When the Food and Drug Administration approves a drug, it's given a label, although there's no sticky stuff on the back and it's not attached to the bottle. Drug labels are multipage documents that list everything from the chemical description of the drug to side effects to the results from clinical trials.
The first section, called Indications and Usage, describes what the drug is approved to treat, but doctors are allowed to prescribe FDA-approved drugs for any indication they want. These so-called off-label prescriptions can be very important to companies.
Cancer drugs, for instance, are often initially approved for late-stage patients before going after a first-line indication. After the data for the first-line indication has been released but before the FDA approves the expanded indication, doctors often prescribe the drug for new patients. Medivation (NASDAQ:MDVN) and Astellas are currently in that situation with their prostate cancer drug Xtandi. The drug is approved only for patients who have failed chemotherapy, but they've shown that the drug also works well in patients who have yet to receive chemotherapy.
Other drugs get used, even though there's little evidence that they help patients. GlaxoSmithKline's (NYSE:GSK) fish oil Lovaza, for instance, is often used for patients with moderately high triglyceride levels even though it's approved only for patients with extremely high levels. There's no proof of a clinical benefit for drugs that lower patients' triglyceride levels if they're not extremely high, although Amarin (NASDAQ:AMRN) and AstraZeneca (NYSE:AZN) are testing their respective fish oils in patients with moderately high triglyceride levels. Interestingly, Amarin's Vascepa hasn't been able to pick up much of the off-label sales that GlaxoSmithKline has, perhaps suggesting that doctors are becoming more tentative about prescribing the drugs off-label. AstraZeneca's Epanova was approved only last month, so we'll have to wait and see if sales are also subdued until more clinical data is available.
Watch the following video for more info on off-label sales from senior biotech specialist Brian Orelli and health-care analyst David Williamson, including how off-label marketing can cost companies billions in fines.
Brian Orelli and The Motley Fool have no position in any of the stocks mentioned. David Williamson owns shares of Amarin. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.