No need for more regulation: payors and their role in balancing the cost and safety considerations of off-label prescriptions.

I. INTRODUCTION In 2009, health care expenditures in the United States totaled $2.5 trillion and accounted for almost eighteen percent of the national Gross Domestic Product (GDP).1 Rising health care costs are an increasing concern in the national health care industry and in government policy reform. When estimates show that thirty percent of health care is unnecessary,2 improving quality and efficiency of health care could eliminate a significant amount of excessive spending. Prescription drugs contributed to ten percent of national health expenditures in 2009, comprising about $250 billion.3 And while the rate of growth for overall health care spending declined as a result of the recent recession, "the number of prescription drugs dispensed rebounded to prerecession rate of growth."4 Estimates show that off-label drug use comprises between twenty and sixty percent of U.S. prescriptions.5 This could be a troubling percentage considering that off -label use carries an increased risk of harm or ineffectiveness. Curbing the amount of drugs prescribed for non-Federal Drug Administration (FDA) approved uses (that contribute to unnecessary and harmful care) could substantially promote health care cost containment. However, the federal government is limited in its jurisdictional authority to control the use of drugs for unapproved purposes and regulates only the marketing of FDA approved drugs for off-label usage.6 Physicians still possess the ability to prescribe drugs for off-label usage in accordance with their standard of care, and the possibility for ineffective or harmful off-label usage persists (albeit lessened by standard of care requirements). Without the ability to regulate the practice of medicine, the federal government has limited methods to ensure the quality and necessity of offlabel drug use. However, another point of "regulation" of off-label drug usage exists that lessens the need for government control while promoting health care efficiency. Whether we like it or not, insurance providers are key components to the national health care structure. They have the ability to act as gatekeepers to the supply of prescriptions by expanding or restricting reimbursement for health care products and services. Given an insurance provider's natural affinity for controlling costs, its best interest is to deny reimbursement for unnecessary care, including off-label prescribing. In fact, many insurance plans only provide reimbursement for off-label prescriptions when there exists evidence of a drug's quality and efficacy.7 In the off-label drug use arena, the insurance payor has the substantial ability to curb costs and lessen unnecessary and harmful care, reducing the pressure on the already overburdened federal government. This note begins with an examination of current enforcement mechanisms in the off-label use arena, particularly the limitations of the FDA, and the need for oversight beyond the physician's standard of care. It then examines whether increased government regulation or enforcement by voluntary intermediaries is desirable, concluding that neither are practical options for addressing the problems of off-label prescribing. Next, the note explains how third-party payors evaluate reimbursement decisions for offlabel prescriptions and how such decisions can proxy safety and efficacy regulations. Finally, the note will demonstrate that despite the government's inability to directly regulate off-label prescribing at the distribution level, it still can reinforce public policy objectives by correcting for market failures that occur at the payor stage. II. THE PREVALENCE OF OFF-LABEL PRESCRIBING The Food, Drug, and Cosmetic Act (FDCA) is the federal statute that governs how pharmaceutical drugs acquire FDA approval.8 After manufacturers provide enough evidence that a new drug is both safe and effective as to a certain medical condition, the FDA approves the drug for only that specified and intended use. …