New uses for drugs that are already on the market could help treat hundreds of diseases and thousands of people; however, the current system of push-and-pull incentives in the modern American pharmaceutical regulatory system is not adequately inducing the expensive research needed to market these old drugs for new uses.[i]
One commentator, Ben Roin, elegantly distills the issue down to a “price discrimination problem.”[ii] “The inability to price drugs by indication necessarily diminishes any incentive to develop new indications because firms cannot charge the profit-maximizing price for each different use.”[iii] Roin, therefore, suggests arming pharma companies with the ability to better enforce their new use patents by expanding the “prior authorization” model to cover all patented indications, “thereby providing a financial incentive to develop those new uses.”[iv] Roin’s prior authorization model is appealing because it’s pragmatic. Instead of rewriting the Patent Act or making the government a pharma company, Roin suggests introducing price discrimination largely without disrupting the current structure of the market. Roin would mandate honest and diligent reporting from doctors, grant pharma companies access to those records, and adopt a fully electronic medical records platform – all seemingly reasonable propositions.
In focusing on the enforcement of new use patents, Roin perhaps misses the forest through the trees. Instead of asking whether doctors should accurately report the indication associated with a prescription, perhaps a better question is why can the doctor prescribe an approved drug for an unapproved use in the first place? After all, 16-year-olds are not allowed to fly Boeing 777’s merely because they have a driver’s license – and while permanent markers might be good tools for writing on packages, they will certainly ruin a whiteboard. However, unapproved uses of approved drugs – otherwise known as “off-label” uses – are common in the United States and around the world. In fact, some states are even considering rolling back restrictions that prohibit pharma companies from promoting off-label use.[v] Alarmingly, the FDA does not regulate or approve these alternative, off-label uses. In some instances, errors have harmed thousands of people. As Roin states, “each of the different indications for drugs is essentially a distinct product.”[vi] So, why are they not treated as such?
1. Proposal: Ban off-label use
While Roin suggests requiring “pharmacists to dispense drugs with the appropriate label for their prescribed indication if that indication is covered by a regulatory exclusivity period,” he does not go far enough.[vii] The U.S. should ban off-label use, require FDA approval for every indication of a drug, and use the new drug approval pathway to approve new uses. A three-year period of full market exclusivity for the newly approved indication would replace the current three-year data exclusivity period for new uses that require clinical trials. To meet the increased demand for clinical trials, generic firms and government agencies could conduct clinical trials for off-patent drugs. Then, they could either retain the market exclusivity or relinquish exclusivity and donate it to the public domain. Finally, encompassing Roin’s suggestion, a total ban of off-label use would prohibit pharmacists from automatically substituting generic versions of off-patent drugs for the market exclusivity period.
2. A system that bans off-label use could still achieve the benefits of the current off-label use system
First, it is important to note that there are several benefits associated with off-label use, the most compelling of which revolves around access to treatment in times of desperation. There might not be any approved drugs to treat a patient’s medical condition, or all approved treatments might have failed for a certain patient. Other times, approval of a drug might only apply to certain demographics. If a patient is part of one of the populations that were absent from the clinical trials, such as children or the elderly, their use of the drug would technically be off-label. Finally, doctors might substitute medications from the same classfor one another, even though the clinical trials associated with a certain drug did not specifically address the patient’s specific condition – such as substituting one chemotherapy drug for another.[viii] Off-label use of approved drugs in these contexts might be a patient’s only option for treatment in a time of desperate need. However, a system that requires FDA approval for alternative uses could potentially achieve the same benefits.
The U.S. could ban off-label use and still achieve the benefits illustrated above by instituting a robust clinical trial system. If there are no approved drugs to treat a patient’s disease, or all approved drugs have failed them, the doctor could direct the patient to a clinical trial exploring yet-unapproved uses of an approved drug. The same goes for populations that were not the focus of the original clinical trials. Moreover, a clinical trial exploring whether a drug in the same classcan be used to treat a different form of a disease would, in theory, cost much less since a bulk of the data would likely overlap.
Permissive off-label use has undoubtedly helped millions of people over the years. But the question remains: does off-label use hurt more people than it helps? Or, said another way, could even more people benefit from a healthcare system that requires FDA approval for alternative uses of known drugs, perhaps solving the problem of new uses?
3. Mandatory FDA approval could remedy the costs associated with off-label use and provide additional benefits
Off-label use creates a perverted incentive scheme that ultimately hurts patients. If doctors are willing to prescribe for off-label indications, pharma companies actually have an incentive not to conduct clinical trials. In fact, “the more physicians are willing to prescribe a drug off-label . . . the less the patentee has to gain from a positive outcome in the trials, and the more it has to lose by risking a negative outcome that would jeopardize the drug’s existing sales.”[ix] The worst-case scenario involves off-label use of a drug that turns out to exacerbate the very condition it was believed to help. This problem is made worse given the false sense of security an “FDA approved” drug may foster. Patients might assume that because the FDA approved a drug it’s “safe and effective” for them to take. However, “safe” merely means the benefits outweigh the risks for the approved indication, which might be a very different calculation depending on whether a terminally-ill patient is trying to extend their life an additional two months or whether a patient is simply looking for a preventative measure. Likewise, “effective” just means effective for that indication. Finally, the current system eliminates incentives to investigate additional uses for off-patent drugs because generics can enter the market, piggy back off the pioneer’s investment, and then take advantage of automatic substitution at the pharmacy.
Banning off-label use would remedy these problems. Without the ability to expand an approved drug’s market through off-label sales, pharma companies would actually have an incentive to invest in new clinical trials. Researchers would study the new indications in controlled environments with patients receiving scheduled observation, thereby protecting against the worst-case scenarios where doctors prescribe drugs off-label to the detriment of patients. Furthermore, the public would have a higher, or at least more appropriate, level of trust in the FDA since every drug would be “safe and effective” for each indication. Finally, as patents and regulatory exclusivity periods expire for pioneer drugs, companies could extend their monopoly by gaining approval for new indications. While generics could enter the market for the old indication, as they do today, doctors and pharmacists would be banned from substituting the generic for a protected indication until the exclusivity period ran out. This added economic incentive would go a long way towards solving the problem of new uses.
In addition to remedying many of the concerns wrapped up in the current system, a ban on off-label use would provide additional benefits. First and foremost, the pharma industry could finally take advantage of price discrimination, allowing drug prices to reflect the therapeutic benefits for each indication. Not only would this eliminate fears of investing in new uses, as discussed above, but indication-specific pricing would enable wider access to treatment.
Currently, insurance companies can deny coverage of off-label uses, but it would be very difficult for insurers to deny coverage of FDA approved drugs for FDA approved indications – particularly at therapeutically fair prices. Finally, since no indication could be sold without FDA approval, banning off-label use would eliminate the incentive for companies to patent new uses but not conduct clinical trials – a problem that Roin’s model does not remedy.[x]
4. Challenges associated with banning off-label use
Of course, banning off-label use would present new challenges for the healthcare industry. Most notably, lack of access to off-label drug treatments would put further separation between patients with no other approved medical options and breakthrough scientific discoveries. But, this assumes that the “new discovery” is both medically valid and the patient’s doctor is well-informed enough to know about the off-label use. A system that requires clinical trials for new uses, however, would ensure the treatment is valid and well-known. Although it might take a couple years to gain approval, it’s arguably better (or at least not any worse) than thousands of doctors prescribing an off-label use that is completely ineffective, or even harmful, without any follow-up studies.
Another challenge would be the enormous increase in the need for clinical trials. Clinical trials are very expensive, and a system that bans off-label use might collapse if patients who want to volunteer for a new use clinical trial can’t because of limited resources. Perhaps if the regulatory exclusivity period was tied to the cost of each clinical trial more firms would be attracted to invest. Similarly, generics might be expected to step up and conduct their own clinical trials since the generic firm would receive the regulatory exclusivity for that indication, even against the pioneer. While currently a duopoly is the best market exclusivity a generic can enjoy, perhaps the promise of a complete monopoly would provide incentives for generic companies to fill the added need. Finally, government agencies could conduct clinical trials for indications that have high social value but low commercial value.
Even ignoring that long-term benefits of forcing clinical trials – thereby ensuring treatments are “safe and effective” – would likely balance out the loss of immediate access to off-label use options, the enormous benefits of discovering new uses would vastly outweigh the costs.
The model for bringing new drugs to market has enjoyed remarkable success by utilizing patent protection and regulatory exclusivity. The chain of investment from government agencies to universities to pharma companies continues to produce new, “safe and effective” drugs that society would likely not have otherwise. But, today the incentive to invest in new usesis lacking. One reason there is a lack of further investment and development is because U.S. law somewhat surprisingly allows doctors to prescribe off-label uses which are not FDA approved or regulated. By banning off-label use, establishing price discrimination in the market, and ensuring greater levels of safety for patients, the U.S. might finally solve the problem of new uses.
[i]See generally Benjamin N. Roin, Solving the Problem of New Uses (October 1, 2013), https://ssrn.com/abstract=2337821.
[ii]Id. at 16. Ben Roin is a leading scholar in patent law and biopharmaceutical innovation policy. He earned his JD from Harvard Law School in 2005 and is currently an Assistant Professor of Technological Innovation, Entrepreneurship, and Strategic Management at the MIT Sloan School of Management.
[iii]Id. at 60.
[iv]Id. at 62-3.
[v]See Starlee Coleman, Arizona Becomes First State to Allow Pharmaceutical Companies to Legally Communicate Off-Label Treatment Uses to Medical Professionals, Goldwater Inst., March 23, 2017, https://goldwaterinstitute.org/article/arizona-becomes-first-state-to-allow-pharmaceutical-companies-legally-communicate-off-label-treatment/.
[vi]Roin, supra note i, at 59.
[vii]Id. at 76
[viii]See Understanding Unapproved Use of Approved Drugs “Off Label”, U.S. Food & Drug Admin. (Feb. 5, 2018), https://www.fda.gov/ForPatients/Other/OffLabel/ucm20041767.htm.
[ix]Roin, supra note i, at 72.