Article
Optimal Regulation of Off-label Drug Use
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Published: | September 2, 2009 |
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Recent EU and US regulations offer an extension of patent duration if manufacturers invest in pediatric clinical tests in order to reduce the extent of off-label drug use. This paper shows that, instead, a reinforcement of physician liability for off-label use is the preferred instrument to achieve dynamic efficiency. Since patent prolongation has no effect on physicians’ prescription behavior, it may lead to biased investment decisions. By contrast, the liability threat reduces the demand for off-label use exactly where it is required, giving manufacturer an appropriate incentive to invest in an extended approval.