Navigating the challenges faced by public companies making public disclosures in the context of a clinical trial can be difficult. It is not always clear what and how information should be disclosed to adhere to boundaries created by securities laws, as well as valid business and investor objectives. Questions concerning the materiality of clinical data and results, and the conclusions that might be drawn therefrom, are often debatable. Potential pitfalls of both overdisclosure and underdisclosure must be avoided.
The potential for First Amendment concerns in this context is exhibited in the prosecution, conviction, and recent appeal of InterMune Inc.’s former chief executive officer, Dr. W. Scott Harkonen. Dr. Harkonen’s prosecution has centered on statements he made in a press release concerning one of the company’s phase III clinical trials. The case is now before the Ninth Circuit Court of Appeals, and has caught the attention of many in the pharmaceutical community, including Pharmaceutical Research and Manufacturers of America, the trade association representing the nation’s leading research-based pharmaceutical and biotechnology companies. PhRMA has joined the case as amicus curiae seeking to overturn Dr. Harkonen’s conviction on First Amendment grounds.
The appeal largely turns on whether the statements in the press release were valid expressions of a scientific opinion that should have been protected from criminal prosecution by the First Amendment, or whether they were simply statements of a commercial nature that, as the jury concluded, amounted to intentional fraud. In deciding the appeal, the Ninth Circuit faces difficult and potentially far-reaching questions, including the precise nature of speech in the clinical trial context and what First Amendment protections are necessary to ensure that improper convictions on the basis of such speech are avoided. If the court seeks to resolve these questions, its decision may have widespread implications for companies and individuals involved with clinical trials and how they interact with the public in making their disclosures.
Dr. Harkonen’s Criminal Prosecution
In October 2006, InterMune entered a deferred prosecution agreement with the government and agreed to pay a $37 million penalty to resolve charges with respect to illegal off-label marketing of its drug, Actimmune, and for false claims for reimbursement under the Medicare program.
Despite the FDA’s position, on Aug. 28, 2002, InterMune issued a positive press release of the trial results.
Subsequent to the release, InterMune developed a follow-on trial that commenced in December 2003. By that time, Dr. Harkonen had resigned his position with the company. The follow-on trial continued through 2007, when it ultimately was abandoned after results demonstrated that Actimmune provided no actual benefits to patients with IPF.
On March 23, 2009, in response to his indictment, Dr. Harkonen filed a motion to dismiss arguing that the statements included in the press release should be excluded as evidence of his culpability at trial, as these statements represented “scientific speech about ‘medical practices in fields where knowledge ha[d] not yet been crystallized in the crucible of experience’ and where there exist[ed] ‘no exact standard of absolute truth by which to prove the assertions false and a fraud.’”
Dr. Harkonen was sentenced in April 2011 to six months of home confinement and fined $20,000 for his role in disseminating misleading information about Actimmune.
The First Amendment Arguments on Appeal
On appeal, Dr. Harkonen has asserted a number of arguments, the most interesting of which concern the relationship between the First Amendment and the government’s ability to prosecute individuals for statements made in public disclosures in the clinical trial context. These First Amendment arguments have been picked up and augmented by PhRMA. Together, Dr. Harkonen and PhRMA characterize the statements in the press release as expressions of scientific opinion on a subject matter over which reasonable scientists could disagree.
According to Dr. Harkonen and PhRMA, even if Dr. Harkonen’s statements in the press release represented a minority position, it should not be considered a fraudulent one subject to criminal prosecution. PhRMA attempts to draw a distinction between “fabrication of data or other outright misstatements of objectively verifiable and material facts,” from “[m]atters of interpretation that can be fairly debated by reasonable scientists and are not empirically verifiable.”
The district court rejected these arguments when advanced in the initial motion to dismiss, and in the post-conviction motions. The court found that “[t]he mere fact that Harkonen is an M.D., that the press release he prepared presented actual data and statistical analyses, and that the dissemination of the press release may have generated vigorous debate in the pulmonological and pharmaceutical analyst community, do not disturb th[e] conclusion that his statements were not protected by the First Amendment.”
Scientific Speech or Commercial Promotion?
Beneath the competing positions of Dr. Harkonen/PhRMA and the district court are different conceptions of the speech at issue in the press release. The conception of the speech is critical, because the Supreme Court has drawn a distinction between “speech proposing a commercial transaction, which occurs in an area traditionally subject to government regulation, and other varieties of speech.”
For Dr. Harkonen and PhRMA, the press release involved noncommercial speech of scientific value, and, therefore, should have been entitled to per se protection under the First Amendment. Dr. Harkonen and PhRMA argue that the speech “could easily be found in a medical or scientific journal, or in a debate among colleagues in an academic setting,” and was, therefore, “unlike speech … that commonly appears in more traditional advertising or labeling contexts.”
The district court viewed the speech quite differently, finding it to be purely commercial. The district court found “that [because] the speech [was] a press release and not a peer-reviewed publication, that it refer[red] to a specific commercial product on the market … , and that it was unquestionably disseminated for commercial benefit … [took it] outside the realm of pure science speech and move[d] it towards the realm of commercial speech,” entitling it to only “qualified” protection.
The precise nature of Dr. Harkonen’s speech—as well as that of other clinical trial disclosures—is probably somewhere in the middle of these respective conceptions. Indeed, clinical trial disclosures serve scientific, commercial, and regulatory aims. They describe analyses from scientific data and advance scientific conclusions—a scientific aim. They promote key products in development for drug companies, often overemphasizing the positive results while playing down the negatives—a commercial aim. And they also serve to inform investors and the public as to the company’s development progress in compliance with applicable laws—a regulatory aim. Such multifaceted speech cannot be pigeon-holed as purely scientific, or purely commercial. Speech of such a mixed nature presents “thorny” issues in terms of the First Amendment concerns involved.
What Protections Are Required?
Dr. Harkonen and PhRMA raise legitimate concerns over the chilling effect criminal prosecution might have on genuine scientific debate. Clinical trials inevitably involve interpretation and extrapolation of clinical data and results, in an effort to determine potential drug efficacy. The conclusions that can be derived from these types of data (often preliminary in nature) are not always clear-cut, and it is through rigorous debate and competing analyses that progress is spurred. Increased risk of criminal prosecution certainly could quell this progress, and the government and courts should be wary before taking overly aggressive action.
To protect against this chilling effect, Dr. Harkonen and PhRMA argue that criminal prosecution of speech in the clinical trial context should only be permitted if “no reasonable expert could find the … statement to be true.” If a reasonable expert can be found to affirm the statement, Dr. Harkonen and PhRMA contend that criminal prosecution should be barred. This would almost certainly eliminate any chilling effect on genuine scientific debate, but it seems overly restrictive and ultimately unjustified. The mere fact that an expert could be proffered in support of a statement made in a disclosure should not prohibit the government from presenting contrary evidence that the speech was false, that the speaker actually knew it was false, and that he had the specific intent to defraud others when making it. There still should be room for the prosecution and conviction of individuals or companies engaged in knowing and intentional fraud, which, as the district court stressed, is not protected by the First Amendment. Simply because an act of fraud occurs in a field that is important to medical and scientific development, or concerns matters of scientific debate, does not mean that it should be immune from criminal prosecution.
Maintaining the ability to prosecute, therefore, while avoiding the negative impact on scientific speech and progress that might result from overzealous prosecution is a delicate, but necessary balance. The district court saw this balance satisfied in the government’s burden of proof, which required it to demonstrate, beyond a reasonable doubt, that Dr. Harkonen knowingly engaged in fraud and had the specific intent to deceive. In the court’s opinion, this burden provided sufficient protection against any First Amendment concerns.
The difficulty with the court’s position is that the government’s ultimate burden of proof does not really come into play until the door to prosecution has been opened. The burden is primarily implicated when the case is at its conclusion—after years of litigation and the specter of a jail sentence pending—at the time of the jury’s verdict and in consideration of post-trial motions. At the front end, when deciding whether prosecution should be permitted in the first place, these standards do not have the same force. In fact, Dr. Harkonen’s pre-trial motion to dismiss was rejected, in large part, because he was “hamstrung” by the requirement that the court must accept all allegations in the indictment as true.
Although the government’s burden of proof becomes more applicable at the back end—with motions for a directed verdict, with respect to the jury’s decision, and with post-trial motions challenging the jury’s decision—it still appears insufficient to ensure that only truly fraudulent conduct results in convictions, and good faith expressions of minority or debatable scientific opinions do not. The insufficiency of the government’s burden as the sole protection against improper convictions in this context stems from the type of evidence that the government might use to meet its burden. To prove the falsity of a statement, for example, the government will likely introduce testimony from witnesses holding a contrary viewpoint—just as it did in the Harkonen case. Even if the defense presents competing experts, a jury without scientific training will effectively be forced to decide whether a challenged viewpoint is a minority position or an outright falsity. This decision, in turn, will almost certainly be impacted by the government’s evidence of fraudulent intent, which will likely center on the clear profit motive common to all commercial drug development. Recognizing this profit motive, it is not hard to imagine a jury of laypersons finding that a minority scientific position is knowing and intentional fraud.
Additional protections—other than the government’s burden of proof—do, therefore, appear to be warranted. These additional protections could be provided in the form of mandatory jury instructions that would reduce the likelihood of a jury convicting minority scientific opinions. Jury instructions on good faith, puffery, and the difference between minority opinions and scientific falsehood would be appropriate to reach an adequate balance.
Whether the Ninth Circuit reverses Dr. Harkonen’s conviction on improper jury instructions or on some other ground, or if it simply affirms his conviction, its decision will be closely watched by the clinical trial community and may have a significant impact on the degree of First Amendment protection that is afforded to clinical trial disclosures going forward. In the meantime, the Harkonen appeal is another reminder of the importance of making accurate and thorough disclosures during the course of clinical trials. Whatever the Ninth Circuit decides, the possibility of criminal prosecution should cause all pharmaceutical companies to re-evaluate their policies and procedures for issuing public disclosures and ensure that these disclosures are given the attention they require.