United States: The Pharmacy Compounding Quality Act Of 2013: Something Old, Something New, Something Borrowed And Something Missing

Last Updated: December 9 2013
Article by Michael A. Walsh

Since 2002, the law governing pharmacy compounding (21 USC 353a) has suffered from a crippling constitutional defect. After a significant human tragedy which drew the attention of Congress, the Senate sent the Drug Quality and Security Act to the President for signature on November 18, 2013. Under Title I, the Compounding Quality Act (the Act) amends the Food Drug and Cosmetic Act ("FDCA") by inserting a new section, 21 USC 353b. According to Senator Michael Bennet, "[t]he legislation strikes unconstitutional provisions in current law, resolving the patchwork of current federal regulation and applying a uniform standard nationwide." ( See here).

The "unconstitutional provisions" relates to the "advertising and promotion" provisions that were declared unconstitutional in Thompson v. Western States, 535 US 357 (2002). The Supreme Court created further confusion when it failed to rule on whether the unconstitutional provision was severable from the rest of the law. In Thompson v. Western States, the Ninth Circuit struck the entire Pharmacy Compounding provision while the Fifth Circuit took a different view in Medical Center Pharmacy v. Mukasey, 536 F.3d 383 (5th Cir. 2008), ruling the advertising prohibitions were severable.

Why Now?

Pharmacy compounding of medications predates the FDCA and is as old as the practice of medicine itself. In 2012, Massachusetts based New England Compounding Center ("NECC") found itself at the center of a meningitis outbreak linked to contaminated sterile injections that were ultimately linked to multiple deaths. Even though the federal law had been in a state of disarray for more than a decade, the NECC disaster could have been avoided by simply investigating the obvious warning signals for which the State of Massachusetts and the FDA had ample authority and power.

On November 15, 2012, after hearing emotional testimony from the family of a patient who had been exposed to a NECC product, Congress questioned Food and Drug Administration ("FDA") Commissioner Hamburg for failing to explain the FDA's authority to regulate and oversee the practice of compounding pharmacy generally and for failing to follow up on its 2002 warnings to NECC. (See here). On July 31, 2013, the Government Accountability Office recommended that Congress close the "gap" in FDA oversight caused by "compounding in large drugs quantities - in anticipation of individual prescriptions or without prescriptions where the drugs are sold across state lines rendering the practice drug manufacturing that should be overseen by FDA." (See GAO report here)

Until now, the medical industry has largely considered pharmacy compounding to be an adjunct to the practice of medicine, not pharmaceutical manufacturing. And since the practice did not fit neatly within the FDA's statutory or regulatory purview, regulation was reserved for the states. Long before the NECC debacle, the proliferation of large-scale compounding facilities increased, and now, the FDA has a framework to require larger compounding pharmacies to register and list what they are compounding, which it long maintained was in need of FDA oversight.

Something Old:

Congress has not rewritten the entire law or supplanted state oversight of pharmacy practice; instead, it has revived the former "pharmacy compounding" provisions in section 353a by deleting the prohibition against soliciting prescriptions in subsection (a) and deleting the "advertising and promotion" provision in subsection (c) in their entirety. As for large scale traditional compounding pharmacies the Compounding Quality Act returns the state of the law to 2002 by imposing the limitations for "inordinate amounts" and "5%" under 353a(b)(3)(B)(i-ii).

Something New – Outsourcing Facilities:

In earlier versions of the Act, Congress echoed the FDA's concerns with the notion of large-scale Compound Manufacturing, which is when pharmacies compound drugs in large quantities in anticipation of individual prescriptions or without prescriptions. The final version of the Act abandons the notion of "Compound Manufacturing" in favor of regulating a discrete class of "outsourcing facilities" defined as:

"The term 'outsourcing facility' means a facility at one geographic location or address that—(i) is engaged in the compounding of sterile drugs; (ii) has elected to register as an outsourcing facility; and (iii) complies with all of the requirements of this section. (B) An outsourcing facility is not required to be a licensed pharmacy. (C) An outsourcing facility may or may not obtain prescriptions for identified individual patients."

The election to register is a Hobson's choice since not "electing" to be an outsourcing facility subjects the facility producing sterile preparations to the rules on misbranding and new drugs. An outsourcing facility must register annually, pay a $15,000 registration fee upon making the election (unless if they have under $1M in sales, in which case they pay $5,000) and report annually to the FDA in June and December, identifying the drugs compounded. The FDA will conduct what are termed "risk-based" inspections under 21 USC 374. These inspections are the same as those for traditional drug manufacturers. The registration fee or "establishment fee" covers the cost of an inspection but the fee for each successive reinspection is $15,000.

The new law also subjects outsourcing facilities to the same records retention and adverse event reporting requirements under Subpart D of the regulations (21 CFR 310.305) that apply to traditional drug manufacturers. The failure to comply with the reporting requirements is considered a "prohibited act" subject to civil and criminal penalties (21 USC 331).

Something Borrowed:

The Act amends the drug misbranding provisions under 21 USC 353 to include compounded drugs. Borrowing from the rules governing approved drugs, a compounded drug is misbranded under the FDCA: "if the advertising or promotion of a compounded drug is false or misleading in any particular."

The Act now paves the way for increased use of the FDA's 2002 Compounding Policy Guide (CPG) for oversight of the promotion of pharmacy compounding products for both sterile and other compounded products. CPG Sec. 140.100 addresses the circumstances under which the FDA will seize books and other materials that constitute misleading labeling and states:

Printed material that promotes the use of a product is labeling within the meaning of the Act. Notwithstanding certain free speech protections, labeling including books can be regulated if it is false or misleading.

Something Missing:

The ongoing controversy over the pharmacy compounding provisions stemmed from the Supreme Court ruling in Western States. Congress purports to cure the First Amendment constitutional infirmity by simply erasing it. The problem with this approach is that it provides the FDA no road-map on how to regulate communications or product labeling. In enforcing the FDCA, the FDA assumes that a fundamental distinction exists under the First Amendment between truthful information and information the government declares "false," which is not entitled to protection. While the terms "false" and "misleading" are generally defined in the regulations (21 CFR 202.1), the FDA subscribes to the view of Justice Roberts in Jacobellis v. Ohio, 378 U.S. 184 (1964) that "it knows it when it sees it." Zauderer v. Office of Disciplinary Counsel 471 U.S. 626, 646 (1985) is often cited by the government to support the notion that "false" speech is not afforded First Amendment protection. However, in U.S. v. Alvarez, 132 S. Ct. 2537 (2012), the Supreme Court rejected this notion stating that it "has never endorsed the categorical rule the Government advances: that false statements receive no First Amendment protection." The notion that "false" speech is not subject to First Amendment protection has only recently been rejected by the Supreme Court.

Since the advent of the FDCA in 1906, the government could rely on courts generally deferring to administrative determinations and, where the government declared a statement, label or advertisement to be false, it could proceed to enforcement without concern for Due Process or the First Amendment. But deference to agency determinations is also being reconsidered by the Supreme Court. For example, in Christopher v. Smithkline Beecham Corp., the Supreme Court refused to defer to an agency's interpretation of ambiguous regulations, stating:

It is one thing to expect regulated parties to conform their conduct to an agency's interpretations once the agency announces them; it is quite another to require regulated parties to divine the agency's interpretations in advance or else be held liable when the agency announces its interpretations for the first time in an enforcement proceeding and demands deference.

In FCC v. Fox Television Stations, Inc., the Supreme Court considered the issue of deference to regulatory agencies in the context of the First Amendment holding that the regulation failed under the Due Process Clause, because "regulated parties should know what is required of them so they may act accordingly;" and "precision and guidance are necessary so that those enforcing the law do not act in an arbitrary and discriminatory way."

The Road Ahead:

With passage (and likely signing) of the Act, little doubt remains that the FDA will now have significant oversight over sterile compounding facilities. The Act also provides the FDA, state regulators, and consumers with increased transparency on the scope of "unapproved" compounded sterile preparations on the market. Congress has even directed the FDA to issue regulations (not guidance) governing pharmacy compounding, but set no deadline for publication of any proposed rules. How the FDA will rein in the burgeoning business of non-sterile compounding, must now await the rulemaking process. In the meantime, the FDA has broad and sweeping new powers to treat pharmacies as drug manufacturers, and the new fees under the Act have the pharmacies paying for it.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Michael A. Walsh
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