Violation of Federal and State False Claims Acts is at the heart of recent lawsuit claims and prosecution of drug companies including Johnson & Johnson, a pharmaceutical company slapped by the Department of Justice (DOJ) with billions of dollars in punitive fines. According to Wall Street Journal reports, the company is about to settle with the DOJ for committing off-label marketing of products, including their flagship drug Risperdal. The settlement is estimated to be around $1.5 billion. It is advantageous to the company to make a settlement with the DOJ on this case because by avoiding a felony charge they would then still be allowed to participate in important government programs like Medicare.
The rub in this case is that pharmaceutical manufacturers are restricted by this law to only marketing their drugs for purposes that have been approved by the FDA. This FDA approval is called a "label" in the industry. With "off-label" marketing, companies skirt the law by going direct to physicians and marketing to them for use of these drugs for purposes not approved by the FDA. Physicians are not bound by the same legal restrictions, as are pharmaceutical companies.
This potentially presents trouble for patients to whom doctors have recommended unapproved drugs; patients can incur serious physical damage because of this practice. These important laws are designed to protect the end user, and when the drug companies go around the law to market expensive drugs that fail to provide adequate results, the patients may be harmed. This has resulted in billions of dollars of lawsuits over recent years. Merely encouraging doctors to recommend any unapproved drug to their patients is considered a violation of Federal and State False Claims Acts.
Source: Wall Street Journal, "J&J Close to Settling Off-Label Probes," Jonathan Rockoff & Joanne Lublin, June 20, 2012