United States: Pharmacy Compliance Issues: The DQSA And More

Last Updated: February 18 2016
Article by Lee H. Rosebush


This chapter addresses recent compliance issues affecting pharmacies. With the enactment of a new federal law specific to pharmacy compounding, it is important for pharmacies to remain apprised of new requirements that may be applicable to them. This chapter also addresses several other pharmacy compliance issues and covers enforcement actions the US Food and Drug Administration (FDA) may take if pharmacies fail to comply with applicable statutes and regulations.

The FDA's New Focus on the Pharmacy Industry

Typically, the pharmaceutical practice is regulated by the states. This remains true for some aspects of pharmacy; however, with the enactment of the Drug Quality and Security Act of 2013 (DQSA),1 the FDA has increased its focus on particular areas of pharmacy, including compounding. Title I of the DQSA requires certain pharmacies that compound products that are not pursuant to a patient prescription to register as "outsourcing facilities." Outsourcing facilities must engage in certain FDA reporting and must follow current good manufacturing practices (cGMPs), while statelicensed pharmacies are required to follow US Pharmacopeia (USP) standards (i.e., USP 797) for the compounding of sterile products. The FDA has issued a number of draft guidance documents regarding what types of entities should register as outsourcing facilities, cGMPs applicable to outsourcing facilities, and standards applicable to outsourcing facilities that repackage human drugs and biologics. The FDA has also issued a draft memorandum of understanding for states that addresses state and FDA oversight responsibilities regarding those entities that remain state-licensed pharmacies (compounding only based on patient-specific prescriptions). In addition to implementing compounding regulations, Title II of the DQSA put forth supply chain security requirements, more commonly known as track-and-trace—specifically, pedigree and documentation standards for pharmacies, which will begin to take effect over the next couple of years. Track-and-trace requirements will help ensure that proper documentation is kept and transferred when one entity purchases a prescription drug product from another, such as a pharmacy purchase of a product from a wholesaler, or a wholesaler purchase from a manufacturer. It will also help identify "suspect" products in the market and ensure that proper quarantine, investigation, and reporting procedures are implemented and followed.

Safety concerns related to pharmacy compounding are the major driver for the DQSA's implementation. These concerns largely stem from the meningitis outbreak caused by an injectable drug compounded by New England Compounding Center in 2012. Approximately 17,000 vials of contaminated sterile injectable were shipped for administration to patients across the country. Based on Center for Disease Control data, the injections led to sixty-four deaths and infection in nearly 700 people. This tragedy shed new light on the oversight responsibilities of state pharmacy boards with respect to compounding pharmacies. It also raised a number of questions about the FDA's responsibility in oversight and its authority to oversee and enforce against state-licensed compounding pharmacies. The enactment and implementation of the DQSA is aimed at clarifying some of those responsibilities. In addition, the emergence of the gray market and drug shortages have recently increased the demand for pedigree requirements. The industries most affected by these issues are pharmacies, manufacturers, and wholesalers.

Specialty Pharmaceuticals Raise the FDA's Attention

We are experiencing a proliferation of specialty pharmaceuticals in the marketplace. These are drugs with high costs and few or no therapeutic alternatives. These drugs tend to treat diseases that, in the past, had no treatment or cure, including hepatitis C, cancer, human immunodeficiency virus (HIV), rheumatoid arthritis, and hemophilia.

Specialty pharmaceuticals have a certain impact on drug spending and patient access. Specialty pharmaceuticals have contributed to the overall increase in drug spending. In addition, the high cost of the drugs has limited patient access to certain medications. Access has been limited not only for patients responsible for their own drug costs, but also for patients who have drug coverage, as their payers have limited the use of particular drugs, or even excluded them from their formularies entirely.

This issue is interwoven with a variety of factors, including the FDA's focus on finding cures for otherwise incurable diseases, regulatory market exclusivity for certain products, and patent exclusivity, and the FDA's accelerated approval pathways for breakthrough therapies. Insurance plans, pharmacy benefit managers, pharmacies, and pharmaceutical manufacturers all must be aware of the issues surrounding specialty pharmaceuticals.

Compliance with Approved Risk Evaluation and Mitigation Strategies

Compliance with approved risk evaluation and mitigation strategies (REMS) requirements have created certain barriers for patient access and generic bioequivalence. REMS are requirements placed on manufacturers to ensure that the benefits of a particular drug or biologic outweigh the risk associated with that product. REMS were authorized by the Food and Drug Administration Amendments Act of 2007 (FDAAA).2 REMS are typically required with the approval of a new product, and are a strategy to manage known or potential serious risks related to a particular product. The requirements go beyond standard labeling requirements for drug and biological products. This allows patients to continue to access/use the product, while managing the safe use of the product. For example, if the drug poses a risk of serious infection, a REMS may require that specific patient education be conducted on the issue before a provider can prescribe the medication. While REMS are requirements placed on the manufacturer of a product, those safety requirements can have a downstream effect on pharmacies and providers, as demonstrated by the aforementioned example. This can take the form of required warnings on the product or that providers must convey to patients, as well as specific use instructions that must be followed to ensure safe use of the product. Because drugs vary, REMS for each drug also vary. While REMS can play an important role in patient safety, this role must be balanced with limitations placed on the practice of medicine and the ability to create generic or compounded medications.

The FDA's focus on clinical drug information will have an impact on safety risk profiles, drug approvals (comparative and therapeutic information), and product liability. Payers and providers will also be able to utilize similar drug information to compare drugs for formulary purposes.

FDA Inspections and Enforcement Actions

For pharmacy clients, especially those that fall, or will fall, within the category of "outsourcing facilities," the most pressing issues are FDA inspections and FDA enforcement actions such as Form 483s and warning letters. An FDA Form 483 is a document issued to a facility, such as a pharmacy or manufacturer in the drug context, after the FDA has inspected the facility. The Form 483 indicates any "observations" or deficiencies the FDA observed. Once a Form 483 is issued, the facility has a number of days to respond to the FDA with its corrective action or corrective action plan. If the facility does not demonstrate corrective action, or provide a sufficient reason why corrective action is not warranted, the facility risks receiving an FDA warning letter, in addition to other possible enforcement action. Warning letters are an enforcement tool the FDA uses to address issues with FDA-regulated products or entities. Typically, a warning letter is issued to an entity based on a perceived violation by the FDA. In certain cases, a warning letter may be issued because an entity has not taken the corrective action recommended by the FDA. Warning letters are commonly issued when a product's advertising indicates that its intended use is for one purpose (e.g., to cure a disease), but it is not approved by the FDA for such use. Form 483s and warning letters are made public after issuance by publication of the FDA website. Enforcement actions have a great impact on a pharmacy's business, but because DQSA enforcement is new, it is difficult to understand exactly what the FDA will focus on with respect to its enforcement and inspections; however, compounded and repackaged drugs are bound to be the most affected. The FDA has begun to inspect all entities registered as "outsourcing facilities" under the DQSA. The majority of those inspected have received Form 483s. In addition, a number of pharmacies have received warning letters from the FDA. Specifically, the FDA has focused on compounding practices that qualify a facility as an "outsourcing facility" instead of a "compounding pharmacy." These enforcement actions demonstrate the FDA's increased interest in the practice of pharmacy compounding, and should be a warning to attorneys and their clients regarding the areas associated with cGMPs that the FDA feels need improvement. Clients must ensure they comply with those requirements in the event of a future inspection.

Policies and Procedures

At the time of an FDA inspection, the facility should have all of its policies and procedures (SOP) in place for the processes that occur in that facility, whether it relates to food, drugs, devices, or cosmetics. The FDA will be interested in reviewing the facility's SOPs for two reasons: (1) to ensure the SOPs reflect FDA statutory and regulatory requirements for that specific type of entity, and (2) to ensure that what the inspectors observe during the inspection complies with the facility's current SOPs. SOPs should cover a number of areas, including but not limited to: personnel hygiene and gowning/garbing, adverse event reporting, recalls, and facility cleaning. There should also be an SOP on deviations and how deviations from an SOP should be documented and retained.

Attorneys can assist clients in understanding the new regulatory framework under the DQSA and help clients prepare for FDA inspections to prevent enforcement actions. Clients should understand that the DQSA has significant implications on business practices, especially for compounding pharmacies. It has brought aspects of the practice of pharmacy under the umbrella of federal regulation in a way that is new to the industry. Attorneys can help clients prepare for such regulation by explaining the requirements of the DQSA and what is necessary to comply. This will include preparation for inspections the FDA will likely conduct in the future.

FDA Warning Letters

The most common types of violations for food and drug law with respect to FDA warning letters are the claims products make. Food, drugs, devices, dietary supplements, and cosmetics are categorized based on their "intended use." In enforcing food and drug regulations, the FDA considers a product's labeling and advertising to determine its intended use. Thus, if the label of a product makes a drug claim, such as a "cure for the common cold," but is being sold as a dietary supplement or cosmetic, the FDA will likely issue a warning letter stating the product is an unapproved new drug. Investigators in a variety of divisions of the FDA investigate claims made on specific products. Dietary supplement and cosmetic companies are most vulnerable to such claim-based enforcement actions because they are limited in the types of claims they can make about a product with respect to its effect on the structure and function of the body.

When labeling products, clients should be aware that how the information is portrayed could categorize the products, from the FDA perspective, in a way not intended. Clients should be cautious when making any claim about what the product does or is intended to do. Promoting curative or treatment properties tends to indicate that a product is a drug, although the product may not be FDA approved as a drug product.


The DQSA and its implementation will drive increased enforcement and oversight over state-licensed pharmacies and outsourcing facilities. Aspects of the law are still being implemented, and a number of guidance documents are in the process of being finalized. We are also likely to see many more breakthrough specialty drugs enter the market in coming years, which will continue to affect drug spending, patient access, and market exclusivity (through new chemical entities exclusivity, new clinical investigations exclusivity, or orphan exclusivity). Finally, as track-and-trace is fully implemented, there should be a reduction in the amount of product loss and gray market availability.

Attorneys can anticipate and respond to the changes by educating themselves on the laws, regulations, and guidances, as well as the implementation timelines. FDA guidance documents are a useful resource and they give insight into how the FDA is thinking about certain issues. In addition, attorneys can assist clients to influence administrative rulemaking and guidance issuance by engaging in the comment process.

Clients should be aware of the requirements surrounding their specific industries and be prepared to provide the FDA with evidence of compliance in the event of an inspection or enforcement action. Having comprehensive policies and procedures, and adhering to those policies and procedures, is a way to show the FDA that the necessary compliance measures are in place.

Key Takeaways

  • Ensure that your clients, who qualify as an "outsourcing facility" under the DQSA, register as such, as well as engage in the required FDA reporting and follow current good manufacturing practices under the law.
  • Warn your clients that the FDA has begun to inspect all entities registered as "outsourcing facilities," as well as a number of compounding state-licensed pharmacies, under the DQSA, with a focus on compounding practices that qualify a facility as an "outsourcing facility" instead of a "compounding pharmacy."
  • Help your clients appropriately label their food, drugs, devices, dietary supplements, and cosmetics based on their "intended use" to avoid being issued an FDA warning letter stating the product is an unapproved new drug.
  • Assist your clients in creating comprehensive policies and procedures that can provide the FDA with evidence of compliance in the event of an inspection or enforcement action.


1 Drug Quality and Security Act of 2013 (DQSA), Pub. L. No. 113-54, 127 Stat. 587.

2 Food and Drug Administration Amendments Act of 2007 (FDAAA), Pub. L. No. 110- 85, 121 Stat. 823.

Previously published in Inside the Minds of FDA Experts, a Thomson Reuters book

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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