Posted by Scott Stein and Nirav Shah
As we reported last year, the Second Circuit held in U.S. v. Caronia that truthful, non-misleading off-label promotion is constitutionally-protected commercial speech. Recently, the United States filed a Statement of Interest in U.S. ex rel. Cestra, et al. v. Cephalon, Inc., 10 Civ. 6457 (SHS) (S.D.N.Y.) setting forth the government’s views on the application of Caronia to an FCA claim based on alleged off-label promotion. The Statement was filed in connection with Cephalon’s motion to dismiss the relator’s complaint alleging that Cephalon promoted two of its drugs, Treanda and Fentora, for off-label uses.
In its Statement, the government begins by acknowledging that “the FCA does not prohibit off-label promotion of prescription drugs.” However, the government continues, Caronia does not “preclude a cause of action under the False Claims Act based on a manufacturer’s off-label marketing.” According to the government, the First Amendment is “not implicated in the context of an FCA claim . . . where the defendant causes others to submit false claims for payment to the Government for non-reimbursable prescription drugs.” (emphasis added). The government argues that the “central question” in an FCA case based on off-label marketing allegations is “whether the defendant’s marketing caused the submission of false claims, i.e., claims for off-label uses that are not covered or reimbursable by federal healthcare programs.” (emphasis added) Simply put, the government’s position is that off-label promotion, per se, does not violate the FCA; rather, it is promotion for uses that are not covered by federal healthcare programs (rendering the claims for such uses “false”) that violates the FCA.
First Amendment concerns are not at issue, according to the government, since “the FCA does not prohibit speech” making it “irrelevant whether a party causes the submission of a false claim by words, by conduct, or by a combination of both.” To the extent that the promoted off-label uses would not have been reimbursed by federal healthcare programs, the government concludes, claims for those uses would have been false.
But as Cephalon appropriately notes in its reply to the government’s Statement, the distinction between the submission of “false claims” and protected First Amendment conduct is artificial. The relator seeks to hold Cephalon responsible for “causing” false claims (i.e., claims for non-reimbursable uses) to be submitted, but conduct that is alleged to have “caused” the submission of the claims is (according to Cephalon) truthful, non-misleading promotion—the very conduct that Caronia held to be protected speech. As Cephalon notes, “[b]ecause it is the ‘marketing’ that allegedly ‘causes’ the false claim, and because it is this ‘causation’ that is the alleged violation of the FCA by Cephalon, it is this ‘marketing’ that is sought to be sanctioned.”
It remains to be seen whether the Court will resolve this dispute. It may bypass the question entirely at this stage if it finds that the relator has alleged that the speech at issue was false and misleading (in which case it would not be Constitutionally protected).
The government’s Statement of Interest clearly articulates that “reimbursability” is the crux for determining whether a claim is “false” under the FCA. In doing so, it establishes when certain categories of claims would give rise to FCA liability. It also raises the question of whether, under the government’s approach, claims for uses that would otherwise be reimbursable by federal healthcare programs would present greater challenges for government prosecutors in the FCA arena.