the false claims act & the policing of promotional claims about drugs

The False Claims Act and the Policing of Promotional Claims about Drugs: A Call for Increased Transparency

A White Paper

by

The Center for Health & Pharmaceutical Law & Policy

September 2015

Seton Hall University School of Law

One Newark Center

Newark, NJ 07102

law.shu.edu


AUTHORSHIP

This White Paper was produced by the Seton Hall University School of Law

faculty identified below.

Kathleen M. Boozang

Dean and Professor of Law

Charles A. Sullivan

Interim Associate Dean for Finance and Administration and Professor of Law

Kate Greenwood*

Research Fellow and Lecturer in Law

*Kate Greenwood served as Research Fellow and Lecturer in Law at Seton Hall

University School of Law through July 24, 2015.


ACKNOWLEDGEMENTS

On April 28, 2014, the Center for Health & Pharmaceutical Law & Policy at Seton Hall

Law School hosted an invitation-only Forum to discuss the intersection of the False Claims Act

and the ban on off-label promotion. Entitled The Ban on Off-Label Promotion and the False

Claims Act: Analyzing a Decentralized, Public-Private Enforcement Regime, the Forum brought

together leaders from academia, government—including the Department of Justice, the Food and

Drug Administration, and a state Medicaid Fraud Control Unit—the plaintiffs’ and defense bars,

and the life sciences industry. The Center wishes to thank all of the individuals who participated

in the Forum for their time and for the lively, insightful discussion they made possible. Special

thanks are due to Professor David Freeman Engstrom of Stanford Law School, who keynoted the

Forum with a presentation on the empirical analyses of False Claims Act litigation he has

conducted.

The Center would also like to thank Amarilys Cattafi, Edward Hartnett, John Jacobi,

Stephen Lubben, Simone Handler-Hutchinson, and a number of anonymous interviewees and

reviewers for sharing their insights with us during the production of the White Paper. Phillip

DeFedele and Nina Trovato provided able research assistance.

All views and recommendations contained in this White Paper are solely those of the

authors. They do not necessarily reflect the perspectives of the Forum participants, the experts

with whom we spoke during the research and writing process, other members of Seton Hall Law

School’s faculty or staff, or members of the Seton Hall Law School Board of Visitors or other

Advisory Boards.


TABLE OF CONTENTS

I. Introduction ....................................................................................................................1

II. The Changing Model of Prescription Drug Promotion .................................................5

III. The Source of the Ban on Off-Label Promotion:

The Federal Food, Drug, and Cosmetic Act and

Its Implementing Regulations .....................................................................................12

IV. Direct Enforcement of the Ban on Off-Label Promotion ...........................................23

V. The Ban on Off-Label Promotion and the

False Claims Act: The Legal Landscape ....................................................................28

VI. The False Claims Act and the Ban on Off-Label

Promotion: The Mechanics of Enforcement ...............................................................41

VII. Empirical False Claims Act Evidence ........................................................................52

A. Critiques of Relator Suits .......................................................................................52

B. Analysis of the Critiques .......................................................................................54

VIII. Off-Label Promotion and the False Claims Act:

Shining a Light on an Enforcement Regime ...............................................................57

A. Transparency in Reimbursement ..........................................................................57

B. Establish Clearer and More Explicit Rules

of the Road for Pharmaceutical Promotion ...........................................................60

C. Enhance the Transparency of the Enforcement

Process and the Terms of Settlement ....................................................................64

Appendices ..............................................................................................................................68


SETON HALL LAW II 1

I. INTRODUCTION

In recent years, it has begun to seem commonplace for pharmaceutical companies accused

of promoting their products for unapproved “off-label” uses to enter into settlements with the

government in excess of a billion dollars. In 2009, Eli Lilly settled with the government for $1.415

billion;1 Pfizer settled for $2.3 billion later that year.2 In 2012, GlaxoSmithKline entered into the

largest healthcare settlement ever, for $3 billion;3 and in 2013, the government settled with

Johnson & Johnson for $2.2 billion.4 The advocacy organization Public Citizen reports that

between 1991 and mid-2012, there were a total of 239 settlements reached between federal and

state governments and pharmaceutical companies, for a total of $30.2 billion.5 While the

allegations underlying these settlements covered a range of violations, “the unlawful promotion of

drugs was associated with the highest penalties.”6

Many observers have concluded that these high-profile, high-dollar settlements indicate

that there is something wrong with either the governing laws or with their enforcement. Some

argue that the statutes, regulations, and sub-regulatory guidance governing pharmaceutical and

medical device promotion are ill-advised as a policy matter, unconstitutional, or both.7 Others

1 Press Release, U.S. Dep’t of Justice, Eli Lilly and Company Agrees to Pay $1.415 Billion to Resolve Allegations

of Off-label Promotion of Zyprexa (Jan. 15, 2009), available at

http://www.justice.gov/archive/opa/pr/2009/January/09-civ-038.html. 2 Press Release, U.S. Dep’t of Justice, Justice Department Announces Largest Health Care Fraud Settlement in Its

History (Sept. 2, 2009), available at http://www.justice.gov/opa/pr/justice-department-announces-largest-health-

care-fraud-settlement-its-history. 3 Press Release, U.S. Dep’t of Justice, GlaxoSmithKline to Plead Guilty and Pay $3 Billion to Resolve Fraud

Allegations and Failure to Report Safety Data (July 2, 2012), available at

http://www.justice.gov/opa/pr/glaxosmithkline-plead-guilty-and-pay-3-billion-resolve-fraud-allegations-and-failure-

report. 4 Press Release, U.S. Dep’t of Justice, Johnson & Johnson to Pay More Than $2.2 Billion to Resolve Criminal and

Civil Investigations (Nov. 4, 2013), available at http://www.justice.gov/opa/pr/johnson-johnson-pay-more-22-

billion-resolve-criminal-and-civil-investigations. 5 SAMMY ALMASHAT & SIDNEY WOLFE, PHARMACEUTICAL INDUSTRY CRIMINAL AND CIVIL PENALTIES: AN

UPDATE, PUBLIC CITIZEN 4 (SEPT. 2012). 6 Id. at 5. 7 In a 2010 article in the YALE JOURNAL OF HEALTH POLICY, LAW & ETHICS, John E. Osborn summarized the

competing views as follows:

The enforcement of off-label promotion restrictions has precipitated far more controversy and

consternation than off-label prescribing. Although the commercial motivations of drug

manufacturers are readily apparent, some believe there is no need to restrict off-label promotion as

manufacturers ultimately are deterred from advertising off-label uses by the threat of substantial

tort liability for misrepresentation and harm to patients. Others point out that while labeling may

be amended to include new information about a drug, invariably there will be occasions in which


2 II SETON HALL LAW

criticize the current enforcement process, with some arguing that it is characterized by “limited

rulemaking and broad enforcement by threat of criminal prosecution.”8 Others criticize it for being

ineffective, arguing that it allows companies to treat settling with the government as a cost of doing

business.9

Given the divide in opinion, it is perhaps unsurprising that neither statutory nor regulatory

reform has been forthcoming. This white paper does not address the wisdom of the ban on off-

label promotion. Instead, it suggests a number of ways in which the current regime could be

improved simply by making it more transparent, to the benefit of all parties. This call for

transparency is timely because, as Section II documents, the enforcement picture may be changing

as a result of an important shift in the way that life sciences companies promote their products --

away from individual physicians and toward formulary committees and other decision-makers at

managed care plans, hospitals, nursing homes, and multi-specialty physician groups.10 Section III

the company is in possession of truthful, non-misleading scientific and medical information that

will not be included in the current, approved labeling. The most extreme position contends that the

current ban on off-label promotion should be modified substantially or even scrapped, since it

significantly increases the cost of drug development, inhibits the rate of adoption of effective new

uses of approved products, and limits the full dissemination to prescribing physicians of useful

medical information. Others contend that restricting off-label promotion ensures public safety by

preventing pharmaceutical companies from spreading false or misleading information about their

products in the pursuit of profits.

John E. Osborn, Can I Tell You the Truth? A Comparative Perspective on Regulating Off-Label Scientific and

Medical Information, 10 YALE J. HEALTH POL’Y L. & ETHICS 299, 305-6 (2010). 8 Id. at 307. 9 Katherine A. Blair, In Search of the Right Rx: Use of the Federal False Claims Act in Off-Label Drug Promotion

Litigation, HEALTH LAWYER, Apr. 2011, at 44 (explaining that many have criticized the use of the False Claims Act

to enforce the ban on off-label promotion and “encouraged the use of alternate enforcement mechanisms that more

closely meet the FDA’s regulatory and policy objectives”). Compare, e.g., Ralph Hall & Robert Berlin, When You

Have a Hammer Everything Looks Like a Nail: Misapplication of the False Claims Act to Off-Label Promotion, 61

FOOD & DRUG L. J. 653, 653 (2006); Vicki W. Girard, Punishing Pharmaceutical Companies for Unlawful

Promotion of Approved Drugs: Why the False Claims Act Is the Wrong Rx, 12 HEALTH CARE L. & POL’Y 119, 121

(2009), and Michael K. Loucks, Pros and Cons of Off-Label Promotion Investigations and Prosecution, 61 FOOD

DRUG L.J. 577, 579 (2006) (“Some have argued that the off-label investigations and prosecutions stifle innovation

and use of products to help patients. Others have argued quietly that the government and government prosecutors are

engaged in the practice of medicine.”) with Kevin Outterson, Punishing Health Care Fraud—Is the GSK Settlement

Sufficient?, 367 N. ENGL. J. MED. 1082, 1083 (2012) (reporting that “questions remain about the efficacy of fines

and corporate integrity agreements in deterring corporate misbehavior” and suggesting that companies “might well

view such fines as merely a cost of doing business – a quite small percentage of their global revenue and often a

manageable percentage of the revenue received from the particular product under scrutiny”) and Aaron S.

Kesselheim, et al., False Claims Act Prosecution Did Not Deter Off-Label Drug Use in the Case of Neurontin, 30

HEALTH AFF. 2318, 2325 (2011) (“Our finding that sales of a drug that was the subject of a federal fraud prosecution

remained robust . . . raises fundamental questions about the deterrent role of the False Claims Act.”). 10 See Sue Sutter, Economic Superiority Claims, Manufacturer/Payer Relationships Ripe for Enforcement Scrutiny,

THE PINK SHEET (Feb. 6, 2012).


SETON HALL LAW II 3

then reviews the source of the ban on off-label promotion in statutory, regulatory, and decisional

law, including Section 114 of the Food, Drug, and Cosmetic Act (FDCA), which allows companies

to use health care economic information that does not appear on a drug’s approved label in

presentations to payers.

Section IV describes the direct enforcement of the ban by the FDA and the Department of

Justice (DOJ), while Section V turns to the False Claims Act and explains the link that courts have

drawn between a statute passed to protect the government from procurement fraud and the legal

regime governing drug and device promotion. Section V also analyzes the pleading standards

governing FCA litigation, which has important implications for when FCA suits can be brought.

Section VI then explores the complicated, multi-jurisdictional enforcement process. Qui

tam relators and their counsel, the DOJ, United States Attorneys’ Offices, the Department of

Health and Human Services (including the FDA, the Office of the Inspector General (OIG), and

the Centers for Medicare and Medicaid Services (CMS)), the Department of Defense, the Veterans

Administration, the Bureau of Prisons, and state Medicaid Fraud Control Units (MFCU) all play a

role in the investigation, litigation, and settlement of FCA cases. Section VII reviews empirical

evidence developed by Professor David Freeman Engstrom testing some of the most commonly-

made criticisms of FCA enforcement across the various types of government fraud.

Finally, in Section VIII, the paper identifies aspects of the intersection of the ban on off-

label promotion and the False Claims Act that have proven controversial and suggests ways in

which enhanced transparency might respond to the concerns that have been raised.

Transparency in Reimbursement

The government should consider requiring that diagnosis information be

added to claims for reimbursement under Medicare Part D and Medicaid, as

it is for claims under Medicare Part B. This would give federal and state

regulators the ability to use standard utilization management tools such as

prior authorization to reduce medically unjustified prescribing and, a

fortiori, false claims.


4 II SETON HALL LAW

Transparency About What Is and Is Not “Promotion”

Where possible, the government should consider making the law governing

product promotion clearer and more granular, including by passing

legislation, promulgating regulations, issuing guidance documents,

developing safe harbors, or implementing an advisory opinion process.

Transparency in Enforcement

o So that meritorious cases do not founder due to purely procedural

hurdles, the government should in appropriate circumstances share

information about claims for reimbursement with qui tam relators.

o When an off-label promotion case is resolved, the government

should provide information about its reasoning in negotiating and

arriving at the settlement amount. This could include an explanation

of the damages model used and the calculations performed. This

would dispel the sense that the settlement amounts are arbitrary; it

would also provide non-parties with helpful guidance.


SETON HALL LAW II 5

II. The Changing Model of Prescription Drug Promotion

In 2012, Sara Miron Bloom, the well-known Assistant United States Attorney for the

District of Massachusetts, told a conference audience that she was “optimistic that the era of ‘really

big, corporate-wide, off-label’ promotional activity has passed.”11 At the same conference, Jill

Furman, the Deputy Director of the Department of Justice’s Consumer Protection Branch, agreed

with Bloom “that the big off-label promotion cases are on the decline.”12 Perhaps indicative of

such a decline, in 2014, the DOJ announced just two settlements with companies accused of off-

label promotion, one for $56.5 million and one for $192.7 million.13 Since False Claims Act cases

typically remain under seal for at least two years after filing, however, confident assessment of

such trends is difficult.

There are likely multiple causes for the slowdown—if there is one—in very large

settlements founded on off-label promotion to prescribers. For one, the increasingly robust

compliance programs that companies have implemented, both voluntarily and as a condition of a

Corporate Integrity Agreement (CIA) or other settlement with the government, may be reducing

the amount of non-compliant promotion engaged in by their salesforces.14 This would of course

be a vindication of the present regime. However, other reasons may explain the perceived

behavioral changes. The Centers for Medicare and Medicaid Services’ (CMS) implementation of

the Physician Payments Sunshine Act, for example, has caused many companies to rethink their

11 Id. See also The Partnership for Public Service, Sara Bloom: Fighting Drug Maker Health Care Fraud,

WASHINGTON POST (Oct. 11, 2010). 12 Sutter, supra note 10. 13 Press Release, U.S. Dep’t of Justice, Shire Pharmaceuticals LLC to Pay $56.5 Million to Resolve False Claims

Act Allegations Relating to Drug Marketing and Promotion Practices (Sept. 24, 2014), available at

http://www.justice.gov/opa/pr/shire-pharmaceuticals-llc-pay-565-million-resolve-false-claims-act-allegations-

relating-drug; Press Release, U.S. Dep’t of Justice, Endo Pharmaceuticals and Endo Health Solutions to Pay $192.7

Million to Resolve Criminal and Civil Liability Relating to Marketing of Prescription Drug Lidoderm for

Unapproved Uses (Feb. 21, 2014), available at http://www.justice.gov/opa/pr/endo-pharmaceuticals-and-endo-

health-solutions-pay-1927-million-resolve-criminal-and-civil. 14 Heather McCollum, Chuck Bell & Elise Roth, Compliance on the Road: Government and Industry Efforts to

Monitor Field Force Compliance, 7 ABA HEALTH ESOURCE (May 2011),

https://www.americanbar.org/newsletter/publications/aba_health_esource_home/aba_health_law_esource_1105_mc

collum.html. See also Sutter, supra note 1010 (quoting Assistant United States Attorney Sara Miron Bloom as

follows, “I think the message is out there . . . There’s been compliance around these issues now in the major

corporations for several years, and if you don’t already have it you really ought to get it because you’re behind.”

https://www.americanbar.org/newsletter/publications/aba_health_esource_home/aba_health_law_esource_1105_mccollum.html



6 II SETON HALL LAW

promotional practices.15 As discussed below, companies have also reduced the size of their

salesforces, as many hospitals and physicians’ offices have restricted or eliminated access to sales

representatives. An increase in the proportion of specialty drugs approved, which are often

promoted with smaller salesforces, may also be a cause

of this downshift, as may be changes in healthcare

payment and delivery that reduce physicians’ decision-

making authority.

Dramatic changes in promotional practices due

to changes in healthcare payment and delivery have been

predicted for many years,16 but only now seem to be

beginning to take place. Writing in 1990 in HEALTH

AFFAIRS, Michael Pollard explained that in the 1980s,

employers and government programs began to monitor health costs more closely

and adopted incentives for or imposed restrictions on drug product selection. This

process began in hospitals through the use of drug product formularies, which are

lists of drugs approved for use in a hospital by a pharmacy and therapeutics

committee. The growth of HMOs expanded the use of drug formularies to

ambulatory care outside of an institutional setting.17

In addition, “utilization review of prescription drugs also came of age in the latter half of the

1980s[.]”18 As a result of these changes, Pollard wrote, “tried and true marketing efforts targeted

on individual physicians are becoming less effective in moving products because physicians often

do not make the ultimate decisions in selecting drugs.”19

The trends Pollard identified did not immediately lead pharmaceutical manufacturers to

change their marketing or sales strategies. The pharmaceutical sales force increased by 50%

15 Charles Ornstein, Eric Sagara & Ryann Grochowski Jones, As Full Disclosure Nears, Doctors’ Pay for Drug

Talks Plummets, PROPUBLICA (Mar. 3, 2014) (“Some of the nation’s largest pharmaceutical companies have slashed

payments to health professionals for promotional speeches amid heightened public scrutiny of such spending, a new

ProPublica analysis shows. . . . GlaxoSmithKline announced in December that it would stop paying doctors to speak

on behalf of its drugs. Its speaking tab plummeted from $24 million in 2011 to $9.3 million in 2012.”). 16 See, e.g., Nicole Gray, Is There Still a Place for the Mighty Pharmaceutical Sales Force?, BIOPHARMA DIVE

(Feb. 23, 2015) (“For the better part of the last decade, the diminishing role of the pharmaceutical sales

representative as an integral part of the pharmaceutical sales model has been a hot topic.”). 17 Michael R. Pollard, Managed Care and a Changing Pharmaceutical Industry, 9 HEALTH AFFS. 55, 57 (1990). 18 Id. 19 Id.

Dramatic changes in

promotional practices due to

changes in healthcare

payment and delivery have

been predicted for many

years, but only now seem to

be beginning to take place.


SETON HALL LAW II 7

between 1996 and 2005, while the number of practicing physicians rose only 26%.20 At its peak

in 2005, the pharmaceutical sales force in the United States numbered over 100,000.21 By 2013,

however, that number had fallen to 66,000.22

The steep decline in the pharmaceutical sales force since 2007 is likely in part a function

of the decline in the economy as a whole. As the economy has improved, companies have begun

hiring again. The Bureau of Labor Statistics has projected that the number of sales representatives

of scientific and technical products generally, which includes pharmaceutical sales representatives,

will grow 10% between 2012 and 2022;23 CNNMoney.com predicted that the number of

pharmaceutical sales representatives will grow 12% between 2006 and 2016.24

Nevertheless, there are reasons to believe that such numbers will not reach their prior

levels, and that the economic decline merely accelerated a trend that would have occurred in any

event, for the reasons Pollard identified and for other reasons, too. It is increasingly costly for a

manufacturer to send a sales representative to visit a physician. Industry observer John Mack

reports that “the average cost of making a sales call to a primary care physician, with samples, is

$210”, with the average cost of a specialist visit with samples being $285.”25 It costs approximately

$160,000 a year to field a single primary care sales representative, rising to $228,000 for a specialty

representative, and $243,000 for a hospital representative.26

The cost/benefit calculations may also be shifting, as an increasing number of physicians

are choosing not to meet with sales representatives. According to the consulting firm ZS

Associates’ 2014 AccessMonitor report,

[o]verall access to physicians has declined steadily since . . . 2008, with about half

(49 percent) of physicians in the U.S. placing moderate-to-severe restrictions on

20 Mari Edlin, Model Calls for Fewer Drug Reps but More Clinical Backing, MANAGED HEALTHCARE EXECUTIVE

(Apr. 2009) (citing PriceWaterhouseCoopers Pharma 2020: Marketing the Future (2009)). 21 Marc Iskowitz, Special Force, MEDICAL MARKETING & MEDIA, Nov. 2011, at 40-41. 22 Emily Wasserman, Pharma Sales Force Took a Hit in North America and Europe in 2013, New Report Shows,

FIERCEPHARMAMARKETING (April 15, 2014). 23 Occupational Outlook Handbook, BUREAU OF LABOR STATISTICS, U.S. DEP’T OF LABOR,

http://www.bls.gov/ooh/sales/wholesale-and-manufacturing-sales-representatives.htm#tab-6 (last visited July 30,

2015). 24 Press Release, National Association of Pharmaceutical Sales Reps, NAPSRx News: State of the Pharmaceutical

Sales Rep Labor Market – 2015 to See Growth (Feb. 23, 2015), available at

http://www.prweb.com/releases/2015/02/prweb12520760.htm. 25 John Mack, The Virtual Sales Rep: Ensuring the Survival of a Venerable Species, PHARMA MARKETING NEWS

(Mar. 2014) (citing estimate by Cutting Edge Information). 26 Ed Silverman, The Pharmaceutical Sales Rep Lives to Fight Another Day, WALL STREET JOURNAL (Mar. 13,

2014) (citing estimate by Cutting Edge Information).


8 II SETON HALL LAW

visits from pharma sales reps in 2014. This compares to 45 percent of prescribers

who restricted rep access in 2013, 35 percent in 2012 and 23 percent in 2008.27

The report attributes the decline in representatives’ access to physicians to, among other

factors, “growing payer/provider consolidations.”28 ZS Associates notes that when HealthPartners,

a non-profit health insurance company and health care provider in Minnesota, merged with Park

Nicollet Health Services in 2013, creating the largest health system in the Twin Cities area, one

result was an increase in the number of physicians covered by a policy limiting access by sales

representatives.29

Another reason that sales forces may not rebound fully is the shift away from drugs

approved to treat primary care conditions affecting large numbers of patients toward specialty

drugs, many of which are used to treat relatively rare diseases. In 2011, Marc Iskowitz explained

that “[i]t’s been well documented that [pharmaceutical companies] have slashed legions of sales

reps once employed to call on general practitioners, as their mass-market brands approach, and fall

over, the patent cliff.”30 In a 2014 article in the NEW ENGLAND JOURNAL OF MEDICINE, two

physicians who are also venture capitalists discussed what they call the “disproportion” between

primary care and specialty drugs.31 In 2013, they report, 8 of the 27 drugs the FDA approved were

for orphan diseases affecting fewer than 200,000 people in the United States.32 More than half of

the 139 drugs approved by the FDA since 2009 were to treat cancers and orphan diseases.33

A final, and perhaps critical, factor is the increase in external control over physicians and

their decision making that Michael Pollard discussed in HEALTH AFFAIRS in 1990. As Professor

Jessica Mantel has explained, “the issue of physician decision making must be considered against

the backdrop of a rapidly transforming health care system that has seen a steady decline in the

27 Press Release, ZS Associates, Even Traditional Rep-Friendly Specialists Will See Fewer Pharmaceutical Sales

Reps This Year (July 22, 2014), available at http://www.zsassociates.com/about/news-and-events/even-

traditionally-rep-friendly-specialists-will-see-fewer-pharmaceutical-sales-reps-this-year.aspx. 28 ZS Associates, supra note 27. 29 Id. By contrast, “[p]ayers and providers in some fragmented markets—such as Texas—remain more traditional

and independent.” Id. 30 Iskowitz, supra note 21. Cf. Ornstein, Sagara & Grochowski Jones, supra note 15 (“‘The industry’s increased

emphasis on expensive specialty medications for such conditions as multiple sclerosis or Hepatitis C, has been

striking,’ said Aaron Kesselheim, an assistant professor of medicine at Harvard Medical School. . . . ‘It’s possible

the number of physicians they need to support sales of these items is less, leading to lower payments overall,’

Kesselheim said.”). 31 Robert Kocher & Bryan Roberts, The Calculus of Cures, 370 NEW ENG. J. MED. 1473, 1473 (2014). 32 Id. 33 Id.


SETON HALL LAW II 9

number of physicians practicing in solo and small group practices and an increase in physicians

affiliating,” with hospitals and other large health care organizations.34 Large health care

organizations increasingly exercise influence if not control over the prescribing decisions of their

member physicians. In a recent decision, the First Circuit held that the plaintiffs, Kaiser Foundation

Health Plan and Kaiser Foundation Hospitals, established that they had a 95% rate of compliance

with their pharmaceutical formulary among their affiliated physicians.35

Given this new reality, the number of sales

representatives charged with making traditional sales

calls on individual doctors in their offices may remain

relatively low.36 Concomitantly, the importance of what

many manufacturers term their “market access” or

“managed markets” department is likely to grow. Such

teams negotiate the prices for payers—whether a

government program, a private insurer like Aetna or Cigna, or a pharmacy benefit manager like

Express Scripts. Discounts from the list price of a prescription drug take the form of rebates paid

34 Jessica Mantel, The Myth of the Independent Physician: Implications for Health Law, Policy, and Ethics, 64 CASE

W. RES. 455, 457 (2013). 35 Kaiser Found. Health Plan, Inc. v. Pfizer, Inc. (In re Neurontin Mktg. & Sales Practices Litig.),

712 F.3d 21, 40-41 (1st Cir.), cert. denied, 134 S. Ct. 786 (2013). The First Circuit explained that

[t]he Kaiser Foundation Health Plan and its subsidiaries do not employ physicians themselves, but

have exclusive contractual relationships with regional Permanente Medical Groups ("PMGs").

Each PMG has its own Pharmacy and Therapeutics ("P & T") Committee which manages each

PMG's formulary, or list of medications that treating physicians may prescribe. Representatives

from both entities sit on the P & T Committees and participate in formulary management. Kaiser

Foundation Hospitals has a Drug Information Service ("DIS") that researches and communicates

information about drugs, including monographs about new drugs or new drug uses, to physicians

and P & T Committees. DIS monographs summarize available evidence -- including publicly

available evidence and unpublished information obtained from pharmaceutical manufacturers -- on

drug safety and efficacy, and P & T Committees rely heavily on these monographs in making

formulary decisions. 36 Cf. W. SCOTT EVANGELISTA, MICHELLE POULIN, CHRISTOPHER T. GEISSLER & JUSTIN ANDREW, PHARMA’S NEW

U.S. COMMERCIAL MODEL: PROMOTING THE SCIENCE NOT THE SWAG, DELOITTE (2009) (“Despite their ubiquitous

presence, a fair question must be asked: What would happen if they all [sales representatives] went away? We

believe the answer is simple: Everyone would be better off. Sales reps cost pharma billions of dollars and drain

scarce physician time, yet provide little of the results-based information increasingly demanded by providers,

patients, payers, and regulators. Their demise could pave the way for the rise of independent, third party drug

representatives, who would do just the opposite. In a scenario that could represent the future of pharma, these new

‘non-captive’ reps would pitch prescription drugs for multiple pharma companies devoid of any brand-based

messaging. Instead, they would focus on outcomes and price, helping decision-makers without the marketing spin to

choose the most appropriate drug.”).

Large health care

organizations increasingly

exercise influence if not

control over the prescribing

decisions of their member

physicians.


10 II SETON HALL LAW

by the manufacturer to the payer.37 The market access team must also negotiate over the formulary

tier in which a new drug will be placed, as well as whether it will be subject to a “step therapy”—

also known as “fail first”—requirement,38 to prior authorization, or to other restrictions.39 Notably,

these negotiations may involve discussions of a drug’s off-label uses. When these discussions take

place prior to FDA approval, the drug does not yet have a label and the entire discussion is off-

label.

As a result of these changes in the promotional

model, companies’ health economics and research

departments will increase in importance.40 Payers are

increasingly focused on drugs’ cost-effectiveness or value,

and providers are beginning to take an interest, too.41 As the

authors of a 2011 article in PHARMACEUTICAL

REPRESENTATIVE wrote, manufacturers’ “success these days is increasingly determined by . . . new

factors that include up-to-the-minute knowledge of healthcare reform and implications for payers

and providers; working with new customers such as integrated healthcare providers; and providing

health economic data and analysis that is relevant for customers.”42 Some companies task their

medical science liaisons (MSLs), who typically have advanced degrees in science or medicine,

with building and maintaining relationships with decision makers at pharmacy benefit managers,

37 Matthew Herper, Inside the Secret World of Drug Company Rebates, FORBES (May 10, 2012). 38 Michael C. Barnes & Stacey L. Worthy, Achieving Real Parity: Increasing Access to Treatment for Substance

Use Disorders Under the Patient Protection and Affordable Care Act and the Mental Health and Addiction Equity

Act, 36 U. ARK. LITTLE ROCK L. REV. 555, 568 (2014). 39Jonathan J. Darrow, Pharmaceutical Gatekeepers, 47 IND. L. REV. 363, 371 (2014). 40 Peter J. Neumann & Cayla J. Saret, A Survey of Individuals in U.S.-Based Pharmaceutical HEOR Departments:

Attitudes on Policy Topics, 13 EXPERT REV. PHARMACOECONOMIC OUTCOMES RESEARCH 657, 659 (2013) (“Our

new survey of 74 HEOR professionals in drug and device companies suggests continued growth in the function

(over 90% of respondents expected to see increases in the use of HEOR at their companies) and also broader internal

support (over 80% stated that senior management viewed internal HEOR group as critical).”). 41 Katherine Cohen, Joseph W. Cormier & Mahnu V. Davar, Predictable Materiality: A Need for Common Criteria

Governing the Disclosure of Clinical Trial Results by Publicly-Traded Pharmaceutical Companies, 29 J. CONTEMP.

HEALTH L. & POL’Y 201, 231 (2013). Cohen and colleagues explain that

pharmaceutical companies regularly conduct pharmacoeconomic studies regarding their products.

These studies are designed to examine the cost-effectiveness of a therapy; they do not evaluate safety

or effectiveness, per se. ‘Positive’ pharmacoeconomic information, however, is very valuable when

seeking drug formulary access. Hospitals and insurance plans, in an effort to increase cost-

efficiencies, seek out interventions that maximize patient benefit while minimizing the overall cost

of care. Whether a drug is listed as a preferred intervention drives how much a patient pays for that

intervention choice, which, in turn, drives physician prescribing behavior. 42 Mark Dancer, Carrie Fisher, & Ian Wilcox, Hurdling Managed Care Challenges, PHARMACEUTICAL

REPRESENTATIVE (April 2011).

Payers are increasingly

focused on drugs’ cost-

effectiveness or value, and

providers are beginning to

take an interest, too.


SETON HALL LAW II 11

payers, and provider organizations.43 Unlike the number of sales representatives, the number of

MSLs has grown in recent years.44

The promotion underlying the large settlements announced in recent years took a number

of forms, but all of them arose in part out of sales activity “in the field.” This included

conversations about unapproved uses between pharmaceutical sales representatives and

physicians, usually in physicians’ offices across the nation, as well as between company-paid

physician speakers and their colleagues, often over restaurant meals.45 THE PINK SHEET reports

that Assistant United States Attorney Bloom has predicted that the next wave of False Claims Act

cases will rest on “false and misleading claims of superior efficacy or safety, and false or unproven

claims of economic superiority.”46 While there was previously “less enforcement focus, and

therefore probably less industry compliance, when it comes to manufacturers’ relationships with

payers and their interactions with P & T committees[,]” Bloom predicts that these relationships

are now ripe “for scrutiny and potential prosecution.”47 THE PINK SHEET notes that pharmaceutical

industry attorneys, too, have “flagged the manufacturer/payer relationships, particularly with

regard to formulary structure, as a growing source of interest for government prosecutors.”48

43 Kate Greenwood & Deborah L. Shuff, Medical Affairs: Effectively and Legitimately Using Medical Science

Liaisons, in OFF-LABEL COMMUNICATIONS: A GUIDE TO SALES & MARKETING COMPLIANCE (Food and Drug Law

Institute 4th Ed. 2014). 44 Id. 45 Heather McCollum, Chuck Bell & Elise Roth, Compliance on the Road: Government and Industry Efforts to

Monitor Field Force Compliance, 7 ABA Health eSource (May 2011),

https://www.americanbar.org/newsletter/publications/aba_health_esource_home/aba_health_law_esource_1105_mc

collum.html (“Off-label promotion in the context of field interactions can take on many forms, including: [1]

Proactive off-label discussions by field representatives during HCP office visits[;] Field representative responses to

off-label questions posed by the HCP, made in lieu of forwarding the HCP’s inquiry to the manufacturer’s medical

information department[;] Modifications to pre-approved publications that highlight off-label information[;] Use of

HCPs as speakers or consultants to deliver off-label messages during peer-to-peer interactions[; and] Field

representative call plans which include HCPs with inappropriate specialties (e.g., specialties that are not aligned

with approved uses of the drug, or that are aligned with known off-label uses).” 46Sutter, supra note 10. 47 Id. (“It can be used for off-label promotion. There can be hidden kickbacks. There can be price concessions that

are not showing up in ASP.”). 48 Id. (citing Brenda Sandburg, DOJ Bull’s Eye: Off-Label Promotion, Formulary Placements, FCPA Violations

Remain Targets, THE PINK SHEET (Dec. 19, 2011).





III. The Source of the Ban on Off-Label Promotion: The Federal Food,

Drug, and Cosmetic Act and Its Implementing Regulations

Enforcement of the laws governing pharmaceutical marketing and promotion is

contentious because the underlying laws and regulations must balance competing priorities. On

the one hand, the government regulates the flow of information about drugs to reduce the risk that

manufacturers will make false, misleading, or unsupported claims about them.49 To this end, the

general rule governing promotional claims about a drug’s safety or efficacy is that any such claims

must relate to an FDA-approved use and be supported by “substantial evidence,” which usually

means two randomized controlled trials.50

There is a category of information, however, that is truthful but either (1) relates to an

unapproved use or (2) relates to an approved use but is not supported by substantial evidence. With

regard to the former, manufacturers are in possession of a significant amount of information on

unapproved uses of their products. Give the prevalence of such uses—a recent analysis found that

in the years 1993 to 2008 more than one in three prescriptions written were for an off-label use—

prescribers could benefit from the information manufacturers’ have.51 Similarly, this category

could include a substantial proportion of the available information about a drug’s cost-

effectiveness. Even if such health care economic information relates to an approved use, it is

frequently not developed through randomized controlled trials.52

49 Kate Greenwood, The Ban on "Off-Label" Pharmaceutical Promotion: Constitutionally Permissible Prophylaxis

Against False or Misleading Commercial Speech?, 37 AM. J. L. AND MED. 278, 279 (2011). 50 Jonathan J. Darrow, Pharmaceutical Efficacy: The Illusory Legal Standard, 70 WASH & LEE L. REV. 2073, 2085-

86 (2013). 51 W. David Bradford, John L. Turner & Jonathan W. Williams, Off-Label Use of Pharmaceuticals: A Detection

Controlled Estimation Approach 25-26 (Mar. 2015) (unpublished manuscript, available at

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2230976). 52 Peter J. Neumann, Karl Claxton & Milton C. Weinstein, The FDA’s Regulation of Health Economic Information,

19 HEALTH AFFAIRS 129, 130 (Sept/Oct 2000) (noting that “‘modeling’ exercises . . . lie at the heart of most cost-

effectiveness analyses”). Cf. Peter J. Neumann, Communicating and Promoting Comparative-Effectiveness, 369 N.

ENGL. J. MED. 209, 209 (2013) (explaining that much comparative-effectiveness information “comes from research

using retrospective databases and quasi-experimental designs rather than randomized clinical trials”).



Another purpose of the ban on off-label promotion is to preserve the integrity of the FDA

approval process.53 Without the ban, Congress feared a pharmaceutical company with a new drug

could seek approval for the single indication for which

safety and efficacy was easiest to establish, secure in the

knowledge that, once approved, it could promote the drug

for other uses.54 The ban gives manufacturers an incentive

to study promising new uses for their already-approved

drugs. Manufacturers have an incentive to shepherd additional uses through the rigorous FDA

approval process because success will allow them to freely promote such new uses.55 This has the

salutary effect of encouraging research into new uses, which in turn gives prescribers the evidence

they need to practice evidence-based medicine.

On the other hand, there are policy considerations weighing against constraining the flow

of information about drugs and devices.56 The First Amendment also limits what the government

can do.57 The FDA has repeatedly emphasized that its regulatory and enforcement schemes are not

intended to limit the free flow of scientific information, including information about off-label uses

and, presumably, about the economic value and impact of medication.58 Similarly, the agency’s

efforts to control the content and circumstances of manufacturer communication about off-label

53 Wash. Legal Found. v. Friedman, 13 F. Supp. 2d 51, 66 (D.D.C. 1998). 54 S. Rep. No. 87-1744 (1962), reprinted in 1962 U.S.C.C.A.N. 2884, 2901-2903 (explaining that without the

requirement that manufacturers demonstrate that a new drug is safe and effective “[t]he expectation would be that

the initial claims would tend to be quite limited[,]” but that post-approval claims could be extreme); Margaret Z.

Johns, Informed Consent: Requiring Doctors to Disclose Off-Label Prescriptions and Conflicts of Interest, 58

HASTINGS L.J. 967, 981 (2007) (explaining that without the ban on off-label promotion, companies would “have no

incentive to conduct the rigorous safety and efficacy studies the FDA requires”). 55 Wash. Legal Found., 13 F. Supp. 2d at 71. 56 See Coleen Klasmeier & Martin H. Redish, Off-Label Prescription Advertising, the FDA and the First

Amendment: A Study in the Values of Commercial Speech Protection, 37 AM. J. L. & MED. 315, 318 (2011)

(concluding that “patients and prescribers would often be aided by the dissemination of information to the medical

profession about these valuable off-label uses--uses that health care practitioners may well be unfamiliar with absent

such communications.”). 57 Id. at 316-17 (arguing that “the FDA's ban on off-label promotion violates the First Amendment right of free

expression”). 58 21 C.F.R. § 312.7(a) (“A sponsor or investigator, or any person acting on behalf of a sponsor or investigator, shall

not represent in a promotional context that an investigational new drug is safe or effective for the purposes for which

it is under investigation or otherwise promote the drug. This provision is not intended to restrict the full exchange of

scientific information concerning the drug, including dissemination of scientific findings in scientific or lay media.

Rather, its intent is to restrict promotional claims of safety or effectiveness of the drug for a use for which it is under

investigation and to preclude commercialization of the drug before it is approved for commercial distribution.”).

Another purpose of the ban

on off-label promotion is to

preserve the integrity of the

FDA approval process.



uses are not intended to limit physicians’ authority to prescribe drugs to their patients for such

uses.59

The FDA frequently disavows jurisdiction over the practice of medicine. It has noted that

"unapproved or, more precisely, ‘unlabeled' uses may be appropriate and rational in certain

circumstances, and may, in fact reflect approaches to drug therapy that have been extensively

reported in medical literature."60 A drug used off-label may represent the standard of care for a

given medical condition or patient population.61 Similarly, with regard to devices, the FDCA states

that "nothing . . . shall be construed to limit or interfere with the authority of a health care

practitioner to prescribe or administer any legally marketed device to a patient for any condition

or disease within a legitimate health care practitioner-patient relationship."62 The Supreme Court

has held that off-label use "is an accepted and necessary corollary of the FDA's mission to regulate

in this area without directly interfering with the practice of medicine."63

While off-label use is permitted, promotion of off-label uses is not. The FDA has explained

that an off-label “new” use is one “that would require approval or clearance of a supplemental

application in order for it to be included in the product labeling.”64 The FDA has offered a broad

range of examples of new uses “[a] completely different indication; modification of an existing

indication to include a new dose, a new dosing schedule, a new route of administration, a different

duration of usage, a new age group (e.g., unique safety or effectiveness in the elderly), another

patient subgroup not explicitly identified in the current labeling, a different stage of the disease, a

different intended outcome (e.g., long-term survival benefit, improved quality of life, disease

59 Wash. Legal Found., 13 F. Supp. 2d at 66 (“FDA does not purport to regulate the practice of medicine, and the

agency has long recognized that, in general, physicians may use an approved drug or device for an unapproved

use.”). 60 Citizen Petition Regarding the Food and Drug Administration’s Policy on Promotion of Unapproved Uses of

Approved Drugs and Devices; Request for Comments, 59 Fed. Reg. 59,820, 59,821 (Nov. 18, 1994). 61 U.S. Food & Drug Admin., Guidance for Industry: Good Reprint Practices for the Distribution of Medical Journal

Articles and Medical or Scientific Reference Publications on Unapproved New Uses of Approved Drugs and

Approved or Cleared Medical Devices 3 (Jan. 2009), available at

http://www.fda.gov/RegulatoryInformation/Guidances/ucm125126.htm (hereinafter “Good Reprint Practices

Guidance”) ("Off-label uses or treatment regimens may be important and may even constitute a medically

recognized standard of care."). 62 21 U.S.C. § 396. 63 Buckman Co. v. Plaintiffs’ Legal Comm., 531 U.S. 341, 350 (2001) (citing 21 U.S.C. § 396). 64 Dissemination of Information on Unapproved/New Uses for Marketed Drugs, Biologics, and Devices, 63 Fed.

Reg. 31,143, 31,145 (1998).



amelioration), effectiveness for a sign or symptom of the disease not in the current labeling; and

comparative claims to other agents for treatment of the same condition.”65

As many observers have noted, the words “off-label promotion” do not appear in the FDCA

or in its implementing regulations.66 The ban on off-label promotion arises from the FDCA’s

prohibition on introducing a new drug into interstate commerce and from its prohibition on

misbranding. A drug is misbranded if, among other things, it is false or misleading67 or it lacks

“adequate directions for use[,]”68 which the regulations define as “directions under which the

layman can use a drug safely[.]”69

The FDCA exempts a prescription drug from the “adequate directions for use” labeling

requirement that their labeling contain “adequate directions for use,” as long as “it bears a label

containing the name and address of the dispenser, the serial number and date of the prescription or

of its filling, the name of the prescriber, and, if stated in the prescription, the name of the patient,

and the directions for use and cautionary statements, if any, contained in such prescription.”70 The

regulations go further, also requiring that, to be exempt, a prescription drug must be labeled with

“adequate information for its use, including indications, effects, dosages, routes, methods, and

frequency and duration of administration, and any relevant hazards, contraindications, side effects,

and precautions under which practitioners licensed by law to administer the drug can use the drug

safely and for the purposes for which it is intended, including all purposes for which it is advertised

or represented[.]”71

Whether a manufacturer “intended” that a drug be used for a given purpose is determined

objectively, with reference to the manufacturer’s “expressions” as well as “the circumstances

surrounding the distribution of the article.”72 The regulations go on to note that “objective intent

may, for example, be shown by labeling claims, advertising matter, or oral or written statements

by [manufacturers] or their representatives.”73

65 Id. 66 See, e.g., Klasmeier & Redish, supra note at 56, at 319. 67 21 U.S.C. § 352(a). 68 21 U.S.C. § 352(j). 69 21 C.F.R. § 201.5. 70 Id. 71 21 C.F.R. 201.100(c)(1) (emphasis added). 72 21 C.F.R. § 201.128. 73 Id.



Thus, a manufacturer’s promotional claims about an unapproved use of a drug demonstrate

that the use is “intended[.]” And, because the label lacks “adequate information for its use,” the

drug is misbranded and banned for sale. Misbranding can be either a felony or a misdemeanor. If

the misbranding was made with the “intent to defraud or mislead,” then it is a felony.74 If it was

not, it is a misdemeanor, with no criminal intent requirement.75

A manufacturer cannot avoid liability for misbranding by adding “adequate information”

about an unapproved use to a drug’s labeling, because to do so would be to run afoul of the FDCA’s

ban on the sale of unapproved "new drug[s]."76

When an approved drug is marketed for an

unapproved use, the FDA's position is that the

drug becomes "an unapproved new drug with

respect to that use."77 The agency reasons that

the FDCA's definition of "new drug" includes

any drug that the FDA has not determined to be

"safe and effective for use under the conditions

prescribed, recommended, or suggested in [its]

labeling."78 Labeling, in turn, is defined to include "all labels and other written, printed, or graphic

matters" on the drug itself, on the drug's "containers or wrappers," or that accompany the drug.79

The Supreme Court has held that written matters "accompany" a drug when they

supplement[] or explain[] it, in the manner that a committee report of the Congress

accompanies a bill. No physical attachment one to the other is necessary. It is the

textual relationship that is significant.80

Should a company “prescribe[], recommend[], or suggest[]” an unapproved use in a drug’s

labeling, the drug would then become a "new drug" for purposes of that use, which would make it

illegal under the FDCA to sell the drug for that use.

The ban on off-label of promotion has a number of formal and informal safe harbors,

several of which the FDA has taken steps to clarify in recent years. The regulations governing

74 21 U.S.C. § 333(a)(2). 75 Id. § 333(a)(1). 76 21 U.S.C. §§ 331(d) & 355(a). 77 Good Reprint Practices Guidance, supra note 61. 78 21 U.S.C. § 321(p). 79 21 U.S.C. § 321(m). 80 Kordel v. United States, 335 U.S. 345, 350 (1948).

Thus, a manufacturer’s promotional

claims about an unapproved use of

a drug demonstrate that the use is

“intended[.]” And, because the label

lacks “adequate information for its

use,” the drug is misbranded and

banned for sale.



investigational new drugs provides that the ban on promoting such drugs “is not intended to restrict

the full exchange of scientific information concerning the drug[s], including dissemination of

scientific findings in scientific or lay media.”81 Manufacturers may disseminate information on

unapproved drugs and unapproved new uses of approved drugs to the physician investigators

participating in clinical trials.82 Information can also be disclosed as required by securities and

other laws, including, for example, the law requiring disclosure to www.clinicaltrials.gov.83

Manufacturers can disseminate off-label information “through the submission of original research

to peer-reviewed publications[,]”84 and by distributing peer-reviewed medical journal articles and

other materials about off-label uses directly to prescribers.85 Manufacturers can also respond to

unsolicited requests for off-label information.86 Subject to certain limitations, manufacturers are

also permitted to fund off-label continuing medical education programs for practicing physicians.87

There is also a provision of the FDCA that governing the presentation of “healthcare

economic information” by a manufacturer “to a formulary committee, or other similar entity, in

the course of the committee or the entity carrying out its responsibilities for the selection of drugs

for managed care or other similar organizations.”88 Known as “Section 114” because of its

numeration in the Food and Drug Administration Modernization Act (FDAMA), the statutory

provision defines health care economic information as “[a]ny analysis that identifies, measures, or

81 21 C.F.R. § 312.7(a). 82 Ralph F. Hall & Elizabeth S. Sobotka, Inconsistent Government Policies: Why FDA Off-Label Regulation Cannot

Survive First Amendment Review Under Greater New Orleans, 62 FOOD DRUG L.J. 1, 9 (2007) (“FDA permits

dissemination of information about investigational uses in order to recruit or educate investigators or clinical trial

subjects.”). 83 Id. at 32-33. 84 Citizen Petition Regarding the Food and Drug Administration's Policy on Promotion of Unapproved Uses of

Approved Drugs and Devices; Request for Comments, 59 Fed. Reg. 59,820, 59,823 (Nov. 18, 1994) (providing that

"information on unapproved uses may be disseminated through the submission of original research to peer-reviewed

publications"). 85 U.S. Food and Drug Admin., Revised Draft Guidance for Industry

Distributing Scientific and Medical Publications on Unapproved New Uses—Recommended Practices (Feb. 2014),

available at

http://www.fda.gov/downloads/drugs/guidancecomplianceregulatoryinformation/guidances/ucm387652.pdf. and

U.S. Food and Drug Admin., Draft Guidance for Industry Distributing Scientific and Medical Publications on Risk

Information for Approved Prescription Drugs and Biological Products—Recommended Practices (June 2014),

available at

http://www.fda.gov/downloads/drugs/guidancecomplianceregulatoryinformation/guidances/ucm400104.pdf. 86 U.S. Food and Drug Admin., Draft Guidance for Industry Responding to Unsolicited Requests for Off-Label

Information About Prescription Drugs and Medical Devices (Dec. 2011), available at

http://www.fda.gov/downloads/drugs/guidancecomplianceregulatoryinformation/guidances/ucm285145.pdf. 87 Final Guidance on Industry-Supported Scientific and Educational Activities, 62 Fed. Reg. 64,074, 64,093-100

(Dec. 3, 1997). 88 21 U.S.C. § 352(a).

http://www.clinicaltrials.gov/



compares the economic consequences, including the costs of the represented health outcomes, of

the use of a drug to the use of another drug, to another health care intervention, or to no

intervention.”89

Section 114 does not create a broad exception to the ban on off-label promotion for cost-

effectiveness information. It applies only to health care economic information directly related to

an approved use of the drug at issue. It does, however, provide manufacturers with increased

flexibility because it allows them to make promotional claims that are not supported by substantial

evidence as long as they are “based on competent and reliable scientific evidence.”90

Observers have noted that the “competent and reliable scientific evidence” standard is used

by the Federal Trade Commission (FTC) to evaluate, among other things, claims made about over-

the-counter drugs.91 More flexible than the FDA’s “substantial evidence” standard, “competent

and reliable scientific evidence” is defined by the FTC to mean “tests, studies or other research

based on the expertise of professionals in the field that have been objectively conducted and

evaluated by qualified people using procedures that give accurate and reliable results.”92 This is

important because neither cost-effectiveness nor comparative-effectiveness are typically

established with randomized controlled trials.93 Instead, as Peter Neumann has explained, “[m]uch

of the information comes from research using retrospective databases and quasi-experimental

designs[.]”94

The FDA has never promulgated regulations or issued guidance interpreting Section 114

and questions remain, including about the data that can be shared, about the personnel who can

share it, and about the manner in which they can share it. In July 2011, the Medical Information

Working Group (MIWG), a coalition of pharmaceutical companies, filed a citizen petition calling

on the FDA “to clarify FDA regulations and policies with respect to manufacturer dissemination

of information relating to new uses of marketed drugs and medical devices.”95 The petition

highlighted four areas in which, it argued, clarification was most needed (1) manufacturer

responses to unsolicited requests, (2) scientific exchange, (3) interactions with formulary

89 Id. 90 Id. 91 Anne V. Maher & Lesley Fair, The FTC’s Regulation of Advertising, 65 FOOD DRUG L.J. 589, 602 (2010). 92 Linda Goldstein, Regulatory: A New Paradigm in FTC Regulation, INSIDE COUNSEL (Feb. 27, 2013), http://www.insidecounsel.com/2013/02/27/regulatory-a-new-paradigm-in-ftc-regulation. 93 Neumann, supra note 52, at 209; Neumann, Claxton & Weinstein, supra note 52, at 130. 94 Neumann, supra note 52, at 209. 95 Citizen Petition, Docket No. FDA-2011-P-0512 (July 5, 2011).



committees, payers, and similar entities, and (4) dissemination of third-party clinical practice

guidelines.96

Since 2011, the FDA has responded to the call from industry for clarity by issuing a number

of new and newly-revised draft guidances addressing the concerns the MIWG raised about

responding to unsolicited requests and about dissemination of third-party clinical practice

guidelines.97 In 2015, the agency indicated it expects to release a draft guidance addressing

“manufacturer dissemination of information regarding unapproved uses,” and, following that, a

guidance addressing health care economic information, which will be titled “Health Care

Economic Information in Promotional Labeling and Advertising for Prescription Drugs Under

Section 114 of the Food and Drug Administration Modernization Act.”98 FDA was also expected

to hold a public meeting in 2015 “to address drug company concern that restrictions on what they

can say about off-label use of drugs violate their First Amendment right to free speech.”99

According to a January 2015 article in THE PINK SHEET, the agency had originally stated

that it would release the Section 114 guidance by the end of 2014 but “Center for Drug Evaluation

and Research Director Janet Woodcock told [a conference audience] that the document was taking

longer to get out than expected because it has been ‘an extremely contentious issue’ internally at

FDA and externally.”100

Nevertheless, the agency has given some less formal indications of its position. In a speech

given on February 9, 2012, Robert Temple, the Deputy Director of Clinical Science of the FDA’s

Center for Drug Evaluation and Research, asserted that the more flexible “competent and reliable

96 Id. 97 Letter from Leslie Kux, Assistant Commissioner for Policy, Food and Drug Administration, to Alan R. Bennett,

Ropes & Gray LLP, Joan McPhee, Ropes & Gray LLP, and Coleen Klasmeier and Paul E. Kalb, Sidley Austin LLP

8 (June 6, 2014), available at http://www.regulations.gov/#!documentDetail;D=FDA-2013-P-1079-0004 (“Since the

submission of both your petitions, we have been engaged in extensive internal review of the Agency’s approach to

the dissemination of scientific information about off-label uses of approved products, and have issued draft guidance

documents for comment as we seek to provide industry with more clarity about how it can share scientific

information about off-label uses.”) 98 Letter from Leslie Kux, Assistant Commissioner for Policy, Food and Drug Administration, to Alan R. Bennett,

Ropes & Gray LLP, Joan McPhee, Ropes & Gray LLP, and Coleen Klasmeier and Paul E. Kalb, Sidley Austin LLP

1 (Dec. 22, 2014), available at http://www.regulations.gov/#!documentDetail;D=FDA-2013-P-1079-0005; U.S.

Food and Drug Administration, Guidance Agenda: New & Revised Draft Guidances CDER Is Planning to Publish

During Calendar Year 2015 (Apr. 28, 2015),

http://www.fda.gov/downloads/drugs/guidancecomplianceregulatoryinformation/guidances/ucm417290.pdf. 99 Toni Clarke, Under Pressure, FDA to Hold Public Meeting on Off-Label Use, REUTERS (May 6, 2015),

http://www.reuters.com/article/2015/05/07/us-fda-pharmaceuticals-constitution-idUSKBN0NS00F20150507. 100 Sue Sutter, FDA Guidance on Health Care Economic Data Is Coming in 2015, THE PINK SHEET DAILY (Jan. 2,

2015).



evidence” standard applies only to claims about “economic costs and consequences.”101 The

underlying clinical assumptions must still be supported by substantial evidence—that is, by two

randomized controlled clinical trials in most cases.102

Dr. Temple offered as an example a company that wants to claim that its insulin product

would save money because it would control patients’ blood sugar levels, which in turn would

prevent certain eye problems from developing.103 Competent and reliable evidence would be

sufficient to support a company’s claim regarding the cost savings attributable to preventing the

eye problems that can develop as a result of high blood sugar. The underlying claim that the

company’s drug controls blood sugar and prevents eye problems from developing, on the other

hand, would need to be established with at least two clinical trials.

Dr. Temple’s interpretation of Section 114—that its competent and reliable evidence

standard applies only to economic outcomes that are not blended with clinical outcomes—would

give it a relatively restricted scope. In an article in HEALTH AFFAIRS, Dr. Peter Neumann and

colleagues have argued that “common approaches in

economic evaluation, such as cost-consequence analyses,

cost-effectiveness analyses, and cost-of-illness studies…

almost always blend clinical and economic outcomes.”104

Assistant United States Attorney Bloom has warned

companies against using economic claims to disguise scientific claims.105 One reason that this

issue has been contentious is the ongoing debate over both Congress’s intent with regard to the

reach of Section 114 and its scope as a policy matter.

In addition to Section 114, companies also rely on the safe harbor permitting manufacturers

to respond to unsolicited requests for off-label information.106 As it explained in a March 2012

letter to the FDA, the Academy of Managed Care Pharmacy (AMCP) has developed a template,

the Format for Formulary Submissions, which can be “used by managed care organizations and

health systems to formally request that pharmaceutical manufacturers present a ‘dossier’

101 Presentation, Robert Temple, Communication of CER Findings (Feb. 9, 2012), available at

http://f.datasrvr.com/fr1/412/13859/Presentation_by_Dr._Richard_Temple.pdf. 102 Id. 103 Id. (explaining that “a treatment that provides tight control of blood sugar (insulin) in type 1 diabetes could have

cost savings attributed to prevention of retinopathy if well-controlled studies show such an effect of tight control.”). 104 Neumann, Claxton & Weinstein, supra note 52, at 130. 105 Sutter, supra note 10. 106 See supra note 86.

Assistant United States

Attorney Bloom has warned

companies against using

economic claims to disguise

scientific claims.



containing detailed information, not only on the drug’s safety and efficacy, but also on its overall

clinical and economic value relative to alternative therapies.”107 To benefit from the safe harbor

for unsolicited requests, the AMCP explains, the following must be true:

1) the manufacturer does not prompt or encourage requests, 2) responses focus on

data rather than company-generated discussions of those data, 3) individuals with

appropriate scientific and medical training prepare responses, 4) responses do not

deliberately go beyond the scope of the request, 5) responses do not include

promotional materials, and 6) responses are objective, balanced and scientifically

rigorous.108

The ban on off-label promotion is influenced, to a disputed extent, by the First Amendment

right to freedom of speech. The ban was first challenged in a series of legal actions brought against

the FDA in the 1990s by the Washington Legal Foundation.109 In 2011 in Sorrell v. IMS Health,

the Supreme Court held that it was unconstitutional for a state to bar pharmaceutical companies,

but not others, from accessing data on physician prescribing patterns for use in marketing.110 In

2012, in United States v. Caronia, the Second Circuit applied the Supreme Court’s decision in

Sorrell and held that it was unconstitutional for the defendant sales representative to be convicted

of the crime of misbranding for engaging in truthful off-label promotion.111

In the recent past, two companies, Allergan and Par Pharmaceutical, brought First

Amendment challenges to the ban while they were under investigation for engaging in off-label

promotion and thereby violating the False Claims Act.112 Both companies dismissed their claims

as part of settlements they entered into with the government.113 In May 2015, Amarin Pharma, a

company which has not disclosed an active investigation by the government, brought a First

Amendment challenge, arguing that it has a First Amendment right to promote its omega-3 fatty

acid Vascepa by making the truthful off-label claim that “supportive but not conclusive research

107 Letter from Edith A. Rosato, Chief Executive Officer, Academy of Managed Care Pharmacy, to Food and Drug

Administration (Mar. 26, 2012). 108 Id. 109 CENTER FOR HEALTH & PHARMACEUTICAL LAW & POLICY, SETON HALL UNIVERSITY SCHOOL OF LAW, DRUG

AND DEVICE PROMOTION: CHARTING A COURSE FOR POLICY REFORM 13 (2009), available at

http://law.shu.edu/ProgramsCenters/HealthTechIP/upload/whitepaper_jan2009.pdf (reviewing the six-year course of

the litigation). 110 Sorrell v. IMS Health, Inc., 131 S. Ct. 2653, 2670 (2011). 111 United States v. Caronia, 703 F.3d 149, 168 (2d Cir. 2012). 112 John C. Richter & Daniel C. Sale, The Future of Off-Label Promotion Enforcement in the Wake of Caronia –

Toward a First Amendment Safe Harbor, 14 SEDONA CONF. J. 19, n. 60 (2013). 113 Id.



shows that consumption of EPA and DHA omega-3 fatty acids may reduce the risk of coronary

heart disease[.]”114

In early June 2015, FDA responded to Amarin’s suit with a letter indicating that the agency

“does not have concerns with much of the information you proposed to communicate.”115

Specifically, the agency “would not consider the dissemination of most of that information to be

false or misleading, and we do not intend to rely on it as evidence that Vascepa is intended for a

use that would render Vascepa a new drug or misbranded.”116 Nevertheless, there remained areas

of disagreement between the FDA and Amarin and, as this white paper was going to press, the

District Court ruled in favor of Amarin’s

challenge. It issued preliminary relief in the

form of a determination that Amarin “may

engage in truthful and non-misleading speech

promoting the off-label use of Vascepa, i.e., to

treat patients with persistently high

triglycerides, and under Caronia, such speech

may not form the basis of a prosecution for

misbranding.”117 Further, “[b]ased on the

information presently known, the combination

of statements and disclosures that Amarin

proposes to make to doctors relating to the use

of Vascepa to treat persons with persistently

high triglycerides, as such communications have been modified herein, is truthful and non-

misleading.”118

The implications of Amarin remain to be seen, most obviously whether it survives an

appeal. But while the case has the potential for a sea change in off-label practices, determining

what is false or misleading will itself be a complicated inquiry should this view of the First

114 Complaint at 7, Amarin Pharma v. U.S. Food and Drug Administration, Civil Action No. 15-cv-3588 (PAE)

(May 7, 2015). 115 Letter from Janet Woodcock, Director, Center for Drug Evaluation and Research, Food and Drug Administration,

to Steven Ketchum, President of Research and Development, Amarin Pharma (June 5, 2015). 116 Id. 117 Amarin Pharma v. United States FDA, 15 Civ. 3588 (PAE), 2015 U.S. Dist. LEXIS 103944, *110 (S.D.N.Y.

Aug. 7, 2015). 118 Id.

…the District Court ruled in favor

of Amarin’s challenge. It issued

preliminary relief in the form of

a determination that Amarin

“may engage in truthful and non-

misleading speech promoting the

off-label use of Vascepa, i.e., to

treat patients with persistently

high triglycerides, and under

Caronia, such speech may not

form the basis of a prosecution

for misbranding.”



Amendment prevail. In addition, much activity now challenged as impermissible will not lend

itself to the kind of resolution the court in Amarin employed.

IV. Direct Enforcement of the Ban on Off-Label Promotion

At the federal level, the laws and regulations governing drug and device promotion are

directly enforced by the FDA and the DOJ. The FDCA provides the FDA with a number of

enforcement tools, which the agency groups into three categories: advisory actions, administrative

actions, and judicial actions.119 Advisory actions include notice of violation letters, which are more

commonly known as untitled letters, and, for more significant violations, warning letters.120 As the

Government Accountability Office has explained, “[b]oth types of letters request the drug

company to take specific actions, such as stopping the dissemination of violative materials and

issuing corrections of previously distributed information.”121 Professor Vicki Girard notes that

“[i]n most cases, companies comply with the agency’s recommendations and reach some mutually-

agreeable resolution with FDA.”122

Administrative actions include administrative detention of a violative product, which the

FDA can order for 20 days, unless the agency needs additional time to initiate a seizure, in which

case the detention can extend to 30 days.123 The FDA can also request or, in certain circumstances,

require, that a manufacturer recall a violative product.124 While the FDA’s authority to require a

recall does not extend to drugs, the agency can withdraw its approval of a drug’s new drug

application, which would make selling the drug illegal.125 In addition, the FDA can issue civil

119 U.S. FOOD & DRUG ADMIN., DEP’T OF HEALTH & HUMAN SERVS., REGULATORY PROCEDURES MANUAL,

CHAPTERS 4, 5, AND 6 (August 2012), available at

http://www.fda.gov/ICECI/compliancemanuals/regulatoryproceduresmanual/default.htm#_top. 120 Peter J. Neumann & Sarah K. Bliss, FDA Actions Against Health Economic Promotions, 2002-2011, 15 VALUE

IN HEALTH 948, 948 (2012). 121 U.S. GOVERNMENT ACCOUNTABILITY OFFICE, PRESCRIPTION DRUGS: FDA’S OVERSIGHT OF THE PROMOTION OF

DRUGS FOR OFF-LABEL USES 2 (July 2008). 122 Vicki W. Girard, Reducing Unlawful Prescription Drug Promotion: Is the Public Health Being Served by an

Enforcement Approach that Focuses on Punishment?, 2 FOOD & DRUG L. INST. FOOD & DRUG POL’Y FORUM 1-18,

6 (2012). 123 21 U.S.C. § 334(g)(1). 124 U.S. FOOD & DRUG ADMIN., DEP’T OF HEALTH & HUMAN SERVS., REGULATORY PROCEDURES MANUAL,

CHAPTER 7 (August 2012), available at

http://www.fda.gov/ICECI/compliancemanuals/regulatoryproceduresmanual/default.htm#_top. 125 21 U.S.C. § 355(e).



monetary penalties, although its authority to do so with regard to drugs is limited to those cases in

which a direct-to-consumer advertisement is false or misleading.126

The third category of enforcement tools, judicial actions, includes seizures,127

injunctions,128 and criminal prosecutions.129 Judicial actions must be initiated in court by the DOJ

acting on behalf of the FDA.130 Statutory penalties upon conviction of a violation of the FDCA

include imprisonment of up to three years and criminal fines of up to $10,000.131 Equitable relief

such as disgorgement of illegally-obtained profits and restitution for a victim’s injury or loss may

also be available. Professor Adam Zimmerman has noted that the FDA

rarely sought restitution or other forms of monetary relief until very recently. . . .

Since 1999, however, the FDA has aggressively pursued restitution and

disgorgement against businesses that misbrand drugs, sell drugs without

authorization, or violate good manufacturing practice requirements. Between 1999

and 2003, the FDA recovered over three-quarters of a billion dollars from

pharmaceutical companies for violations of good marketing practices. The FDA's

Deputy Chief Counsel for Litigation has stated that the agency will continue to

pursue restitution and disgorgement.132

As of 2011, the FDA had funneled all recovered restitution and disgorgement monies to the United

States Treasury.133

The FDA includes an Office of Criminal Investigation (OCI), which has investigative

agents spread across a headquarters office and field and other offices around the country.134 OCI,

with the support of the Food and Drug Division of the HHS Office General Counsel, investigates

criminal violations of the FDCA and other statutes including the Prescription Drug Marketing Act

and the Federal Anti-Tampering Act.135 When FDA completes its investigation of a case, it decides

126 21 U.S.C. § 333(g)(1). 127 21 U.S.C. § 334. 128 21 U.S.C § 332(a). 129 Nancy W. Mathewson, Prohibited Acts and Enforcement Tools, 65 FOOD & DRUG LAW J. 545, 546 (2010). 130 By regulation, “All civil and criminal litigation and grand jury proceedings arising under the [FDCA]” shall be

“assigned to, and shall be conducted, handled, or supervised by the Assistant Attorney General, Civil Division[.]” 28

C.F.R. c. 0.45(j). 131 21 U.S.C. § 333 (a). 132 Adam S. Zimmerman, Distributing Justice, 86 N.Y.U. L. REV. 500, 537-38 (2011). 133 Id. at 538. 134 History, Inspections, Compliance, Enforcement, and Criminal Investigations, U.S. FOOD AND DRUG

ADMINISTRATION, http://www.fda.gov/ICECI/CriminalInvestigations/ucm123041.htm (last visited Aug. 2, 2015). 135 ANNUAL REPORT OF THE DEP’T OF HEALTH AND HUMAN SERVICES AND JUSTICE, HEALTH CARE FRAUD AND

ABUSE CONTROL PROGRAM FY 2014 69 (Mar. 19, 2015) (hereinafter “ANNUAL HCFAC REPORT”), available at

https://oig.hhs.gov/publications/docs/hcfac/FY2014-hcfac.pdf.



whether to pass the case on to the DOJ. The DOJ investigates and prosecutes violations of the

FDCA through its Civil Division, specifically its Consumer Protection Branch (formerly known

as the Office of Consumer Litigation) and its Fraud Section, 136 and through local United States

Attorneys’ Offices (USAOs).137

In recent years, the FDA has received funding from the Health Care Fraud and Abuse

Control (HCFAC) Account138 for its Pharmaceutical Fraud Program (PFP), the focus of which

includes “fraudulent marketing schemes.”139 In DOJ’s and HHS’s most recent annual report on

HCFAC, the agencies reported that FDA received $3.4 million in HCFAC funding for the PFP in

Fiscal Year 2014.140 DOJ and HHS report that, since the PFP began in Fiscal Year 2010, the OIC

has opened a total of 89 criminal investigations.”141 In Fiscal Year 2014, FDA’s fourth full fiscal

136 CIVIL DIVISION, U.S. DEP’T OF JUSTICE, FY 2013 BUDGET AND PERFORMANCE PLANS 37 (Feb. 2012), available

at http://www.justice.gov/about/fy13-budget-and-performance (hereinafter “FY 2013 BUDGET AND PERFORMANCE

PLANS”). The Civil Division explains that it

is a leading player in the Federal Government’s efforts to combat health care fraud. The Civil

Division’s Fraud Section and its Consumer Protection Branch investigate and litigate health care

fraud cases under the False Claims Act and the Federal Food, Drug and Cosmetic Act. In many of

these matters, the Civil Division works collaboratively with other Department of Justice

components, such as U.S. Attorneys, and client agencies, such as the U.S. Department of Health &

Human Service’s Office of Inspector General, the Food and Drug Administration, and the Centers

for Medicare & Medicaid Services.

Id. 137 Id. See also John R. Fleder, Who Decides Your Fate in FDA Enforcement Matters?, UPDATE MAGAZINE,

May/June 2007, at 40, available at http://www.hpm.com/pdf/FlederMayFDLI.pdf. Fleder explains that

OCI cannot initiate a criminal case on its own. Instead, it must convince either a U.S. Attorney or

[what is now called the Consumer Protection Branch,] to bring a case. Federal regulations provide

that OCL has handling or supervising authority for criminal proceedings brought under the FDCA.

In instances where OCL is involved, it must obtain approval to initiate the prosecution from the

Deputy Assistant Attorney General who supervises OCL, and ultimately from the Assistant

Attorney General for the Justice Department’s Civil Division. However, U.S. Attorneys’ Offices

commence criminal cases under the FDCA without following these approval policies.

Id. 138 Created by the Health Insurance Portability and Accountability Act of 1996 (HIPAA), HCFAC is a revolving

fund used to support the enforcement of the healthcare fraud and abuse laws. ANNUAL HCFAC REPORT, supra note

135, at 1-3. The monies come from the Medicare Hospital Insurance Trust Fund and they flow to DOJ, the FBI, and

HHS. 42 U.S.C. § 1395i(k)(3). Some of the funds can be used only by the HHS-OIG. Id. 139 Margaret H. Lemos & Max Minzner, For-Profit Public Enforcement, 127 HARV. L. REV. 853, 866 (2014)

(explaining that in many states the attorney general retains a portion of the proceeds of “enforcement of state

consumer protection, false claims, and related statutes”). 140 ANNUAL HCFAC REPORT, supra note 135, at 69. 141 Id. at 70.



year of HCFAC Program activity, the OCI opened 24 criminal investigations, including a number

involving promoting drugs or devices for unapproved or uncleared uses.142

The FDA’s response to off-label advertising and promotion, then, ranges from issuing an

untitled letter to referring the matter to the DOJ to pursue criminal charges based on, depending

on the facts, introducing an unapproved new drug into interstate commerce or misbranding

charges,143 healthcare fraud,144 mail, or wire fraud,145 or violations of the criminal False Claims

Act.146

Most off-label promotion cases that the DOJ pursues, however, do not begin as an agency

investigation or arise from a referral from the FDA. As is discussed at length below, most of the

pharmaceutical and medical device off-label promotion cases that the DOJ prosecutes began as a

FCA lawsuit filed by a qui tam relator. These cases focus not on off-label promotion as a statutory

and regulatory violation but rather on the effect of that promotion on federal and state spending on

drugs and devices. The stakes are high.147 In 2013, the three programs administered by CMS—

Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP)—spent over $97 billion

142 Id. 143 Allison D. Burroughs, Mark Carlisle Levy, Gregory G. Schwab & Young Paik, Off-Label Promotion:

Government Theories of Prosecution and Facts that Drive Them, 65 FOOD & DRUG L.J. 555, 559-69 (2010)

(explaining the two theories underlying the criminal prosecution of off-label promotion under the FDCA). 144 18 U.S.C. § 1347 & 42 U.S.C. § 1320a-7b(a). 145 18 U.S.C. §§ 1341 & 1343. 146 18 U.S.C. § 287. 147 Robert S. Litt & Nathan Cortez, Trends in Criminal Enforcement Against Off-Label Promotion, THE ABA’S 21ST

ANNUAL NATIONAL INSTITUTE ON WHITE COLLAR CRIME, at L-23 to L-33 (2007) (noting that “a persistent rise in

health care spending during the 1990s, particularly on prescription drugs . . . helped trigger a greater government

interest in prosecuting all kinds of health care fraud and abuse, using extremely broad laws like the federal anti-

kickback statute and False Claims Act. Moreover, legislation passed in the 1990s both increased the statutory

authorities for federal investigation and prosecution, and provided dedicated resources for health care fraud…”).

Most off-label promotion cases that the DOJ pursues,

however, do not begin as an agency investigation or

arise from a referral from the FDA. . . . most of the

pharmaceutical and medical device off-label promotion

cases that the DOJ prosecutes began as a FCA lawsuit

filed by a qui tam relator.



on prescription drugs.148 The Department of Defense and the Department of Veterans Affairs spent

an additional $4.8 and $2.7 billion respectively.149

Not discussed at length in this paper, but worth noting, is that manufacturers that engage

in off-label promotion can, depending upon the facts, face liability under a number of federal and

state regimes in addition to the FDCA, health care and other fraud statutes, and False Claims Acts.

These include state and federal consumer protection laws, state and federal securities laws, and

state and federal Racketeering Influenced and Corrupt Organizations Acts.150 Shareholder

derivative suits alleging that a company’s board failed to prevent off-label promotion are also

common,151 as are suits bringing common law causes of action, including products liability (where

the plaintiff sustained a personal injury) and fraud (where the plaintiff’s alleged injury was

economic).152 Some of these lawsuits are brought by consumers, payers, and other private

plaintiffs. Others are brought by state attorneys general, sometimes, controversially, by

outsourcing to private counsel.153

148 Historical, National Health Expenditure Survey, CENTERS FOR MEDICARE & MEDICAID SERVICES,

https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-

Reports/NationalHealthExpendData/NationalHealthAccountsHistorical.html (last visited Aug. 2, 2015). 149 Id. 150 Douglas Mossman & Jill L. Steinberg, Promoting, Prescribing & Pushing Pills: Understanding the Lessons of

Antipsychotic Drug Litigation, 13 MICH. ST. J. OF MED. & LAW 263, 298-313 (2009) (discussing claims that could

be brought by state attorneys general, by consumers, and by shareholders). 151 Kathleen M. Boozang, Responsible Corporate Officer Doctrine: When Is Falling Down on the Job a Crime? 6

ST. LOUIS U. J. OF HEALTH LAW & POL’Y 77, 92-98 (2012) (discussing corporate derivative suits brought against the

boards of directors of pharmaceutical companies accused of engaging in off-label promotion). 152 Kate Greenwood, Physician Conflicts of Interest in Court: Beyond the ‘Independent Physician’ Litigation

Heuristic, 30 GA. ST. U. L. REV. 759, 782-83, 795-98 (2014) (discussing products liability personal injury cases and

RICO and other economic injury cases brought against pharmaceutical companies in which allegations of physician

conflicts of interest due to physician-industry financial relationships play a role). 153 Ethan Posner, Gerald F. Masoudi, Christopher A Blow To State Encroachment On Federal Turf, LAW360,

http://www.cov.com/files/Publication/5cd06f46-cb02-4e64-a00a-

048cb94f01d0/Presentation/PublicationAttachment/3b760ef4-b3df-47cd-8d2e-

1088b7692821/Law360_A_Blow_To_State_Encroachment_Federal_Turf.pdf (last visited Apr. 6, 2015) (“Civil

justice reform groups and even Congress have expressed concern about [private counsel hired by state attorneys

general on a contingency-fee basis to pursue litigation against pharmaceutical companies]. In fact, a congressional

committee recently held a public hearing to investigate the potential for conflicts and other harms associated with

this practice.”).



V. The Ban on Off-Label Promotion and the False Claims Act:

The Legal Landscape

The False Claims Act allows a private individual, called a relator or, more colloquially, a

whistleblower, who learns of a fraud committed on the government to file a qui tam complaint on

the government’s behalf.154 The statute was enacted in 1863 to address fraud by Union Army

contractors during the Civil War.155 In 1986, Congress passed amendments that strengthened the

statute by making qui tam actions more lucrative. As a result, Joan Krause writes, “[t]his general

Civil War-era antifraud law has become a key component of the government’s modern war against

health-care fraud.”156 In 2005, to encourage states to join the fight, Congress passed Section 6031

of the Deficit Reduction Act (DRA), which incentivized states to pass their own False Claims Acts.

As CMS has explained, “[i]f a State enacts a False Claims Act that is closely modeled on the

federal version of the law, the Federal Government will increase the state share of amounts

recovered under that False Claims Act by 10 percentage points.”157 As hoped, many states

responded by passing their own False Claims Acts.158

154 31 U.S.C. § 3730(b)(1). 155 Joan H. Krause, Kickbacks, Self-Referrals, and False Claims: The Hazy Boundaries of Health Care Fraud, 144

CHEST 1045, 1046 (2013). 156 Id. 157 CENTERS FOR MEDICARE & MEDICAID SERVS., U.S. DEP’T OF HEALTH & HUMAN SERVS., THE DEFICIT

REDUCTION ACT: IMPORTANT FACTS FOR STATE OFFICIALS, available at http://www.cms.gov/Regulations-and-

Guidance/Legislation/DeficitReductionAct/downloads/Checklist1.pdf. 158 OFFICE OF INSPECTOR GENERAL, U.S. DEP’T OF HEALTH & HUMAN SERVS., STATE FALSE CLAIMS ACT REVIEWS,

https://oig.hhs.gov/fraud/state-false-claims-act-reviews/ (last visited Apr. 6, 2015).

Elements of a False Claim Action:

(1) that there was a claim, which is defined as a request for money or property that is presented to the government,

(2) that the claim was false in a way that was material to the government’s decision to pay it,

(3) that the defendant’s words or actions caused the claim to be presented to the government, and

(4) that the defendant had the requisite scienter.



While federal FCA suits have been commonplace in the health care sector for years, the

first case in which off-label promotion formed the basis of such a suit was United States of America

ex rel. David Franklin v. Parke-Davis,159 which was settled in 2004 for $430 million.160 The

district court in Franklin denied the defendant’s motion for summary judgment, holding that an

FCA suit could be founded on a defendant’s truthful off-label promotion to the extent that the

promotion caused physicians to prescribe, and the government to pay for, a drug for a use not

covered by Medicaid.161 Since Franklin, numerous drug and device companies have entered into

multi-million—and even multi-billion—dollar off-label promotion FCA settlements.

The elements of a False Claims Act cause of action are: (1) that there was a claim, which

is defined as a request for money or property that is presented to the government, (2) that the claim

was false in a way that was material to the government’s decision to pay it, (3) that the defendant’s

words or actions caused the claim to be presented to the government, and (4) that the defendant

had the requisite scienter.162 The FCA’s scienter requirement is “knowingly,” which the statute

defines to “mean that a person, with respect to information-- (i) has actual knowledge of the

information; (ii) acts in deliberate ignorance of the truth or falsity of the information; or (iii) acts

in reckless disregard of the truth or falsity of the information[.]”163 There is no requirement of

“proof of specific intent to defraud[.]”164

The FCA sets forth two routes to establishing that a defendant is civilly liable for a false

claim. The first, 31 U.S.C. § 3729(a)(1)(A), the “presentment provision,” makes it illegal for an

individual to “knowingly present[], or cause[] to be presented, a false or fraudulent claim for

payment or approval.”165 The second, 31 U.S.C. § 3729(a)(1)(B), is the false record or false

statement provision, which bars “knowingly mak[ing], us[ing], or caus[ing] to be made or used, a

false record or statement material to a false or fraudulent claim.”166 Section 3729(a)(1)(B), then,

has a “double falsity” requirement, but Section 3729(a)(1)(A) does not.

159 United States ex rel. Franklin v. Parke-Davis, 2003 U.S. Dist. LEXIS 15754 (D. Mass. Aug. 22, 2003). 160 Press Release, U.S. Dep’t of Justice, Warner-Lambert to Pay $430 Million to Resolve Criminal & Civil Liability

Relating to Off-Label Promotion (May 13, 2004), available at

http://www.justice.gov/archive/opa/pr/2004/May/04_civ_322.htm. 161 Franklin, 2003 U.S. Dist. LEXIS 15754, at *9-10. 162 United States ex rel. Brown v. Celgene Corp., 2014 U.S. Dist. LEXIS 99815,*6-7 (C.D. Cal. July 10, 2014). 163 31 U.S.C. § 3729(b)(1)(A). 164 31 U.S.C. §3729(b)(1)(B). 165 31 U.S.C. § 3729(a)(1)(A). 166 31 U.S.C. §3729(a)(1)(B). Note that prior to 2009, this section was designated Section 3729(a)(2).



The paradigmatic false claim for purposes of the FCA is a claimant’s billing the

government for goods or services that were not provided.167 These so-called “factually false” cases

could involve, for example, “billing for services not actually rendered, billing for services that

were partially rendered, upcoding, inflating costs, or manipulating pricing[.]”168 In FCA cases that

involve pharmaceutical promotion, however, the prescription drugs at issue have typically been

prescribed by physicians and provided to patients, and there is therefore not the paradigmatic

factually false claim.

A claim can also be false for purposes of the FCA if it is “legally false” because the

individual or entity submitting a claim for payment to the government failed to comply with a

“condition of payment.” As Kathleen McDermott and Arianne Callender have explained, a

condition of payment “is an obligation that is a prerequisite for payment[.]”169 Courts that have

addressed the question have concluded that compliance with the ban on off-label promotion is not

a condition of payment, which means that a plaintiff does not state a claim for violation of the FCA

merely by alleging that the defendant’s off-label promotion resulted in claims being submitted to

Medicare or Medicaid.170 Conditions of payments are distinguishable from conditions of

participation, which are conditions that providers must meet to be eligible to participate with

Medicare or Medicaid.171 However, McDermott and Callender go on to write that, “because the

Centers for Medicare & Medicaid (CMS) could choose to continue to pay claims even if a provider

167 Joan H. Krause, Health Care Providers and the Public Fisc: Paradigms of Government Harm Under the Civil

False Claims Act, 36 GA. L. REV. 121, 125 (2001) (“As the numbers of health care FCA suits have grown, so too

have the types of activities targeted by enforcement efforts. The FCA initially was applied in straightforward cases

of fraud, such as physicians who billed the government for services they never performed. But gradually, more

creative theories have emerged.”). 168 Kathleen McDermott & Arianne Callender, Practice Resource: Compliance Certifications and the Era of

Accountability--A Forecast to Debate, 5 J. HEALTH & LIFE SCI. L. 158 (2012). 169 Id. 170 See, e.g., United States ex rel. Hartwig v. Medtronic, 2014 U.S. Dist. LEXIS 44475, *36-37 (S.D. Miss. Mar. 31,

2014) (holding that “allegations of off-label promotion are insufficient to bring rise to FCA liability” and citing

United States ex rel. King v. Solvay S.A., 823 F. Supp. 2d 472, 510 (S.D. Tex. 2011), vacated in part on other

grounds, 2012 U.S. Dist. LEXIS 42482 (S.D. Tex. Mar. 28, 2012) ("FCA liability does not attach to violations of

federal law or regulations, such as marketing of drugs in violation of the Food, Drug, & Cosmetic Act, that are

independent of any false claim." (citations omitted)) and United States ex rel. Bennett v. Boston Scientific Corp.,

2011 U.S. Dist. LEXIS 34745, at *94 (S.D. Tex. Mar. 31, 2011) ("[E]ven if a drug or device manufacturer's

marketing or promotion activities violate FDA regulations, that is insufficient to plead that the manufacturer caused

physicians or hospitals to submit false claims for reimbursement.")). 171 See, United States ex rel. Leysock v. Forest Labs., Inc., 2014 U.S. Dist. LEXIS 151685, at *23-24 (D. Mass. Oct.

27, 2014) (defining conditions of payment as “preconditions that are a prerequisite to a particular payment,” in

contrast to conditions of participation).



fails to comply with a given condition of participation, allegations based on certifications related

to conditions of participation likely are not actionable under the FCA.”172

However, a claim can also be legally false if it is accompanied by an express false

certification of compliance with laws and regulations that are material to the government’s

decision to pay. Courts of Appeals in the Second, Third, Sixth, Ninth, Tenth, Eleventh, and District

of Columbia Circuits have gone further, recognizing that there can be liability under a theory of

“implied false certification.”173 Neither theory of false certification, express or implied, however,

applies to claims for reimbursement for pharmaceuticals when prescriptions were caused by off-

label promotion. Such claims are not accompanied by a certification of compliance with the ban

on off-label promotion, and courts have held that no certification of compliance with the ban is

implied by a request for reimbursement.

How, then, could a FCA case be founded on

the defendant having engaged in off-label

promotion? If the off-label promotion was false or

misleading, a relator could argue that physicians

were defrauded into prescribing drugs that were not

medically necessary or were otherwise not eligible

for reimbursement under Medicare or Medicaid or

other government health care programs. Even if the

off-label promotion was truthful, however, it can form the basis of a false claim. Under Franklin

and the cases that followed it, if the defendant’s off-label promotion caused physicians to

prescribe, and the government to pay for, drugs for an off-label use that was not just off-label, but

also not reimbursable, the defendant could be held liable under the FCA. 174

The Medicare statute sets forth the general rule that an item or service will not be covered

unless it is “reasonable and necessary for the diagnosis or treatment of illness or injury or to

improve the functioning of a malformed body member[.]”175 Under Medicare Parts A and B,

which pay for drugs that are typically administered by physicians “in hospitals, skilled nursing

172 McDermott & Callender, supra note 168. 173 United States ex rel. Wilkins v. United Health Group, 659 F.3d 295, 306 (3d Cir. 2011). 174 Franklin, 2003 U.S. Dist. LEXIS 15754, at *9-10. 175 42 U.S.C. § 1395y(a)(1).

…if the defendant’s off-label

promotion caused physicians to

prescribe, and the government to

pay for, drugs for an off-label use

that was not just off-label, but

also not reimbursable, the

defendant could be held liable

under the FCA.



facilities, and outpatient dialysis and oncology clinics,” 176 drugs are covered only for uses that are

“safe and effective and otherwise reasonable and necessary.”177 CMS presumes that uses that

appear on the FDA-approved label are safe and effective.178

Off-label uses can also be covered, as long as they are “medically accepted.”179 Of

relevance to this determination are “the major drug compendia, authoritative medical literature,

and/or accepted standards of medical practice.”180 There is a separate definition of “medically

accepted” for oncology drugs.181 The Secretary of HHS can promulgate a generally applicable rule

that an off-label use is or is not medically accepted, known as a national coverage determination

(NCD).182 Much more commonly, though, the Secretary allows individual carriers or fiscal

intermediaries to make the determination with regard to a particular drug. Carriers and

intermediaries, in turn, can either promulgate a generally applicable rule, known as a local

coverage determination (LCD), or make the determination on a case-by-case basis.183 As such, a

drug’s off label use can be medically accepted in some areas of the country but not others.

Coverage under Medicare Part D, which pays for drugs that patients administer to

themselves, is likewise limited to drugs when used for a “medically accepted indication.”184 The

definition of “medically accepted indication” is imported from the Medicaid statute, except that

Medicare Part D uses a broader definition if a drug is part of an “anticancer chemotherapeutic

regimen[.]”185 The Medicaid statute defines the term “medically accepted indication” to mean “any

176 See, Jennifer L. Herbst, The Short-Sighted Value of Inefficiency: Why We Should Mind the Gap in the

Reimbursement of Outpatient Prescription Drugs, 2 CASE WESTERN RESERVE JOURNAL OF LAW, TECHNOLOGY &

THE INTERNET 1, 6 (2011). 177 CENTERS FOR MEDICARE & MEDICAID SERVS., U.S. DEP’T OF HEALTH & HUMAN SERVS., MEDICARE BENEFIT

POLICY MANUAL, ch. 15, § 50.4.1 (hereinafter “MEDICARE BENEFIT POLICY MANUAL”), available at

http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Internet-Only-Manuals-IOMs-

Items/CMS012673.html. 178 Daniel Meron & Eric C. Greig, Medicare and Medicaid Reimbursement for Off-Label Uses of Pharmaceuticals

and Medical Devices, in OFF-LABEL COMMUNICATIONS: A GUIDE TO SALES & MARKETING COMPLIANCE (Food and

Drug Law Institute 4th Ed. 2014). 179 MEDICARE BENEFIT POLICY MANUAL, supra note 177177 § 50.4.2. 180 Meron & Greig, supra note 178, at 151. 181 Id. at 151-52. 182 MEDPAC, REPORT TO THE CONGRESS: MEDICARE PAYMENT POLICY 245 (Mar. 2003), available at

http://www.medpac.gov/documents/reports/Mar03_Entire_report.pdf?sfvrsn=0. 183 42 U.S.C. §§ 1869(f)(2)(B), 1395ff(f)(2)(B) & 1395u; 42 C.F.R. § 421.200. 184 42 C.F.R. § 423.100. 18542 U.S.C. § 1395w-102(e)(4)(A) (“For purposes of paragraph (1), the term "medically accepted indication" has

the meaning given that term—(i) in the case of a covered part D drug used in an anticancer chemotherapeutic

regimen, in section 1395x(t)(2)(B) of this title…”); 42 U.S.C. § 1395x(t)(2)(“For purposes of paragraph (1), the term

"drugs" also includes any drugs or biologicals used in an anticancer chemotherapeutic regimen for a medically

accepted indication (as described in subparagraph (B)). (B) In subparagraph (A), the term "medically accepted



use for a covered outpatient drug which is approved under the Federal Food, Drug, and Cosmetic

Act or the use of which is supported by one or more citations included or approved for inclusion

in any of the compendia” described in the statute:186 “(I) American Hospital Formulary Service

Drug Information; (II) United States Pharmacopeia-Drug Information (or its successor

publications); and (III) the DRUGDEX Information System[.]”187 With regard to Part D, coverage

determinations are made by each individual participating plan’s pharmacy and therapeutics

committee, which sets that plan’s formulary.188

Under the Medicaid program, each of the 50 states is authorized to—and has in fact elected

to—pay for “covered outpatient drugs.”189 State Medicaid programs “may” decline to cover drugs

when used for indications that are not medically accepted.190 Concomitantly, they must, absent

special circumstances, cover drugs when used for medically accepted indications. Courts disagree

regarding whether the compendium has to merely list an indication or whether it has to support the

indication.191

indication", with respect to the use of a drug, includes any use which has been approved by the Food and Drug

Administration for the drug, and includes another use of the drug if-- (i) the drug has been approved by the Food

and Drug Administration; and (ii) (I) such use is supported by one or more citations which are included (or

approved for inclusion) in one or more of the following compendia: the American Hospital Formulary Service-Drug

Information, the American Medical Association Drug Evaluations, the United States Pharmacopoeia-Drug

Information (or its successor publications), and other authoritative compendia as identified by the Secretary, unless

the Secretary has determined that the use is not medically appropriate or the use is identified as not indicated in one

or more such compendia, or (II) the carrier involved determines, based upon guidance provided by the Secretary to

carriers for determining accepted uses of drugs, that such use is medically accepted based on supportive clinical

evidence in peer reviewed medical literature appearing in publications which have been identified for purposes of

this subclause by the Secretary. The Secretary may revise the list of compendia in clause (ii)(I) as is appropriate for

identifying medically accepted indications for drugs. On and after January 1, 2010, no compendia may be included

on the list of compendia under this subparagraph unless the compendia has a publicly transparent process for

evaluating therapies and for identifying potential conflicts of interests.”). 186 42 U.S.C. § 1396r-8(k)(6). Most courts have rejected the argument made by some Medicare recipients that an

indication can be “medically necessary” even if it does not appear in a compendia. See, e.g., Broome v. Burwell,

2015 U.S. Dist. LEXIS 44040, *9-10 (D. Or. Apr. 1, 2015); Rickhoff v. United States Sec'y for the Dep't of Health

& Human Servs., No. CV-ll-2189-PHX-DGC, 2012 U.S. Dist. LEXIS 175206, 2012 WL 6177411, at *2 (D. Ariz.

Dec. 11, 2012); Kilmer v. Leavitt, 609 F. Supp. 2d 750, 753 (S.D. Ohio 2009). But see Layzer v. Leavitt, 770 F.

Supp. 2d 579, 582-86 (S.D.N.Y. 2011).] 187 42 U.S.C. § 1396r-8(g)(1)(B)(i). 188 Memorandum Report from Stuart Wright, Deputy Inspector General for Evaluations and Inspections to Donald

M. Berwick, Administrator, Center for Medicaid & Medicare Services, Medically Accepted Indications for Part D

Drugs, OEI-07-08-00152 (Nov. 14, 2011) (“The Centers for Medicare & Medicaid Services (CMS) charges

[Prescription Drug Plan (PDP)] sponsors with ensuring that Medicare reimbursement for Part D drugs is limited to

drugs provided for medically accepted indications.”). 189 Medicaid Program; Payment for Covered Outpatient Drugs Under Drug Rebate Agreements with Manufacturers,

60 Fed. Reg. 48,442, 48,451 (Sept. 19, 1995). 190 42 U.S.C. 1396r-8(d)(1)(B)(i). 191 Compare Edmonds v. Levine, 417 F.Supp.2d 1323 (S.D. Fla. 2006) with Ctr. for Medicaid and State Operations,

Medicaid Drug Rebate Program Release No. 141, For State Medicaid Directors: Compendia Clarification.



Other programs are less restrictive than Medicare and Medicaid. TRICARE, for example,

which provides benefits to military personnel, military retirees, and their dependents, limits

reimbursement of off-label prescriptions to those that are “medically necessary,” but in

determining medical necessity it takes into account nationally accepted standards of practice in the

medical community.192 Under TRICARE, a prescription is medically necessary when it is

‘generally accepted by qualified professionals to be reasonable and adequate for the diagnosis and

treatment of illness.”193

In short, a drug can be off-label and reimbursable or off-label and not reimbursable, a

distinction recognized in the case law. In United States ex rel. Bennett v. Boston Scientific, the

court found that the plaintiff’s allegations regarding an experimental off-label use of a medical

device were not sufficient to state a claim under the

FCA.194 A use that is experimental and off-label,

the Bennett court found, could nonetheless be

“reasonable and necessary” and therefore

reimbursable.195 In contrast, in United States ex rel.

Brown v. Celgene Corporation, the court denied the

defendant’s motion to dismiss because the relator

alleged that the defendant had promoted two of its

drugs for a total of nearly thirty off-label uses that were not adequately supported in the compendia

and so were not reimbursable.196

In other cases, relators have argued successfully that, even though an off-label use appeared

in the relevant compendia, the claims submitted for that use were nonetheless false because the

defendant had improper influence over the compendia’s content.197 Relators have also avoided

summary judgment by arguing that claims were false despite being for uses approved by a state

192 32 C.F.R. §199.4(g)(15)(i)(A). 193 32 C.F.R. § 199.2. 194 United States ex. rel. Bennett v. Boston Sci. Corp., 2011 U.S. Dist. LEXIS 34745, *89 (Mar. 31, 2011). 195 Id. 196 United States ex rel. Brown v. Celgene Corp., 2014 U.S. Dist. LEXIS 99815,*17. 197 See, e.g., United States v. Genentech, 2014 U.S. Dist. LEXIS 175223 at *9 (D.N.J. Dec. 18, 2014) (denying

motion to dismiss, explaining that “Relator alleges that Defendant's actions have compromised the reliability of the

various drug compendia entries that list the medically acceptable (and therefore reasonable and necessary) off-label

uses of Avastin. … For example, Relator alleges that Defendants misled the key opinion leaders whose reviews of

Avastin impacted what off-label uses would be listed in the compendia.”).

In short, a drug can be

off-label and

reimbursable or off-label

and not reimbursable, a

distinction recognized in

the case law.



Medicaid program’s pharmaceutical and therapeutics ("P&T") committee because the defendant

had improper influence over the committee’s members.198

Relators have also argued successfully that a claim for payments associated with a

reimbursable off-label use of a drug or device was nonetheless “false” for purposes of the FCA

because it resulted from promotion that was false or misleading. In United States ex rel. Bui v.

Vascular Solutions, for example, a device case, the court denied the defendant’s motion to dismiss

the government’s claim that the defendant misled physicians “into believing the short kit was

FDA-approved for treating perforator veins, possibly clouding their judgment as to reasonableness

and medical necessity.”199

Note that where a relator or the government can plead or prove that a defendant life sciences

company made false or misleading product claims, it does not need to also show that the use at

issue was not reimbursable. In United States ex rel. Elisa Dickson v. Bristol-Myers Squibb, the

court denied a motion to dismiss the relator’s complaint alleging that the “‘defendants manipulated

clinical trial data to support fraudulent claims regarding Plavix’s efficacy compared to cheaper

alternatives;’ ‘fraudulently downplayed and misrepresented specific and known health risks of

Plavix use compared to cheaper alternatives;’ ‘mischaracterized clinical studies which

contradicted the sales campaign;’ and ‘targeted doctors whose patients rely on government payors

for health care treatment so as to wrongfully inflate sales and profits at a tremendous cost to

American taxpayers[.]’”200 In sum, the court concluded, the relator alleged that the defendants

confused physicians and caused them “to feel that Plavix was essentially their only option.”201

The relator’s allegations, the Dickson court held, supported her theory that the defendants’

“fraudulent actions caused physicians and pharmacists to submit claims for reimbursement of

prescribed treatment that was not ‘reasonable and necessary’ and thus false.”202 The court rejected

the defendants’ argument that the “relator fail[ed] to allege a ‘false or fraudulent’ claim because

relator's allegations relate entirely to prescriptions of Plavix for its FDA-approved indications[,]”

198 See, e.g., United States ex rel. Drummond v. Solvay S.A., 2015 U.S. Dist. LEXIS 7692, *14 (S.D. Tex. Jan. 23,

2015) (denying summary judgment without prejudice on the relator’s claim that the defendant "actively targeted

doctors who were members of states' Medicaid pharmaceutical and therapeutics (‘P&T’) committees and pushed its

off-label messages for its drugs in an effort to obtain placement of its drugs on the state Medicaid formularies."). 199 United States ex rel. Bui v. Vascular Solutions, 2013 U.S. Dist. LEXIS 187974, *12 (W.D. Tex. Mar. 7, 2013). 200 United States ex rel. Elisa Dickson v. Bristol-Myers Squibb et al., Case 3:11-cv-00246-DRH-SCW (S.D. Ill. Jan.

30, 2013). 201 Id. 202 Id.



noting that “as relator points out, the fact a drug is FDA-approved, does not mean it is ‘reasonable

and necessary’ in every instance it is prescribed.”203

Relators in FCA cases founded on off-label

promotion confront a hurdle absent from

paradigmatic FCA suits. Pharmaceutical

manufacturers do not submit claims to the

government for reimbursement; rather, physicians,

pharmacies, and hospitals do. In addition,

pharmaceutical manufacturers do not determine whether a drug is medically necessary for a given

beneficiary; physicians do that. Complaints in off-label promotion FCA cases, therefore, must

support a chain of causation running from the promotion through the physician’s prescribing

decision to the pharmacist or other provider’s submission of a claim for reimbursement.

Assuming such proof, a recent decision in United States ex rel. Brown v. Celgene

emphasizes that FCA liability is not limited to claimants.204 The FCA, the court wrote, “has a far

broader reach,” broad enough to encompass a manufacturer that does not itself “falsely certify

compliance with any legal condition of payment,” but rather “caused claimants to implicitly make

such false certifications and thereby caused the submission of false claims.”205

Courts determine whether a manufacturer’s promotional efforts were the legal cause of the

submission of a false claim by reference to the common law standard of “reasonable

foreseeability.”206 In United States ex rel. Fox Rx v. Omnicare, the court held that pharmacists did

not break the causal chain between the promotion at issue in the case and the alleged false claims,

because pharmacists “do not have a duty to evaluate whether a drug has been prescribed for an on-

label or otherwise medically accepted indication prior to submitting a claim for reimbursement to

the federal healthcare programs.”207 Whether physicians break the chain is a closer question. In

Franklin, the court held that they do not, because “the participation of doctors and pharmacists in

the submission of false Medicaid claims was not only foreseeable, it was an intended consequence

of the alleged scheme of fraud.”208

203 Id. 204 Brown, 2014 U.S. Dist. LEXIS 99815 at *12. 205 Id. 206 United States ex rel. Simpson v. Bayer Corp., 2013 WL 4710587, at *14 (D.N.J. 2013). 207 United States ex rel. Fox Rx v. Omnicare, 2014 U.S. Dist. LEXIS 70902, *19 (N.D. Ga. May 23, 2014). 208 United States ex rel. Franklin v. Parke-Davis (Parke-Davis I), 147 F. Supp. 2d 39, 52-53 (D. Mass. 2001).

“as relator points out, the fact

a drug is FDA-approved, does

not mean it is ‘reasonable and

necessary’ in every instance it

is prescribed.”



Similarly, in United States ex rel. Bui v. Vascular Solutions, the defendant argued that the

complaint should be dismissed because the government failed to plead facts that would support a

finding of causation.209 The defendant, the court wrote, “focuses on the Complaint's inability to

connect a particular doctor to a particular statement and then a particular procedure.”210 This kind

of connection, however, was not necessary to establish causation. The government alleged that the

defendant’s salespeople discussed with physicians the use of “short kits” in perforator procedures

and told them that the procedures would be covered by Medicare and TRICARE.211 Based on these

allegations, the court concluded, it was “easily foreseeable” that the physicians “would ultimately

submit claims for those procedures to Medicare and TRICARE... By telling their physician

customers Medicare and TRICARE would cover the perforator procedures, Vascular Solutions'

representatives set in motion a chain of events culminating in the submission of the claims at the

heart of this case.”212

By contrast, in a 2014 case interpreting the Louisiana Medical Assistance Programs

Integrity Law—which is similar, though not identical, to the federal False Claims Act—the

Supreme Court of Louisiana reversed a $330 million judgment against Johnson & Johnson and its

subsidiary, Janssen Pharmaceutica, finding that there could be no liability unless the health care

providers who actually submitted the claims knew that they were false.213 The court held that “[t]o

be liable under this provision, the Attorney General would have had to show that a Louisiana

doctor who prescribed Risperdal for his patient, or a health care provider who dispensed the drug

to the patient, knew that the defendants had made misleading statements about their product, but

nonetheless prescribed or dispensed the drug to the patient knowing that there may be drugs that

are equally safe, and less expensive, or safer than Risperdal, and notwithstanding that knowledge,

prescribed or dispensed Risperdal.”214

In its recently-filed suit against FDA, Amarin argues that it would not be exposed to False

Claims Act liability if it were permitted by FDA to make the off-label claims it desires to make.

This is because, Amarin explained, the company’s claims would be accompanied by a “clear and

unambiguous statement that ‘Vascepa® may not be eligible for reimbursement under federal

209 United States ex rel. Bui v. Vascular Solutions, 2013 U.S. Dist. LEXIS 187974, *15 (W.D. Tex. Mar. 7, 2013). 210 Id. 211 Id. at *12. 212 Id.at 15-16. 213 Caldwell ex rel. State v. Janssen Pharmaceutica, 144 So. 3d 898, 909 (La. 2014). 214 Id. (interpreting La. Rev. Stat. § 43:438.3(A).).



healthcare programs such as Medicare or Medicaid for treatment of patients with triglyceride levels

in the 200–499 mg/dL range. We encourage you to check that for yourself.’”215 Amarin argued

that this warning would break the chain of causation between its proposed promotional claims and

any government reimbursement of its drug.216 Although the District Court did not reach the FCA

issue when it granted preliminary relief in the form

of a declaration that the proposed claims were

neither false nor misleading and were protected by

the First Amendment,217 it seems likely that

Amarin’s position that it would have no FCA

liability if the FDA permitted its off-label claims

will prevail if the District Court’s decision

survives appeal.

Even if they adequately allege a chain of causation, FCA relators face another hurdle in the

pleading standard governing False Claims Act cases. The federal circuit courts agree that Federal

Rule of Civil Procedure 9(b) governs cases brought under the False Claims Act, which means that

the underlying fraud needs to be pleaded with particularity.218 The courts, however, are split with

regard to what particularity means in practice in FCA cases.219

The more rigorous standard adopted by some circuits requires that plaintiffs plead

“representative examples” of false claims actually submitted to the government. Under this

approach, relators who do not have access to billing records will rarely be able to survive a Rule

12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted. In contrast,

the more relaxed, or “nuanced,” standard would dispense with pleading actual submissions where

215 Complaint, supra note 114, at 60. 216 Complaint, supra note 114, at 60. 217 The court found preliminary relief related to potential FCA claims not “a ripe controversy” because “neither

Amarin nor the doctor plaintiffs express an intention to be party to any practice that has been the subject of prior

FCA actions. It is, at this time, wholly conjectural that (1) a doctor who prescribed Vascepa for an off-label use

would falsely claim, in seeking medical reimbursement, to have done so for an approved use, or (2) the FDA would

seek to hold Amarin accountable for such conduct by a doctor.” Amarin Pharma v. United States FDA, 15 Civ. 3588

(PAE), 2015 U.S. Dist. LEXIS 103944, *69 n.53 (S.D.N.Y. Aug. 7, 2015). 218 The rule provides as follows: “In alleging fraud or mistake, a party must state with particularity the circumstances

constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged

generally.” Fed. R. Civ. P. 9(b). 219 See generally Emily T. Chen, Note, Depressing Diagnosis: Stringent Particularity Requirement of the Rule 9(b)

Pleading Standard as a Critical Bar to Off-Label Promotion Fraud Whistleblowers, 36 CARDOZO L. REV. 333

(2014).

…it seems likely that Amarin’s

position that it would have no FCA

liability if the FDA permitted its

off-label claims will prevail if the

District Court’s decision survives

appeal.



the complaint “allege[s] particular details of a scheme to submit false claims paired with reliable

indicia that lead to a strong inference that claims were actually submitted.” A number of circuits

have adopted some version of this relaxed approach,220 and it was endorsed by the Solicitor

General in an amicus brief.221 Further, even some of the circuits originally taking the representative

example view have recognized the possibility of exceptions to such a rigid rule.222

In short, pleading law is very confused in this area. The effects are, of course, mostly felt

when the government declines to intervene.223 Should it actually intervene, the United States will

have access to claims records sufficient to satisfy the courts that require a “representative example”

of a false claim.224 Absent such intervention, it can be difficult in the stricter circuits for relators

to plead a False Claims Act cause of action against a pharmaceutical company. Unless they are

implicated in the wrongdoing, relators at pharmaceutical companies will not have access to bills,

which are submitted by providers and pharmacists. Those at providers or pharmacists who have

access to the bills are unlikely to have access to information as to why they are false because the

government does not require the submission of the diagnosis for which a drug was administered

or prescribed. Since the relator’s complaint will typically be met with a motion to dismiss for

failure to state a claim, discovery will not have occurred allowing the identification of examples

of the alleged false claims.

220 E.g., Foglia v. Renal Ventures Mgmt., LLC, 754 F.3d 153, 156 (3d Cir. 2014); Ebeid ex rel. United States v.

Lungwitz, 616 F.3d 993, 998-99 (9th Cir. 2010).United States ex rel. Duxbury v. Ortho Biotech Prods., L.P., 579

F.3d 13, 29 (1st Cir. 2009); United States ex rel. Lusby v. Rolls-Royce Corp., 570 F.3d 849, 854 (7th Cir. 2009);

Ebeid ex rel. United States v. Lungwitz, 616 F.3d 993, 998-99 (9th Cir. 2010). 221 Brief of the United States in United States Ex Rel. Nathan v. Takeda Pharms. North America, Inc., 2014 U.S. S.

Ct. Briefs LEXIS 760 (Feb. 2014). 222 In re Baycol Prods. Litig., 732 F.3d 869, 875-77 (8th Cir. 2013); Chesbrough v. VPA, P.C., 655 F.3d 461, 471

(2011); United States ex rel. Lemmon v. Envirocare of Utah, Inc., 614 F.3d 1163, 1172 (2010). 223 Declination of intervention should not be interpreted as indicating that the government “considers the evidence of

wrong doing insufficient or the qui tam relator's allegations for fraud to be without merit. In any given case, the

government may have a host of reasons for not pursuing a claim.” United States ex rel. Atkins v. McInteer, 470 F.3d

1350, 1360 n.17 (11th Cir. 2006). 224 Assuming the government identifies at least some false submissions, it may very well be permitted to prove the

extent of the violations by statistical sampling. See United States ex rel. Martin v. Life Care Ctrs. of Am., Inc., 2014

U.S. Dist. LEXIS 142657, *14-54 (E.D. Tenn. Sept. 29, 2014) (approving the use of medical records of a random

sample of 400 Medicare beneficiaries to determine whether their therapy was medically unnecessary, with the

planned extrapolation of the results across 54,396 patient admissions, comprising 154,621 claims).



Of course, relators could attempt to obtain claims submitted to the government. In a case

in which the government chooses not to intervene, it could nonetheless turn claims information

over to the relator, perhaps contingent on the relator having access to sufficient relevant facts to

ensure that the case is not a mere fishing expedition. But the government does not, at least not

often, take this step. Perhaps the next most obvious method of obtaining relevant information to

support an FCA pleading is by making a

Freedom of Information Act225 request. That,

however, has been ruled out of bounds by the

Supreme Court: any information so obtained

is viewed as within the FCA’s bar of suits

based on “public disclosure.”226 Medicaid data

obtained from state governments or private

organizations, however, apparently would not

be within this bar,227 and states have

historically been able to access the Medicaid

claims data that relators need to make their

cases.228 Further, as more Medicaid beneficiaries have been moved from the traditional fee-for-

service program into managed care plans, more of this type of data is in private hands.

Nevertheless, federal and state privacy protections may prevent access to claims for particular

patients, which may be essential in representative example jurisdictions. Even in the more liberal

circuits, the courts have yet to allow a complaint to survive a Rule 12(b)(6) motion to dismiss for

failure to state a claim on the basis of the kind of data that is more likely to be available, which is

225 5 U.S.C. § 552 (2014). 226 Schindler Elevator Corp. v. United States ex rel. Kirk, 131 S. Ct. 1885, 1890 (2011). 227 The language of the statute seems limited to federal sources insofar as government is concerned:

The court shall dismiss an action or claim under this section, unless opposed by the Government,

if substantially the same allegations or transactions as alleged in the action or claim were publicly

disclosed--

(i) in a Federal criminal, civil, or administrative hearing in which the Government or its agent is a

party;

(ii) in a congressional, Government Accountability Office, or other Federal report, hearing, audit,

or investigation; or

(iii) from the news media….

31 U.S.C. § 3730 (e)(4). 228 See, e.g., Connecticut v. Eli Lilly & Co. (In re Zyprexa Prods. Liab. Litig.), 2009 U.S. Dist. LEXIS 39692, *25

(E.D.N.Y. Apr. 24, 2009) (discussing states’ production of databases of Medicaid prescription drug claims).

Of course, relators could attempt to

obtain claims submitted to the

government. In a case in which the

government chooses not to

intervene, it could nonetheless turn

claims information over to the

relator, perhaps contingent on the

relator having access to sufficient

relevant facts to ensure that the case

is not a mere fishing expedition.



data establishing the percentage of a patient population covered by Medicare, Medicaid, and other

government programs.229

VI. The False Claims Act and the Ban on Off-Label Promotion:

The Mechanics of Enforcement

The vast majority of off-label promotion FCA cases come to the government via qui tam

litigation,230 there are also other sources. Companies sometimes voluntarily disclose issues that

they uncover.231 The FDA can refer cases to the DOJ and the DOJ, local USAOs, or state

enforcement agencies can also build cases from the ground up. This can involve data mining.232 It

can also involve investigating multiple companies to determine if practices the investigating

agency learns about from a qui tam filing extend beyond the defendant in the case.

Relators and their counsel choose where to file off-label promotion False Claims Act cases

based on a number of strategic factors. Typically, they choose to file in the federal courts, which

have more experience with FCA cases and, in particular, with the need to keep them under seal.

Relators’ counsel may base their choice of which federal court on whether the USAO has

experience with and expertise in this type of case, on whether USAOs devote adequate resources

to investigating FCA cases, and on how quickly such investigations proceed.233 Some USAOs

invite relators to file in their districts, touting their experience and promising to devote adequate

resources to expeditiously investigating FCA cases.

229 Cf. Martin, supra note 224, at *14-54. 230 CIVIL DIVISION, U.S. DEP’T OF JUSTICE, FY 2016 BUDGET AND PERFORMANCE PLANS 37 (Feb. 2015), available

at http://www.justice.gov/about/fy16-budget-and-performance (“In FY 2014, 94% of new health care fraud cases

received by Civil’s Fraud Section were qui tam cases.”); ALMASHAT & WOLFE, supra note 5, at 5 (“Whistleblower-

initiated investigations were responsible for most federal settlements [with pharmaceutical companies] (75%) and

financial penalties (78%) during the current study period.”). 231 Publication of the OIG's Provider Self-Disclosure Protocol, 63 Fed. Reg. 58,399 (1998). 232 FY 2013 BUDGET AND PERFORMANCE PLANS, supra note 136, at 27. Writing in 2012, the Civil Division

explained that HHS was using a data-mining contractor which “assists over 40 qui tam investigations, including

many of the largest pharmaceutical fraud cases.” Id. The information generated by the contractor was shared with

local USAOs, enabling government attorneys to: (1) “Access and analyze vast amounts of Medicare and Medicaid

claims data more quickly”; (2) “Utilize advanced outlier analysis to initiate new investigations”; (3) “Investigate

potential leads more efficiently”; and (4) “Develop damages estimates.” Id. 233 Pitfalls to Avoid When Filing a Qui Tam Case, PHILLIPS & COHEN LLP, http://www.phillipsandcohen.com/Qui-

Tam-Whistleblowers/Pitfalls-to-Avoid-When-Filing-a-Qui-Tam-Case.shtml (last visited Aug. 3, 2015)

(recommending that qui tam relators and their counsel consider in deciding where to file (1) how courts in various

jurisdictions have interpreted the False Claims Act and (2) “the experience and the resources of the local U.S.

attorney's office.”



Another factor is the degree to which a USAO permits relators’ counsel to participate in

qui tam litigation. There are some districts in which the USAO does not share information with

relators’ counsel or let relators’ counsel assist in building the case. Other offices welcome relators’

counsels’ assistance and put them to work, even, in some cases, allowing relators and their counsel

to “assume the bulk of the investigative and litigative duties.”234 Some in government believe that

these arrangements are a positive way to make the best use of limited investigative resources,235

while others find them concerning and note that they have the potential to jeopardize any parallel

criminal investigation.236

After an FCA complaint is filed, the government is required to investigate the relator’s

claims and determine whether it wants to intervene in the case. The FCA directs that “[t]he

complaint and a written disclosure of all the relevant information known to the relator must be

served on the U.S. Attorney for the judicial district where the qui tam was filed and on the Attorney

General of the United States.”237 The United States Attorney Manual elaborates that United States

234 Pamela H. Bucy, Games and Stories: Game Theory and the Civil False Claims Act, 31 FLA. ST. U.L. REV. 603,

610 (2004). 235Dinesh Kumar, Adverse Events: Ethical Issues in the Prosecution of Qui tarn Health Care Fraud Cases under the

False Claims Act, 25 GEO. J. LEGAL ETHICS 661, 667 (2012) (“Parallel investigation has beneficial features that

allow prosecutors to work strategically without breaching ethical lines.”). 236 There are legal, ethical, and practical concerns that arise when parallel civil and criminal investigations are

conducted. The American Bar Association’s Standards on Prosecutorial Investigations caution that prosecutors “(i)

should retain sole control of the criminal investigation and maintain independent judgment at all times; (ii) should be

aware of rules that prohibit or restrict the sharing or disclosure of information or material gathered through certain

criminal investigative techniques; (iii) should not be a party to nor allow the continuation of efforts by civil

investigative agencies or attorneys.” Standards on Prosecutorial Investigations, AMERICAN BAR ASSOCIATION,

http://www.americanbar.org/publications/criminal_justice_section_archive/crimjust_standards_pinvestigate.html

(last visited Aug. 3, 2015). The United States Attorneys’ Manual cautions prosecutors and agents dealing with qui

tam relators and their counsel to (1) “follow Rule 6(e), Federal Rules Criminal Procedure, and its general prohibition

against disclosing matters occurring before the grand jury[,]” and (2) to be careful “about sharing information with

attorneys and agents or employees working on the civil aspects of criminal cases.” OFFICES OF THE UNITED STATES

ATTORNEYS, U.S. DEP’T OF JUSTICE, U.S. ATTORNEYS’ MANUAL, 932 (hereinafter “U.S. ATTORNEYS’ MANUAL”),

available at http://www.justice.gov/usam/criminal-resource-manual-932-provisions-handling-qui-tam-suits-filed-

under-false-claims-act.

In United States v. Martoma, 990 F. Supp. 2d 458, 461 (S.D.N.Y. Jan. 6, 2014), an insider trading case, the

court ruled that the government’s obligation to turn over exculpatory or impeaching information to the defense

extended to information in the possession of the Securities and Exchange Commission (SEC), because the court

found that the SEC and the United States Attorney’s Office were conducting a “joint investigation.” 237 31 U.S.C. § 3730(b)(2). (“A copy of the complaint and written disclosure of substantially all material evidence

and information the person possesses shall be served on the Government pursuant to Rule 4(d)(4) of the Federal

Rules of Civil Procedure.”). DOJ Criminal Division Chief Calls on Whistleblowers to Come Forward, THE FCPA

BLOG (Oct. 9, 2014), http://www.fcpablog.com/blog/2014/10/9/doj-criminal-division-chief-calls-on-whistleblowers-

to-come.html# (reporting that Leslie Caldwell, the Chief of the DOJ’s Criminal Division said that “[t]he DOJ's

criminal division fraud section employs about 100 lawyers and 70 paralegals and other support staff … It is divided

into specialized units, including a 40 attorney health care fraud unit – the largest and most prolific unit of criminal

prosecutors dedicated solely to health care fraud in the country," … Prosecutors in the criminal fraud section are



Attorneys should forward a copy of the complaint and statement of evidence to the Commercial

Litigation Branch of the Civil Division, “particularly because relators frequently fail to serve the

Attorney General or delay in doing so.”238

FCA complaints are filed in camera and they automatically remain under seal for 60

days.239 False Claims Act cases can be transferred while they are under seal.240 Sometimes, “Main

Justice” in Washington will seek transfers with the goal of “bundling” together in a single

jurisdiction some number of cases filed by multiple qui tam relators against a single defendant. As

long as the case remains under seal, the government’s motion to transfer can be decided on an ex

parte basis with the defendant none the wiser.241

As prominent relators’ counsel Vogel, Slade & Goldstein explain, “[t]he seal on the case

is designed to protect the confidentiality of the Government’s investigation, enabling the

Government to utilize investigatory techniques that depend upon secrecy and surprise for their

success, such as search warrants and consensual monitoring.”242 They also note that “[b]y

concealing the identity of the Government’s main source of information, the seal also serves to

deter defendants from destroying or altering evidence even after they have become aware that they

are under investigation by the Government.”243

The court can and usually does extend this seal period upon a showing of “good cause” by

the government.244 As Professor Joel Hesch has explained, practices vary widely across the

able to review the complaints immediately to determine whether to open a parallel criminal investigation, … She

added that the criminal division has ‘unparalleled experience prosecuting health care fraud, procurement fraud and

financial fraud’ and that it will ‘bring that expertise to bear by increasing [its] commitment to criminal investigations

and prosecutions that stem from allegations in False Claims Act lawsuits.’”). 238 U.S. ATTORNEYS’ MANUAL, supra note 236, 9-42.440. 239 31 U.S.C. § 3730(b)(2). 240 Keith D. Barber, David B. Honig & Neal A. Cooper, Prolific Plaintiffs or Rabid Relators? Recent Developments

in False Claims Act Litigation, 1 IND. HEALTH L REV. 1, 139 (2004) explaining that “[d]uring the time the case is

under seal, the government can also conduct extensive pre-trial motions practice (e.g., motions to amend complaint

or to transfer the case) ex parte while such motions would otherwise be subject to a defendant's responsive

pleadings”). 241 Id. 242 Qui Tam Lawsuits Under the False Claims Act, VOGEL, SLADE & GOLDSTEIN, LLP, http://vsg-law.com/false-

claims-act-lawyers-explain-qui-tam-lawsuits/#18 (last visited Aug. 3, 2015). 243 Id. 244 31 U.S.C. § 3730(b)(3). Compare U.S. ATTORNEYS’ MANUAL, supra note 236, 932 (“Congress indicated that

such extensions should not be granted automatically and that it expected the courts to require proof of a serious

inquiry and a legitimate need for more time before granting extensions of time.”) with Joel D. Hesch, It Takes Time:

The Need to Extend the Seal Period for Qui Tam Complaints Filed Under the False Claims Act, 38 SEATTLE U. L.

REV. 901, 906 (2015) (“Although the FCA does not define good cause, the overall structure and goal of the FCA is

geared towards permitting the government sufficient time to use the investigative tools and subpoenas for documents

and testimony before making a decision to intervene.”).



country.245 In some jurisdictions, where “courts routinely place qui tam cases on administrative

hold so that these unique cases do not count negatively towards judges as long-pending cases[,]”

the government can investigate a case for “many years.”246 In other districts, judges keep qui tam

cases on their active dockets, but nonetheless allow for ample extensions “provided the

government shows that its investigation remains active and ongoing.”247 Finally, there are courts

that are much less willing to grant extensions, limiting extra time to “between six and eighteen

months.”248 For qui tam cases filed between October 2006 and January 2011, “the average length

of time that the case remained under seal was 13 months[.]”249 The average length of time under

seal may have been even longer in the past. In recent years, judges have become concerned about

the long periods under seal and more aggressive about lifting the seals. The government is

concerned by this, believing that it needs these cases to remain under seal for as long as necessary

to thoroughly investigate them.

In some cases, one of the parties will request that the seal be partially lifted. The

government might, for example, ask the court for permission to disclose the complaint to the

defendant so that the defendant can better assist the government with the government’s

investigation. Alternatively, as defense attorney John Bentivoglio and his colleagues explain, the

government may seek to share the complaint for purposes of negotiating a settlement when its

investigation is complete.250 In addition, where multiple relators have filed close in time to one

another, the government may seek a partial lift to enable relators’ counsel to enter into negotiations

245 Hesch, supra note 244, at 907. 246 Id. at 907-8. 247 Id. at 908. 248 Id. 249 John T. Bentivoglio, Jennifer L. Bragg & Michael K. Loucks, False Claims Act Investigations: Time for a New

Approach?, SKADDEN (May 12, 2011), https://www.skadden.com/insights/false-claims-act-investigations-time-new-

approach. 250 Id. See also Bucy, supra note 234, at 620 n. 107 (noting that it is common for the government to seek to lift the

seal to permit discussions with the defendant).

For qui tam cases filed between October 2006 and

January 2011, “the average length of time that the

case remained under seal was 13 months[.]”



with one another regarding whether any of them is barred from proceeding by the “first to file”

rule.

Defense counsel may also request a partial or full lift of the seal. Even if it has not been

served with the complaint, a pharmaceutical or medical device manufacturer that receives a civil

investigative demand from DOJ can be fairly certain that there is a qui tam action pending against

it.251 However, the company does not know exactly what it is alleged to have done, which means

that it “cannot look into the allegations in the complaint and is not able to take corrective action to

address any misconduct.”252 From the government’s perspective, however, lifting the seal can

result in defendants tailoring their proposed proffers to the facts in the complaint, instead of being

guided by what their internal investigations uncover. To counter this tendency, the government

may provide the defendant with a summary of the issues in the case rather than the complaint itself.

Once a qui tam complaint is received by Main Justice, it is assigned to an attorney in the

Commercial Litigation Branch of the Civil Division, which “will contact the agency involved, the

Criminal Division, and, frequently, the Inspector General of the agency, to determine if the

allegations are known to them and to obtain an assessment of the material evidence furnished by

the relator.”253 The Criminal Division is then charged with checking with the relevant USAOs and

investigative agencies “to determine if the allegations relate to a pending criminal

investigation.”254

DOJ’s contact with the agency that is the victim of the alleged fraud can be both formal—

frequently, DOJ sends what is sometimes termed a “call letter” to the affected agency—and

informal. In off-label promotion and other health care fraud cases, the call letter is sent to the

251 Gina L. Simms & James P. Holloway, Podcast: Responding to a Government Subpoena or Other Document

Demand: Six Helpful Hints (2013), available at http://www.ober.com/files/respondingGovtRequestsForDocs-

podcast.pdf (explaining that “[a] Civil Investigative Demand, or CID for short, allows the U.S. Department of

Justice to compel the production of documents for its investigation of potential fraud committed against the

government in a False Claims Act case. “); Ty Howard, Examining the False Claims Act and Civil Investigative

Demands, INSIDE COUNSEL (Sept. 5, 2013), http://www.insidecounsel.com/2013/09/05/litigation-examining-the-

false-claims-act-and-civi (last visited Aug. 3, 2015) (explaining that use of civil investigative demands has

“increased significantly” since the passage in 2009 of the Fraud Enforcement and Recovery Act, “which enabled the

Attorney General to delegate to U.S. attorneys the power to issue CIDs.”). 252 John T. Bentivoglio, Jennifer L. Bragg & Michael K. Loucks, False Claims Act Investigations: Time for a New

Approach?, SKADDEN (May 12, 2011), https://www.skadden.com/insights/false-claims-act-investigations-time-new-

approach. 253 U.S. ATTORNEYS’ MANUAL, supra note 236, 9-42.440. 254 Id.



Office of General Counsel at HHS. The agencies within HHS that might be informed of the filing

include CMS, FDA, and HHS OIG.

CMS is an obvious source for claims data, but it does not typically devote resources to

investigating or play a role in settling health care fraud cases unless asked to by the DOJ or the

HHS OIG. CMS may be more likely to become involved in cases that are high-profile, in cases

that are novel, and in cases that involve the prospect of a significant recovery; off-label promotion

cases often fall into one or more of these categories.

Although the ban on off-label promotion is derived from statutes and regulations enforced

by the FDA, it is DOJ, not FDA, which determines whether or how a False Claims Act case is

pursued, or whether or how it is settled. That said, attorneys at FDA often participate in the

investigation of False Claims Act cases founded on violations of the FDCA, including by providing

legal counsel, by determining if there are potential criminal violations that should be investigated,

and, if there are, by conducting criminal investigations.255 In 2008, officials at the FDA’s Division

of Drug Marketing, Advertising and Communications, now the Office of Prescription Drug

Promotion, told the Government Accountability Office (GAO) “that they provided input to DOJ,

such as information on whether the matter promoted off-label use or was otherwise violative, as

well as opinions on the seriousness of the violation.”256 The GAO was also told that FDA was

involved in each of the 11 settlements involving allegations of off-label promotion that DOJ

reached between 2003 and 2007.257 According to the GAO, “[i]n many of those instances, FDA

became involved at DOJ’s request and remained involved from the preliminary investigation

through the final settlement.”258

HHS OIG is also often involved in investigating and settling off-label promotion False

Claims act cases. HHS OIG can impose civil monetary penalties and has the authority under the

Social Security Act to exclude manufacturers from participation in federal health care programs

including Medicare and Medicaid.259 Exclusion is mandatory upon conviction of, among other

things, felony health care fraud.260 Other convictions, including for misdemeanor health care fraud,

255 UNITED STATES GOVERNMENT ACCOUNTABILITY OFFICE, FDA’S OVERSIGHT OF THE PROMOTION OF DRUGS FOR

OFF-LABEL USES 30 (July 2008). 256 Id. 257 Id. 258 Id. 259 Civil Monetary Penalties and Affirmative Exclusions, OFFICE OF INSPECTOR GENERAL, U.S. DEP’T OF HEALTH &

HUMAN SERVICES, https://oig.hhs.gov/fraud/enforcement/cmp/ (last visited Aug. 3, 2015). 260 42 U.S.C. § 1320a-7(a)(1).



are grounds for permissive exclusion.261 Violations of the FCA are also grounds for permissive

exclusion.262 In some cases, particularly those that have involved a criminal investigation, defense

counsel will seek a global settlement of all of the matters the government has pending against the

defendant. Because of HHS OIG’s exclusion authority, defense counsel might request that HHS

OIG be present for and participate in settlement negotiations. One reason for seeking HHS OIG’s

participation in the settlement process is to avoid exclusion by negotiating a Corporate Integrity

Agreement (CIA).

The DOJ does not view itself as having a traditional lawyer-client relationship with CMS,

FDA, or HHS OIG. In both the criminal and civil contexts, the DOJ can pursue or settle a case

over the agencies’ objection. Several current and former government attorneys report that DOJ has

pursued cases in which the FDA did not believe that the promotion at issue violated the law or in

which CMS did not believe that the off-label use at issue was wrongly reimbursed. There is also

the potential for disagreement among agencies over

whether a case should be brought when the promotion

at issue was illegal but the underlying use was the

standard of care or important to patient care overall.

Some believe that CMS has more leverage than

the FDA over whether a case is brought or settled

because the laws governing payment are clearer than the

laws governing promotion. Because the contours of the ban on off-label promotion are not set forth

clearly in black-letter law, there is room for debate regarding whether a given communication is a

violation. If CMS finds that a use is covered by a government health care program, it can be

difficult for DOJ to pursue a FCA case. The DOJ could still pursue a criminal or other civil case,

but any relator would not share in any recovery.

In off-label promotion cases, investigative agents could come from the Federal Bureau of

Investigation, the FDA, the Department of Defense, the Office of Personnel Management, the

Veterans Administration, and the HHS OIG. Among the decisions Main Justice must make is how

much involvement to have with the investigation. Main Justice will delegate some cases to the

United States Attorney’s Office; this is the lowest level of supervision. In other cases, Main Justice

261 42 U.S.C. § 1320a-7(b)(1). 262 42 U.S.C. § 1320a-7(b)(7).

Some believe that CMS has

more leverage than the FDA

over whether a case is

brought or settled because

the laws governing payment

are clearer than the laws

governing promotion.



will monitor the litigation, which means it will institute a reporting requirement and exercise close

supervision over it. In still other cases, Main Justice and the USAO will work the case together.

The final option is for Main Justice to investigate a case itself.

States are also involved in enforcing the ban on off-label promotion. 263 Relators’ counsel

can approach a state if a case does not fit within the priorities of a USAO. More frequently, counsel

sues on behalf of one or more states in addition to the federal government. States can also choose

to join an action. The states enforce the ban through their MFCUs. A national organization, the

National Association of Medicaid Fraud Control Units (NAMFCU) coordinates their efforts.264

The relator’s materials are reviewed by representatives of one or more states. They may also

analyze relevant data and perform a damages analysis before making a recommendation regarding

whether states should join the case.

In some cases, the MFCUs will participate in aspects of the federal government’s

investigation. For example, they may attend the initial interview with the relator. Some or all of

the MFCUs have access to claims data, particularly to data from fee-for-service Medicaid. Their

access to data may be more limited with regard to Medicaid managed care, because such data

belongs to the managed care company. Similarly, the DOJ can relatively easily access data from

Medicare Parts A and B, while data from Part D are not as readily available. The states seek to

complete their process on the same timetable as the federal government. Coordination is important

for a number of reasons, including that an uncoordinated state investigation could compromise the

federal qui tam case’s seal. It could also compromise any criminal case. Defendants, too, often

favor coordination, since it serves their desire for as global a settlement as possible.

Often, defendants are given the opportunity to prepare what is called a “white paper.” This

is the defendants’ attorneys’ first opportunity to make their case. Defense counsel frequently argue,

263 See Lisa Schencker, Anti-Fraud Fervor: States Step up False Claims Actions to Recover Medicaid Dollars,

MODERN HEALTHCARE (July 25, 2015),

http://www.modernhealthcare.com/article/20150725/MAGAZINE/307259960. 264 National Assoc. of Medicaid Fraud Units, Frequently Asked Questions http://www.namfcu.net/faq/frequently-

asked-questions (last visited Apr. 6, 2015) (explaining that “the federal government, often at the request of defense

counsel, turns to the state MFCUs because it cannot settle the Medicaid portion of [a Medicare] case without the

Units. Moreover, defense attorneys are unlikely to settle the case without the affected states because each state has

the authority to exclude a convicted provider from its health care programs. The Department of Justice typically

contacts the National Association of Medicaid Fraud Control Units about a potential settlement, and the President of

the Association appoints a settlement team which usually consists of three to four members.”).



for example, that the alleged off-label promotion was isolated and not directed by headquarters.

They also frequently review their clients’ compliance programs and, presumably, argue that they

are meaningful and robust. Sometimes defendants will contend that they should not be held

responsible for the actions of a new acquisition. The illegalities may have been discovered during

due diligence and reported by the acquiring entity. Sometimes they highlight that new management

is in place since the violations occurred, or that the individuals involved with the behavior have

been sanctioned.

Once the government’s investigation is complete, it must notify the court of its decision

whether to intervene in the suit. The FCA provides that if the government intervenes in a qui tam

action, “it shall have the primary responsibility for prosecuting the action.”265 In some cases, the

government decides not to decide, notifying the court that it declines to intervene at the present

time. For example, the government may want to wait and see if a qui tam complaint survives a

motion to dismiss before it decides the intervention question. Even if the government has not

intervened in a qui tam case, it may file a “statement of interest” to alert the court to the

government’s position on an issue.266

Even if the government decides against intervention when its investigation is complete, it

can request permission to intervene later. The statute provides that “[w]hen a person proceeds with

the action, the court, without limiting the status and rights of the person initiating the action, may

nevertheless permit the Government to intervene at a later date[.]”267 If the government chooses to

wait until a later date, however, it loses its automatic right to intervene and is required to make a

“showing of good cause.”268 Regardless of whether the government chooses to take over the

prosecution of an FCA case, “[i]t can dismiss the action, even over the objection of the relator, so

long as the court gives the relator an opportunity for a hearing and it can settle the action even if

the relator objects so long as the relator is given a hearing and the court determines that the

265 31 U.S.C. § 3730(c)(1). 266 A provision of Title 28 of the United States Code, which relates to the judiciary and judicial procedure,

authorizes the Department of Justice to inform judges of the government’s position in a case using the statement of

interest mechanism. 28 U.S.C. § 517 (“The Solicitor General, or any officer of the Department of Justice, may be

sent by the Attorney General to any State or district in the United States to attend to the interests of the United States

in a suit pending in a court of the United States, or in a court of a State, or to attend to any other interest of the

United States.”). 267 31 U.S.C. § 3730(c)(3). 268 Id.



settlement is fair.”269 The relator cannot settle or dismiss an FCA case without the consent of both

the government and the court.270

If a defendant is found liable, it is subject to a civil penalty of between $5,500 and $11,000

for each false claim.271 In addition, the Secretary of HHS can issue a civil monetary penalty in the

amount of $50,000 for each false record or statement where the defendant “knowingly makes,

uses, or causes to be made or used, a false record or statement material to a false or fraudulent

claim for payment for items and services furnished under a Federal health care program[.]”272

Finally, violators must pay the government three times the amount of the government’s

damages.273 In cases involving off-label promotion, the damages calculation can be complex and

contested, with room for debate over the percentage of prescribing that was off-label, the

percentage of off-label prescribing that constituted a false claim, and the percentage of false claims

that were caused by the manufacturer’s off-label promotion.

Relators are entitled to a percentage of the damages recovered from the defendant, as well

as to reimbursement of their attorneys’ fees and costs and other reasonable expenses. If the

government intervenes in a case, the court must award the relator “at least 15 percent but not more

than 25 percent of the proceeds of the action or settlement of the claim, depending upon the extent

to which the person substantially contributed to the prosecution of the action.”274 If the government

does not intervene, the relator is entitled to “not less than 25 percent and not more than 30 percent

of the proceeds of the action or settlement[.]”275

As noted, whether off-label promotion FCA cases trench on defendants’ First Amendment

rights is a hotly-debated question and another complicating factor. The Amarin decision finding a

269 31 U.S.C. § 3730(c)(2)(A) & (B). 270 31 U.S.C. § 3730(b)(1). 271 31 U.S.C. § 3729(a)(1); 28 C.F.R. § 85.3(a)(9). 272 42 U.S.C. § 1320a-7a. 273 31 U.S.C. § 3729(a)(1)(G). Note that “where a person who has violated the FCA reports the violation to the

government under certain conditions, the FCA provides that the person shall be liable for not less than double

damages.” U.S. DEP’T OF JUSTICE, THE FALSE CLAIMS ACT: A PRIMER,

http://www.justice.gov/sites/default/files/civil/legacy/2011/04/22/C-FRAUDS_FCA_Primer.pdf (last visited Aug. 4,

2015) (hereinafter “FCA PRIMER”). 274 31 U.S.C. § 3730(d)(1). An exception to this general rule is made “[w]here the action is one which the court finds

to be based primarily on disclosures of specific information (other than information provided by the person bringing

the action) relating to allegations or transactions in a criminal, civil, or administrative hearing, in a congressional,

administrative, or Government [General] Accounting Office report, hearing, audit, or investigation, or from the news

media[.]” Id. Where that is the case, “the court may award such sums as it considers appropriate, but in no case more

than 10 percent of the proceeds, taking into account the significance of the information and the role of the person

bringing the action in advancing the case to litigation.” Id. 275 FCA Primer, supra note 273.



First Amendment right to make statements that are not false and misleading,276 has the potential

to change the ground rules, but even that case involved a heavily litigated question about whether

the proposed statements were false or misleading.277

In a recent court filing, the government argued that, even if the ban on off-label promotion

violates the First Amendment, off-label promotion can still form the basis of a FCA action.

According to the government, “[b]ecause off-label promotion by a pharmaceutical company can

be evidence of that defendant’s having caused physicians to submit false claims, the First

Amendment is not implicated, even where the defendant’s promotional message is factually

true.”278 It is not surprising that the government is focusing on this argument, because, if accepted,

it would allow a court to bypass the questions raised by Sorrell and Caronia about the level of

scrutiny that applies when off-label promotion or other commercial speech is restricted. However,

the District Court in Amarin gave the argument short shrift.279 The government has also argued

that, as a practical matter, it rarely, if ever, pursues a criminal prosecution or FCA or other civil

case where the manufacturer limited itself to truthful off-label statements. There is, the government

claims, always a “plus” factor such as false or misleading statements or kickbacks, which makes

the First Amendment challenge moot.

276 Amarin Pharma v. United States FDA, 15 Civ. 3588 (PAE), 2015 U.S. Dist. LEXIS 103944 (S.D.N.Y. Aug. 7,

2015). See text supra at nn.113-118 and nn.216-218. 277 Id. 278 United States’ Statement of Interest Regarding Certain Issues Raised in Defendants’ Motions to Dismiss the

Relator’s First Amended Complaint Pursuant to F. R. Civ. P. 12(B)(6) at 10, U.S. ex rel. Frank Solis v. Millenium

Pharmaceuticals and Schering-Plough, Civil Action No. 2:09 - CV - 3010 MCE JFM (Oct. 24, 2013) (citing cases

exempting speech used for evidentiary purposes from First Amendment scrutiny). 279 Amarin Pharma. *83-84 (“the proposition that speech can be admissible in evidence to prove intent or motive in

a criminal case is beside the point here. Amarin's lawsuit is directed instead to the act requirement—the situation in

which a misbranding action takes aim at truthful, non-misleading speech. And Caronia construed the misbranding

statute, categorically, not to reach a manufacturer or its representative under those circumstances. That construction

applies no matter how obvious it was that the speaker's motivation was to promote such off-label use. Promoting

such use, in fact, was transparently Caronia's intent.”).



VII. Empirical False Claims Act Evidence

A. Critiques of Relator Suits

Critiques of the False Claims Act are legion, and many of the criticisms are of the core

enforcement mechanism of the Act – the enlistment of private citizens as relators through the qui

tam process. The criticisms range from highly theoretic to intensely practical. On the theoretic

side are concerns for democratic values, as private parties, driven at least in part by profit motives,

shape the enforcement agenda for wide-ranging federal enactments. Such concerns are especially

acute where, as with “implied certification” claims,280 relators have essentially used the FCA to

create a private cause of action to enforce laws that Congress originally entrusted solely to

government enforcement. The acceptance of such theories by the Department of Justice through

intervention,281 the courts,282 and, in some cases by Congress itself,283 may or may not be a

persuasive response to the democratic values concerns.

As for more practical criticisms, one example is the U.S. Chamber’s Institute for Legal

Reform report,284 entitled Fixing the False Claims Act: The Case for Compliance-Focused

Reforms.285 The Chamber identifies one major problem as an incentive structure that it believes

“systematically overpays relators and their counsel,”286 which incentivizes frivolous relator suits.

But the report is also concerned with “irrationally excessive penalties, sometimes for technical

280 See note 173, supra, and accompanying text. 281 See David Freeman Engstrom, Private Enforcement Pathways: Lessons from Qui Tam Litigation, 114 COLUM.

L. REV. 1913, 1971 (2014) (detailing the belated involvement of Justice in “average wholesale price” litigation

followed by proposed rulemaking by CMS). 282 See, e.g., United States ex. rel. Mikes v. Straus, 274 F.3d 687 (2d Cir. 2001). Not all courts recognize the theory,

and there is some variation even among those who do. Nevertheless, it remains true that FCA relators have

convinced a number of courts that this is a viable theory of recovery. 283 Engstrom, supra note 281, at 1970-71 (detailing how FCA “average wholesale price” claims resulted in new

legislation); Id. at 1983-84 (detailing how FCA claims based on violations of the Anti-Kickback Statute resulted in

new legislation) 284 The Institute is affiliated with the United States Chamber of Commerce. 285 http://www.instituteforlegalreform.com/uploads/sites/1/Fixing_The_FCA_Pages_Web.pdf (October 2013). 286 Id. at 23. The Report has two major thrusts. One is a set of recommendations intended to incentivize adoption of

“industry-specific “state-of-the-art ‘gold standard’” compliance programs, id. at 2, by providing that companies so

certified would have “recalibration of the damages multiplier,” immunity from qui tam actions for self-disclosure,

no exclusion and debarment for executives absent personal involvement, and the right to fire any employee who

failed to report internally 180 days before filing a qui tam. Id.

The second set of reforms would apply even to those without gold standard certification, including:

reduction of the relator’s share; a bar on qui tam actions by government employees arising out of that employment;

the elimination of “implied false certification” liability; proof of all elements of a violation by “clear and convincing

evidence”; and recalculation of damages to reflect the government’s “actual loss.” Id. at 23.



violations that occur despite businesses’ good faith efforts to comply with contracts or regulations”

and the threat of such large liability as to “coerce businesses that may have done nothing wrong to

pay enormous out-of-court settlements based on untested and questionable legal theories.”287

The structure of the liability provisions of the FCA is beyond the scope of this white paper,

but we take the theme of Fixing the False Claims Act to be a common critique of its enforcement

structure: while enlisting private citizens in law enforcement may be an effective mechanism for

increasing enforcement resources, the downside is that the resulting “police” may be motivated, at

least in part, by the potential bounty, and thus lack the public enforcer’s inclination to look past

“technical violations” or seek recoveries only proportionate to the harm caused.

So viewed, the question becomes the effectiveness of DOJ’s oversight of qui tam relators.

In theory, of course, a relator’s lawsuit may be largely controlled by DOJ intervention in suits it

believes are well-founded and by dismissal of those it believes should not go forward.288 Even

failing such intervention, DOJ remains empowered to be involved in any efforts to settle or dismiss

the claims,289 thus allowing it to exercise some control over at least some aspects of qui tam suits.

In practice, however, DOJ is presented with far more qui tam filings than it can possibly

intervene in, and there is some doubt as to how closely it monitors the cases that it allows relators

to pursue by themselves. Critics often point out the widely disparate success rates of cases in

which DOJ intervenes and those in which it does not290 as evidence that most relators’ cases are

without merit; the obvious argument is that DOJ should far more often move to dismiss such claims

when it fails to intervene.291 In any event, if the perception that relators’ claims are not likely to be

meritorious is widespread, it may become a self-fulfilling prophecy: courts that view DOJ

declination as a statement on the merits of the claim are likely to rule against such claims in

287 Id. at 2. 288 31 U.S.C. § 3730(c). 289 Id. § 3730(b). 290 Sean Elameto, Guarding the Guardians: Accountability in Qui Tam Litigation Under the Civil False Claims

Act, 41 PUB. CONT. L.J. 813, 826 (2012), reports that “Qui tam cases in which the Government has declined to

intervene are dismissed at a staggering rate of eighty-six percent.” Government intervention, in contrast, far more

often results in liability for the defendant. Elameto reports that only about 5% of cases in which the government

intervenes are eventually dismissed. Id. Other data make a similar point: while the government intervened in only

22% of qui tam filings, almost 97% of the total recoveries are in cases in which it intervened. Id. 291 Dayna Bowen Matthew, The Moral Hazard Problem with Privatization of Public Enforcement: The Case of

Pharmaceutical Fraud, 40 U. MICH. J.L. REFORM 281, 334-35 (2007) (recommending that Congress amend “the

FCA statute to require the Government to evaluate the underlying merits of all cases in which it permits qui tam

relators to prosecute in its stead” which “could be done by requiring the Government to either join or move to

dismiss each qui tam case within a certain statutory time period.”).



deciding dispositive motions,292 especially motions to dismiss that are subject to a heightened

pleading standard.293 Others respond that the disparity in success rates is due not to radical

differences in the intervened and declined cases but rather to DOJ leverage when it intervenes and

excessive judicial skepticism of qui tam relators.294

Beyond the criticism that DOJ does not often enough put an end to frivolous filings are the

related but distinct criticisms (and in considerable tension with each other) that DOJ’s decisions

to intervene are either wholly arbitrary or politically partisan rather than merits-based.

B. Analysis of the Critiques

Recent studies by David Freeman Engstrom attempt to answer some of these critiques

through an empirical review of more than 6,000 unsealed qui tam cases filed between 1986 and

2011.295 Analyzing this dataset, he “confirm[ed] that DOJ rarely uses its termination authority,

raising questions about DOJ's will or capacity to play a welfare-maximizing role.”296 In other

words, DOJ does not view its role as helping to screen out meritless claims, leaving that to the

judicial process and therefore at least partially confirming some criticisms.

On the other hand, Professor Engstrom’s data

led him to “reject heated claims about DOJ [partisan]

politicization,”297 because “intervention rates appear

similar within and across presidential

administrations.”298 As for the criticisms of the

rationality of intervention decisions, he found that “DOJ

appears to have substantial merits-screening capacity,

292 See, e.g., United States ex rel. Jamison v. McKesson Corp., 649 F.3d 322, 331 (5th Cir. 2011) (noting that DOJ

decision to intervene as to seven defendants but not more than 400 others meant that the unintervened claims

"presumably lacked merit"). But see, e.g., United States ex rel. Williams v. Bell Helicopter Textron Inc., 417 F.3d

450, 455 (5th Cir. 2005) (Attorney General may decide not to intervene "for any number of reasons"). 293 See supra notes 214-22 and accompanying text 294 This leverage in part derives from the power of the government to threaten debarment of a firm from

participating in public programs. In both the defense and health sectors, such a sanction can be a death sentence for a

firm. 295 David Freeman Engstrom, Private Enforcement’s Pathways: Lessons from Qui Tam Litigation, 114 COL. L. REV.

1913 (2014). 296 David Freeman Engstrom, Public Regulation of Private Enforcement: Empirical Analysis of DOJ Oversight of

Qui Tam Litigation Under The False Claims Act, 107 NW. U.L. REV. 1689, 1696 (2013). Professor Engstrom

estimates that dismissal is sought in no more than 4% of cases filed. Id. at 1717. However, he also notes that

declination of intervention often meant that there was no further litigation, presumably because the relator was

unwilling to proceed without government support. Id. at 1717-18. 297 Id. at 1696. 298 Id. at 1720.

[Engstrom] found that “DOJ

appears to have substantial

merits-screening capacity,

contrary to the view that DOJ

intervention decisions are

wholly arbitrary.”

https://advance.lexis.com/document/?pdmfid=1000516&crid=a2ef21be-bf22-495a-884e-5ffd175e6bd8&pddocfullpath=%2Fshared%2Fdocument%2Fanalytical-materials%2Furn%3AcontentItem%3A5B3K-0YR0-00CW-00W5-00000-00&pddocid=urn%3AcontentItem%3A5B3K-0YR0-00CW-00W5-00000-00&pdcontentcomponentid=7350&ecomp=4rpg&earg=sr3&prid=05693000-53be-402d-b9e6-0ea377e6c7eb

https://advance.lexis.com/document/?pdmfid=1000516&crid=a2ef21be-bf22-495a-884e-5ffd175e6bd8&pddocfullpath=%2Fshared%2Fdocument%2Fanalytical-materials%2Furn%3AcontentItem%3A5B3K-0YR0-00CW-00W5-00000-00&pddocid=urn%3AcontentItem%3A5B3K-0YR0-00CW-00W5-00000-00&pdcontentcomponentid=7350&ecomp=4rpg&earg=sr3&prid=05693000-53be-402d-b9e6-0ea377e6c7eb



contrary to the view that DOJ intervention decisions are wholly arbitrary.”299 Further, “DOJ makes

intervention decisions strategically, separate and apart from pure ‘merits’ considerations, in

response to simple resource constraints, judicial threats to its ability to police collusive relator-

defendant settlements, and the identity (and corporate power) of the defendant.”300 Professor

Engstrom does note that DOJ is more likely to intervene in cases filed by “more sophisticated,

repeat plaintiff’s counsel,”301 which may be a contributing factor in the greater success rate in

intervened cases but raises the obvious question whether such cases might be more efficiently left

to private counsel.302

As these findings may imply, Professor Engstrom also found that “specialized relator-side

firms” are not “filing mills.”303 They “appear to play a positive role in the system, enjoying higher

litigation success rates and surfacing larger frauds compared to less experienced firms.”304 Counsel

who had handled 40 or more FCA cases were “roughly 1.5 times more likely to win DOJ

intervention (37.1% versus 22.6%) and achieve impositions (40.7% versus 29.0%)” than were

counsel handling their first FCA case.305 Moreover, the impositions experienced counsel won were

“roughly four to five times that of one-shotter counsel.”306 With regard to repeat relators “who are

almost by definition outsiders,” the picture is different. Repeat relators are less likely than one-

shotters to secure DOJ intervention or achieve an imposition, but, when they do win, they win

more money than those who have never filed a case before.307

With regard to “certain repeat players—namely former DOJ prosecutors turned private

sector relator counsel,” Professor Engstrom found that they “are far more likely to persuade the

DOJ to exercise its powerful authority under the FCA to intervene in qui tam cases and push them

299 Id. at 1696. This suggests that courts should not infer from a declination that Justice believes the claim to be

weak. However, in a more recent article, Professor Engstrom found evidence that the Department “may increasingly

be overwhelmed” by filings, as evidenced by the steady increase in the time taken to reach a decision whether to

intervene or decline, which has led to some push-back by courts unwilling to approve serial requests for extensions.

Engstrom, Private Enforcement’s Pathways, supra note 295, at 1993-94. In addition, there seems to be growing use

by the government of a declination “at this time.” Id. 1994. 300 Engstrom, Public Regulation of Private Enforcement, supra note 296. 301 Id. 302 Engstrom suggests that the FCA’s tiered bounty system, with higher shares for relators when Justice does not

intervene, may explain the tendency of the Department to intervene in cases that would be well-litigated in any

event. Id. at 1696. 303 David Freeman Engstrom, Harnessing the Private Attorney General: Lessons from Qui Tam Litigation, 112

COLUM. L. REV. 1244, 1249 (2012). 304 Id. 305 Id. at 1299. 306 Id. at 1300. 307 Id. at 1295-97.



to resolution.”308 On the other hand, “former DOJ lawyers also achieve substantially lower

impositions than their nonformer DOJ counterparts.”309 Professor Engstrom suggests that this

raises “provocative questions about whether the FCA’s public-private hybrid structure facilitates

clientelism or even ‘revolving door’ capture between public prosecutors and specialized qui tam

enforcers.”310

In a subsequent study, Professor Engstrom rejected claims of a “gold rush” or “litigation

explosion” in the FCA arena.311 Although trending upwards, rather than a consistent increase,

filings have “ebbed and flowed” over time,312 what the author calls “a steady maturation.”313

Further, the increases can be linked more directly to increased government spending and

unemployment rates than to the FCA’s increased favor among filers.314 Professor Engstrom does,

however, note an increase in the mean number of defendants per action, which suggests that “qui

tam enforcement efforts have increased over time by pushing into regulatory interstices.”315

308 Id. at 1251-52. 309 Id. 310 Id. 311 Engstrom, Private Enforcement’s Pathways, supra note 295, at 1922. 312 Id. at 1952. 313 Id. at 1956. In addition, “recoveries have climbed more or less in tandem with filings[.]” Id. at 1957. A

substantial portion of the growth in overall recoveries can be attributable to “a handful of especially large

settlements of roughly $ 500 million or more (in 2013 dollars), most of them against pharmaceutical companies

Abbott Laboratories ($ 582 million in 2012), Eli Lilly ($ 480 million in 2009), GlaxoSmithKline ($ 1.53 billion in

2012 and $ 471 million in 2010), and Pfizer ($ 750 million in 2009).” Id. at 1958. 314 Id. at 1956. 315 Id. at 1964. This interpretation is supported by three case studies, involving: pharmaceutical “average wholesale

price claims”; oil and gas royalty claims; and healthcare kickbacks and self-referral claims. Id. at 1968-1991. See

also David Freeman Engstrom, Whither Whistleblowing? Bounty Regimes, Regulatory Context, and the Challenge

of Optimal Design, 15 THEORETICAL INQUIRIES L. 605, 619 (2014) (“[T]heory and evidence suggest that

entrepreneurial qui tam enforcers will relentlessly press law’s boundaries, exploiting regulatory ambiguities in

industry-wide lawsuits . . . The presence of a qui tam mechanism can thus drive the law down pathways it would not

travel if enforcement was left in purely public hands.”).



VIII. Off-Label Promotion and the False Claims Act: Shining a Light

on an Enforcement Regime

Many commenters have criticized the use of the False Claims Act to police off-label

promotion, arguing that it results in an enforcement regime that is unfairly harsh and unpredictable

and that suppresses manufacturers’ truthful speech about their products.316 Others make the

opposite argument, that the significant number of large-dollar settlements—and the fact that some

companies are repeat offenders—suggests that the ban on off-label promotion is under-enforced.317

In the absence of persuasive empirical evidence of either over- or under-enforcement, it may be

impossible to resolve the debate over reforms that would make the regime as a whole more or less

harsh. Increased transparency, though, could be a reform that attracts support.

A. Transparency in Reimbursement

An alternative way to approach the issues that arise when the ban on off-label promotion

is enforced via the False Claims Act is to reduce the number of arguably false claims that are filed.

One reason that promotion of uncovered uses leads to false claims is that the Medicare Part D and

state Medicaid programs pay for many prescriptions without requiring the prescriber to provide

the patient’s diagnosis. As Jennifer Herbst has explained, “[t]he current billing systems for

Medicare Part D and Medicaid…do not require pharmacists submitting claims for outpatient

prescription drugs to provide any information regarding the use of the drug beyond the drug name

and amount dispensed.”318 However, when physicians submit claims under Medicare Part B, which

covers prescription drugs administered in physicians’ offices, they must indicate the applicable

diagnosis code on the required paperwork.319

To uncover unreimbursable off-label uses, Herbst writes, “the Government must match a

patient‘s treatment history (based on claims submitted for the prescribing physician‘s services) to

316 See, e.g., Girard, supra note 122, at 121; Hall & Berlin, supra note 9 at 653; Sandra H. Johnson, Polluting

Medical Judgment? False Assumptions in the Pursuit of False Claims Regarding Off-Label Prescribing, 9 MINN. J.

L. SCI. & TECH. 61, 66-67 (2008); Edward P. Landsdale, Used as Directed? How Prosecutors are Expanding the

False Claims Act to Police Pharmaceutical Off-Label Marketing, 41 NEW ENG. L. REV. 159, 161 (2006);

Christopher D. Zalesky, Pharmaceutical Marketing Practices: Balancing Public Health and Law Enforcement

Interests; Moving Beyond Regulation Through Litigation, 39 J. HEALTH L. 235, 247-49 (2006). 317 Outterson, supra note 9, at 1083; Kesselheim, supra note 9, at 2325. 318 See Jennifer L. Herbst, The Short-Sighted Value of Inefficiency: Why We Should Mind the Gap in the

Reimbursement of Outpatient Prescription Drugs, 2 CASE WESTERN RESERVE J. OF LAW, TECHNOLOGY & THE

INTERNET 1, 3 (2011). 319 Id.



a claim for reimbursement for an outpatient prescription drug, and show that the patient‘s diagnosis

is not a medically accepted indication for the particular drug.”320 Moreover, “[d]ue to the current

patchwork of contracted private insurers responsible for administering Medicare Parts A, B, D,

and Medicaid, the claims submitted for a physician’s services are processed and paid by different

entities than the claims submitted by retail pharmacists for reimbursement of outpatient

prescription drugs.”321 This mean that “identification of ineligible claims due to medically

inappropriate off-label prescriptions requires side-by-side evaluation of multiple decentralized

data sets maintained by private contractors.”322

In 2011, the HHS OIG explained in a memorandum sent to Donald Berwick, then the

Administrator of CMS, that plans “must establish a comprehensive fraud and abuse plan to detect,

correct, and prevent fraud and abuse as part of a compliance plan[.]”323 The OIG wrote that

“[p]ayments for Part D drugs that are not for medically accepted indications are considered

potential fraud and abuse” and that to combat the risk of such payments, prescription drug plan

(PDP) “sponsors may rely on strategies such as prepayment edits, prior authorization [in some

instances], and postpayment reviews. 324 The OIG acknowledged, however, that “many of these

strategies depend on information that is not required for Part D claims[.]”325 In particular,

“[d]iagnosis codes are not required data elements of prescription drug data.”326

In its report, the OIG wrote, “CMS stated that it does not have statutory authority to require

physicians to include diagnosis information on prescriptions, which are generally governed by

State law.”327 In addition, CMS opined, “the current approach, which permits PDP sponsors to use

prior authorization to target drugs that are at high risk for being prescribed without a medically

accepted indication, is the appropriate balance to control PDP sponsors’ costs and additional

320 Id. at 14. 321 Id. at 16. 322 Id. at 16-17. 323 Memorandum from Stuart Wright, Deputy Inspector General for Evaluation and Inspections, Office of Inspector

General, to Donald M. Berwick, Administrator, Centers for Medicare and Medicaid Services (Nov. 14, 2011),

available at https://oig.hhs.gov/oei/reports/oei-07-08-00152.pdf (captioned “Memorandum Report: Ensuring that

Medicare Part D Reimbursement Is Limited to Drugs Provided for Medically Accepted Indications, OEI-07-08-

00152”). 324 Id. 325 Id. 326 Id. 327 Id.

https://oig.hhs.gov/oei/reports/oei-07-08-00152.pdf



burdens that excessive use of prior authorization

would place on pharmacies, prescribers, and

beneficiaries of Part D drugs.”328

The government should consider requiring

that diagnosis information be added to claims for

reimbursement under Medicare Part D and

Medicaid, as it is for claims under Medicare Part

B. This will not solve the problem of physicians

prescribing and the government paying for

unnreimbursable uses; there have been a number

of FCA cases brought involving Part B.329 It will, however, enhance the ability of federal and state

regulators and the health insurance plans and other private contractors that would work with them

to use standard utilization management tools such as prior authorization to reduce medically

unjustified prescribing and, a fortiori, false claims.

The additional information will enable the government, in its capacity as payer, to consider

whether, perhaps with the aid of technology, to more effectively police off-label uses that are not

evidence-based or medically necessary, without unduly burdening patients or providers. For

example, the OIG’s Work Plan for Fiscal Year 2013 indicates that it plans to “review off-label

(prescribed for a condition that is not listed on the product’s label) and off-compendia use of certain

Medicare Part B prescription drugs and determine the extent to which specified compendia provide

support for coverage.”330 This type of review is much more straightforward for Part B drugs than

it is for Part D drugs.

328 Id. 329 See, e.g., Press Release, U.S. Dep’t of Justice, Amgen Inc. Pleads Guilty to Federal Charge in Brooklyn, NY;

Pays $762 Million to Resolve Criminal Liability and False Claims Act Allegations (Dec. 19, 2012), available at

http://www.justice.gov/opa/pr/amgen-inc-pleads-guilty-federal-charge-brooklyn-ny-pays-762-million-resolve-

criminal); Press Release, Waters & Kraus LLP, DOJ Intervenes, Settles Novo Nordisk Whistleblower Case (June 10,

2011), available at http://www.myquitamlawsuit.com/index.aspx?id=news_novonordisk_montiel; Press Release,

U.S. Dep’t of Justice, Biopharmaceutical Firm Intermune to Pay U.S. Over $36 Million for Illegal Promotion and

Marketing of Drug Actimmune (Oct. 6, 2006), available at

http://www.justice.gov/archive/opa/pr/2006/October/06_civ_728.html; United States ex rel. Duxbury v. Ortho

Biotech Prods., L.P., 579 F.3d 13, 29-30 (1st Cir. 2009); Strom ex rel. United States v. Scios, Inc., 676 F. Supp. 2d

884, 891-92 (N.D. Cal. 2009). 330 OFFICE OF INSPECTOR GENERAL, U.S. DEP’T OF HEALTH AND HUMAN SERVICES, HHS OIG WORK PLAN FY 013

28, available at https://oig.hhs.gov/reports-and-publications/archives/workplan/2013/WP01-Mcare_A+B.pdf.

The government should

consider requiring that

diagnosis information be

added to claims for

reimbursement under

Medicare Part D and

Medicaid, as it is for claims

under Medicare Part B.



Ian Ayres and Ryan Abbott have also written in support of requiring diagnosis information

as a condition of payment.331 Their focus is not on reducing the number of false claims, but rather

on developing information. They write that

with this single step, we would gain the ability to link off-label Medicare/Medicaid

prescriptions to those in other areas and thus be able to provide a more complete

picture of the evolving (and untested) use of certain drugs. This would result in a

very robust dataset, as CMS covers about one hundred million U.S. residents. Not

only would this have the additional benefit of potentially saving CMS billions of

dollars, but it would also have a substantial impact on the private-insurance market

because many private payers follow CMS coverage and reimbursement policies.332

In short, there are multiple reasons to consider this step.

B. Establish Clearer and More Explicit Rules of the Road for Pharmaceutical

Promotion

Many observers object to what Christopher Zalesky characterizes as the regulation of

pharmaceutical promotion “through litigation.”333 Life sciences companies contend that the ban

on off-label promotion is one of the gray areas to which Professor Engstrom refers, one that, they

believe, has been exploited by qui tam relators, with sub-optimal results that fail to comport with

congressional intent. The industry has repeatedly asked the FDA to further delineate the contours

of the ban. This would help clarify manufacturers’ exposure to direct enforcement but also to

liability under the False Claims Act. To the extent that a company’s speech or actions are clearly

permitted by the FDA, whether because they comport with a regulation or guidance document, fall

331 Ryan Abbott & Ian Ayres, Evidence and Extrapolation: Mechanisms for Regulating Off-Label Uses of Drugs and

Devices, 64 DUKE L. J. 377, 380 (2014). 332 Id. at 406. 333 Zalesky, supra note 316, at 247-49. See also John N. Joseph, David Deaton, Houman Ehsan & Mark A.

Bonnano, Enforcement Related to Off-Label Marketing and Use of Drugs and Devices: Where Have We Been and

Where Are We Going?, 2 J. HEALTH & LIFE SCI. L. 73 (2009) (claiming that “the most difficult task for a

manufacturer is knowing what distinguishes direct or indirect promotion for off-label uses (which are not permitted

by FDA) as opposed to communicating about off-label uses in a strictly non-promotional and scientific context

(which is permitted commercial speech).”) and Vicki W. Girard, Reducing Unlawful Prescription Drug Promotion:

Is the Public Health Being Served by an Enforcement Approach that Focuses on Punishment?, FOOD & DRUG L.

INST. FOOD & DRUG POL'Y FORUM 1 (2012) (recommending that FDA “partner with companies to efficiently and

effectively clarify the rules regarding off-label promotion and address their First Amendment concerns in a

comprehensive fashion through informal rulemaking or substantive guidance”).



into a safe harbor, or are pre-cleared by an agency advisory opinion, they cannot form the basis of

an FCA claim.334

Where possible, Congress and the FDA should consider making the law governing product

promotion clearer and more granular. This could occur through more FDA-driven enforcement. It

could also occur through passing legislation,

promulgating regulations, issuing guidance

documents, developing safe harbors, or

implementing an advisory opinion process. The

Amarin decision, which seems to involve a kind

of minuet danced by the FDA and the plaintiffs,

with both sides coming ever closer to agreement

on what was not false and misleading, could point

the way towards such a result. Although Amarin

itself was resolved only by judicial decision, the final areas of disagreement were relatively narrow,

and might suggest a greater role for advisory opinions to avoid litigation.

Increased enforcement by the FDA rather than the DOJ would allow for more real time

corrections to problematic promotional activities and, through publication of FDA’s actions and

their bases, more transparency to industry as a whole. Professor Vicki Girard has called for FDA

to increase its “oversight of companies’ promotion and advertising activities through its traditional

correction and compliance approach.”335 Professor Girard argues that the FDA is in a better

position than DOJ to “focus on the delicate balance between lawful and unlawful off-label and

other types of promotion.”336 She points to the fact that the FDA can move more quickly than DOJ,

reducing the potential risk to the public health. She writes that other “important advantages of

334 See, e.g., United States ex rel. Boise v. Cephalon, Inc., 2015 U.S. Dist. LEXIS 49341, at *20 (E.D. Pa. Apr. 15,

2015) (discussing defendant’s argument that “it is legal for a speaker to respond to questions from the audience

about the off-label use of a medication because that does not constitute off-label promotion,” but finding that the

relators adequately alleged that the defendant initiated the off-label discussions). 335 Girard, supra note 333, at 2, 6 (“FDA’s traditional approach to unlawful promotion fosters collaboration and

communication with regulated companies. When FDA acts as the primary gate keeper, it makes a preliminary

assessment as to the lawfulness of certain promotional material. Typically, FDA initiates action with a regulatory

compliance (untitled or warning) letter. The letter states FDA’s objection to specific claims being made in the

promotional labeling or advertising and provides an opportunity for the company to discuss appropriate marketing

messages with FDA. In most cases, companies comply with the agency’s recommendations and reach some

mutually-agreeable resolution with FDA. Only if the parties are unable to agree is more formal action sought

through FDA’s Office of Chief Counsel or DOJ’s Office of Consumer Litigation.”). 336 Id. at 4.

Where possible, Congress

and the FDA should

consider making the law

governing product

promotion clearer and

more granular. This could

occur through more FDA-

driven enforcement.



FDA’s more traditional correction and compliance approach [include]: (1) fostering collaboration

between FDA and companies, (2) leveraging FDA’s expertise, and (3) achieving more immediate

and forward-looking results.”337 To facilitate FDA’s

increased involvement in enforcement, Professor Girard

recommends that the agency “receive a portion of the fines

recovered from settlements associated with unlawful drug

promotion[.]”338

This is not to suggest that the FDA’s enforcement or guidance activity always achieves the

goals Professor Girard extols. FDA’s enforcement efforts have not filled the gaps in understanding

about health economic claims. Professors Peter Neumann and Sarah Bliss analyzed all of the

warning and untitled letters that FDA sent out from 2002 through 2011, and found that FDA cited

health economic claims in just 35 of the letters, which was 12% of the total.339 Professors Neumann

and Bliss note that their “study highlights that the FDA has never issued a warning letter or notice

of violation pertaining to an infringement of FDAMA Section 114.”340

The need for clear rules of the road governing health economic promotional claims is

particularly pressing. According to THE PINK SHEET, the Pharmaceutical Research and

Manufacturers of America (PhRMA) has complained about the lack of regulations or guidance

from FDA, as a result of which “‘some companies have made the decision not to invest in this

research or to disseminate potentially informative data.’”341 In a recent article, Mark Dancer and

colleagues explain that companies’ managed markets teams used to be charged with “simply

obtaining a formulary listing at an acceptable cost.”342 Now, consistent with the aspirations of the

Affordable Care Act, the market demands much more, and life science companies are under

pressure to “create value for the complicated eco-system of payers and providers that ultimately

337 Id. at 5. 338 Id. at 9. 339 Neumann & Bliss, supra note 120. 340 Id. There is “podium policy” about Section 114, derived from presentations made by Dr. Temple as well as by

other FDA officials. 341 Sue Sutter, CDER Policy Council Urged to Address Manufacturer/Payer Communications, THE PINK SHEET 21

(Sept. 2, 2013). 342 Dancer, supra note 42. Note that even this is not as easy as it once was. Mason Tenaglia, Out of Control: The

Ever Increasing Price of Preferred Formulary Access, PHARMACEUTICAL EXECUTIVE (May 2011) (“Three factors

have given the plans more market power: consolidation, Part D, and the ability and willingness to use step edits and

prior authorizations (PAs) to manage access.”).

FDA’s enforcement efforts

have not filled the gaps in

understanding about

health economic claims.



impact patient experiences and outcomes.”343 Similarly, Jonothan Tierce, a senior consultant at

IMS Health, recommends that managed care organizations “require manufacturers to demonstrate

how an upcoming treatment will compare with existing options, whether through systematic

literature reviews or analyses that model clinical trial results into real-world contexts.”344

Another way to move beyond “podium policy” would be for Congress to require that FDA

establish an advisory opinion process akin to the one HHS OIG offers with regard to the application

of the fraud and abuse laws to business arrangements.345 Other agencies also issue binding advisory

opinions, including CMS, on the applicability

of the Stark Law, 346 and the DOJ, addressing

the applicability of the antitrust laws,347 and

the Foreign Corrupt Practices Act.348 The

FTC349 and the Securities and Exchange

Commission (SEC)350 issue binding advisory

opinions as well. The process could be used by

companies to obtain “timely binding advice”

regarding whether a particular proposed

communication or marketing tactic or strategy

runs afoul of the ban on off-label promotion.351

In 2011, an FDA task force on transparency declined to recommend that the agency

implement an advisory opinion process, noting that companies can already obtain feedback from

343 Dancer, supra note 42. 344 Jonothan Tierce, Collaborative Efforts Leverage CER into Coverage Strategies, MANAGED HEALTHCARE

EXECUTIVE (Jan. 1, 2011). 345 Advisory Opinions, Office of Inspector General, U.S. Dep’t of Health & Human Services,

https://oig.hhs.gov/compliance/advisory-opinions/ (last visited July 4, 2015). 346 Advisory Opinions, Centers for Medicare and Medicaid Services, http://www.cms.gov/Medicare/Fraud-and-

Abuse/PhysicianSelfReferral/advisory_opinions.html (last visited July 4, 2015). 347 Department of Justice, 28 C.F.R. § 50.6 Antitrust Division Business Review Procedure,

http://www.justice.gov/atr/public/busreview/201659c.htm (last visited July 4, 2015). 348 Opinion Procedure Releases, Department of Justice, http://www.justice.gov/criminal-fraud/opinion-procedure-

releases (last visited July 4, 2015). 349 Advisory Opinions, Federal Trade Commission, https://www.ftc.gov/policy/advisory-opinions (last visited July

4, 2015). 350 Staff No Action, Interpretive and Exemptive Letters, Securities and Exchange Commission,

http://www.sec.gov/interps/noaction.shtml (last visited July 4, 2015). 351 TRANSPARENCY TASK FORCE, FOOD AND DRUG ADMINISTRATION, U.S. DEP’T OF HEALTH AND HUMAN

SERVICES, FDA TRANSPARENCY INITIATIVE: IMPROVING TRANSPARENCY TO REGULATED INDUSTRY 43 (JANUARY

2011) (hereinafter “TRANSPARENCY REPORT”).

Another way to move beyond

“podium policy” would be for

Congress to require that FDA

establish an advisory opinion

process akin to the one HHS

OIG offers with regard to the

application of the fraud and

abuse laws to business

arrangements.



the FDA’s Office of Prescription Drug Promotion on the promotional materials they develop.352

This feedback, however, is not accompanied by a commitment not to pursue enforcement action.

In the opinion of the FDA task force, “the feedback FDA currently provides to pharmaceutical

companies on the content of specific promotional pieces is within the agency’s expertise and

contributes to FDA’s mission to protect and promote the public health.”353 If the agency were to

issue binding advisory opinions, by contrast, it could “place inappropriate restrictions on FDA’s

ability to respond to emerging issues to best protect and promote the public health.”354

In an article in the YALE JOURNAL OF HEALTH POLICY, LAW & ETHICS, John Osborn, who

was formerly an in-house counsel at a number of pharmaceutical companies, suggested an

alternative pathway to enhanced guidance for industry.355 Osborn suggests as an alternative to the

“present criminal enforcement approach,” the establishment of “significant, statutory civil

penalties for the dissemination of false or misleading information.”356 This could be accompanied

by “a legal presumption in favor of liability based upon some showing by the government or

private plaintiffs that could then be rebutted by the accused company.”357 Another option would

be to establish “an enforcement panel operated by the OIG, with medical, legal, and policy input

from the FDA, that metes out civil liability penalties in a streamlined process reminiscent of that

used by Britain's PMCPA.”358

C. Enhance the Transparency of the Enforcement Process and the Terms

of Settlement

A final proposed reform with the potential to improve the fairness and efficiency of the

enforcement system, without making it more or less harsh across the board, would be to increase

the transparency of the process. Osborn argues that “as the DOJ has assumed a higher degree of

352 21 C.F.R. § 202.1(j)(4) (“Any advertisement may be submitted to the Food and Drug Administration prior to

publication for comment. If the advertiser is notified that the submitted advertisement is not in violation and, at

some subsequent time, the Food and Drug Administration changes its opinion, the advertiser will be so notified and

will be given a reasonable time for correction before any regulatory action is taken under this section. Notification to

the advertiser that a proposed advertisement is or is not considered to be in violation shall be in written form.”). 353 TRANSPARENCY REPORT, supra note 351, at 43. 354 Id. at 44. 355 John E. Osborn, Can I Tell You the Truth? A Comparative Perspective on Regulating Off-Label Scientific and

Medical Information, 10 YALE J. HEALTH POL'Y L. & ETHICS 299, 354 (2010). 356 Id. 357 Id. 358 Id.



involvement in developing cases alleging civil and criminal violations under the FDCA and the

FCA, the investigation, consideration, and resolution of these cases also have become less

transparent.”359 He claims that the involvement of local USAOs in the process has led to “an

absence of transparency in terms of ascertaining standards as to whether there has been

wrongdoing by a company, whether a case is treated as a criminal or civil matter, and what level

of financial penalty should be levied if there has been wrongdoing.”360 This problem is exacerbated

by the absence of “a comprehensive code of written standards”, the difficulty of obtaining

“meaningful review and oversight” from DOJ officials, and the rarity of judicial review.”361

Qui tam relators likely have similar complaints. So that meritorious cases do not founder

due to purely procedural hurdles, the government should in appropriate cases share information

about claims for reimbursement with relators. Appropriate cases might be those in which the

government has obtained the relevant claims data as part of its own investigation. If the

government then decides against intervening in the case, for a reason other than that it determines

that the case lacks merit, the government should share the claims data with relator’s counsel.

Further, the government should more often move to dismiss cases that lack merit or contravene

public policy or health.

One salutary reform that DOJ has already made was to move away from settlements in

which the targeted companies neither admit nor deny the alleged conduct. Now, companies must

admit to engaging in wrongdoing, although there is room to negotiate over the description of the

conduct. Nevertheless, it is still difficult for anyone other than the government and the company

accused of illegal promotion to know how the size and composition of a settlement were derived.

359 Id. at 321-22. 360 Id. at 323. 361 Id. at 321-22.

If the government then decides against intervening in the

case, for a reason other than that it determines that the

case lacks merit, the government should share the claims

data with relator’s counsel. Further, the government

should more often move to dismiss cases that lack merit

or contravene public policy or health.



Some claim that the government “backs into” the civil and criminal fines. We do not know

whether the starting point is the number of patients prescribed the drug who were federal healthcare

beneficiaries multiplied by the percentage of prescriptions that were for off-label uses. We also do

not know how the parties’ determine the percentage of prescribing that was off-label, or the

percentage of off-label prescribing that constituted a false claim, or the percentage of false claims

caused by the manufacturer’s off-label promotion. With regard to causation, Osborn writes that,

in his experience,

there is no evident willingness to engage on the question of whether the allegedly

improper promotion has actually led physicians to prescribe off-label. Once counsel

enters into settlement discussions, the government will emphasize the statutory

bases of criminal and civil liability. For example, the FCA provides a civil penalty

of up to three times the amount that was falsely claimed from the government. On

the criminal side, the government may apply a multiplier of up to two times the

amount of the corporate gain or the government loss. However, these multipliers

are only meaningful if the underlying base amount (which represents the alleged

level of "inappropriate" off-label prescriptions) is derived in a fair and transparent

manner.362

We also do not know how frequently disputes arise whether the uses in question are

covered by the relevant government programs. We do not know what role a drug’s coverage status

plays in settlement negotiations. Nor do we know what criteria the government employs in

determining whether a company has an “effective” compliance and ethics program363 which, under

the Federal Sentencing Guidelines,364 while a mitigating factor for sentencing courts, is also

claimed by DOJ to be a factor in its settlement negotiations.365 Perhaps it is of minimal

significance, given other penalties, or perhaps it is important given the role played by qui tam

relators and their counsel, who collect a percentage of the False Claims Act portion of the

settlement. Because so few of these cases are litigated, the case law is very limited. By providing

362 Osborn, supra note 355, at 326. 363 A 2012 Report by the Center for Ethics calls for 1) DOJ to be internally consistent among its divisions and

among US Attorneys’ Offices in evaluating ethics and compliance programs by establishing standards for such

evaluations and being transparent about what those standards are and 2) that all other executive branch agencies

adopt, publicize and apply clear written policies with respect to their assessment of ethics and compliance programs.

Ethics Resource Center, The Federal Sentencing Guidelines for Organizations at Twenty Years: A Call for Action

for More Effective Promotion and Recognition of Effective Compliance and Ethics Program at 4, 85-88 (2012)

available at http://www.ethics.org/files/u5/fsgo-report2012.pdf. 364 United States Sentencing Commission, Guidelines Manual 8B2.1 (Nov. 2014) available at

http://www.ussc.gov/sites/default/files/pdf/guidelines-manual/2014/GLMFull.pdf 365 Id.



more information about its reasoning in negotiating and arriving at settlements, the government

could provide companies with helpful guidance.

When an off-label promotion case is resolved, the government should provide information

about its reasoning in negotiating and arriving at the settlement amount. This could include an

explanation of the damages model used and the calculations performed. This would dispel the

sense that the settlement amounts are arbitrary; it would also provide companies with helpful

guidance. At a recent conference, a former DOJ official told the audience that there were times

when settlements would be presented to him for his review and he would determine that the

numbers were not “anchored” to a damages model and that the relevant computations were not

clear. It should also be made clear to the public the share of each settlement going to private health

insurance companies, to participating states, and elsewhere.366

366 ALMASHAT & WOLFE, supra note 5, at 7 (explaining that “data were not sufficiently available in the press

releases to delineate state shares of financial penalties.”).



APPENDICES

APPENDIX A

Center for Health & Pharmaceutical Law & Policy

The Center for Health & Pharmaceutical Law & Policy (“the Center”) exists primarily to

educate lawyers and health care industry professionals regarding the extraordinarily complex set

of laws that govern patients, health care providers, manufacturers and suppliers. Furthermore,

Center faculty and research fellows produce scholarship, white papers and recommendations for

policy on the varied and complex issues posed by health and pharmaceutical law, health care

access, human subject research, mental health issues, and non-profit governance.

Faculty members bring to the Center's work nationally recognized expertise in

nanotechnology, health care finance, intellectual property law and bioethics, among other areas.

The Center fosters informed dialogue among policymakers, consumer advocates, the medical

profession and industry in the search for solutions to the ethical, legal, and social questions

presented in the health and pharmaceutical arena.

The Center offers:

Academic Programs. The Center offers three degree programs for JD, LLM and MSJ

students, online Graduate Certificates, and certificate programs in Healthcare

Compliance.

Health & Public Policy. The Center researches, reviews, and develops policy

recommendations on key issues of health and life sciences law and compliance to inform

and shape policy at the state and national levels.

Scholarship. The Center produces scholarship through journal publication and white

papers on emerging legal, ethical, and social issues in health and life sciences law.

Special Programs. The Center hosts guest speaker programs and educational fora on

local, national and international health and life sciences issues by leading experts from

the public and private sectors to examine important policy and legal issues.

Certification in Healthcare Compliance. The Center offers intensive life sciences

compliance training programs in the US, Europe and Asia-Pacific, that address the

research, approval, promotion, and sale of drugs and medical devices in these regions.

The Center operates under the leadership of Faculty Director and Professor of Law John

Jacobi and Assistant Dean for Graduate and Professional Education Simone Handler-

Hutchinson. To contact the Center, please call 973-642-8871 or email simone.handler-

[email protected].



APPENDIX B

Center Financial Disclosure Statement and Policies

The Center for Health & Pharmaceutical Law & Policy (the "Center") of Seton Hall Law

School is committed to independent, academic inquiry focusing on health and pharmaceutical

law and policy. As a part of Seton Hall University, the Newark-based Law School is a nonprofit

501(c)(3) organization. The University and Law School engage in fundraising from alumni and

other contributors. Remaining committed to examining divergent perspectives on policy issues

related to health and pharmaceutical law and policy is critical to the mission of the Center.

Law School faculty and Center staff are devoted to academic independence in their

research and transparency in their relationships. As such, funding sources are announced on all

published materials and on the Law School website. Regardless of whether financial support is

received in the form of an endowment, as unrestricted funds or for a specific project, Law School

and Center donors are not involved in the academic work of Law School professors or Center

staff. Grants and donations are only accepted if they do not limit the faculty's or the Center's

ability to carry out research, free of outside influence and consistent with the Center's mission

and values.

The Law School funds the salaries of the tenured faculty affiliated with the Center.

Research and administrative support for the Center are jointly funded through a combination of

Law School funds and through unrestricted funds provided by pharmaceutical companies and

restricted funds provided by a variety of corporations. Companies or entities of regulated

industries are not permitted to designate or allocate any portion of their financial contribution to

the Center toward scholarships awarded to government employees. Full and partial scholarships

for government employees, individuals experiencing hardship, alumni and law students are

offered solely by the Center and no external parties will be notified regarding the number of

scholarships provided, or the identities or affiliations of scholarship recipients. This information

will remain confidential.

The Center and its faculty assume sole responsibility for the content of its publications

and position statements. The Center does not issue publications or statements on behalf of any

donor or other entity.

The organizations that have provided funding to the Center or to the Law School are

listed below.

Bristol-Myers Squibb provided a $5 million endowment in 2005 in support of The Harvey

Washington Wiley Chaired Professorship in Corporate Governance & Business Ethics. This

position is filled by Professor Stephen Lubben.



In 2014, the Robert Wood Johnson Foundation provided $200,000 to support Professor John

Jacobi's "QHP Market Behavior: Sentinel Report" designed to examine provision of benefits

under the Affordable Care Act.

In both 2014 and 2015, Otsuka, Novartis, Johnson & Johnson, and Horizon BlueCross &

BlueShield of NJ each provided $10,000 to fund a summer student fellowship.

In 2013, Johnson & Johnson provided $10,000 to fund a summer student fellowship.

In 2014, Johnson & Johnson provided $10,000 to fund “Celebrating Diversity in the

Compliance Profession” networking event.

In 2014, Johnson & Johnson provided $100,000 in unrestricted support to the Center in

support of its educational mission. The company additionally provided $50,000 in unrestricted

support in 2013 and $100,000 in unrestricted support to the Center in each of 2011 and 2012.

In 2010, Johnson & Johnson provided $50,000 in unrestricted funds to the Center. In 2009, the

company provided $100,000 as seed funding for two projects: (i) a program on "Strategies for

Compliance Professionals: Honing Decision-Making Skills," and (ii) creation and

implementation of an international compliance program. In 2008, Ortho-McNeil Janssen

Scientific Affairs, a subsidiary of Johnson & Johnson, provided $49,900 in unrestricted funds.

Johnson & Johnson provided $50,000 in 2007 and $100,000 in 2006 in unrestricted funds to

support the Center. Two of Johnson & Johnson's subsidiaries, Centocor, Inc., and Ortho

Biotech, provided $125,000 in unrestricted funding to the Center in 2007.

In 2013, the New Jersey Health Care Quality Institute provided $21,250 to Professor John

Jacobi for research related to the Affiliated Accountable Care Organizations.

In 2013, Microsoft provided $30,000 to support HIPAA related work.

In 2011, the following provided funds in support of “Is a For-Profit Structure a Viable

Alternative for Catholic Health Care Ministry”

Alvarez & Marsal - $5,000

Ardent Health Services - $25,000

Bass, Berry & Sims, PLC - $5,000

Cardinal Health - $1,000

Catholic Health Partners - $10,000

Catholic Healthcare West - $5,000

Ernst & Young, LLP - $2,500

Saint Peter's Healthcare System - $8,000

SSM Health Care - &7,500

University of St. Thomas - $15,000

In 2006, sanofi-aventis provided $500,000 to the Law School in "support and development of

the Center for Health & Pharmaceutical Law and the programs and activities associated with

the Center."

The former Schering-Plough Corporation provided the Law School with a $2.5 million

endowment to establish the Schering-Plough Professor in Health Care Regulation and

Enforcement. The endowment was announced in 2006 and completed in 2010.



In 2008, Purdue Pharma provided $25,000 in unrestricted funding for the Center.

In 2008, Roche provided $50,000 for a symposium sponsored by the Gibbons Institute of Law,

Science & Technology, the Seton Hall Law Review, and the Center on "Preparing for a

Pharmaceutical Response to Pandemic Influenza."

For further information about

Programs and publications of


please visit our website at law.shu.edu

the false claims act & the policing of promotional claims about drugs

Documents