By Terry Baynes

(Reuters) - A drug company executive convicted of misrepresenting the results of a clinical drug trial cannot use the First Amendment to overturn his conviction, a federal appeals court ruled in a case with potentially far-reaching implications for the pharmaceutical industry.

The 9th U.S. Circuit Court of Appeals in San Francisco on Monday upheld the criminal conviction of former InterMune CEO Scott Harkonen, who was prosecuted for overstating the therapeutic benefits of a pediatric drug in a company press release.

The Food and Drug Administration had approved the drug, Actimmune, for two rare pediatric diseases. But InterMune sought to tap into the larger market for a chronic lung disease, a use not approved by the FDA. When the company conducted a clinical drug trial for the lung disease in 2002, the initial results were disappointing, showing no benefit overall. But when Intermune re-examined the results and focused more narrowly on patients with mild to moderate lung disease, the company calculated a statistically significant benefit.

Harkonen, a physician and CEO of the company, announced the subgroup results in a company press release, saying the data demonstrated that Actimmune could prolong life. Federal prosecutors charged Harkonen with wire fraud for allegedly misstating the study results and for promoting the drug off-label in violation of the Food Drug and Cosmetic Act.

A jury convicted Harkonen of fraud in 2009 but acquitted him on the off-label charge. The district judge imposed a $20,000 fine and sentenced him to three years' probation, even though the prosecutors had requested a 10-year prison sentence.

On appeal, Harkonen argued that the conviction violated his free speech rights because his statements were a matter of scientific interpretation and he was engaging in genuine scientific debate. But the 9th Circuit's three-judge panel rejected his appeal in an unpublished, unsigned opinion, pointing to evidence that Harkonen knew that the press release was misleading.

The decision, if allowed to stand, will permit the government to put pressure on manufacturers to rein in what they can say about promising clinical results, stifling the flow of information to doctors and seriously ill patients, said Harkonen's lawyer, Mark Haddad at Sidley Austin.

"Allowing the government to criminally prosecute and convict a speaker for expressing a scientific opinion with which the government disagreed represents a real sea change in the law," he said.

A 'VERY DISTURBING' OPINION

Haddad said Harkonen will likely request a rehearing before the full 9th Circuit. In the meantime, Harkonen cannot practice medicine because the state medical board has taken away his license. He is also barred from participating in research that goes before the FDA, which makes it virtually impossible for him to continue his career as a researcher, Haddad said. Before the case, Harkonen's work had contributed to the approval of five different drugs, three of which treated rare diseases, he added.

Daniel Meron, former general counsel of the U.S. Department of Health and Human Services now at Latham & Watkins, called the opinion "very disturbing."

"Perhaps the subgroup analysis Dr. Harkonen proposed was right or wrong, but that's subject to scientific debate. It's not something we should be using criminal law to go after," said Meron, who submitted an amicus brief on behalf of the Abigail Alliance for Better Access to Developmental Drugs, an advocacy group for people with serious illnesses.

The decision could expose not only drugmakers but also the publishers of medical journals to criminal prosecution for articles that overstate the benefits of a drug, said Nathan Schachtman, a law professor at Columbia University.

The role of the First Amendment in pharmaceutical marketing has come into sharp focus since the 2nd Circuit in December overturned the conviction of a pharmaceutical sales representative, Alfred Caronia, on free speech grounds. Caronia had been convicted for promoting a drug off-label. But the 2nd Circuit found that Caronia had a First Amendment right to inform a physician about off-label uses for a drug, provided the statements were truthful.

Pharmaceutical companies and their lawyers have looked to the Caronia ruling as a weapon to fend off government allegations of fraud in the marketing of their products. But the 9th Circuit declined to apply the same logic to Harkonen's case.

The cases are fundamentally different, said Michael Loucks, a former federal healthcare fraud prosecutor now at Skadden, Arps, Slate, Meagher & Flom. Caronia involved truthful statements to doctors, while a jury found Harkonen's statements to be fraudulent.

"If there's evidence of falsity, the First Amendment analysis that permeates the Caronia decision will not help you as a defendant," Loucks said.

Loucks also noted that Harkonen presented his strongest evidence at the sentencing hearing, not the jury trial, according to a footnote in the 9th Circuit's opinion. The court said it would not reverse the jury's verdict based on evidence it never considered.

While different from Caronia, the Harkonen decision gives defendants an opportunity to bring the issue before the Supreme Court by arguing that a split exists between the 9th and 2nd Circuits, said Suzanne Durrell, a lawyer who represents whistle-blowers in healthcare fraud cases.

Another whistle-blower lawyer, Erika Kelton of Phillips & Cohen, welcomed the 9th Circuit's decision.

"Misleading speech couched as scientific speech isn't sheltered by the Constitution," Kelton said. It simply gives false hope to individuals who suffer from serious diseases, she said.

The case is USA v. Harkonen, 9th U.S. Circuit Court of Appeals, No. 11-10209.

For the prosecution: Anne Voigts of the Justice Department.

For Harkonen: Mark Haddad of Sidley Austin.

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