In December of last year, we reported on a landmark ruling from the United States Court of Appeals for the Second Circuit (New York), which ruled in United States v. Caronia, " that the government cannot prosecute pharmaceutical manufacturers adn their representatives under the FDCA for speech promoting the lawful, off label use of an FDA-approved drug." While the victory for industry and free speech advocates has remained uncertain. In practice, several other closely watched First Ammendement cases involing the pharmaceutical industry were being closley looked at. Consequently, the U.S. Court of Appeals of the Ninth Circut decided one of those cases in early March.
Specifically, former InterMune Inc. Chief Executive W. Scott Harkonen appealed his 2009 wire fraud conviction for a news release that trumpeted the purported survival benefits of Actimmune, made to treat fatal lung disease. As noted by Bloomberg News, “Harkonen, a physician, was accused of crafting a deceptive press release in 2002 to boost sales of Actimmune. InterMune marketed Actimmune as a safe, effective treatment for idiopathic pulmonary fibrosis, or IPF, a fatal lung disease, although the drug wasn’t approved by the U.S. Food and Drug Administration, prosecutors said.”
Harkonen’s press release, which said Actimmune reduced deaths by 70 percent in patients with mild to moderate IPF, was false and misleading, according to a March 2008 federal grand jury indictment. After the company’s clinical trials failed to show that Actimmune was effective in treating IPF, Harkonen directed employees to conduct additional analyses of death-rate data by breaking patients up into subgroups, according to the indictment.
The government, which indicted Dr. Harkonen in 2008, maintained in its brief that the First Amendment doesn't bar a “criminal prosecution of false statements with an intent to defraud" just because they "concern scientific matters.” “It is important to the FDA to preserve the notion that you can't sell a medicine for an unapproved purpose,” said Washington attorney Bert W. Rein of Wiley Rein, who has represented an opponent of FDA marketing rules. “That agency is so vested in its regulatory scheme that they will fight.” PhRMA filed an amicus brief on Dr. Harkonen's side, calling the case “an unprecedented prosecution of a pharmaceutical executive for expressing in a news release his scientific opinion about the development of a drug to treat disease.
His attorneys contended that the conviction should be reversed because the release “expressed a scientific view” that is protected by First Amendment free-speech rights, the Wall Street Journal reported. Harkonen was also excluded by HHS-OIG, and is appealing that decision as well in the U.S. District Court of Northern California, San Francisco Division.
InterMune, which made Actimmune to treat rare bone and immune disorders, agreed in 2006 to pay $36.9 million to settle U.S. claims it illegally marketed the drug for unapproved uses and caused false claims for reimbursement from government health programs.
Rejecting Harkonen’s First Amendment arguments, the Ninth Circuit upheld his convictions for disseminating misleading information about Actimmune. “A jury found, beyond a reasonable doubt, that Harkonen issued the press release with the specific intent to defraud, and that finding is supported by the evidence presented at trial,” the court said in an opinion.
Harkonen’s case was closely watched by the pharmaceutical industry. The Pharmaceutical Research and Manufacturers of America, a trade association for drug companies, filed a brief in support of Harkonen’s appeal.
Harkonen will seek review of his case by a larger panel of appeals court judges, his lawyer told Bloomberg. “The central issue is whether the government may criminally prosecute a speaker for his scientific interpretation of valid study results,” Mark Haddad, his lawyer, said in an e- mail. “The implications of the decision, if allowed to stand, are profound.
First Amendment Analysis
In approaching the case, the Ninth Circuit recognized that the First Amendment does not protect fraudulent speech, so the core constitutional issue in Harkonen’s case is whether the facts the jury found establish that the Press Release was fraudulent. Accordingly, the Court engaged in a two-step inquiry.
First, the Court sought to determine whether sufficient evidence supported the verdict. The Court went through the three elements of wire fraud: (1) knowing participation in a scheme to defraud; (2) use of the wires in furtherance of the scheme; and (3) a specific intent to deceive or defraud. The court noted that the second element was uncontested on appeal and was irrelevant for First Amendment purposes.
For the knowing participation, the Court acknowledged that practically everyone involved in the clinical trial in question testified that the Press Release misrepresented the results. Based on this and other facts, the Court found this element satisfied.
For the third element, the Court used the same evidence in the first factor, coupled with circumstantial evidence, to show his intent. “Given his clear financial incentive to find a positive result in the face of GIPF-001’s failure to meet its pre-determined goals,” the court concluded that “the evidence sufficiently supports the jury’s determination that Harkonen had the specific intent to defraud.”
The Court then engaged in an analysis under a 1902 U.S. Supreme Court Case, American School of Magnetic Healing v. McAnnulty, 187 U.S. 94 (1902). Under this case, Harkonen argued that the Court should reverse his conviction because “genuine debates over whether a given treatment caused a particular effect are outside the scope of the mail and wire fraud statutes.”
First, the court noted that McAnnulty does not categorically prohibit fraud prosecutions for statements about the efficacy of a particular drug; indeed, “[t]hat false and fraudulent representations may be made with respect to the curative effect of substances is obvious. Here, the government alleged the Press Release contained “false and misleading information” about Actimmune, and the government was permitted to go to trial on that theory.”
Second, Harkonen’s McAnnulty-based argument that his statements were fraudulent only if they were universally considered objectively false “is unavailing,” the Court wrote. As used in the criminal mail fraud statutes, the term “to defraud” has its commonplace definition and includes any sort of “dishonest method or scheme,” and any “trick, deceit, chicane or overreaching.”
Third, Harkonen’s request that the Court reverse his conviction because he was engaging in a genuine scientific debate “is hardly different than arguing that he is innocent; genuine debates of any sort are, by definition, not fraudulent.” Here, a jury found, beyond a reasonable doubt, that Harkonen issued the Press Release with the “specific intent to defraud, and that finding is supported by the evidence presented at trial,” the Court wrote.
It remains to be seen when and whether Harknonen’s appeal will take place—and it is uncertain whether his challenge has any merit. Now that Par Pharmaceutical has settled their case and dropped their First Amendment challenge, the Caronia decision remains the only positive sign of a shift in First Amendment jurisprudence for industry.