Off-label prescribing shows that less regulation means more clinical benefits

FDA performs worse on drugs for pain, psychiatry, and allergies, but off-label prescribing helps

The FDA performs worse on drugs for pain, psychiatry, and allergies,[1] but off-label prescribing helps patients in these areas especially

Off-label prescribing provides the majority of therapeutic uses of drugs

…once a drug has been permitted for a specified use, physicians may legally prescribe it for other uses called ‘off-label’ uses. …off-label prescribing provides a window onto a world with substantially less FDA regulation.

Off-label prescribing is regulated by the judgments of doctors, medical researchers, industry, the patient community, and patients. The off-label experience testifies to the fact that much knowledge about efficacy and safety of drugs is produced outside the FDA regulatory apparatus.

…from the 29 new drugs permitted onto the market in 1988 there were 143 substantial new uses that were developed over the subsequent five years. Importantly, 57% of the new uses were discovered by clinicians working in the field.

Drugdex and other compendia collect information about off-label indications and in effect certify thousands of drug uses quite independently of the FDA.

Off-label prescribing brings new therapies and tailored therapies

Viagra (sildenafil citrate) was initially intended to treat angina…

…when older men reported its unusual side-effect it became a blockbuster treatment for erectile dysfunction.

After being approved for that use, sildenafil citrate was also found to be useful in the treatment of pulmonary hypertension for which it was prescribed off-label. Since the market for pulmonary hypertension is considerably smaller than that for erectile dysfunction it is quite likely that had sildenafil citrate not already been permitted for erectile dysfunction it would not have been profitable to research and develop the drug for pulmonary hypertension.

This is the problem of drug loss – drugs that are never researched and developed because the permitting process is too expensive to justify the effort.

Off-label prescribing bypasses this process and brings new treatments to patients.

…when a drug reaches the end of its patent life, no firm ever has a strong incentive to undertake clinical trials despite the fact that off-label prescribing may be common.

What works well in some patients does not work well in others. Off-label prescribing increases a physician’s arsenal. A larger arsenal is useful when standard treatments fail, as they often do. When standard treatments fail it is not irrational to try treatments with less evidence of efficacy especially when the disease is life-threatening or the drug to be prescribed has a strong safety profile.

…off-label use is most common in the absence of strong scientific support in the treatment of pain, psychiatric problems and allergies. In each of these cases, standard treatments often fail, the disease in question may be difficult to diagnose even when symptoms are plain, patients are heterogeneous, and physicians and patients can with considerable safety run a series of personal drug trials to find the best match.

Off-label prescribing would help more if the FDA was less-controlling and if information was shared more-widely

The post-marketing surveillance system in the United States is weak. Analysis of data from Medicare as well as from large HMOs could be used to improve prescribing both on and off-label, especially if access to the data was widespread.

More generally, FDA currently works on a paternalistic model: one choice to rule them all. But another model, what I have called the Consumer Reports model, would meet the needs of diverse health-care consumers much better.

Consumer Reports does not try to replace consumer choice. Instead, by carefully evaluating and testing new products and providing this information to readers, Consumer Reports helps consumers to make better choices.[2]

Every drug available for prescription in the United States must have gone through at least phase I clinical trials. Phase I trials examine a drug for toxicity in healthy volunteers and establish that the drug meets a minimum level of safety.

Drugs used in FDA-approved ways have also been through phase II and phase III “efficacy” trials. Studies… consistently find few benefits and large costs.[3] …no such requirement exists for new uses of old drugs.

…the reform proposal… would resolve the inconsistency by dropping efficacy requirements, so that people would be freer to produce, sell, and market drugs, even for initial uses… Those with the best knowledge of the particular circumstances and with the strongest incentives to do right by the patient would then have expanded options of utilizing therapies that may be very beneficial.[4]

…a less paternalistic FDA would provide more information to patients and doctors, but it would also leave more choices in their hands because only patients and their doctors have the particular knowledge that allows each patient to be treated as an individual.

…innovation often arises from the bottom up rather than from the top down.[2]


  1. DiMasi, Joseph A., Christopher-Paul Milne, and Alex Tabarrok. AN FDA REPORT CARD: Wide Variance in Performance Found Among Agency’s Drug Review Divisions. Project FDA Report 7. Manhattan Institute, 2014.
  2. Tabarrok, Alex. “From off-label prescribing towards a new FDA.” Medical Hypotheses 72.1 (2009): 11-13.
  3. Tabarrok, Alexander T. “Assessing the FDA via the anomaly of off-label drug prescribing.” The Independent Review 5.1 (2000): 25-53.
  4. Klein, Daniel B., and Alexander Tabarrok. “Do Off‐Label Drug Practices Argue Against FDA Efficacy Requirements? A Critical Analysis of Physicians’ Argumentation for Initial Efficacy Requirements.” American Journal of Economics and Sociology 67.5 (2008): 743-775.

Preexisting conditions need to become business opportunities

Preexisting conditions consultation
[1]

Preexisting conditions can be insured and treated better by making changes that give people good incentives. Here are ten such changes:

Change Explanation
Create a national market for health insurance. More competition, especially among the special needs insurers, would be a huge benefit for the chronically ill. Being able to buy insurance across state lines would encourage that competition.
Encourage portable insurance. Most of the time, the problem of preexisting conditions arises precisely because health insurance isn’t portable.
Allow access to mandate-free insurance. …mandates raise premiums… and divert dollars away…
Give individual buyers the same tax break employees get. All insurance should get the same tax relief regardless of where it is obtained, and individuals should get the same tax relief, regardless of how they obtain it.
Encourage post-retirement health insurance. …give post-retirement health insurance the same tax encouragement as active-worker insurance and allow pre-retirement insurance to be portable.
Allow special needs health insurance. …allow plans to specialize in treating one or more chronic conditions. Plans could specialize, for example, in diabetic care, heart care, or cancer care, and they would be able to charge a market price (say, to employers, other insurers, and even risk pools)…
Allow providers to repackage and reprice their services under Medicare and Medicaid. …to create innovative solutions to the care of diabetes, asthma, cancer, heart disease, and other chronic health issues… …providers should be able to offer a different bundle of services and be paid in a different way so long as they reduce the government’s overall cost and provide a higher quality of care.
Allow health status insurance. …health status insurance would pay future premium increases people face if they have a change in health status and then try to switch to another health plan. You can think of this as a way of insuring against the emergence of preexisting conditions.
Allow self-insurance for changes in health status. …people need the ability to engage in contingency savings—a Health Savings Account for future, rather than current, medical costs.
Allow special Health Savings Accounts for the chronically ill. Cash and Counseling pilot programs in Medicaid are under way in more than half the states. Homebound, disabled patients manage their own budgets and hire and fire those who provide them with services. Satisfaction rates are in the mid-90 percentile (virtually unheard of in any health plan anywhere in the world).

[2, pp. 249-251.]

…markets enjoy their greatest advantage in complex settings that call for imaginative solutions that no government-driven system can deliver.[2, p. 610.]

…you have got to let business make money out of the process…[3]


  1. “China Health Insurance For Pre-Existing Conditions.” China-Health-Insurance.com. www.china-health-insurance.com/china-information/coverage/pre-existing-conditions/. Accessed 23 Jan. 2017.
  2. Goodman, John C. Priceless: Curing the Healthcare Crisis. Scribd ed., Independent Institute, 2012, pp. 249-251, 610.
  3. Higgs, Robert. Depression, war, and cold war: Studies in political economy. Oxford University Press, 2006, p. 30.

Ideal health insurance would be developed by people in business, not government

Ideal health insurance would pay the full cost where this reduces risk, and would pay less for less-proven options.Figure 11.2

Ideal health insurance

Imagine you could… create an insurance plan just for 1,000 people.

Terms of entry

Each person should pay a premium equal to the expected healthcare costs he or she adds to the 1,000‑person pool. …or others must make a charitable contribution on their behalf.

Terms of renewal

…a reasonable rule is to raise or lower everyone’s premium at renewal time, based on whether the whole group’s costs have been more or less than expected.

Third-party insurance vs. self-insurance

…we should encourage individuals to purchase directly most diagnostic tests, most forms of preventive medicine and most primary care.  It may make… sense for the pool to pay for vaccinations, …or to require that members obtain them…

Suppose… a member is diagnosed with cancer. …bad decisions early on could generate larger subsequent costs for the group. Such considerations may create a presumption in favor of paying for all treatment costs from the pool in cases where the entire treatment regime promises to be expensive.

Table 11.1. General Rules

Individual Choice Collective Choice
1. No risky medical event. 1. Risky medical event.
2. Price of third-party insurance is high. 2. Price of third-party insurance is low.
3. Exercise of choice creates no externalities [risks for others]. 3. Exercise of choice creates risks for others.

Implications for HSA design

The design pictured on the right side of Figure 11.2 [above] is preferable. Under this design, the plan pays first dollar for some treatments, while leaving the insured free to pay even higher amounts for other services.

Design of third-party payment

…why not fix the plan’s cost for an entire treatment regimen? If patients selected doctors who charge more, they paid the difference out of pocket.

Terms of exit

After an automobile accident, a claims adjuster inspects the damage, agrees on a price, and writes the car owner a check.

…members would commit to the pool for a period of, say, three, four, or five years. …leaving the pool would require the consent of the pool.

…if a healthy member left… plan A to join… plan B, B would compensate A… …if a sick member left A to join B, A would compensate B…

Ideal health insurance would allow insurers to specialize in the business of insurance

Ideal health insurance would allow… market developments by providing a mechanism for people to leave one insurance pool and join another (without extra cost) when their health condition changes.

Ideal health insurance would be improved by the free flow of information 

Under ideal health insurance… the insurer and the insured are on the same team, with a similar interest and objective: acquiring good value in a competitive market.[1]


  1. Goodman, John C. Priceless: Curing the Healthcare Crisis. Independent Institute, 2012. Chapter 11.