Off-Label Use of Pharmaceuticals: A Detection Controlled Estimation Approach

Abstract

We identify the rate of off-label use of prescription drugs in the United States during 1993-2008 using Detection Controlled Estimation. We find the rate rises from 29.9% to 38.3% during this period. Off-label prescribing increases when there are fewer FDA-approved alternatives and a patient's insurance has less restrictive formularies and lower copayments. The temporal increase in off-label use coincides with a surge in settlements of Department of Justice (DOJ) lawsuits for off-label marketing. Those drugs targeted by the DOJ have 4.6% higher rates of off-label use initially, but the rate decreases 10.2% after the company becomes aware of the suit. The welfare effects of such regulatory intervention are unclear because we find off-label prescribing patterns by physicians that are consistent with enhancement of patient welfare.

Keywords: off-label use, pharmaceuticals, detection controlled estimation

JEL Classification: C1, L51, I10, I18, I13, K23