Truth, Falsity, and Fraud: Off-Label Drug Settlements and the Future of the Civil False Claims Act

Abstract

The pharmaceutical industry may be losing the battle of public opinion, but it has won important victories in the war over First Amendment commercial speech. In December 2012, the Second Circuit held in United States v. Caronia that the misbranding provisions of the Food, Drug and Cosmetic Act could not prohibit a pharmaceutical sales representative’s truthful statements promoting the off-label use of one of his company’s products. The case fueled a growing debate over pharmaceutical commercial speech, with the industry declaring victory over needless government regulation while critics decried the erosion of the FDA’s ability to protect the public from harmful drugs.

Yet a parallel area of pharmaceutical litigation has, curiously, proceeded almost untouched. In the months both leading up to and after Caronia, companies agreed to multi-million- and even billion-dollar Civil False Claims Act settlements based on allegations that they caused false claims to be submitted to Medicare and Medicaid by promoting their products off-label. While Caronia did not address the FCA, logic suggests that if companies have a First Amendment right to discuss truthful off-label uses of their products, it is difficult to see how claims submitted when the drugs are prescribed for those very uses can be considered “false.”

This inconsistency is problematic, and likely unsustainable. If pharmaceutical manufacturers are emboldened by Caronia to challenge these FCA prosecutions, the litigation likely will turn on the truth or falsity of the company’s statements regarding off-label uses. Despite its name, however, the FCA is particularly unsuited to addressing what are at core disputes over medical and scientific data. In order to maintain the integrity of this key anti-fraud enforcement tool, it is crucial to separate questions about the truth of the claims for payment from questions about the truth of the underlying scientific statements. Because Medicare and Medicaid coverage determinations rely heavily on FDA approval, however, those issues are inextricably intertwined. This article explores why off-label promotion has been treated inconsistently in the First Amendment and FCA contexts, and the ways in which this trend highlights the limitations of the FCA as a panacea for health care fraud.

Keywords: fraud, false claims, food and drug