Applying the False Claims Act to Off-Label Marketing

What is off-label marketing?

When it comes to pharmaceutical marketing, it may seem like the options are virtually endless for a company seeking to boost sales and increase exposure of its product. However, despite the relentless television commercials and internet ads, there are a number of restrictions placed on the marketing practices of drug companies. Hefty fines and penalties await those that attempt to market their product for purposes other than those approved by the FDA.

Known as “off-label marketing,” companies in the pharmaceutical sales business often tout their drugs for uses outside the scope of approval. In some cases, this practice is considered harmless and perhaps even beneficial for patients awaiting relief for certain symptoms. However, off-label marketing also involves a dangerous component, particularly when a drug has not been tested in the treatment of a certain symptom or condition.

It’s in this latter scenario that patients may end up experiencing unexpected injuries, side effects, corrective surgeries, or death after trying a drug for an unapproved use. The risk to patient health has caused the Department of Health and Human Services to take a hard-hitting approach in prosecuting companies for off-label marketing under the False Claims Act, which addresses the practice as related to the Medicaid, Medicare, and TRICARE federal healthcare programs.

The controversy of off-label marketing

The concept of punishing companies for off-label marketing has been hotly contested by proponents across the industry. Most recently, supporters have advanced arguments under the First Amendment to the U.S. Constitution, citing a company’s rights to free corporate speech within the context of marketing and commercial communication.

However, in this case, the Centers for Medicare and Medicaid Services (“CMS”) take a different approach to the issue, explaining that:

“By promoting off-label uses that are not medically accepted, the manufacturers caused pharmacies to claim Medicaid payment for drugs used in ways that are not covered by Medicaid. Most, if not all, State Medicaid programs exclude coverage for drugs that are used for off-label indications that are not medically accepted. Such use can waste Medicaid funds on ineffective treatments.”

Therein lies the tension between private sector drug companies and the government, the former attempting to increase profits and enhance patient success rates, the latter seeking to minimize wasteful spending on unapproved treatments.

Applying the False Claims Act

The False Claims Act applies in any off-label marketing situation involving Medicare, Medicaid, and other government-insured patients and may even apply outside this realm as well. Under the act, any individual with original, first-hand information about this type of activity may launch a whistleblower action, and may receive up to 30 percent of the proceeds of any settlement or verdict.

Recognizing off-label marketing is not always easy, and the CMS offers the following red flags for anyone considering a False Claims Act action:

• Payment of incentives to sales professionals based on number of sales for off-label use
• Payment of kickbacks in any form to physicians for off-label prescription of drugs
• Use of misleading or deceptive advertising materials
• Counseling practitioners on how to properly code for off-label uses without triggering denial by Medicaid or Medicare
• Promoting studies tending to show the efficacy of the off-label use while suppressing studies that show no efficacy or adverse effects

Contact us to learn more

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