Healthcare Business News

Boon for drugmakers

Victory on off-label marketing called 'new era'

By Joe Carlson
Posted: December 8, 2012 - 12:01 am ET

Though they are not celebrating in public, executives and lawyers for pharmaceutical companies had to be happy last week after an appeals court in New York concluded that federal law does not prohibit sales reps from marketing drugs for uses not approved by the Food and Drug Administration.

“This has been considered by the industry as being a billion-dollar case,” said private attorney Thomas Liotti, whose client Alfred Caronia successfully overturned his felony conviction for illegal drug marketing by fighting over a legal principle that drug manufacturers have never won—that the FDA's federal power to regulate drugs doesn't usurp corporations' First Amendment right to truth-fully talk about them.

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Several drug companies declined to talk about the ruling. An executive with industry trade group Pharmaceutical Research and Manufacturers of America said the ruling opened the door for liberalization of drug-market rules.

“I do think this moves us toward a new conversation with the Food and Drug Administration,” said Mit Spears, executive vice president and general counsel for PhRMA. “We think it's a useful decision and a helpful decision, and we think it's going to clarify the regulatory environment over time.”

The ruling marked a major departure from past readings of FDA power and potentially undercuts much of the legal authority that the Justice Department uses to extract huge settlements from drugmakers when their sales reps tell doctors, nursing homes and hospitals that certain drugs may show promise for uses that the FDA has not yet approved. Scores of settlements over the past two decades have resulted in drugmakers paying billions of dollars to settle claims they illegally engaged in off-label marketing of FDA-approved drugs.

Daniel Reinberg, an attorney with Polsinelli Shughart in Chicago, said he believes the U.S. Supreme Court will have the final word on the issue, because of its wide ramifications for the drug industry. “It's significant because these are some of the biggest-dollar cases with the drug companies that we have ever seen,” he said.

There's still a long way to go before the Dec. 3 ruling from the 2nd U.S. Circuit Court of Appeals reaches the high court, however. Federal officials are likely to ask the Circuit Court judges to take another look at U.S. v. Caronia. At least two other circuits challenging the FDA's authority to regulate drug marketing on free-speech grounds are pending.

In October 2011, Par Pharmaceuticals sued the FDA in U.S. District Court in Washington “to preserve our First Amendment right” to talk about the drug Megace ES, which is commonly prescribed to cancer and geriatric patients but has been approved by the FDA only for AIDS patients, the lawsuit says.

Proceedings in Par v. U.S. were stayed in June pending ongoing settlement negotiations. Officials with the drug company did not return calls for comment on whether the Caronia ruling will affect the settlement talks.

Meanwhile, the 9th U.S. Circuit Court of Appeals in San Francisco heard oral arguments Dec. 6 in the case of U.S. v. Harkonen, in which former InterMune President and CEO Dr. Scott Harkonen appealed a wire-fraud conviction based on a company news release announcing preliminary results of a clinical study that seemed to show survival benefit for the drug Actimmune.

Harkonen maintained that his ability to truthfully summarize results of a clinical trial was protected by the First Amendment, regardless of FDA opposition to his doing so. “Decisions about prescribing medicine 'must result from free and uninhibited speech,' ” Harkonen's 100-page brief to the 9th Circuit says, quoting the recent Supreme Court case Sorrell v. IMS Health.

The 6-3 Sorrell decision came down in June 2011. It found that private companies' free-speech rights to market drugs outweighed states' interest in trying to control rising healthcare costs by limiting how drug sellers' can market more-expensive products to doctors. Sorrell also was the linchpin in the Caronia case.

Alfred Caronia was a drug salesman for Orphan Medical (later acquired by Jazz Pharmaceuticals), where his job was to market the powerful sleep-inducing drug Xyrem, whose active ingredient is a compound known as GHB—more commonly called the “date rape drug.”

Caronia was convicted by a jury in 2008 of one count of conspiring to illegally introduce misbranded Xyrem into interstate commerce because he told doctors the drug could be used for patients with fibromyalgia, chronic pain and muscle disorders, even though it had been FDA-approved only for a condition associated with narcolepsy known as cataplexy, according to a judge's summary of the case.

Jazz Pharmaceuticals agreed in July 2007 to plead guilty to felony misbranding of Xyrem and paid $20 million in settlements and penalties without admitting civil liability. PhRMA's Spears noted that companies in such cases may face the devastating penalty of exclusion from Medicare if they go to trial and lose.

Caronia fought his criminal conviction on First Amendment grounds, arguing to the Second Circuit panel in December 2010 that, contrary to FDA and Justice Department legal theories, the federal Food, Drug and Cosmetic Act does not make it illegal to tell doctors about potential uses of drugs or results of clinical studies that support unapproved uses. The final ruling in his case last week cited the Supreme Court's guidance in Sorrell: “Speech in aid of pharmaceutical marketing … is a form of expression protected by the Free Speech Clause of the First Amendment.”

Constitutional law attorney John Kamp, who is executive director of drug marketing trade group Coalition for Healthcare Communication, predicted that the FDA will not be eager to bring the Caronia case to the Supreme Court because the same 6-3 majority is likely to strike down the FDA's off-label marketing rules.

“I think we are in the beginning of a new era of FDA regulation of drugs, marketing of drugs,” Kamp said. “My guess is what the FDA is likely to do … is to go to a Federal Trade Commission-type analysis for what is true: If you make a claim for your product, you need to have substantial evidence for what you claim.”

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