An interesting ruling in New York Monday questions whether the Federal Drug Administration has the authority to tell pharmaceutical companies for which uses their drugs may be marketed. Via The New York Times:

In a case that could have broad ramifications for the pharmaceutical industry, a federal appeals court on Monday threw out the conviction of a sales representative who sold a drug for uses not approved by the Food and Drug Administration. The judges said that the ban on so-called off-label marketing violated the representative’s freedom of speech.

The 2-to-1 decision by a three-judge panel of the Court of Appeals for the Second Circuit in Manhattan addresses a long-running and costly issue for the industry, which has paid billions of dollars in penalties to the federal government in recent years after being accused of marketing blockbuster drugs for off-label uses.

In July, for example, the British drug maker GlaxoSmithKline agreed to pay $3 billion in fines, in part for promoting antidepressants and other drugs for unapproved uses; a month later, Johnson & Johnson announced that its pharmaceutical unit had reached a $181 million consumer fraud settlement with 36 states and the District of Columbia over its marketing of Risperdal, an antipsychotic drug.

The case involved a sales representative from a drug company caught promoting a drug used to treat narcolepsy for other conditions, such as insomnia and fibromyalgia. He was convicted in 2008 after being recorded discussing “unapproved” uses of the drug with a doctor.

There are some interesting complexities. According to Katie Thomas’ reporting, while the FDA blocks the pharmaceutical industry from marketing the drug for other purposes, a doctor is allowed to prescribe a drug for whatever purpose he or she wants. So a doctor could legally prescribe the aforementioned drug to treat insomnia, but the company’s salesperson wouldn’t be allowed to tell the doctor it could be used to treat insomnia. The court ruled this violated the salesman’s freedom of speech:

“The government clearly prosecuted [Alfred] Caronia for his words — for his speech,” the majority wrote, concluding later “the government cannot prosecute pharmaceutical manufacturers and their representatives under the F.D.C.A. for speech promoting the lawful, off-label use of an F.D.A.-approved drug.”

The case may go back to circuit court’s full panel of judges for a rehearing, and then ultimately could be taken up by the Supreme Court.

(Hat tip to former Reason Editor Virginia Postrel)