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Dealing with Excessive Off-label Drug Use: Liability vs. Patent Prolongation

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  • Stefan Felder

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  • Anja Olbrich
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    Abstract

    The US and the EU recently introduced regulation to curb the extent of risky off-label drug use. It offers manufacturers a prolongation of patent protection or exclusivity if they invest in pediatric clinical tests. This paper shows that a reinforcement of physician liability for off-label use may be the preferred instrument for achieving dynamic efficiency. The liability threat reduces the demand for off-label use, giving manufacturers an appropriate incentive to invest in extended approval. By contrast, patent prolongation does not affect physicians' prescription decisions and increases the likelihood of investments in cases where the induced additional benefit falls short of testing costs.

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    File URL: http://repec.rwi-essen.de/files/REP_09_114.pdf
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    Bibliographic Info

    Paper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0114.

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    Length: 21 pages
    Date of creation: Jun 2009
    Date of revision:
    Handle: RePEc:rwi:repape:0114

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    Related research

    Keywords: Off-label use; patent protection; exclusivity; liability;

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    1. Steven Shavell, 1984. "A Model of the Optimal Use of Liability and Safety Regulation," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 271-280, Summer.
    2. Schmitz, Patrick W., 2000. "On the Joint Use of Liability and Safety Regulation," MPRA Paper 12536, University Library of Munich, Germany.
    3. Judith K. Hellerstein, 1998. "The Importance of the Physician in the Generic Versus Trade-Name Prescription Decision," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 108-136, Spring.
    4. Lundin, Douglas, 2000. "Moral hazard in physician prescription behavior," Journal of Health Economics, Elsevier, vol. 19(5), pages 639-662, September.
    5. Patricia M. Danzon, 1991. "Liability for Medical Malpractice," Journal of Economic Perspectives, American Economic Association, vol. 5(3), pages 51-69, Summer.
    6. Patricia Danzon, 1997. "Price Discrimination for Pharmaceuticals: Welfare Effects in the US and the EU," International Journal of the Economics of Business, Taylor and Francis Journals, vol. 4(3), pages 301-322.
    7. Kolstad, Charles D & Ulen, Thomas S & Johnson, Gary V, 1990. "Ex Post Liability for Harm vs. Ex Ante Safety Regulation: Substitutes or Complements?," American Economic Review, American Economic Association, vol. 80(4), pages 888-901, September.
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