On Caronia, Free Speech And Risk Mitigation

Posted On Thursday, March 7, 2013

When the Second Circuit ruled in December that drug manufacturers could not be prosecuted for promoting off-label uses of their products, we noted that the decision had “potentially wide-ranging ramifications for pharmaceutical regulation and free-speech law.”

That’s still true, of course.  But the key word there was “potentially”—given the unsettled nature of this area of the law, the practical consequences of Caronia won’t be clear for some time.  And the government’s decision not to appeal the ruling ensured that the case would not establish binding precedent outside of the Second Circuit.

Some observers had thought the Ninth Circuit, facing a similar First Amendment issue in United States v. Harkonen, might bring the issue to a head by parting with the Second Circuit’s analysis.  But Harkonen involved a wire-fraud conviction, and on Monday, the Ninth Circuit affirmed Harkonen’s conviction without citing Caronia, concluding instead that the First Amendment did not protect Harkonen’s fraudulent—as opposed to merely off-label—speech.

Thus, the uncertainty remains.  And on Tuesday, the effects of that uncertainty were on display when the CEO of generic drug manufacturer Par Pharmaceutical Companies pleaded guilty in New Jersey federal court on behalf of the company to charges of misbranding of a drug used by AIDS patients.

Par will pay an $18 million fine, $4.5 million in restitution and a $22 million civil penalty.

The criminal charges against Par involved Megace ES, a drug approved by the FDA to treat AIDS patients with anorexia or other disorders leading to significant weight loss.  Par promoted the product for treatment of patients without AIDS who had weight-loss problems.

In 2011, Par filed a federal lawsuit in the District of Columbia challenging the FDA regulations that criminalize off-label promotion.  But the company stipulated on Tuesday to dismiss the suit, presumably as part of the settlement that led to its plea deal.

Par’s plea highlights the quandary drug companies face in the wake of Caronia: Do they press forward with First Amendment challenges, hoping to build on favorable precedent?  Or do they seek to mitigate risk by accepting plea deals that minimize their exposure? 

Until the Supreme Court speaks on this issue, these are questions drug companies and their attorneys will be asking themselves a lot.