In 2007, Congress granted the Food and Drug Administration (FDA) new powers to order pharmaceutical companies to conduct drug safety studies and clinical trials in the postmarketing period after drugs are approved The methodologies include observational studies that examine patients' insurance claims data and clinical records to infer whether drugs are safe in actual clinical practice. Such studies offer a valuable tool for improving drug safety, but they raise ethical and privacy concerns because they would entail widespread use of patients' health information in commercial research by drug manufacturers. This is the first article to explore the ethics of these section 505(0)(3) observational studies, so named after the section of the Food, Drug, and Cosmetic Act that authorizes them. Data access problems threaten to make the FDA's section 505(0)(3) study requirements unenforceable. Under existing federal privacy regulations, it appears highly unlikely that pharmaceutical companies will have reliable access to crucial data resources, such as insurance claims data and healthcare records, to use in these studies. State privacy laws present another potential barrier to data access. If pharmaceutical companies do manage to gain access to the needed data, this will raise serious privacy concerns because section 505(0)(3) observational studies do not appear to be covered by any of the major federal regulations that afford ethical and privacy protections to persons whose data are used in research. If the FDA's program of section 505(o)(3) observational studies fails because of the above problems, this failure will have a number of bad consequences: the public will be exposed to avoidable drug safety risks; taxpayers may be forced to bear the costs of having the FDA conduct drug safety investigations that would have been funded by drug manufacturers if data had been available; and, perhaps most troubling, the FDA may be forced to order postmarketing clinical trials to answer questions that could have been answered using observational studies. Problems with access to data for section 505(0)(3) studies thus could directly imperil human research subjects by forcing a needless over-reliance on risky postmarketing drug safety trials. This Article concludes by describing a promising new legal pathway for resolving these problems. Congress has provided the FDA a new set of powers that if skillfully exercised will allow the agency: (1) to facilitate pharmaceutical companies' appropriate access to data for use in section 505(0)(3) observational studies, (2) to impose strict ethical and privacy protections for persons whose data are used in these studies, and (3) to mobilize private-sector funding to generate much-needed evidence of the safety of FDA-approved drugs.