By Jeffrey S. Bucholtz, Robert K. Hur, Michael R. Pauzé, and John C. Richter, Partners with King & Spalding LLP in Washington, DC and counsel to Vascular Solutions in United States v. Vascular Solutions.
On February 26, 2016, a federal jury in the Western District of Texas acquitted medical-device maker Vascular Solutions, Inc. (VSI) and its founder and CEO, Howard Root, on all charges. VSI and Mr. Root had been indicted on four counts of misbranding a medical device and one count of conspiracy to misbrand and to defraud the Food and Drug Administration (FDA) by concealing the misbranding. All the charges involved the alleged off-label promotion of one of the company’s medical devices.
Federal prosecutors from the Department of Justice’s Consumer Protection Branch and the U.S. Attorney’s Office for the Western District of Texas alleged that VSI and Mr. Root encouraged doctors to use one of the company’s products (called Vari-Lase) to treat varicose veins in a manner that was outside the scope of the device’s FDA clearance. More specifically, the government alleged that the company and Mr. Root engaged in a campaign to promote the Vari-Lase devices for use in a specific type of vein—perforator veins—when the devices were cleared for use only in superficial veins (which are closer to the skin). Following more than three weeks of trial in which the government presented its case, the defendants rested without calling a single witness. After a day and a half of deliberations, the jury found VSI and Mr. Root not guilty on all charges.1
Given the rarity of judicial review in corporate prosecutions, the VSI case provides unique insight into the government’s evolving tactics, particularly the government’s shift in strategy as the courts have recognized the importance of First Amendment protections in the context of the government’s regulatory and enforcement efforts. This Legal Backgrounder highlights three lessons from the VSI acquittal:
Lesson 1: The Key is Now Whether Promotion is False or Misleading, Not Whether it is “Off-Label.”
Beginning with the Washington Legal Foundation cases of the late 1990s,2in which courts struck down FDA guidance curtailing the distribution of scientific publications to medical professionals, pharmaceutical and device manufacturers have advanced the argument that the First Amendment protects truthful speech about off-label uses. And manufacturers have scored significant wins in recent years, in Caronia in the Second Circuit in 2012 and more recently in Amarin and Pacira in the Southern District of New York.3Just a week after the jury’s verdict in favor of VSI and Mr. Root, Amarin entered into a favorable settlement with FDA that recognizes the company’s First Amendment right to engage in truthful and non-misleading speech promoting the off-label use of a prescription drug.
The First Amendment played an important—albeit sometimes hidden—role in the VSI trial. Consistent with its efforts in Caronia, Amarin, Pacira, and the earlier declaratory judgment actions filed by Allergan and Par Pharmaceuticals,4the government consistently sought to sidestep the First Amendment issues in the case. At the motion-to-dismiss stage, the government represented to the court that it did not intend to rely at trial on truthful promotion and instead would rely only on false or misleading promotion. Electronic Case File (ECF) No. 107 at 42 n.12. Closer to trial, the government sought to moot a second defense motion concerning the First Amendment by going beyond its earlier promise to rely only on false or misleading speech and representing that in order to “eliminate any possibility that the misbranding offenses criminalize promotional speech,” it “does not plan to use promotional speech to doctors to prove the intended use of the devices for perforator ablation.” ECF No. 178 at n.2 and associated text.
The presiding judge, Royce Lamberth (who authored the WLF opinions),5 took the government at its word and stated that “should the Court become concerned that the government is indeed pursuing a theory that the FDCA [Federal Food, Drug & Cosmetic Act] prohibits even truthful non-misleading off-label promotion, the Court will address this issue at that time.” ECF No. 213 at 4. Lest the government resurrect its position in WLF that all off-label promotion is necessarily misleading, Judge Lamberth dispatched that notion. Id. at 5. “With respect to defendants’ request that the Court hold that speech about off-label use is not misleading merely because the FDA has not approved that off-label use or reviewed or approved the speech, the Court agrees that such a principle goes without saying[.]” Ibid.
Conceding as much, the government acknowledged in its proposed jury instructions that “[i]t is also not a crime for a device company or its representatives to give doctors wholly truthful and non-misleading information about the unapproved use of a device.” ECF No. 172 at 31. And the court went a step further by instructing the jury that, “[i]f you find that VSI’s promotional speech to doctors was solely truthful and not misleading, then you must find the Defendants not guilty of the misbranding offense.” ECF No. 282 at 12.
The approach taken by the government in this case illustrates its latest effort to avoid First Amendment scrutiny or impact on its enforcement theories. In VSI, the government alleged that the company engaged in misleading sales tactics—specifically, by continuing to promote the Vari-Lase device for the treatment of perforator veins after FDA failed to clear a supplemental 510(k) for that use, by failing to disclose results from a clinical trial related to that use, and by providing misleading reimbursement information—and conspired to defraud FDA by concealing these sales practices. But the government failed to persuade the jury that any such fraud had actually occurred.
As the government’s losses accumulate, it is becoming clearer that the key battleground in off-label promotion investigations is the truth or falsity of the alleged promotion. Shifting the enforcement focus in this way leaves less room for future First Amendment challenges to government enforcement, but also significantly heightens the government’s evidentiary burden. This acquittal post-Caronia confirms that fraud in the context of medical device and drug promotion is much easier to allege than to prove.
That said, however, the VSI case and the Amarin settlement are not a panacea for drug and device companies. As noted above, the government’s proposed jury instructions in VSI stated that it is not a crime to provide “wholly truthful and non-misleading information” about off-label uses of the device. ECF No. 172 at 31 (emphasis added). Manufacturers and the government are likely to have markedly different interpretations of what constitutes “wholly” truthful information. The defendants in VSI attempted to elicit DOJ’s position on this point, i.e., whether truthful statements supposedly become misleading if they fail to contain all the information known about the product that could conceivably be of interest to the listener, but DOJ never staked out a clear position regarding what it considers to be “wholly” truthful information.
Moreover, the government in VSI was able to introduce truthful and non-misleading speech during trial to establish an overt act in furtherance of the alleged conspiracy—a use of speech that Judge Lamberth found would not impinge on the defendants’ First Amendment rights because even a lawful act may serve as the necessary overt act in furtherance of a conspiracy. ECF No. 213 at 5. Thus, the government may continue to seek to stretch the definition of what can be considered false and misleading in future cases.
Lesson 2: FDA Guidance Is Not the Law
As any practitioner in this space knows, FDA regulations leave unclear exactly what information a manufacturer may legally disseminate. FDA often issues broad 510(k) clearances for medical devices, only to press later the position that a specific use is off label. Though acknowledging a lack of clarity on this issue, FDA continues to rely on non-binding guidance documents to address when a manufacturer should submit a supplemental 510(k) for a change in a device’s design or intended use, rather than provide clear rules through notice-and-comment rulemaking. Manufacturers—facing inherent pressures to please their primary regulator—routinely have followed FDA non-binding guidance that directs them to submit supplemental 510(k)s that are not legally required and have refrained from promoting their devices for specific uses or conditions that are encompassed by the existing clearances.
Most manufacturers have also resolved criminal and civil enforcement actions rather than bear the risk that a loss at trial could result in exclusion by The Office of Inspector General at HHS. As a result, FDA regulators and DOJ prosecutors have grown accustomed to imposing their views without judicial scrutiny. The VSI trial exposed what happens when a judge and jury are asked to consider the law itself rather than the enforcement positions taken by the government—which are heavily informed by FDA’s non-binding guidance, informal practice, and the views of individual investigators and prosecutors.
At trial, one of the government’s misbranding theories was that VSI failed to secure FDA clearance for an alleged change in intended use. But during cross-examination of several government witnesses—including an FDA official—the defense was able to prove that while FDA guidance suggested that the company should have submitted a supplemental 510(k), the actual statutory and regulatory language at issue did not require such a submission unless the change in intended use was “major.” By cross-examining witnesses with the 510(k) review files and FDA guidance documents, the defense was able to establish that what the government claimed was an off-label use was in fact encompassed by the existing clearance. While FDA may have preferred that the company submit a supplemental 510(k), there was no legal obligation to do so. Thus, while practitioners often bemoan the vagueness of the FDCA regulatory scheme, that vagueness—when viewed through the lens of the government’s burden of proof at trial—can support successful defenses in these types of cases.
Lesson 3: The Acquittals in VSI Represent a Significant Blow to the Government’s Off-Label Enforcement Regime and Illustrate Poor Judgment in Enforcement Discretion
Despite the fact that four out of five counts in the VSI indictment were strict-liability misdemeanors, the government failed to prevail in a case on which the government staked significant resources and moral authority. As one senior HHS-OIG official remarked publicly shortly before trial, the government “hand-picked” the case to send a message to industry and to turn the tide after the government’s losses in Caronia and Amarin and its capitulation in Pacira. See ECF No. 121 at 1-2.6 The case agent testified that during the five years it took for the government to investigate and bring this prosecution, the government interviewed over 50 doctors; that number is likely closer to 70, plus upwards of 100 other interviews. The investigation and trial involved the review of well over a million pages of documents and the human resources of at least a half a dozen government attorneys and many more FDA officials.
The defense verdict raises real questions about the government’s exercise of prosecutorial discretion and use of resources in the post-Caronia world. In VSI, there was no patient harm. At trial, one of the government’s own physician witnesses testified that the device was of high quality and had improved his patients’ lives. Total sales over the seven years the device was on the market were barely $500,000. Moreover, VSI had never been the subject of any FDA warning letter relating to promotion of its more than 100 medical devices. Given the other enforcement options at DOJ’s and FDA’s disposal—including civil actions, forfeitures and seizures, untitled letters, and warning letters—the government’s decision to prosecute VSI and Mr. Root is particularly mystifying, considering that the defense had informed the government many times that the use of the device at issue was encompassed by the existing clearance and thus on-label.
The VSI verdict should serve as a wake-up call to the FDA enforcement community. Undoubtedly some misbranding cases may warrant enforcement action. But as the VSI case illustrates, how and when to pursue such enforcement requires exercise of good judgment. The jury in VSI sent the message loud and clear that the criminalization of FDA regulatory issues can go too far.
The acquittal of VSI represents a significant blow to the government’s off-label enforcement regime. For years the government has sought to thread the needle between the legality and legitimacy of off-label use on the one hand and its position that manufacturers nonetheless may not speak about off-label uses on the other. But FDA has not kept up with the law in this area and has been seemingly immobilized since promising to issue guidance on off-label manufacturer communications in 2014. The favorable outcomes for VSI, Mr. Root, Amarin, Pacira, and Mr. Caronia, in addition to other industry wins, increase the pressure on FDA to take action. But in the absence of government movement, these industry wins also demonstrate that litigation—both offensive and defensive—can be an effective tool to shape off-label policy and to protect the rights of manufacturers. The success of declaratory judgment actions, from WLF to Allergan and Par and now Amarin and Pacira, could embolden other manufacturers to bring affirmative claims—under their own terms—to protect their First Amendment rights and obtain the legal clarity that is so often lacking under the FDCA and FDA regulations and guidance.
- See Wash. Legal Found. v. Friedman, 13 F. Supp. 2d 51 (D.D.C. 1998), amended by 36 F. Supp. 2d 16 (D.D.C. 1999), appeal dismissed sub nom. Wash. Legal Found. v. Henney, 202 F.3d 331 (D.C. Cir. 2000)
- See Wash. Legal Found. v. Friedman, 13 F. Supp. 2d 51 (D.D.C. 1998), amended by 36 F. Supp. 2d 16 (D.D.C. 1999), appeal dismissed sub nom. Wash. Legal Found. v. Henney, 202 F.3d 331 (D.C. Cir. 2000).
- See United States v. Caronia, 703 F.3d 149, 168 (2d Cir. 2012); Amarin Pharma, Inc. v. U.S. Food & Drug Admin., 119 F. Supp. 3d 196 (S.D.N.Y. 2015); Pacira Pharmaceuticals, Inc. v. FDA, No. 15-cv-7055 (S.D.N.Y). [WLF was heavily involved in the Caronia case and filed an amicus brief in Amarin—Eds.]
- See Allergan v. United States, No. 09-cv-1879-JDB (D.D.C.) (government obtained dismissal of declaratory judgment action in resolution of government investigation); Par Pharmaceuticals, Inc. v. United States, No. 11-cv-1820-RWR (D.D.C.) (same).
- The Honorable Royce Lamberth, of the U.S. District Court for the District of Columbia, was sitting in the Western District of Texas by designation.
- This document is on file with Washington Legal Foundation.