By Jonathan Stempel

NEW YORK, Dec 3 (Reuters) - A divided federal appeals court on Monday threw out the conviction of a sales representative for promoting off-label use of a prescription drug, a ruling that could make it harder for the government to police how drugs are marketed and sold.

The 2nd U.S. Circuit Court of Appeals in New York found that the sales representative's free speech rights under the First Amendment had been violated.

"In the fields of medicine and public health, where information can save lives, it only furthers the public interest to ensure that decisions about the use of prescription drugs, including off-label usage, are intelligent and well-informed," Circuit Judge Denny Chin wrote for a 2-1 majority.

The decision overturned the October 2008 conviction of Alfred Caronia, a sales representative for Orphan Medical Inc, now part of Jazz Pharmaceuticals Plc.

Using drugs "off-label" means that they are taken for conditions other than those for which they received U.S. Food and Drug Administration approval.

Many large healthcare settlements with the U.S. government have involved off-label promotions, including GlaxoSmithKline Plc's $3 billion accord in July over several medicines, and Pfizer Inc's $2.3 billion accord in 2009 over treatments such as the anti-inflammatory drug Bextra.

Matthew Bennett, vice-president of the Pharmaceutical Research and Manufacturers of America, an industry lobby, in a statement said the group was "pleased that the Second Circuit has recognized that the FDA's ability to regulate communication about medicines is circumscribed by the rights protected by the First Amendment."

An FDA spokeswoman declined to comment. The U.S. Justice Department, which prosecuted Caronia, did not immediately respond to a request for comment.

CONSPIRACY CONVICTION

Caronia had appealed his conviction by a Brooklyn, New York, jury on one count of conspiracy for introducing a misbranded drug into interstate commerce, violating the federal Food, Drug & Cosmetic Act.

He was sentenced to one year of probation plus 100 hours of community service for the misdemeanor.

The drug was Xyrem, which won FDA approval in July 2002 to treat patients with narcolepsy, a condition associated with weak muscles, and in November 2005 to treat patients with excessive daytime sleepiness linked to narcolepsy.

Prosecutors said that in October 2005, prior to the second FDA approval, Caronia had improperly promoted Xyrem for "off-label" uses including excessive daytime sleepiness, muscle disorders, chronic pain and fatigue.

But Caronia said it should not be a crime for drug companies and sales representatives to truthfully promote FDA-approved drugs for legal, off-label uses when others, like doctors, may engage in such speech without penalty.

The 2nd Circuit agreed, noting that the U.S. Supreme Court had in 2011 found that speech that aided in drug marketing was a form of constitutionally protected expression.

Chin rejected the government's contentions that restrictions were needed to stop the non-approved usage of drugs, and preserve the efficacy of the FDA drug approval process.

"The First Amendment directs us to be especially skeptical of regulations that seek to keep people in the dark for what the government perceives to be their own good," Chin wrote.

Chin made clear in a footnote that off-label promotion that is false or misleading does not get First Amendment protection.

NO MORE GUESSWORK

Thomas Liotti, a lawyer for Caronia, welcomed the decision.

"If physicians can talk about alternative uses of drugs among themselves, it doesn't seem to make any sense that others cannot," he said in a phone interview.

He said the decision "increases the marketability of drugs, and means consumers can be fully informed by sales representatives, manufacturers and their own physicians."

Chin was joined in the majority by Circuit Judge Reena Raggi.

Circuit Judge Debra Ann Livingston dissented. She called the case indistinguishable from a 2004 case in which a unanimous panel of the federal appeals court in Washington, D.C., including then-judge and current U.S. Chief Justice John Roberts, found no First Amendment protection.

"The majority calls into question the very foundations of our century-old system of drug regulation," Livingston wrote. "I do not believe that the Supreme Court's precedents compel such a result."

The case is U.S. v. Caronia, 2nd U.S. Circuit Court of Appeals, No. 09-cr-5006.

(Additional reporting by David Ingram)

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