Compounded Drug Distribution MOU Between FDA and the States

The Food and Drug Administration (FDA) continues to make drug compounding a high priority and will enforce the requirements of the Drug Quality and Security Act (DQSA).[1]  On May 13, 2020, the FDA issued two letters, one denying a Citizen’s Petition and one announcing the availability of a long awaited final draft MOU for Public Comment. Draft MOUs were issued in 2015 and 2018 with over 6,000 public comments having been made.  The comment period for this “final” version ends June 15, 2020.  It is critical for stakeholders, including compounding pharmacies, 503(a) and 503(b), API manufacturers and others, to voice their opinion. 

This is because the MOU describes the conditions under which certain compounded drugs by a pharmacist in a state-licensed pharmacy, or by a licensed physician, are exempt from current good manufacturing practice, labeling with adequate directions from use, and from approval of drugs under a new or abbreviated new drug application.[2] The MOU could have a dramatic impact on stakeholders.

Additionally, this “final” version includes the following provisions:

  • Retains the ceiling on interstate distribution of compounded prescriptions at 50% and 5%[3] of the pharmacy’s total annual prescription volume (i.e. the “5 percent rule”) for states that do not sign the MOU
  • State Board of Pharmacy (BOP) notification to FDA within 5 days following receipt of a complaint related to a serious adverse drug experience or product quality issue for a compounded drug
  • State BOP to notify state regulators of physicians following receipt of a complaint related to a serious adverse drug experience or product quality issue for a compounded drug compounded by a physician (as well as notify the FDA within 5 days) (even though BOPs do not have regulatory jurisdiction over physician compounders)
  • State BOP to identify pharmacies that compound an inordinate amount of compounded drugs interstate (using surveys/inspections or data submitted to an information sharing network) (notification to FDA within 30days)
  • Investigative file sharing from BOP and FDA and coordination with National Association of Boards of Pharmacy (NABP) to develop an information-sharing platform for data exchange between states and the FDA on complaints, adverse events, and serious product quality issues
  • The final MOU and the statutory five-percent limit do not apply to drugs compounded by outsourcing facilities or drugs that are compounded for animals
  • Describes a 365 day time period in states that have not signed the MOU, for when FDA intends to take action against compounders, including specialty pharmacies, for distributing more than five percent of their compounded drug products interstate
  • Importantly, FDA retains the contentious use of the term “distribution” to include patient specific dispensing of compounded medications across state lines in both the MOU and statutory 5% cap

Despite numerous comments from many organizations and pharmacy groups as well as the January 22, 2020 Citizen’s Petition (requesting the FDA to treat dispensing and distribution as distinct acts), FDA has failed to recognize the distinction between “dispensing” to a specific patient and “distribution”. Under the MOU, FDA redefines “distribution” to include patient specific dispensing, thus providing FDA with its long sought goal of regulatory authority over the act of dispensing. In fact, FDA stated “The FDA disagrees that dispensing and distribution are distinct acts, and states that Congress established the inclusion of dispensing to a patient and distribution to healthcare practitioners, hospitals, or other entities as a single act in the DQSA.”

This definition of distribution is in conflict with state laws and the NABP model Pharmacy Act that defines distribution and dispensing as separate activities. At least 20 states have now indicated they will not sign this MOU because of this. If fewer states sign, this will create problems for both pharmacies in those states and patients that these pharmacies serve as they would be limited to filling prescriptions across state lines to 5 percent of their total volume.  Many compounding pharmacies have a regional or national clientele, and the limits of the MOU if a state doesn’t sign would be disastrous. Pharmacies are able to comply with the 5% limit on distribution of compounded drug products, provided the limit applies, as Congress intended, to distribution, and not dispensing. By the plain language of the statute, Pharmacies that dispense based upon patient specific prescriptions will not run afoul of the 5% rule, since they do not distribute. Similarly, pharmacies that distribute would not object to a 50% ceiling on distributions for the same reason.

Previous public comments indicated that the 50% ceiling on total prescription orders dispensed or distributed can be reached quite easily for pharmacies that do relatively small amounts of compounding. The example provided is if the pharmacy compounds 10 prescriptions and ship 6 of them interstate, it will have already exceeded the limit. In response, FDA stated “The 50% is intended as a threshold for identifying the compounder and reporting to the FDA and is not a limit on the amount of compounded drugs that can be distributed”. This statement provides a lack of clarity inasmuch as FDA fails to provide any notice or guidance as to what will happen to compounding pharmacies once they are deemed to have distributed inordinate amounts of compounded medication interstate. This lack of guidance does not withstand the bounds of basic due process as regulated entities are entitled to have fair notice of the standards by which FDA will enforce statutes and regulations.

How Frier Levitt Can Help

Frier Levitt’s FDA attorneys have provided comments for FDAs proposed Guidances, have drafted legislation and have filed Citizen Petitions to assist our industry trade organization and pharmacy clients to amend FDA’s authorities. 

[1] P.L. 113-54.

[2] Section 503A(b)(3)(B)(ii) of the DQSA.

[3] 21 U.S.C. 355(a).

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