In a ruling with potentially far-reaching implications, a U.S. appeals court panel late last year overturned the 2008 conviction of a former pharmaceutical sales representative, who was prosecuted for encouraging doctors to prescribe a drug on an off-label basis. The court agreed that his First Amendment rights were violated because the federal government failed to prove his remarks were false or misleading.

Here are a few specifics: Alfred Caronia worked a decade ago as a sales rep and marketed the Xyrem drug for treating a form of narcolepsy. He was charged with introducing a misbranded drug into interstate commerce, which is a misdemeanor, because he was talking up unapproved uses.

There is nothing new about off-label prescribing, of course. Physicians are free to prescribe any medication for an unapproved use. But the U.S. Department of Justice has reached settlements with numerous drugmakers for violating the Food, Drug & Cosmetic Act, which prevents a drug from being marketed for unapproved uses.

Recently, though, the pharma industry has been challenging this notion by arguing that the FDA is stifling a legal right to convey “truthful” information to physicians. The theory is that such commercial free speech is protected by the First Amendment. One pending lawsuit, which was filed by Par Pharmaceuticals against the FDA, makes this claim.

The Caronia decision, however, was unexpected and left drug makers feeling victorious (if only temporarily) and regulators feeling leery (to say the least). For instance, Bob Temple, the deputy director for clinical science at the FDA Center for Drug Evaluation and Research, told an industry conference that he was ‘horrified’ at the ruling.

Why? If the decision stands, drugmakers would not be required to obtain clinical data for additional uses of an approved drug, he explained at the FDA/CMS Summit that was held in Washington, DC. And permitting the industry to promote unproven uses without such a requirement could “kill vast numbers of people,” he continued.

For this reason, the ruling quickly sparked debate about the extent to which off-label marketing might become more pervasive and what the FDA may do in response. Although investors were cheered by the prospect of a potentially big boost in revenues, it appears unlikely that physicians should expect to see such promotions suddenly emerge when dealing with reps.

Keep in mind that the decision was actually made by a three-person panel, including one judge, Debra Ann Livingston, the lone dissenter on the Second Circuit Court of Appeals panel, who argued that allowing drugs to be promoted for unapproved uses would remove incentives to seek FDA approval. This would, of course, undermine the ability of the FDA to fulfill its mission as a purveyor of public health.

In any event, the FDA is expected to appeal the decision to the full Second Circuit court and, regardless of its outcome, many legal experts suggest that the case will then wind up before the U.S. Supreme Court. This would, obviously, take some time to play out, which means that drugmakers are more than likely to take the proverbial wait-and-see approach before changing their marketing plans.

The same holds true consumer marketing. It is unlikely, at best, that direct-to-consumer advertising — whether on television, the Interne, hand-held devices or anywhere else — will suddenly change. It would simply be too risky for drugmakers to so publicly change their promotional pitches while legal dictums remain in play.

Here is another point to consider: for now, the ruling actually pertains only to the states covered by the Second Circuit, which are NY, CT and VT. This means the FDA will be free to continue pursuing marketing violations in other parts of the country while sorting out the correct legal strategy to pursue. On the other hand, those three states include some significant markets.

Of course, there is no certainty that the ruling will stand. Nonetheless, the FDA and the Justice Department find themselves in an unexpected position that requires rethinking their approach to off-label marketing violations. There is, however, one aspect to the ruling that may well keep both regulators and prosecutors busy.

In the ruling, the panel noted that free speech rights did not extent to promotions that are knowingly false and misleading. Mr. Caronia, for instance, may have promoted the unapproved virtues of Xyrem, but the majority of the panel determined that his pronouncements were truthful. This opens the way to a great deal of parsing — legally and scientifically — if the ruling stands.

Then again, legal experts who are familiar with the many industry settlements, as well as the underlying whistleblower cases, say that federal prosecutors have always been careful to pursue cases where off-label marketing crossed that ‘false and misleading’ line. The suggestion is that such cases will continue and the rate might only slow down because so many settlements have already been reached.

“If the condition for which it is not approved is sufficiently different than the condition for which it is approved, you probably have a clearer case from an evidentiary perspective that we are only using the marketing speech as evidence to prove that what the company did was engage in false and misleading speech,” says University of Tulsa College of Law professor Tamara Piety, who specializes in commercial and corporate speech.

After all, prosecutors typically examine thousands and thousands of pages of documents in search of marketing patterns, employee training, top-down orders and other evidence to determine whether a drugmaker intended to market a medication for unapproved uses. This sort of scrutiny extends way beyond comments made by a given sales rep.

Just the same, you can be sure that industry marketers are now ever alert for any changes that would allow the sort of off-label promotions that have previously been the equivalent of jail-bait. And while it may be too soon to start contingency planning, you can almost hear the calculators on Wall Street trying to estimate the added revenue such marketing could generate.

Remember, not only would new marketing for unapproved uses boost revenues, but overall costs would also be lower. Yes, marketing costs would increase, but this would be overshadowed by the savings that would come from no longer being required to generate the clinical data needed to receive FDA approval. This is the sort of permissive scenario that terrifies the FDA’s Bob Temple.

In fact, Mr. Temple told that same industry conference that the FDA could try to hinder off-label marketing by challenging specific claims as being false and misleading. But such a piecemeal approach would require the agency to muster resources not currently at its disposal. “If we have to do it case by case, it’s over,” he said.

Indeed, the FDA’s ability to gather the appropriate evidence — and then argue over the legality — is unlikely. Of course, the agency could choose instances that appear more egregious. But this is not a promising scenario for those who worry about balancing legitimate commercial speech rights with the need to maintain public health. In other words, the door may be flung open to promote unapproved uses.

You can, in fact, almost hear the door creaking open in the direction of off-label marketing. Ms. Piety, for instance, notes that regulators and prosecutors will likely try to argue that they are not attempting to criminalize speech, but using speech as evidence that a drugmaker was illegally marketing a drug inappropriately.

“But remember, this is the distinction the dissenting judge (in the Caronia ruling) thought could be applied there. And she lost,” said Ms. Piety. “My sense is this argument is just too fine a distinction for most of the court or the public to parse and that (the Caronia ruling) will mean bad things for the FDA’s ability to limit pharmaceutical company marketing.”

As it is, the many settlements reached with various drugmakers have yet to prove that illegal activities — which are deemed harmful to public health — have abated. Also last month, the state of Oregon extracted a $1 million payment and a commitment from Pfizer to run a national television ad campaign for violating the terms of an earlier consumer protection settlement.

This is the same drugmaker that paid $2.3 billion in 2009 for marketing several drugs for unapproved uses, pleaded guilty to a misdemeanor and signed a corporate integrity agreement. The recent infraction in Oregon has suggested to some that, while such penalties are large, they remain a cost of doing business when the drugs involved generate countless dollars over an extended period.

To some, the idea that any type of off-label marketing will become protected is akin to allowing moviegoers to yell “Fire!” in a crowded theater. There is free speech, and there is speech that can cause real harm. There is logic to this line of reasoning. After all, the Food, Drug & Cosmetic Act was codified to protect the public from fraudulent claims.

Drugmakers have the privilege to sell their medicines and this comes with a responsibility. The industry should be willing and able to back up claims with data. Otherwise, drugmakers are no better than the snake-oil salesman of yesteryear. 

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Ed Silverman is a prize-winning journalist who has covered the pharmaceutical industry for The Star-Ledger of New Jersey, one of the nation’s largest daily newspapers, for more than 12 years. Prior to joining The Star-Ledger, Ed spent six years at New York Newsday and previously worked at Investor’s Business Daily. Ed blogs about the drug industry at Pharmalot, at www.pharmalot.com. He can be reached at [email protected].