established and viewed as easier to prove, the number of off-label sales investigations has increased steadily following the Genentech case. Most off-label investigations have both a criminal and civil element and now typically involve the FDA, DOJ, and often one or more state attorney general's office. Investigations are usually driven by a U.S. Attorney's office, which initiates an investigation pursuant to a qui tam whistleblower suit filed by a former employee or individual with alleged knowledge of potential company practices that could violate the federal or applicable state False Claims Act. Several U.S. Attorneys' offices, including those in Boston, Philadelphia and San Francisco, have developed a particular expertise in investigating allegations of off-label promotion and have driven a significant number of settlements.

[1] Statutory Framework

Government criminal prosecutions for off-label promotion generally arise from the provisions of the FDCA that prohibit the introduction into interstate commerce of an unapproved new drug⁸ or a misbranded drug.⁹

The relevant statutory definitions provide that a "drug" is, among other things, an article "intended for use in the diagnosis, cure, mitigation, treatment or prevention of disease in man."¹⁰ The statute defines a "new drug" as "[a]ny drug . . . the composition of which is such that such drug is not generally recognized, among experts qualified by scientific training and experience to evaluate the safety and effectiveness of drugs, as safe and effective for use under the condition prescribed, recommended, or suggested in the labeling thereof. . . ."¹¹ A drug is deemed to be misbranded if, among other things, its "labeling" is "false or misleading in any particular,"¹² or does not bear "adequate directions for use."¹³

The FDCA does not define "adequate directions for use," but FDA's regulations provide that the term means "directions under which the layman can use a drug safely and for the purposes for which it is intended."¹⁴ FDA's regulation further provides that directions for use may be inadequate due to omissions or the incorrect specification of, among other things, statements of all intended conditions, uses, and purposes of the drug that are prescribed, recommended, or suggested in its "oral, written, printed, or graphic advertising."¹⁵ The regulation also states that advertisements for prescription drugs may not "recommend or suggest" the drug for unapproved uses.¹⁶ From this combination of statutory language and supporting regulations, the theory of off-label promotion has developed. In recent years, and in response to the First Amendment developments discussed infra, the statutory framework has evolved from a general ban on off-label promotion—i.e., that companies may not promote a drug to health care professionals or the general public for any use other than its approved indication—to a framework where the statutory touchstone for reviewing promotional labeling and advertising is whether the materials are truthful and not misleading.

The statute contains provisions for both a misdemeanor and felony offense.¹⁷ The misdemeanor offense is premised on strict liability and thus has no intent requirement. Any violation, whether intentional or not, can be a misdemeanor offense. Individuals or entities that violate the statute with an intent to defraud or mislead or second-time violators may be guilty of a felony violation of the statute.¹⁸

FDCA violations may also lead to exclusion from Medicare and state health care programs for the convicted entity or individual. Under separate statutory authority, individuals or entities may be excluded from participation in any federal health care program if:

convicted for an offense which occurred . . . in connection with the delivery of a healthcare item or service or with respect to any act or omission in a healthcare program operated by or financed in whole or in part by any Federal, State, or local government agency, of a criminal offense consisting of a felony relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct. . . . ¹⁹

These provisions of the FDCA and related statutes provide the legal framework for criminal investigations of off-label promotion.

The civil component of an off-label investigation typically falls under the umbrella of the False Claims Act ("FCA").²⁰ The FCA imposes civil liability on an individual or company that knowingly submits or causes the submission of a false claim for payment to the government,²¹ and may result in treble damage.²²

The statute allows private whistleblowers to bring an action on behalf of the government.²³ Such suits brought by private citizens with knowledge of potential fraud against the government are called qui tam actions. If the private citizen's qui tam suit succeeds in recovering funds on behalf of the government, the individual is usually entitled to a portion of the total recovery.²⁴

Traditionally, a claim under the FCA involves a company causing false billing or fraudulent claims to be submitted to the government. The FCA has been used widely in the area of defense contracting, but the statute has also gained significant traction in the pharmaceutical industry. The catalyst for more aggressive FCA enforcement against the pharmaceutical industry is the settlement involving Warner-Lambert's drug Neurontin, discussed in detail below.²⁵ FCA liability may arise if the pharmaceutical company has caused the submission of false Medicare claims to the government by promoting the drug to physicians for uncovered and unapproved off-label uses.²⁶ Congress amended the FCA in both 2009 and 2010 to further fortify the statute as an enforcement tool. As examples, these amendments lowered the bar for prosecuting sub-contractors and made it more difficult to dismiss whistleblower suits based on publicly available information.

[2] The First Amendment and Off-Label Promotion

There is little case law that addresses the theory of liability for off-label promotion under the FDCA and FCA. The paucity of case law is primarily due to the stern penalties for any company that does not negotiate a settlement, including potential exclusion from government programs. With these significant risks in mind, most pharmaceutical manufacturers targeted by extended government investigations have reached some form of resolution rather than risk indictment and losing control over the negotiation process.

However, in recent years, pharmaceutical manufacturers, their counsel, and other interested parties have maintained that truthful off-label promotional speech is protected by the First Amendment of the United States Constitution, and manufacturers' historical unwillingness to challenge the statutory off-label promotion regime has receded.

The First Amendment provides that "Congress shall make no law . . . abridging the freedom of speech."²⁷ "[A]s a general matter, the First Amendment means that government has no power to restrict expression because of its message, its ideas, its subject matter, or its content."²⁸ In addition, as the Supreme Court stated in Sorrell v. IMS Health, "[t]he First Amendment requires heightened scrutiny whenever the government creates 'a regulation of speech because of disagreement with the message it conveys.'"²⁹ Under the heightened-scrutiny standard, "the government must show that the regulation at issue is narrowly tailored to serve or promote a compelling government interest."³⁰ "Criminal regulatory schemes . . . warrant even more careful scrutiny."³¹

Although the Supreme Court has accorded lesser, but still rigorous, scrutiny to regulations of "commercial speech," it defines this category narrowly as speech that "does no more than propose a commercial transaction."³² When speech does not merely propose such a commercial transaction and instead attempts to provide information and to education, it is "fully protected expression" whose regulation requires the government to satisfy strict scrutiny.³³ Even speech that is properly classified as commercial speech is entitled to significant First Amendment protection. As the Court recognized, a "consumer's concern for the free flow of commercial speech may be far keener than his concern for urgent political dialog."³⁴ For that reason, as the Court held in Sorrell, "[s]peech in aid of pharmaceutical marketing . . . is a form of expression protected by the . . . First Amendment."³⁵

Even aside from the heightened scrutiny required by Sorrell, government regulations of commercial speech must at the very least satisfy intermediate scrutiny as set forth in the Central Hudson case.³⁶ Under Central Hudson, the court must first determine whether the speech at issue "concern[s] lawful activity" and is not false or misleading.³⁷ Truthful...