It has been roughly a decade since Congress established a different evidentiary standard for the provision of “health care economic information” (HCEI) than the standard applicable to other promotional claims for prescription drug products. However, there remains uncertainty about the quantity and quality of support needed for HCEI-related claims. The confusion may be attributable to the absence of Food and Drug Administration (FDA) regulations or guidance on HCEI.1 Another likely contributing factor is that the FDA has never applied the HCEI statutory standard in a regulatory letter.

This Update reviews the origins of the HCEI statute, describes relevant FDA enforcement, and offers guidance for companies that wish to disseminate HCEI today.


Under the Food, Drug, and Cosmetic Act (FDCA), a drug is “misbranded” if its labeling or advertising contains claims that are not supported by “substantial evidence.”2 “Substantial evidence” generally means support from at least two adequate and well-controlled clinical studies.3

Until the Food and Drug Administration Modernization Act (FDAMA) was enacted in 1997, the FDA took the position that “cost-effectiveness claims are claims,” and that there was “no distinction in the law or regulations as to the type of claim made about a product.”4 Accordingly, cost-effectiveness claims were subject to the substantial evidence standard, and the FDA expressed concern about proposals to “lower[ ] the accepted scientific standards required for substantiation of claims related to cost-effectiveness

Nevertheless, that is essentially what Congress did in 1997. Section 114 of FDAMA provides that:

Health care economic information provided to a formulary committee, or other similar entity, in the course of [its] carrying out its responsibilities for the selection of drugs for managed care or other similar organizations, shall not be considered to be false or misleading . . . if the health care economic information directly relates to an indication approved . . . and is based on competent and reliable scientific evidence. 6

The “competent and reliable” standard is used by the Federal Trade Commission (FTC) to determine whether advertising claims in other contexts, such as food, dietary supplement, and over-the-counter drug products (and non-FDA-regulated products like tires and air conditioners), are false or misleading.7 The FTC standard is widely recognized as more flexible and “allowing a broader range of claims” than the substantial evidence standard.8 It requires that a claim be supported by “tests, analyses, research, studies or other evidence based on the expertise of professionals in the relevant area, that have been conducted and evaluated in an objective manner by persons qualified to do so, using procedures generally accepted in the profession to yield accurate and reliable results.” 9


However, section 114 establishes three important limitations on when the competent and reliable standard applies. If any of the three criteria is not met, the information or claim will be subject to the substantial evidence standard. 

  • Definition of HCEI: The information must be HCEI, defined as “any analysis that identifies, measures, or compares the economic consequences, including the costs of the represented health outcomes, of the use of a drug to the use of another drug, to another health care intervention, or to no intervention.” This is generally understood to mean that HCEI does not include stand-alone claims about the safety and effectiveness of a drug or drugs. Rather, HCEI (also known as “pharmacoeconomic information”) must tie clinical outcomes to economic measures or consequences. 
  • Directly Relates” to an Approved Indication: HCEI must be directly related to a drug’s approved indications. For example, the manufacturer of a drug approved to prevent bone fractures due to osteoporosis could discuss the economic consequence of fractures, including the “secondary” costs (e.g., loss of productivity, cost of rehabilitation services, etc.). However, the following claims are not directly related to the drug’s approved indication: (1) Economic claims based on preventing rheumatoid arthritis progression for a drug approved only to treat symptoms of the disease; and (2) Resource savings resulting from insulin therapy approved to control blood sugar that accounts for cost savings associated with prevention of eye and kidney diseases.
  • Information Provided to a Formulary Committee or Other Similar Entity: The audience for HCEI must be a formulary committee or other similar entity carrying out its responsibilities for the selection of drugs for managed care or other similar organizations. Congress reasoned that the limitation was necessary to “ensure that the information is presented only to parties who have established procedures and skills to interpret the methods and limitations of economic studies.”11 Congress specifically noted that the audience should not include “medical practitioners who are making individual patient prescribing decisions.



The FDA has never explicitly invoked the “competent and reliable evidence” standard in a regulatory letter regarding HCEI. Instead, the agency has articulated an “adequate evidence” standard. For example: 

  • Untitled Letter to Boehringer Ingelheim Pharmaceuticals (Apr. 1, 1998). The FDA objected to promotional claims that Flomax (tamsulosin) reduced the overall cost of care in treating patients with benign prostatic hyperplasia (BPH) by virtually eliminating dose titration, “which saves time and effort for the physician and reduces the overall cost of care.” The agency also cited Boehringer’s claim that Flomax “like other alpha blockers, may delay or obviate the need for expensive inpatient surgery.” The FDA concluded that these claims “suggest, without adequate evidence, that Flomax reduces the overall cost of care in treatment of patients with BPH” and are therefore misleading. 
  • Untitled Letter to Glaxo Wellcome (Mar. 13, 2000). The FDA objected to claims in a formulary kit suggesting that Relenza (zanamivir) positively impacts medical costs and productivity loss while reducing hospitalizations, “when such has not been demonstrated by adequate evidence.” Glaxo had presented data on the costs associated with influenza in conjunction with the clinical claim that Relenza reduced the duration of flu symptoms by one day in a letter to formulary committee members. The agency stated that, “[w]hile your referenced studies evaluate the costs of influenza to society, they do not demonstrate that the . . . reduction of symptoms with Relenza has an impact on costs.” The FDA also found statements concerning the prevalence of disease and resulting hospitalizations misleading, “because this presentation suggests that Relenza has been shown to impact hospitalizations and death from influenza.”

These letters are not especially illuminating with respect to what constitutes “adequate evidence,” but they show that the FDA will carefully evaluate each HCEI claim, including the validity of the inputs, assumptions, study design, and methodology.

Comparative Claims

The FDA also closely scrutinizes HCEI-related comparative claims. For example, the agency objected to promotional statements and materials that compared the treatment costs associated with Diprivan (propofol) and a generic version of the product.13 AstraZeneca had essentially claimed that, although the acquisition cost of the generic product was lower, the overall cost of treatment with the generic was higher because of adverse events associated with one of the inactive ingredients in the product. The FDA found the analysis misleading because it was based on “erroneous” assumptions and information. For example, the agency determined that fewer than 0.05 percent of patients were likely to have an adverse reaction to the generic drug, rather than the 0.18 percent estimate used in AstraZeneca’s analysis.


Each component of the FDAMA 114 standard presents complex questions of legal and factual analysis. With regard to the definition of HCEI, for example, it is clear that HCEI should focus on the economic impact of a drug, not its clinical profile. However, the economic and clinical outcomes associated with a drug are often closely linked.

FDA’s treatment of simple cost comparative claims, such as “Drug A costs less than Drug B,” is illustrative.14 Before FDAMA was enacted, the agency explicitly recognized that companies could present basic comparative cost information (e.g., drug acquisition costs), provided the company disclosed the source of the information and made clear that the compared products did not necessarily provide comparable clinical benefits.15 However, since that time, the FDA generally has taken the position that a naked cost comparison (“Drug A is less expensive than Drug B”) necessarily implies that Drugs A and B have comparable clinical benefits. Because comparative clinical benefit must be supported by substantial evidence, this view arguably eviscerates section 114.

For example: 

  • Untitled Letter to Novartis Pharmaceuticals Corporation (Jan. 21, 1999). The FDA objected to the claim that Lescol (fluvastatin sodium) cost less than other cholesterollowering therapies in part because the company had not demonstrated that Lescol was “comparable in effectiveness to these other agents.” 
  • Warning Letter to Watson Pharmaceuticals, Inc. (Dec. 22, 1998). The FDA cited the claim that Condylox (podofilox) was the ‘least expensive treatment option available’ because, “in the absence of substantial evidence that demonstrate that [the products’] effects are comparable,” the claim was misleading.

The FDA has continued to object to price comparisons on the grounds that they imply unsubstantiated comparability of clinical benefit. For example, the Untitled Letter to Janssen Pharmaceutica (Mar. 30, 2000) describes how price comparisons are misleading because they imply that Duragesic “is equally safe, effective, and interchangeable with Oxycontin for the doses compared”; the Untitled Letter to Braintree Laboratories (Mar. 29, 2001) discusses how the chart comparing daily, weekly, and annual therapy costs is misleading “because it implies that efficacy and/or outcomes of the different therapies are the same without supporting evidence”; and the Untitled Letter to GlaxoSmithKline (June 19, 2003) details how the claim that Flonase has lower copayment than competitors misleadingly suggests that Flonase “is therapeutically equivalent to, or interchangeable with, the other oral antihistamines”.

Section 114 also purports to limit application of the “competent and reliable” standard to HCEI presented to a formulary committee “or other similar entity.” However, it appears unlikely that the FDA would be able to enforce this audience-based distinction in the face of a First Amendment challenge. Recent court decisions have emphasized that the FDA may not suppress scientifically credible information merely because it is complicated or has the potential to mislead. Thus, the agency would need to demonstrate that HCEI would necessarily mislead physicians or other audiences.16 It is possible that the FDA also has found the distinction unconvincing, as the agency’s regulatory letters have not, to date, applied a different legal standard to HCEI based on the intended audience.


To date, the FDA has studiously avoided any application of the “competent and reliable” standard to HCEI claims. Instead, the agency has used a vague “adequate evidence” standard, perhaps in an effort to move “competent and reliable” closer to “adequate and well-controlled” or “substantial evidence” – standards with which the FDA is familiar and expert at applying. This avoidance, however, is contrary to Congressional mandate and resists growing interest in HCEI.