What Does It Mean for a Drug Label to Have a Black Box?

By Markets Fool.com

The Food and Drug Administration gives "black box" warnings to prescription drugs with side effects that can lead to serious injury or death. Officially termed a "boxed warning" by the agency, they're displayed in the upper left of the full prescribing information section of the drug's label.

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Drugs with such a label are banned from what the FDA considers "reminder ads" -- the type that display the name of the drug but don't include a list of side effects. Advertising limitations are just one effect a black-box warning can have on a drug's commercial potential.

For some indications, black-box warnings can severely limit a new drug's chances of a successful commercial launch. For example,MannKind's Afrezza began with a black-box warning that required physicians toperform a detailed medical history, physical examination,and lung-strength test before prescribing the inhalable insulin product. With plenty of available options for diabetics that don't require jumping through these hoops, Afrezza's initial launch was a flop.

Black-box warnings added after a drug gains popularity, however, aren't always detrimental to sales growth. Humira fromAbbVie is one of the world's most popular anti-inflammatory drugs, with annual sales of $14.0 billion in 2015, a 12% increase over 2014. It continued its growth trajectory despite the addition of a black-box warning in 2009 that cited an increased risk for certain forms of cancer.The FDA applied similar warnings to other drugs of the same class as Humira, which may have mitigated its detrimental effect.

It's also important to realize that a warning doesn't necessarily need to be of the "black box" variety to slow a drug's sales growth. For example, Biogen's multiple sclerosis pill, Tecfidera, was one of the most successful drug launches of 2013 because of its clean safety profile and impressive efficacy. Just two years following its launch, the drug was on pace to record annual sales of about $3.5 billion and was expected to climb much higher.

A few cases of a deadly brain infection associated with its use, more common among stronger multiple sclerosis drugs, slowed its sales growth significantly. In February 2016, the FDA added a non-boxed warning that requires physicians to monitor for signs of the deadly infection. The drug finished the three months ended March 2016 with U.S. sales of $744.4 million, a bit lower that the $785.1 million in U.S. sales recorded during the previous three-month period.

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When it comes to warnings of the black-box or less severe variety, you need to gauge their potential impact on a case-by-case basis. In general, warnings that increase responsibilities of already overburdened physicians generally lead to lower sales.

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