Citizen groups recently have begun using state unfair competition and false advertising laws to sue prescription pharmaceutical manufacturers in California over "off-label" use of their drugs.  These lawsuits highlight some of the mischief resulting from two of the state's more unique anti-business statutes California's "unfair competition" law, Business and Professions Code section 17200 et seq., and the recently-amended "anti-SLAPP" statute, Code of Civil Procedure sections 425.16 and 425.17.  This Legal Backgrounder provides a summary of these statutes, the inter-play between them in the context of off-label use litigation, and the legislative strategies that might curtail the spread of Section 17200 lawsuits.

California's Unfair Competition Statute. As it has developed over time, California's unfair competition law Section 17200 and the related false
advertising statute, Section 17500 have less and less to do with remedying practices that hurt businesses' ability to compete fairly.  Instead, Section 17200 has become the broadest consumer liability statute in the country, primarily because of three features: (1) it creates liability by making even technical violations of regulations or statutes lacking their own remedial provisions "unlawful" conduct; (2) it also imposes liability for conduct or advertising that is merely "unfair" or "likely to deceive the public;" and (3) it can be used by any plaintiff on his or her own behalf, or on behalf of the "general public" even if no appreciable injury ever resulted.

Under Section 17200, "unfair" is a particularly broad and ill- defined standard.  Any business practice not expressly authorized by law carries some risk of being deemed unfair if later challenged in using Section 17200.  See Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal. 4th 163, 184, 187 (1999) (unfair competition law cannot condemn an action that the Legislature otherwise permits, but absent such a "safe harbor," an act may be "unfair" if it threatens an incipient violation of an antitrust law, or "the policy or spirit" of an antitrust law, or "otherwise significantly threatens or harms competition").

Compounding the problem with Section 17200's vague standards for actionable conduct is its expansive standing provision.  Since no actual injury is required under Section 17200, these actions can be brought by entirely unaffected parties.  They also usually can be brought on behalf of the general public without any of the procedural safeguards present in traditional class actions. Together, these provisions make Section 17200 ripe for misuse by professional litigants as well as consumer groups unable to effect change in practices they disapprove of through legislation or regulation.

California's Anti-SLAPP Statute and Recent Amendments Limiting the Ability of Businesses to Protect Their First Amendment Rights.  In 1992, the California Legislature enacted Code of Civil Procedure Section 425.16, California's anti-SLAPP statute.  The law was designed to curtail a perceived problem with lawsuits brought "primarily to chill the valid exercise of constitutional rights of freedom of speech and petition for the redress of grievances" so- called SLAPP suits (Strategic Lawsuits Against Public Participation).  Cal. Civ. Proc. Code Sec. 425.16(a).  To stop such lawsuits, the anti-SLAPP statute allows defendants to file a special motion to strike any lawsuit premised on acts "in furtherance of [the defendant's] right of petition or free speech under the United States or California Constitution in connection with a public issue." Cal. Civ. Proc. Code Sec. 425.16(b)(1).  Once the defendant files an anti-SLAPP motion demonstrating the lawsuit's connection to speech on a public issue, the lawsuit is dismissed unless the plaintiff demonstrates a probability that he or she will prevail on the merits.  See id.

Because anti-SLAPP motions are filed during the early stages of a lawsuit within 60 days of service of the complaint [Civ. Proc.  Code Sec. 425.16(f)] plaintiffs have a hard time meeting this burden.  In addition, because the anti-SLAPP statute is designed to protect free speech, successful motions result in immediate dismissal of the case, before the defendant incurs any discovery or other significant defense costs.  See Mattel, Inc. v. Luce, Forward, Hamilton & Scripps, 99 Cal. App. 4th 1179, 1190 (2002). Finally, the anti-SLAPP statute provides unsuccessful defendants the right to immediately appeal, providing a second chance at dismissal before any litigation on the merits ever takes place. See Civ. Proc. Code Sec. 425.16(j).

Although the original intent of the anti-SLAPP statute was to protect nonprofit organizations and common citizens from expensive retaliatory litigation, businesses sued in California also benefited from it, so long as the litigation touched on First Amendment activities arguably protected by the statute.  See, e.g., Yu v. Signet Bank/Virginia, 103 Cal. App. 4th 298, 316 (2002) (bank brought anti- SLAPP motion against class action filed by credit card customers over bank's collection activities). In 2000, the statute was successfully used by a pharmaceutical manufacturer to defeat a consumer class action alleging that it made false statements through lobbying efforts, advertising, marketing and PR releases which artificially inflated the price of Coumadin.  See DuPont Merck Pharmaceuticals Co. v. Superior Court, 78 Cal. App. 4th 562, 565-67 (2000). The company's lobbying statements were protected under the right to petition, and marketing and PR statements directed at the medical profession and the general public arose from the company's right to free speech and concerned an issue of public interest, patient health.  Both accordingly were protected by the statute.  Id. at 565-66.

While DuPont was a favorable decision for corporate defendants, the use of the anti-SLAPP statute to protect speech by corporate defendants provoked some backlash.  The courts acted first.  See, e.g., Consumer Justice Center v. Trimedica Int'l, Inc., 107 Cal.  App. 4th 595 (2003) (distinguishing DuPont, rejecting application of the anti-SLAPP statute, and concluding commercial speech about the specific properties and efficacy of herbal breast enhancing product was not a matter of general public interest); Nagel v. Twin Laboratories, Inc., 109 Cal. App. 4th 39 (2003) (concluding defendant's product labels and internet listing of ingredients of its nutritional and dietary supplements were not protected speech in connection with a public issue and distinguishing DuPont).

And last year, the Legislature amended the anti-SLAPP statute for the express purpose of "stop[ping] corporate abuse" of the anti-SLAPP statute.  See Senate Judiciary Committee Analysis of S.B. 515, at 4-5 (May 6, 2003).  Although then-Governor Davis vetoed a virtually identical bill in 2002, he signed the bill into law while facing recall, and it took effect January 1, 2004.  This new statute, California Code of Civil Procedure Section 425.17, expressly (1) prohibits a defendant from bringing an anti-SLAPP motion against a lawsuit brought in the public interest, or "on behalf of the general public" (that is, a representative Section 17200 action), and (2) prohibits any business engaged in commercial speech from bringing an anti-SLAPP motion.  Civ. Proc. Code Sec. 425.17.

Off-Label Use and the First Amendment.  Many prescription drugs and medical devices are used for "off-label" purposes.  Although the FDA authorizes the marketing of prescription drugs and devices for specific uses indicated in the product labeling physicians often prescribe them for different purposes as well. See Buckman Co. v.  Plaintiffs' Legal Comm., 531 U.S. 341, 350 (2000); see also James M.  Beck & Elizabeth D. Azari, FDA, Off-Label Uses, and Informed Consent: Debunking Myths and Misconceptions, 53 Food & Drug L.J 71, 83, 85 (1998).

There is nothing untoward about the practice, since Congress has not attempted to regulate the practice of medicine, but instead has authorized
physicians to treat patients with any available treatment, in accordance with their experience, judgment and scientific advances.  See 21 U.S.C.  396. Thus, the FDA acknowledges the practice [see Beck & Azari, supra, at 82], as do the courts [see Buckman, 531 U.S.  at 1018 (off-label usage "is a necessary corollary of the FDA's mission to regulate in this area without directly interfering with the practice of medicine")].

Despite the freedom afforded physicians, manufacturers cannot directly promote their prescription drugs or devices for unapproved uses.  See Washington Legal Foundation v. Henney, 202 F.3d 331, 323-33 (D.C. Cir. 2000) (noting manufacturers cannot market a prescription drug with the intention that it be used for an off-label purpose or label the product with information about unapproved uses).  The limitations on manufacturers' speech regarding off-label uses are not absolute, however.  As even the FDA acknowledges, manufacturers have a First Amendment right to distribute scientific articles to physicians regarding off-label uses.  Id. at 336.

Section 17200, the Anti-SLAPP Statute, and Lawsuits Over Off-Label Uses. Given the regulatory dichotomy regarding manufacturers' speech regarding off-label uses they cannot promote off-label use, but they do have a First Amendment right to supply articles to physicians regarding off-label uses off-label uses implicate both Section 17200 and California's anti-SLAPP statute. Off-label uses implicate Section 17200, because some critics view any manufacturer speech regarding off-label uses as an improper, "unfair" or "unlawful" business practice; and they implicate the anti-SLAPP statute because Section 17200 lawsuits challenging manufacturers' speech regarding off-label uses potentially allow for defensive use of an anti-SLAPP motion.

One organization has, in fact, spawned off-label use litigation implicating both statutes.  The Prescription Access Litigation Project was formed in 2001 with the specific purpose of using the courts to regulate the pharmaceutical industry in accordance with its priorities.  (See
www.prescriptionaccesslitigation.org) Through the Congress of California Seniors, this organization sued Pharmacia and Pfizer in December 2002 over alleged off-label practices regarding Bextra; Solvay Pharmaceuticals, Inc. in August 2003 for off-label use of Estratest; and Pfizer in February 2003 over off-label use of Neurontin.  In each case, plaintiffs relied on Section 17200 to claim that the manufacturers' speech about off-label uses constitutes an unlawful, unfair, or fraudulent business practice.

These cases also demonstrate the utility of the anti-SLAPP statute at least prior to the January 1, 2004 amendment restricting its use by businesses.  In one of the earlier lawsuits, Congress of California Seniors v. Pharmacia Corp., Los Angeles County Superior Court Case No. BC 287484, plaintiffs filed a representative Section 17200 and false advertising action over the publication of a study allegedly promoting off-label use of Bextra.  Before any discovery took place, Pfizer brought and prevailed on an anti-SLAPP motion, resulting in dismissal of the entire lawsuit.

Now that the anti-SLAPP amendments have taken effect, however, a very different result is possible.  Section 425.17 now bars manufacturers from using the anti-SLAPP statute if they are engaged in commercial speech, and plaintiffs are certain to argue that any speech regarding off-label uses is commercial. The statute does expressly permit businesses "engaged in the dissemination of ideas or expression in any book or academic journal" to continue to use anti-SLAPP motions, and distributing published studies regarding off- label uses might well apply.  Nevertheless, how willing California's courts are to allow manufacturers to continue to use the anti-SLAPP statute remains to be seen.

Fortunately, other defenses remain open to defendants named in off- label lawsuits as well.  Even without the anti-SLAPP statute's express procedural mechanisms, the First Amendment still should protect manufacturers from off-label lawsuits like those in the Congress of California Seniors cases.  Cf. Kasky v. Nike, Inc., 27 Cal. 4th 939 (2002), cert. granted, 123 S. Ct. 817 (2003), cert. dismissed 156 L.Ed.2d 580 (2003) (although California Supreme Court concluded less-protected commercial speech could be the basis for a Section 17200 lawsuit, the United States Supreme Court's grant of certiorari held promise they might have ultimately disagreed; unfortunately, the Court dismissed the case without reaching the merits, and the issue accordingly remains an open one).  Preemption also should protect against off-label litigation, since Congress vested the FDA with the sole authority to approve prescription drugs for specific uses, regulate product labeling, and most significantly determine when a violation has occurred.  See Buckman Co. v. Plaintiffs' Legal Comm., 531 U.S. at 351; see also Kanter v. Warner-Lambert Co., 99 Cal.  App. 4th 780, 797 (2002) (Section 17200 claim preempted by Food and Drug Administration Modernization Act).

If Successful, Proposals to Amend Section 17200 Would Be an Important Step Toward Limiting Many Abusive Lawsuits, Including Those Regarding Off-Label Use. The best defense against abusive Section 17200 litigation like that presented in the Congress of California Seniors cases, however, might not be one asserted in court during litigation, but rather reform of the statute itself.

In California, plaintiffs' lawyers long have employed Section 17200 to target businesses in the state in ways the legislature never intended, and to
extract settlements with the threat of protracted and expensive litigation for conduct that is not unlawful.  There appears to be an ever-increasing use of Section 17200: the approximately ten reported Section 17200 decisions per year in the 1980s increased to approximately 65 reported decisions in 2003.  Although all reform efforts to date have failed, some efforts to effect a policy change in Section 17200 are currently underway that carry the prospect of substantial, albeit modest, change.

During his campaign, recently-elected Governor Arnold Schwarzenegger promised to reform Section 17200.  Although recognizing the law's value when used for its original purpose consumer protection Schwarzenegger also acknowledged the statute's too-loose standards made it ripe for abuse.  In addition to Governor Schwarzenegger's promise to work toward legislative reform, the business community through "Californians Against Shakedown Lawsuits" also has sponsored an initiative for the November 2004 ballot.

Both proposals have common, and laudable reform goals: requiring an actual injury before plaintiffs can sue; limiting the use of Section 17200 by private citizens purporting to act on behalf of the general public and requiring traditional class action standards; providing res judicata effect and prevent copycat litigation over the same alleged conduct; and limiting plaintiffs' attorneys' fees.

Under the current state of California law, however, pharmaceutical manufacturers sued over off-label use of their drugs must rely on the courts, and the hope that they will uphold the First Amendment and the preemption defenses.

For more information contact:  Washington Legal Foundation, 2009 Massachusetts Ave. Washington, D.C., 20036; (202) 588-0302.