American Journal of Law & Medicine

No need for more regulation: payors and their role in balancing the cost and safety considerations of off-label prescriptions.


In 2009, health care expenditures in the United States totaled $2.5 trillion and accounted for almost eighteen percent of the national Gross Domestic Product (GDP). (1) Rising health care costs are an increasing concern in the national health care industry and in government policy reform. When estimates show that thirty percent of health care is unnecessary, (2) improving quality and efficiency of health care could eliminate a significant amount of excessive spending.

Prescription drugs contributed to ten percent of national health expenditures in 2009, comprising about $250 billion. (3) And while the rate of growth for overall health care spending declined as a result of the recent recession, "the number of prescription drugs dispensed rebounded to prerecession rate of growth." (4) Estimates show that off-label drug use comprises between twenty and sixty percent of U.S. prescriptions. (5) This could be a troubling percentage considering that off-label use carries an increased risk of harm or ineffectiveness.

Curbing the amount of drugs prescribed for non-Federal Drug Administration (FDA) approved uses (that contribute to unnecessary and harmful care) could substantially promote health care cost containment. However, the federal government is limited in its jurisdictional authority to control the use of drugs for unapproved purposes and regulates only the marketing of FDA approved drugs for off-label usage. (6) Physicians still possess the ability to prescribe drugs for off-label usage in accordance with their standard of care, and the possibility for ineffective or harmful off-label usage persists (albeit lessened by standard of care requirements).

Without the ability to regulate the practice of medicine, the federal government has limited methods to ensure the quality and necessity of off-label drug use. However, another point of "regulation" of off-label drug usage exists that lessens the need for government control while promoting health care efficiency. Whether we like it or not, insurance providers are key components to the national health care structure. They have the ability to act as gatekeepers to the supply of prescriptions by expanding or restricting reimbursement for health care products and services. Given an insurance provider's natural affinity for controlling costs, its best interest is to deny reimbursement for unnecessary care, including off-label prescribing. In fact, many insurance plans only provide reimbursement for off-label prescriptions when there exists evidence of a drug's quality and efficacy. (7) In the off- label drug use arena, the insurance payor has the substantial ability to curb costs and lessen unnecessary and harmful care, reducing the pressure on the already overburdened federal government.

This note begins with an examination of current enforcement mechanisms in the off-label use arena, particularly the limitations of the FDA, and the need for oversight beyond the physician's standard of care. It then examines whether increased government regulation or enforcement by voluntary intermediaries is desirable, concluding that neither are practical options for addressing the problems of off-label prescribing. Next, the note explains how third-party payors evaluate reimbursement decisions for off-label prescriptions and how such decisions can proxy safety and efficacy regulations. Finally, the note will demonstrate that despite the government's inability to directly regulate off-label prescribing at the distribution level, it still can reinforce public policy objectives by correcting for market failures that occur at the payor stage.


The Food, Drug, and Cosmetic Act (FDCA) is the federal statute that governs how pharmaceutical drugs acquire FDA approval. (8) After manufacturers provide enough evidence that a new drug is both safe and effective as to a certain medical condition, the FDA approves the drug for only that specified and intended use. (9) The label on the newly-approved drug includes information on the approved dosage and method of administration only as it pertains to that specified use. (10) However, many FDA approved drugs treat medical conditions other than those for which the drug received initial approval. Given that the FDA does not have the jurisdiction to regulate the practice of medicine, (11) physicians are free to prescribe FDA approved drugs based on their own medical judgment. They retain this autonomy regardless of whether that use is included on the drug's label. (12) Such off-label prescribing can take a variety of forms including: (1) prescribing for unapproved conditions, (2) prescribing for patient groups other than those approved, and (3) varying the dosage or method of administering a drug. (13)

Of course, physicians are always subject to malpractice liability. If a physician's conduct falls outside the standard of care (14) and harms the patient, he or she can be liable for medical malpractice. While the fact that a drug use was off-label is never conclusive to establish malpractice liability, Richardson v. Miller held that plaintiffs could introduce evidence of off-label use to demonstrate that the physician deviated from the standard of care. (15) In malpractice claims based on off-label prescriptions, plaintiffs generally allege the physician's failure to obtain informed consent regarding the off-label usage in addition to their general negligence claim. (16) In such cases, many courts have held that physicians do not have to disclose that they are prescribing a drug for an off-label use. (17)

Off-label prescribing is extremely common among physicians. In 2001, of 725 million U.S. prescriptions written for the most popular drugs, about twenty-one percent were for off-label uses. (18) Other estimates have been as high as sixty percent. (19) Off-label prescribing can be beneficial to patients for a variety of reasons. (20) Not only can physicians prescribe off-label to treat medical conditions other than those for which the drug received approval, but they can also expand the prescription to different patient populations and veer from the label in the prescription's administration or dosage. (21) The benefit of physician discretion is especially evident in pediatrics. Because the FDA labels only twenty to thirty percent of its approved drugs for pediatric use, most prescriptions for children occur off the label. (22) In fact, the FDA has even recognized that off-label prescribing may be the standard of care in certain instances. (23) According to one American Medical Association (AMA) officer, "in some cases, if you didn't use the drug in the off-label way you'd be guilty of malpractice." (24)

An overwhelming majority of cancer, kidney dialysis, and AIDS patients receive treatment for those conditions with off-label drugs. (25) The General Accountability Office (GAO) conducted a study with the conclusion that doctors prescribed over one-third of anticancer drugs off-label and that over half of cancer patients received at least one off-label prescription. (26) A different study uncovered that forty percent of prescriptions for HIV patients were offlabel and that over eighty percent of HIV patients received at least one offlabel prescription. (27) These statistics demonstrate that off-label prescribing is both commonplace and beneficial (and in some cases necessary), particularly for conditions where not treating at all would produce devastating, and perhaps fatal, consequences.


Despite evidence of the benefits of off-label usage, many off-label prescriptions lack scientific support of efficacy. (28) A 2006 study found that nearly seventy-five percent of off-label prescriptions were for drugs that had "little or no scientific support" (or were only supported by observational and case data). (29) Physicians have misconceptions about the FDA approval of, and level of evidence supporting, a drug's indication. A recent survey conducted at the University of Chicago Medical Center found that respondent-physicians were only able to identify the FDA approval status of a drug just over half of the time and that physicians were more likely to believe erroneously a drug has FDA approval for a use when they had prescribed it for that indication. (30) These studies identify the need for more evidence-based prescribing practices, particularly for off-label usage that has not passed the FDA's quality and efficacy barriers to market. "Efforts should be made to scrutinize underevaluated off-label prescribing that compromises patient safety or represents wasteful medication use." (31)

In 2006, the biopharmaceutical company InterMune earned virtually all its revenue through off-label prescriptions of Actimmune for pulmonary fibrosis. (32) The manufacturer later found, however, that the drug was not effective in treating this condition. (33) InterMune's $90 million in earnings that year, derived solely from Actimmune sales, is just one example of how "wasteful medication use" can vastly augment spending on unnecessary health care. (34) Such "waste" is prevalent in antipsychotic prescribing. Doctors often prescribe patients powerful drugs with extreme side effects intended for severe mental illnesses (e.g., schizophrenia) although most of these patients suffer from much less severe illnesses (e.g., depression and insomnia). (35)

Even worse, off-label prescriptions have the risk of compromising patient safety. For example, the FDA-approved drug fenfluramine was widely prescribed off-label for a brief period in the 1990s. (36) Doctors prescribed fenfluramine, in combination with phentermine (together, "fen-phen"), to promote long-term weight loss for their patients. (37) In that time, the FDA estimated that 285,000 fen-phen users suffered from heart valve damage. (38) So, while off-label prescribing can be very beneficial to some patients, this common practice can also be unnecessary and, in some cases, very risky.



The FDA's authority to regulate off-label prescribing is constrained by its inability to regulate the practice of medicine. Despite this "practice of medicine" exception, the federal government has jurisdictional authority to prohibit drug manufacturers from promoting off-label use, stemming from the federal power to regulate interstate commerce. (39) In fact, the government has had some success using the False Claims Act (40) (FCA) to enforce the ban on off-label promotion, "with 2008 yielding close to a half-billion dollars with one settlement alone." (41) This success, however, is not usually the result of any initial action by the FDA, but by private litigation. "More and more frequently, it is not FDA action but litigation that raises important questions about off-label drug prescribing." (42)

Additionally, the FDA has begun to face challengers when attempting to enforce the ban on off-label marketing. …

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