U.S. v. Facteau: First Circuit Upholds Misdemeanor Convictions for Off-Label Promotion

Lynn C. Tyler^[*]

Late last year, in United States v. Facteau, the First Circuit upheld the misdemeanor convictions of two defendants on ten counts of distributing adulterated and misbranded medical devices based on off-label promotion.^[1] This article will focus on the court’s analysis of the defendants’ First Amendment defense, which it rejected primarily based on Wisconsin v. Mitchell.^[2] The First Circuit relied on Mitchell for the proposition that “the first amendment does not apply to the ‘evidentiary use of speech to establish the elements of a crime or to prove motive or intent.’”^[3]

Why It Made the List

After a string of losses dating back over fifteen years, the verdict in Facteau was the first time the government had overcome a First Amendment defense to score a (partial) victory in an off-label promotion case. Although the defendants were acquitted on related felony charges, the district court had sentenced them to time served and to fines of $1,000,000 and $500,000, respectively, on the misdemeanor convictions. The First Circuit has now upheld those convictions and sentences in the face of the defendants’ First Amendment and due process defenses, among others. The importance of the case is confirmed by the large number of sophisticated amici curiae who submitted briefs.

Discussion

William Facteau was the CEO, and Patrick Fabian was the VP of Sales, of a medical device company named Acclarent. In its opinion, the First Circuit stated the evidence most favorable to the verdict supported the following facts. Beginning in or about 2005, Facteau, Fabian, and others at Acclarent caused Acclarent to develop and design a device known as the Relieva Stratus Microflow Spacer (Stratus) to release the steroid Kenalog-40 in the nasal passages over ten to fourteen days. The Stratus did not elute saline for any significant period of time.

Facteau, Fabian, and others understood that FDA would likely require significantly more testing and clinical data to permit the interstate distribution of the Stratus as a steroid delivery device than it would require for a device that did nothing more than maintain a space in the sinuses and release saline. Facteau, Fabian, and others therefore pursued a strategy to obtain marketing authorization more quickly by concealing from FDA that they intended the Stratus to be used as a steroid delivery device. Instead, they falsely claimed that the Stratus was a sinus spacer for use with saline that was substantially equivalent to an existing legally marketed spacer.

Six months after securing clearance for the Stratus as a sinus spacer, Acclarent requested additional clearance to market the Stratus for drug delivery. In May 2007, FDA denied Acclarent’s request to expand the Stratus’s indication to include drug delivery, finding that combining drug delivery with a device would make the Stratus a combination product and require a more extensive approval process. As late as 2010, FDA declined to approve a clinical study involving the use of the Stratus with Kenalog-40. Acclarent never obtained FDA approval of the Stratus as a drug delivery device.

Nonetheless, beginning in September, 2008, Facteau, Fabian, and others marketed the Stratus almost exclusively as a steroid delivery device. Sales representatives were not trained about any benefits of using the Stratus solely as a spacer without saline or Kenalog-40. Instead, the sales representatives were told that the Stratus was designed for use with Kenalog-40. In several internal trainings, the Stratus was presented as a drug delivery device, not a saline device.

A “physician discussion guide” for the Stratus included a potential physician question and a recommended answer that “the only agent that works optimally with the current [Stratus] is [Kenalog-40].” There was testimony that no physicians used the Stratus to deliver saline and those who used it did so with Kenalog-40. Some physicians testified that they were never told to use the Stratus as a spacer or to deliver saline, and saw no benefit to those uses. Instead, they were told to use it to deliver Kenalog-40. At physician conferences, Acclarent demonstrated the use of the Stratus with Kenalog-40, not saline. A physician training video and a slide presentation showed how to use the Stratus with Kenalog-40.

Because Acclarent never received premarket approval or clearance to market the Stratus as a steroid delivery device, the government alleged that it was adulterated and misbranded. The government’s theory was that a medical device is “misbranded” if a 510(k) notification had not been submitted to FDA at least ninety days before the device was introduced into interstate commerce or if it was intended for a new use for which a 510(k) notification was required but not submitted to FDA.

Among several defenses, Facteau and Fabian argued that the promotion of the Stratus as a steroid delivery device was truthful and non-misleading, and therefore protected by the First Amendment.

The government’s case against Facteau and Fabian had to overcome the adverse results in several prior cases where FDA’s (or other) restrictions on promotion collided with the First Amendment. Some of the older cases on this issue include Washington Legal Foundation v. Henney, Thompson v. W. States Med.Ctr., Sorrell v. IMS Health, Inc., U.S. v. Caronia, and Amarin Pharma., Inc. v. U.S. FDA.

The tide began to turn in the government’s favor in United States v. Vascular Solutions, Inc. (“VSI”).^[4] The government pursued charges against VSI for misbranding based on off-label promotion. In a motion in limine, VSI argued that the court should apply heightened scrutiny because the government was applying a content- and speech-based ban on speech. The district court denied VSI’s motion in limine, rejecting VSI’s First Amendment argument because the government stated it intended to prove the misbranding violation by relying only on conduct. The court also followed Mitchell’s holding that speech may serve as an overt act in a conspiracy case, stating that “[t]he Court . . . sees no First Amendment threat from this proposed use of speech.”^[5] Despite these legal wins for the government, it lost the case when the jury acquitted VSI and its CEO of all charges.

In the Facteau case, the district court’s jury instructions reflect that it followed Caronia by ruling that the Federal Food, Drug, and Cosmetics Act (FDCA) does not make off-label promotion a crime, but also followed Mitchell, VSI, and other cases by ruling that the defendants’ speech could be used as evidence of a crime:

The indictment in this case does not charge any defendant with the crime of promoting a device off-label, because that is not itself a crime. Rather, the FDCA crimes charged are conspiring to introduce, and causing the introduction of, devices into interstate commerce that were adulterated or misbranded. Although you may not convict a Defendant of a crime based solely on truthful, non-misleading statements regarding off-label use, even truthful statements about an off-label use can be considered as evidence. To put it another way, to convict, there must be a criminal act. Truthful, non-misleading speech cannot be a criminal act in and of itself, but it can be evidence and therefore used by you to determine whether the government has proved each element of each offense beyond a reasonable doubt, including the element of intent.^[6]

The jury found the defendants guilty of causing the introduction of an adulterated device into interstate commerce and causing the introduction of a misbranded device into interstate commerce. The jury also found the defendants lacked the intent to defraud or mislead, so the convictions were misdemeanors, not felonies. Further, the convictions were based on the lack of a required premarket notification for the Stratus’s intended use, and not on false or misleading labeling or lack of adequate instructions for use.

On appeal, the defendants challenged the instruction quoted above based on the First Amendment. The First Circuit began its opinion with a fairly extensive review of FDCA provisions and related FDA regulations on adulteration and misbranding, premarket approval and 510(k) clearance, and intended use. The court concluded the review by stating:

In sum, it is unlawful for a manufacturer to commercially distribute a device for an intended use that represents a “major change or modification” from the specific use for which the device received § 510(k) clearance. Such off-label marketing would amount to the commercial distribution of an “adulterated” and “misbranded” device.^[7]

The court then turned to the defendants’ First Amendment defense. As noted in the introduction, it rejected this defense primarily based on the Supreme Court’s decision in Mitchell. In Mitchell, the Court held that the government’s use of the defendant’s speech as proof of his intent in an aggravated battery case did not implicate the First Amendment. Based on U.S. v. Caronia,^[8] Facteau argued:

that permitting the jury to consider his off-label promotional speech in assessing his guilt under the FDCA amounts to the de facto criminalization of his protected speech, creating a “backdoor” through which the government may sneak past the First Amendment’s reach and punish appellants simply for the things they said about Stratus.^[9]

The First Circuit distinguished Caronia, however, because:

Unlike in Caronia, the government’s case here relied on a wide array of evidence, which included not only promotional speech about off-label uses but also internal communications regarding regulatory and marketing strategy and the product’s physical design. It is not the case, as it was in Caronia, that the government set out to punish appellants for what they said about the product; rather, what appellants said about Stratus simply shed light on how they intended it to be used.^[10]

The court further distinguished Caronia on the grounds that Facteau’s jury “found appellants guilty of misbranding because Stratus lacked the proper regulatory clearance — a theory of misbranding less intertwined with appellants’ speech” and that unlike the salesman-defendant in Caronia, Facteau and Fabian were high-level executives responsible for the product design and regulatory and sales strategy behind the Stratus.^[11]

Facteau made another First Amendment argument based on FDA guidance explaining when truthful, non-misleading speech regarding off-label uses will not be considered evidence of a product’s intended use. According to this argument, although Mitchell may generally permit a jury to consider promotional speech as evidence of intent, “any evidence so presented because it is not protected by the safe harbor would be the product of a government policy that unequally foists the burden of potential evidentiary use upon certain speech based on its content.”^[12] The court rejected this argument as well, however, because Facteau failed to demonstrate that the FDA safe harbor burdened speech. “Far from burdening what device manufacturers may say, the safe harbor guidance expands, rather than contracts, the domain of speech that the government shields from being used as evidence.”^[13]   

Impact

Despite the acquittals on the felony charges, Facteau represents a significant victory for the government. It has another precedent authorizing the use of speech as evidence of a crime in this context. Further, the defendants likely spent millions in legal fees and have been convicted and sentenced to pay substantial fines, in addition to the time served in prison. These results should have a deterrent effect on others contemplating off-label promotion of FDA-regulated products.

[*] Lynn C. Tyler is a partner in the Indianapolis office of Barnes & Thornburg LLP. He concentrates his practice in FDA counseling and intellectual property litigation and opinions.

[1]   United States v. Facteau, 89 F.4th 1 (1st Cir. 2023).

[2]   508 U.S. 476, 489 (1993).

[3]   Facteau, 89 F.4th at *23.

[4]   181 F. Supp. 3d 342 (W.D. Tex. 2016).

[5]   Id. at 345.

[6]   Dkt. No. 436 at 27 (emphasis added). See also id. at 26 (“It is not illegal in and of itself for a device manufacturer to provide truthful, not misleading information about an off-label use. The FDCA does not prohibit or criminalize truthful, not misleading off-label promotion.”).

[7]   89 F.4th at *15.

[8]   703 F.3d 149 (2d Cir. 2012).

[9]   89 F.4th at *24.

[10]  Id.

[11]  Id. at *25.

[12]  Id. at *26.

[13]  Id. at *28.