Production was suspended Tuesday after she failed to turn up for filming, and Deadline reports that Midler had to pull out on doctors' orders after suffering a herniated disc.
David Mamet told the crew that HBO and the insurance company were looking at recasting the part, which has since been confirmed by the cable network.
Mamet wrote the film, which is being exec-produced by 'Rain Man' director Barry Levinson.
Midler was slated to play Linda Kenney Baden, a defense attorney who represented disgraced music producer Phil Spector during his first trial for murdering Lana Clarkson. 'Arrested Development' star Jeffrey Tambor plays another of Spector's attoneys, Bruce Cutler.
However, losing Midler may not be the only problem right now as there are reports that the murder victim's friends are threatening to take action against the production. According to 'TheWrap,' some of Clarkson's friends are worried about how Mamet will portray the late actress, and are threatening to protest the movie and organize a campaign to keep it from winning any Emmys.
The writer recently revealed that he thinks Spector may have been wrongly convicted in 2008. In a 'Financial Times' interview given while scouting filming locations in New York City, Mamet said "I don't think he's guilty. I definitely think there is reasonable doubt."
He added, "They should never have sent him away. Whether he did it or not, we'll never know but if he'd just been a regular citizen, they never would have indicted him."
This has led some of Clarkson's friends to allege pro-Spector, anti-Clarkson bias. Edward Lozzi, a public relations executive who told 'TheWrap' he used to date Clarkson, said Mamet's comments mean "he is going to portray Lana Clarkson as being responsible for her own death."
Lozzi said that if the film does depict Clarkson in the same negative light as Spector's attorneys did during his trial, then "we intend to put a campaign on with the Academy members to make sure there are no Emmy nominations for a motion picture that's a lie and hurts people who are alive today."
In a statement, HBO said that the network "has a long tradition of capturing real life events on film. We think our track record of dealing with the complex adaptation of history speaks for itself and we hope people will reserve judgment until they have seen the film."