Managing Off-Label Drug Use

Guest Post by Marc Rodwin

Last year Endo Pharmaceuticals paid just under $182 million to settle a Department of Justice prosecution over its illegal marketing of Lidoderm for uses that the FDA had not approved.[1]  This settlement reflects a widespread practice in which pharmaceutical firms illegally promote drugs for off-label uses. In recent years, pharmaceutical firm settlement agreements for off-label promotion have included Johnson and Johnson ($2.2 billion for off-label promotion of Risperdal, Invega and Natrecor);[2] Pfizer ($2.3 billion for off-label promotion of Bextra);[3] and GlaxoSmith Kline ($3 billion for off-label promotion of Avandia).[4]  However, the problem of off-label drug use is more complex than it appears.

Manufacturers are prohibited from marketing drugs off-label, that is, for purposes that the FDA has not found to be safe and effective. However, physicians may prescribe drugs off-label for a different therapeutic purpose, with a different dose or for a different category of patients than that on which the drug was tested. Physicians—with the manufacturer’s encouragement—prescribe off-label much more frequently than is justifiable and risk harming their patients. In fact, 70 percent of off-label uses lack significant scientific support.

Physicians value the right to prescribe off-label, but it is the pharmaceutical firms’ incentive to increase sales that drives this practice. More sales means increased profits, so manufacturers have financial incentives to promote off-label use. The First Amendment protects certain off-label promotion as commercial free speech. Furthermore, manufacturers sometimes engage in illegal off-label promotion when the expected revenue exceeds potential penalties.

Unmanaged off-label drug use compromises good medical practice and the FDA’s ability to protect consumers from unsafe and ineffective drugs. Yet typical reform proposals, such as stronger sanctions for illegal promotion, don’t eliminate the problem. Public policy should manage off-label drug use by tracking off-label prescribing, removing economic incentives to sell off-label, and evaluating the safety and effectiveness of off-label uses.

Physicians should be required to indicate on each prescription the purpose for which the drug is prescribed, recording the patient’s principal diagnostic and symptom codes, gender and age. Third party payers should condition physician reimbursement on reporting this information. This prescribing data would identify the therapeutic goals of off-label uses and the affected populations. Researchers could then obtain anonymized data from treating physicians to evaluate the safety and effectiveness of these uses. The data also could signal when the FDA should investigate possible illegal off-label promotion.

Yet prohibitions on illegal off-label marketing alone are ineffective, because off-label sales are in the drug firms’ economic interests; monitoring compliance is difficult; and fines are too small given that off-label sales can generate billions of dollars in profits. Far more effective would be to change the economic incentives through new payment rules. Manufacturers would cease promoting and would even discourage off-label prescribing if it increased their costs but not their revenue.

It might not be the manufacturers’ fault that a physician prescribes a drug off-label, but the FDA grants market exclusivity for new drugs—with resulting monopoly profits—only for approved uses. Allowing firms to earn monopoly profits from off-label prescribing undermines the whole point of FDA regulation. Therefore, insurers should reimburse drug firms only for the marginal cost of manufacturing a drug when it is prescribed for off-label uses. Implementing this policy would require verifying the manufacturers’ production costs. The Medicare program, which requires hospitals to report cost data to determine reimbursement rates, provides a working model.

Yet when manufacturers sell drugs in bulk to wholesalers, it is uncertain how much will be prescribed off-label. Therefore, it will be necessary to adjust their compensation after the prescription is filled in order to reduce their income from off-label sale. Congress should require manufacturers to deposit their excess payments into a government-supervised fund dedicated to the evaluation of off-label drug use and drug safety.

When a drug’s off-label sales exceed a significant threshold, it makes sense to evaluate the safety and efficacy of these unapproved uses. Requiring that manufacturers finance these evaluations is a logical extension of their obligations to monitor the safety of drugs they sell. Moneys generated from the proposed claw-back of off-label sales revenue could fund the evaluation. Until that reform is adopted, the evaluation should be financed by taxing manufacturers. The National Institutes of Health should select and oversee independent researchers to conduct these evaluations.

Economic incentives for firms to sell drugs off-label without controls on physician prescribing are a recipe—nay, a prescription—for trouble. To promote sound medical practice Congress should remove financial incentives to sell off-label and monitor and evaluate the safety and efficacy of off-label prescriptions.

Marc A. Rodwin is a professor of health law at Suffolk University Law School.  He has developed this reform proposal in Rodwin, Marc A. “Rooting Out Institutional Corruption to Manage Inappropriate Off‐Label Drug Use.” The Journal of Law, Medicine & Ethics 41, no. 3 (2013): 654-664.  This research was conducted while he was a lab fellow at the Edmond J. Safra Center.

[1] http://www.justice.gov/opa/pr/endo-pharmaceuticals-and-endo-health-solutions-pay-1927-million-resolve-criminal-and-civil

[2]http://www.justice.gov/opa/pr/johnson-johnson-pay-more-22-billion-resolve-criminal-and-civil-investigations

[3]http://www.fbi.gov/news/podcasts/inside/pfizer-2.3-billion-settlement.mp3/view

[4] http://www.fbi.gov/boston/press-releases/2012/glaxosmithkline-to-plead-guilty-and-pay-3-billion-to-resolve-fraud-allegations-and-failure-to-report-safety-data

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