Healthcare Advertising and Reimbursement: Free Speech Protection But Not Unfettered

Advertising has always been one of the more powerful tools for generating sales of pharmaceutical and medical device products. Recent court decisions have, it is generally acknowledged, reduced the extent of governmental regulation of promotion of such products both on-label and off-label.

Manufacturers would be well advised, however, not to read too much into this recent trend. The pre-FDAMA (Food and Drug Administration Modernization Act) regulation of prescription drug advertising still in place and provides some cornerstones around which FDA continues to regulate. For example an advertisement may not be "false, lacking in fair balance, or otherwise misleading." It may not contain comparative claims unless demonstrated by "substantial evidence or substantial clinical experience." These concepts resonate with and draw strength from the Federal Trade Commission's regulation of advertising under which advertisers and ad agencies must have "reasonable basis for advertising claims before they are disseminated."

Even in the recent cases where courts have not sided with government agencies, they have still applied the traditional 4-prong test to determine the proper limits of governmental restrictions on commercial speech:

1. Does the speech concern unlawful activity or is it inherently misleading? (if yes, there is no First Amendment protection).
2. Has the government asserted a "substantial" interest in restricting the speech?
3. Has the government demonstrated that the regulation "directly advances" the asserted purpose of the restriction?
4. Is the restriction no more extensive than necessary to achieve that asserted governmental interest?

Applying these factors, the court in the WLF (Washington Legal Foundation) case found that FDA guidances on drug manufacturer sponsorship of educational programs and distribution of journal articles describing off-label uses to be unconstitutional because the government's interest could have been achieved through more narrowly drawn legislation. In the wake of that case and a subsequent case Thompson v. Western States Medical Center (holding that FDAMA prohibitions on advertising compounded drugs are unconstitutional) FDA has requested comments on several first amendment issues. Hundred of comments have been filed.

While those issues await comment and resolution, the government is not sitting idly by. DDMAC (Division of Drug, Marketing, Advertising, and Communications) continues to send letters to manufacturers warning them about their promotional activities. To be sure WLF case left intact the FDA provisions regarding the "safe harbor" dissemination of information on off-label uses. However that safe harbor is of limited utility given the number of requirements which must be met in order to utilize it. Accordingly manufacturers and their public relations and ad agencies are left to determine how far they may push the envelope.

Perhaps more significantly, FDA is no longer their only concern. The Office of Inspector General (OIG) of the Department of Health and Human Services has begun numerous investigations, reportedly as many as 20, centered around the submission of false claims to Medicare/Medicaid based upon allegations that the drug products were fraudulently priced and marketed. As evidenced by the TAP Pharmaceutical plea ($875,000,000) and the criminal charges which can flow from these investigations, the stakes are enormous. Moreover, there is growing evidence that the Government, particularly zealous US Attorneys offices in Philadelphia and Boston, and just beginning, and that those theories of prosecution will likewise be applied to the medical device industry. It is difficult to challenge such theories, even if they may be legally suspect, in the face of threats to exclude companies from Medicare and other health care programs. Moreover these federal investigations have spawned private party and state attorney general litigation seeking massive judgments based on tenuous theories of fraud liability.

Industry itself has contributed to the newly evolving array of requirements and guidelines. PHARMA enacted a new ethics "Code" to address interactions with physicians and other health care professionals regarding pre-launch activities. The Code contains detailed rules regarding marketing practices. Building upon that Code, the OIG recently released a draft compliance policy guide for the pharmaceutical industry which, according to the OIG, is intended to "assist" companies in the design of internal controls and compliance programs for adhering to requirements of federal health care programs. The guidance recites basic elements that are widely recognized as fundamental to "effective programs"; for example, implementing written procedures, training and education, designating a compliance officer, conducting internal monitoring and auditing.

This, too, is a process which is just beginning to play out. Compliance programs are large undertakings: they need to be tailored to the specific organization, practices and goals of the company, be flexible enough to account for modifications and follow through on implementation. Against the swirling regulatory landscape this is a daunting task. Our recent experiences suggest that it is especially important to coordinate regulatory activities and counsel in the healthcare field, both FDA and Medicare/Medicaid. This coordination should likewise involve not only instruction of company employees but also service providers such as public relations firms and advertising agencies.

Donald E. Segal contributed to this advisory.