When the Food and Drug Administration approves a new drug for marketing, it authorizes the use of a label that prescribes the appropriate uses for the drug. In order to achieve FDA approval, the drug manufacturer must demonstrate the safety and efficacy of the drug in three levels of patient testing.

It’s illegal for a drug manufacturer to promote the use of one of its FDA approved drugs for so-called off-label or unapproved uses. Earlier this month, Eli Lilly & Co. agreed to plead guilty to promoting the off-label use of its anti-psychotic drug Zyprexa. Lilly also agreed to pay $1.4 billion (with a b) in fines and damages.

Yesterday Pfizer announced its acquisition of fellow drug maker Wyeth. Pfizer also announced a big drop in earnings. It turns out that a major cause of the drop is a proposed $2.3 billion (again with a b) settlement of the federal government’s charges that Pfizer promoted off label use of the painkiller Bextra and other Pfizer drugs (as reported at philly.com). Wow.

However, it’s lawful for doctors to prescribe FDA approved drugs for off-label uses. Whether the patient’s health plan will cover the off-label use is another question. Medicare Part B covers cancer drugs. Business Week reports that

Although it is not the case with other drugs, Medicare must reimburse doctors or patients for virtually all cancer drug uses, even those not yet approved by the Food & Drug Administration. And it is not permitted to favor the lowest-cost treatment. As a result, says author Dr. Peter Bach of Memorial Sloan-Kettering Cancer Center in New York, “the prices of cancer drugs appear to be rising faster than the health benefits associated with them.”

[Dr.] Bach recommends that Congress rectify the situation by establishing a center for comparative effectiveness—a concept embraced by President Obama’s Administration—that would determine when a cancer drug’s use is reasonable and necessary, based on clinical research. However, Bach acknowledges that patients may not be keen on this solution, as an authority other than their oncologist would end up restricting their access to some treatments. “This is going to be tough going,” he says. “But that is maybe one of the trade-offs we need to make to bring prices under control.”

A law creating a regulatory pathway for FDA approval of follow-on biologic drugs (or biogenerics) also would help. AIS reports that “the follow-on biologics debate will likely see renewed action with Waxman overseeing the House commerce committee, some say.” It should.