Second Circuit Affirms Dismissal of Off-Label Promotion Case That was Brought under the False Claims Act, Relying on Caronia

By David C. Gibbons & John R. Fleder –

The Second Circuit has issued an interesting new opinion that suggests liability under the federal False Claims Act (FCA) cannot attach to at least certain types of off-label promotion. While many of the interesting sections of the court’s discussion appeared only in dicta, and was not the central holding of the case, the decision does provide insight into the Second Circuit’s thinking concerning a question that both we and our readers have been wrangling with since U.S. v. Caronia, 703 F.3d 149 (2d Cir. 2012), was decided.

That is, can the government’s theory of FCA liability be predicated solely on a manufacturer’s off-label promotion of its product? The answer seems to be no, according to the Second Circuit in United States ex rel. Polansky v. Pfizer, No. 14-4774 (2d Cir. May 17, 2016) (“Polansky IV”), a case heard by a panel that included Judge Debra Ann Livingston, who also presided over Caronia.

The FCA imposes liability upon any person who, among other things:

(A) knowingly presents [to the federal government], or causes to be presented, a false or fraudulent claim for payment or approval; [or]

(B) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim . . . . [31 U.S.C. § 3729(a)(1)(A)-(B).]

A Look Back At Franklin

Some courts have broadly construed the FCA to include statements made by pharmaceutical manufacturers to prescribers that are material to the payment of claims for the manufacturer’s products by Medicare or Medicaid. See, e.g., United States ex rel. Franklin v. Parke-Davis, 147 F. Supp. 2d 39, 53 (D. Mass. 2001). In Franklin, NEURONTIN (gabapentin), a drug approved by FDA for epilepsy was also prescribed for a variety of off-label uses, including pain management, epilepsy, bipolar disorder, and attention deficit disorder. Id. at 45. The relator, a former medical science liaison with Parke-Davis, alleged that the company “engaged in an extensive and far-reaching campaign” to promote the product for off-label uses and “to coach doctors on how to conceal the off-label nature of the prescription” so that such uses could be reimbursed under patients’ healthcare insurance, including government programs. Id. at 45-46.

Ruling on a Motion to Dismiss, the court, in Franklin, had to resolve whether the alleged off‑label marketing scheme could cause a false claim to be presented. On this issue, the court denied Parke-Davis’ Motion stating that “the alleged FCA violation arises . . . from the submission of Medicaid claims for uncovered off‑label uses induced by [Parke-Davis’] fraudulent conduct.” Id. at 52. Parke‑Davis argued that its conduct could not have met the causation element of the FCA because the independent actions of prescribers and pharmacists “were an intervening force that [broke] the chain of legal causation.” Id. The court countered that this would have been true if the intervening efforts of the prescribers had been unforeseeable. However, the court stated, “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.” Id. at 52-53. Thus, the court denied (in part) Parke-Davis’ Motion to Dismiss. Id. at 44.

Contrasting View of FCA Liability under Polansky

The case brought against Pfizer by Dr. Jesse Polansky examined the paradigm presented in Franklin. Polansky alleged that Pfizer, Inc. (“Pfizer” or the “Company”) violated the FCA by off‑label marketing its cholesterol‑lowering drug, LIPITOR^®, for patients with cholesterol levels outside of the National Cholesterol Education Program Guidelines (Guidelines). Polansky IV at 3.

Polansky alleged that Pfizer acted unlawfully under the following theory: Pfizer marketed LIPITOR for patients whose cholesterol levels were below the cutoff for receiving LIPITOR under the Guidelines; the Guidelines are “incorporated into and made mandatory” by the approved prescribing information (PI); Pfizer “induced” prescribers to use the drug in such patients; and federal and state healthcare programs paid for such off‑label uses. Id. at 2.

The lower court dismissed the complaint, holding that the Guidelines “themselves expressly disclaimed prescriptive force.” Id. at 13. The lower court had held that “Pfizer had not engaged in off-label marketing as a matter of law” and, therefore, could not have violated the FCA. Id. at 11.

The Second Circuit, affirming on the same ground, stated: “[the Guidelines’] general guidance need not hold for individual patients and should not override a physician’s clinical judgment about appropriate treatment of a particular patient.” Id. at 13-14 (internal quotation marks omitted). Since the Guidelines were recommendations and not mandatory within the labeling, the Second Circuit concluded that even if LIPITOR were promoted outside the Guidelines, such conduct did not constitute off‑label promotion. Id. at 13.

The most interesting part of this case, however, is the dicta expressing doubt whether off‑label promotion of pharmaceuticals is ever properly a basis for FCA liability. Here, the Second Circuit, in sharp contrast to the court in Franklin, stated:

[I]t is unclear just whom Pfizer could have caused to submit a ‘false or fraudulent’ claim: The physician is permitted to issue off‐label prescriptions; the patient follows the physician’s advice, and likely does not know whether the use is off‐label; and the script does not inform the pharmacy at which the prescription will be filled whether the use is on‐label or off. We do not decide the case on this ground, but we are dubious of Polansky’s assumption that any one of these participants in the relevant transactions would have knowingly, impliedly certified that any prescription for Lipitor was for an on‐label use. Id. at 16.

The district court had earlier reasoned that, because it is commonly understood that physicians may prescribe drugs for uses outside those approved by FDA and appearing in the product’s PI, “the entities to which reimbursement claims are made could hardly be understood to have operated on the assumption that the physician writing the prescription was certifying implicitly that he was prescribing LIPITOR in a manner consistent with the Guidelines.” Mem. and Order, United States ex rel. Polansky v. Pfizer, No. 04-cv-0704, 1 (E.D.N.Y. May 22, 2009) (“Polansky I”) at 12.

The Second Circuit’s opinion liberally discusses and applies its earlier ruling in Caronia, particularly with regard to how doctors are legally allowed to prescribe an FDA-approved drug for a use that has not been approved by FDA. However, the Polansky court stated that “pharmaceutical manufacturers are generally prohibited from promoting off-label uses of their products if the off-label marketing is false or misleading, or if it evidences that a drug is intended for such off-label use and is therefore ‘misbranded.’” Polansky IV at 5. The Court relied on the last part of that discussion by pointing to 21 C.F.R. § 201.128, an FDA regulation that defines a product’s “intended use.” Interestingly, FDA has proposed to strike the provision in this regulation that places the onus of providing adequate directions for the use of a medical product on the manufacturer when the manufacturer is merely on notice that its product is being used outside its FDA-approved uses. FDA, Clarification of When Products Made or Derived From Tobacco Are Regulated as Drugs, Devices, or Combination Products; Amendments to Regulations Regarding “Intended Uses,” 80 Fed. Reg. 57756, 57757, 57764 (Sep. 25, 2015). See our previous post on this proposed rule here.

The Court also agreed with the lower court that “there is an important distinction between marketing a drug for a purpose obviously not contemplated by the label (such as, with respect to Lipitor, ‘to promote hair growth or cure cancer’) and marketing a drug for its FDA-approved purpose to a patient population that is neither specified nor excluded in the label.” Polansky IV at 17-18. We are unclear as to the meaning of the distinction that the court drew here and we will have to see if other courts follow it. In fact, we are skeptical that any court will be able to resolve the serious constitutional issues raised by FDA’s policies with regard to off-label marketing by applying the distinction made by the Second Circuit.

For Polansky, whose legal battles in this matter against Pfizer have now lasted six times as many years as he was employed by the Company, the Second Circuit’s decision may be the practical end of his long dispute with Pfizer.

We note that the court’s ruling reached a result that is certainly favorable to pharmaceutical and medical device manufacturers facing FCA claims predicated on a theory of off-label promotion. Nevertheless, the court stated somewhat ominously at the end of its decision that where the promoted use is one where “it would be obvious to anyone” that it is not FDA-approved, FCA claims may survive a motion to dismiss. Polansky IV at 18. This language could mean that, at least in the Second Circuit, some off-label promotion by manufacturers may well expose them to FCA liability.