What Is a Drug Label?

A drug label refers to all the printed information included with any dietary supplement, over-the-counter medicine, or prescription drug. They're strictly regulated by the Food and Drug Administration and provide plenty of useful information savvy healthcare investors use to evaluate a company's products.

When it comes to investing in drugmakers, you can learn more about their products from the "full prescribing information" portion of their prescription-drug label than from any other single source, including:

  1. Generic name.
  2. Year of first FDA approval.
  3. Severe "black box" warnings.
  4. List of approved indications.
  5. Dosage details.
  6. Contraindications.
  7. Less severe warnings.
  8. Most frequent adverse reactions (i.e., side effects).
  9. Drug interactions.

These nine items are on the first page alone. There's plenty more in the pages beyond, but let's start with the insight provided at the top.

The generic name gives you clues to what kind of drug it is. For example, almost anything ending in "mab" is a "monoclonal antibody," which lets you know it's a complexbiologic drug and less exposed to post-exclusivity competition than small-molecule drugs.

Searching for the generic name(s) can also inform you if it's a new entity or a reworked version of an older drug. For example, a quick check ofRaptor Pharmaceuticals'Procysbi would show you that it's a decades-old drug, cysteamine bitartrate, in a delayed-release capsule. Knowing a company is heavily dependent on a less-than-remarkable innovation might drive you take a closer look at the challenges it faces.

The FDA puts "black box" warnings only on drugs that have special problems that could lead to serious injury or death. Although never an advantage, for some advanced-stage cancer therapies such warnings aren't going to severely limit sales. For drugs with available options that don't carry such warnings, such as MannKind's inhalable insulin, Afrezza, for treatment of diabetes, a black box can make make marketing the drug extremely difficult.

Labels are also especially useful for gauging the impact a recently approved competitor's drug might make. For example, a quick comparison of drug labels from Harvoni, by Gilead Sciences,and its would-be competitor for hepatitis C Virus patients, Viekira Pak from AbbVie, would have provided hints that it had little chance of displacing Harvoni's dominance in the space.

Comparing dosage details would have shown you that poorly tolerated ribavirin is required for more patients taking Viekira Pak than for those taking Harvoni. The two labels' "warnings and precautions" and "adverse reactions" sections also spoke volumes about Viekira Pak's commercial potential, or lack thereof.

Beyond the first page, you can find more details about side effects in the "adverse reactions" section, even data from the "clinical studies" that led to the drug's approval.

This article is part of The Motley Fool's Knowledge Center, which was created based on the collected wisdom of a fantastic community of investors. We'd love to hear your questions, thoughts, and opinions on the Knowledge Center in general or this page in particular. Your input will help us help the world invest, better! Email us at knowledgecenter@fool.com. Thanks -- and Fool on!

The article What Is a Drug Label? originally appeared on Fool.com.

The Motley Fool owns shares of and recommends Gilead Sciences. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.

Copyright 1995 - 2016 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.