Is Off-Label Marketing Here to Stay?

Since 2004, there have been dozens of settlements in qui tam cases alleging off-label marketing by pharmaceutical and medical device manufacturers. These include some of the largest qui tam settlements in history, including $1.4 billion paid by Eli Lilly in January 2009 and $2.3 billion paid by Pfizer in September 2009. One might reasonably ask whether the drug and device industries have learned their lesson from these cases and will be deterred from future off-label marketing. The writer thinks not, simply because off-label sales are an important part of the business model for drug and devices companies.

To understand this point, one must understand two simple facts about these industries: 

1. getting FDA approval for a new “indication” for a drug or device is very expensive; and
2. once a drug or device has been approved for a single use, no matter how narrow or specific, doctors are free to prescribe it for any other use they see fit.

If you are in charge of rolling out a new drug or device for a manufacturer, your job is to maximize sales of that drug or device and your compensation is likely tied to your success in doing so. Therefore, you don’t have to be a marketing genius to figure out that the market for your product can be increased greatly, and the company’s sales of the new drug or device will soar, if only doctors will make up their minds to use it for an off-label condition that affects large numbers of people.

Yet you are not supposed to actively “promote” a use of a drug or device that is not described in its FDA-approved labeling. If you do so, you may be guilty of misbranding, 21 U.S. C. §352, for which there are criminal penalties including imprisonment for not more than one year and fines of up to twice the gross gain realized by your company. 21 U.S. C. §§331 & 333. Moreover, the False Claims Act may subject you to treble damages and civil penalties on sales to government healthcare programs. 32 U.S.C. §3729. This creates a real conundrum for the drug or device marketer, one in which he weighs the benefits of violating the law (potentially billions of dollars in annual sales for a blockbuster drug) against the likelihood and consequences of getting caught (not too great and not to bad).

As a practical matter, even when drug and device companies are caught, no one goes to jail and the fines imposed are significantly less than the profits realized, especially profits pocketed by executives and sales personnel who have moved on and left others to clean up the mess. It often takes four to five years for the government to act upon a qui tam complaint and the complaint itself may not be filed until several years after the illegal activity occurs. Several of the off-label cases settled within the last year involved conduct occurring between 1998-2000, for a starting point, and 2004-2006, for an end point. The company and many in its sales force often realize years of profit before they are asked to pay anything back. So, doing a simple cost/benefit analysis, many people in the industry decide to break the law. It’s as simple as that.

Once the decision is made to break the law by engaging in off-label promotion of drugs or devices, it takes only a small additional failure of conscience to use money to influence medical education, to distort medical research and to influence the prescribing behavior of physicians, especially if you are losing market share to cut-throat competitors who are already doing so. Depending upon the circumstances, these acts may constitute violations of the Anti-Kickback Statute, 42 U.S.C. §1320a-7b(b)(2) and the False Claims Act, 31 U.S. C. §3729 et seq.

I'm convinced that people in the drug and device industries are no worse morally than people in any other. But these are tough, competitive industries where people are expected to produce outsized profits on their compainies' best products to make up for all the drugs and devices that never pay for their costs of development. The pressure to produce and compete can be overwhelming. many executives and sales representatives eventually reach a day when they can no longer look themselves in the mirror. If you have reached that point, the lawyers at Waters & Kraus are here to help you do the right thing without sacrificing the financial well-being of your family. The government provides you a significant bounty of 10% to 30% of its recovery in any qui tam case you file in order that you will not have to make the Hobson's choice of either breaking the law or having no livelihood.

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WM. Paul Lawrence, II serves as of counsel to Waters & Kraus, LLP. His practice focuses on appellate, class action, and qui tam (whistleblower) litigation under the False Claims Act.