Appeals Court Ruling on Off-Label Drug Marketing: What it Means
Earlier this week, a federal appeals court panel overturned the conviction of a former sales rep for allegedly encouraging doctors to prescribe a drug on an off-label basis, ruling that his conviction violated his First Amendment rights. The FDA may seek a rehearing by the full US Court of Appeals for the Second Circuit and the case may make its way to the US Supreme Court. But for now, the ruling throws into question a fundamental premise long asserted by the FDA and the US Department of Justice, which is that off-label promotion is prohibited by law, an idea that free speech advocates will now argue is not automatically the case (read Pharma news).
Drug makers – including GlaxoSmithKline (GSK), Pfizer (PFE) and AstraZeneca (AZN) -- have had a hard time of late generating revenue growth, as patents expire on existing medicines and company labs fail to develop enough new drugs. Extending the market for existing drugs – which at times has allegedly involved promoting off-label uses – is one way for Pharma companies to try to generate sales growth.
If the ruling ultimately stands, it would become a boon to the pharmaceutical industry, which has paid billions of dollars in fines over the past decade after being accused of off-label marketing. Drug makers, however, have been pushing back, arguing that the ability to lawfully promote medications was impeded by an overly zealous interpretation of the Food, Drug & Cosmetic Act. We spoke with Tamara Piety, a professor at the University of Tulsa College of Law who specializes in commercial and corporate speech, about the many implications…
Pharmalot: Why is this so important?
Piety: The ruling signals that it’s going to be increasingly difficult to bring these cases and these great big settlements, like we saw with Glaxo, for off-label marketing. The language in the opinion was taken from Sorrell, which prohibited pharmaceutical companies and similar entities from using prescriber identifying data and that speech in aid of pharmaceutical marketing is a form of expression protected by the First Amendment (back story)… So a legitimate question about the sale of data in that case was speech whether that was really about speech at all. But in this case, it’s definitely about speech and promotional activities that are clearly speech. And the majority opinion takes the heightened scrutiny of the Sorrell case standard and applies it here.. And also talks about marketing content …
Pharmalot: So what are the implications?
Piety: If your proposition is to single out marketing for different treatment, it’s not clear then why we have a separate commercial speech doctrine… If that’s discriminatory, it’s hard to see your way to other kinds of regulations of marketing being constitutional. In this issue, the court is really constructing this as being a regulation of marketing speech that ought to be the last resort. It puts into question the entire structure and approach the FDA has been using to criminalize this kind of behavior and puts in jeopardy the big fines.. I don’t think those fines are going to get disgorged. What’s past is past. But going forward, it’s going to bring these cases to a halt.
Pharmalot: What about direct-to-consumer advertising? Will we see off-label marketing to consumers?
Piety: I think we might… This ruling balances the political stuff against the legal doctrine. The position taken in thise case would seem to make some of these issues wide open. And it’s not just in the pharmaceutical industry, but also securities law and truth in advertising. I’m not sure everyone’s fully thought it through… With doctors, the thinking was that these are customers who are sophisticated and experienced. But what is the evidence to market to consumers? And isn’t the FDA role to set standards as the protector of public interests? …It now seems like the next step is to say ‘why can’t we advertise to consumers off label?’
Pharmalot: The ruling seemed to make a distinction about false and misleading statements, though. Where does that leave us?
To read the remainder of this article, go to Pharmalot.
Ed Silverman, a contributing editor of YCharts, is the founder and editor of Pharmalot. He previously reported on the pharmaceutical industry and other business topics for the Star-Ledger of New Jersey, New York Newsday and Investor’s Business Daily.
Read more articles about: Company Analysis
- stocks that look cheap
- tech stocks
- pharma stocks
- stocks that look pricey
- money managers
- value investing
- retail stocks
- dividend growth
- income investing
- energy stocks
- stock buybacks
- growth stocks
- earnings season
- warren buffett
- bank stocks
- stock screener
- dividend yields
- short sellers
- dividend yield
- healthcare stocks
- interest rates
- junk bonds
- entertainment stocks
- federal reserve