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 that 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.