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

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  • Felder, Stefan
  • Olbrich, Anja

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.

Suggested Citation

  • Felder, Stefan & Olbrich, Anja, 2009. "Dealing with Excessive Off-label Drug Use: Liability vs. Patent Prolongation," Ruhr Economic Papers 114, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    • Handle: RePEc:zbw:rwirep:114
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    References listed on IDEAS

    as
    1. Danzon, Patricia M., 2000. "Liability for medical malpractice," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 26, pages 1339-1404, Elsevier.
    2. 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.
    3. Schmitz, Patrick W., 2000. "On the joint use of liability and safety regulation," International Review of Law and Economics, Elsevier, vol. 20(3), pages 371-382, September.
    4. Patricia Danzon, 1997. "Price Discrimination for Pharmaceuticals: Welfare Effects in the US and the EU," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 4(3), pages 301-322.
    5. 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.
    6. 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.
    7. Lundin, Douglas, 2000. "Moral hazard in physician prescription behavior," Journal of Health Economics, Elsevier, vol. 19(5), pages 639-662, September.
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    More about this item

    Keywords

    Off-label use; patent protection; exclusivity; liability;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics

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