Pharmaceutical Manufacturer Lawsuit Against 503B Outsourcing Facility for Compounding Preempted by FDA Enforcement Authority

The Ninth Circuit ruled that a pharmaceutical manufacturer cannot sue a 503B compounding facility for compounding versions of its commercially available product in Nexus Pharmaceuticals, Inc v. Central Admixture Pharmacy Services (CAPS)[1], Nexus Pharmaceuticals v. Quva[2], and Nexus Pharmaceuticals v. Leiters Inc, et al[3]. In dismissing the three cases,  the court ruled such a lawsuit would usurp the FDA’s authority under the Drug Quality and Security Act (DQSA). Under that Act, 503B compounders may not compound products that are “essentially a copy of one or more approved drugs”.[4] This exception detailed in FDA Guidance was meant to prevent compounding facilities from becoming a new route for generics.[5] The lawsuits originally alleged state unfair trade practice violations and were dismissed in late 2020 for failure to state a claim due to the preemption prohibition on private enforcement, but Nexus appealed. Private enforcement of any provision of the FDC Act is prohibited by express statutory language. Further, the Supremacy clause preempts any state laws which are contrary to Federal Statutes.[6] Courts have generally been protective of FDA’s statutory monopoly on enforcement power.

The product involved was ready-to-use ephedrine syringes. Nexus’s product was both FDA-approved and trademark protected. However, even where cases have asserted violation of other laws such as the Lanham Act, unfair competition or patent infringement, the courts still revert to the underlying claims as existing solely by virtue of the FDC Act. The one exception has been tort claims where a patient is injured.

We continue to see increased FDA inspections of compounding facilities (as well as 503A pharmacies) as the FDA grapples with the line between manufacturing and compounding, and various provisions of the DQSA. Recently, the FDA’s Acting Director of the Division of Compounded Drugs stated that the FDA had taken no enforcement action as yet based on the “essentially a copy” exclusion in situations where outsourcing facilities “compound drug products using FDA-approved drug products—rather than bulk drug substances—as a starting point,” pending an “upcoming revision to its guidance for outsourcing facilities.”[7] The FDA has also recently stated that it “does not intend to take action” against a facility that compounds drugs that are “essentially a copy” of drugs that have been discontinued and are no longer marketed, despite the statutory provision that entitles it to take action.[8] These three cases are the first to interpret the “essentially a copy” provision. The FDA has indicated that it has plans to issue clarifying guidance on what “essentially a copy” means. In the meanwhile, 503(a) pharmacies and 503(b) outsourcing facilities should review their product offerings to ensure compliance with DQSA criteria as well as the FDA’s current guidance and statements as to what is and is not essentially a copy of a commercially available drug. Now is the time for compounders to perform a thorough review of their compounded products to reflect the nuances of the FDA Guidance (e.g. where the compound is compared to an OTC drug; drugs appearing on the FDA’s shortage list;  or the meaning of “prescriber determination of clinical difference”) and/or obtain the opinion of counsel regarding same.

How Can Frier Levitt Help. We regularly assist 503A compounding pharmacies and 503B outsourcing facilities with a broad range of legal and regulatory matters ranging from FDA and Board of Pharmacy inspections to advertising reviews. Contact us to speak to an attorney today.

[1] Case No. 20-56227 (U.S. Ct App 9th Cir).

[2] Case No. 20-56160 (U.S. Ct App 9th Cir).

[3] Case No. 20-56158 (U.S. Ct App 9th Cir).

[4] 21 U.S.C. §353(b).

[5] FDA, Compounded Drug Products That Are Essentially Copies of Approved Drug Products Under Section 503B of the Federal Food, Drug, and Cosmetic Act, at 4 (Jan. 2018) [FDA Guidance].

[6] U.S. CONST. art. VI, cl. 2.

[7] Case No. 20-56227 at 21 (U.S. Ct App 9th Cir).

[8] Id.