May 08, 2012
Washington Post readers must be wondering after reading an article on a settlement by Abbott labs in a case brought by the Justice Department over promoting its drugs for off-label uses, in which Abbott agreed to pay $1.6 billion. The issue is that the Food and Drug Administration determines the acceptable uses for a drug. While doctors are allowed to prescribe drugs for other uses, the manufacturers are not allowed to promote their own drugs for “off-label” uses.
The Justice Department apparently had compelling evidence that Abbott had promoted off-label uses of its drug Depakote, a drug that was being improperly promoted as a sedative for elderly patients in nursing homes, according to the article. Such off-label promotions are a common, even if illegal, practice as the article notes.
The reason that drug companies violate the law and promote their drugs for unapproved uses is the huge patent rents that they are able to earn as a result of the patent monopolies granted by the government. Generic drug companies do not engage in the same sort of practices because they don’t have the incentive.
It would have been worth mentioning patent monopolies since they are central to the story. This sort of abuse is one reason that people are interested in promoting more efficient alternatives to patents for financing drug development.
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