The Drug Quality and Security Act is Signed by President, but How Does the FDA Intend to Enforce it?

On November 27, 2013, President Obama signed into law the Drug, Quality and Security Act. The bill contained a section known as the “Compounding Quality Act” which endeavored to regulate both “traditional” and “non-traditional” compounding. With respect to traditional compounders, the Compounding Quality Act removed certain provisions from Section 503A of the Federal Food, Drug, and Cosmetic Act (FDCA) that were found to be unconstitutional by the U.S. Supreme Court in 2002, and reinstated the remainder of that section. With respect to “non-traditional” compounders, the Compounding Quality Act also created a new Section 503B in the FDCA, under which a compounder can become an “outsourcing facility.” Together, Section 503A and Section 503B provide two separate exemptions to certain requirements of the FDCA applicable to manufacturers of new drugs.

Traditional Compounding

Section 503A, which was initially enacted in 1997 to regulate traditional compounders, has been effectively “reinstated” in the FDA’s eyes by the Compounding Quality Act. Section 503A describes the conditions under which certain compounded human drug products are entitled to exemptions from three sections of the FDCA requiring: (i) compliance with current good manufacturing practices (CGMP); (ii) labeling with adequate directions for use; and (iii) FDA approval prior to marketing. Unless a pharmacy registers as an “outsourcing facility” (see below), drugs produced by compounders must meet the conditions of Section 503A to qualify for the above three exemptions. Deriving from the prior 2002 Compliance Policy Guidance (460.200) and the language of Section 503A, there are ten conditions with which compounds must comply in order to qualify for the exemptions to the new drug registration, CGMP, and labeling requirements:

  1. The drug product is compounded for an identified individual patient based on the receipt of a valid prescription order, approved by the prescribing practitioner, on the prescription order that a compounded product is necessary for the identified patient
  2. The compounding of the drug product is performed:
    • By a licensed pharmacist in a State licensed pharmacy, or by a licensed physician on the prescription order for an individual patient made by a licensed physician or other practitioner authorized by State law to prescribe drugs
    • By a licensed pharmacist in limited quantities before the receipt of a valid prescription order for such individual patient when:
      • the pharmacy historically received valid prescription orders for the compounding of the drug product and
      • the orders have been generated solely within an established relationship between the licensed pharmacist, the patient for whom the prescription order will be provided, or the physician who will write such prescription order.
  3. The drug product is compounded in compliance with the United States Pharmacopoeia (USP) chapters on pharmacy compounding using bulk drug substances, as defined in 21 CFR 207.3(a)(4), that comply with the standards of an applicable USP or National Formulary (NF) monograph, if one exists
    • If such a monograph does not exist, the drug substance(s) must be a component of an FDA-approved human drug product. If a monograph does not exist and the drug substance is not a component of an FDA-approved human drug product, it must appear on a list of bulk drug substances for use in compounding developed by FDA through regulation.
    • The drug product is compounded using bulk drug substances that are manufactured by an establishment that is registered under section 510 of the FD&C Act (including a foreign establishment that is registered under section 510(i) of the FD&C Act).
    • The drug product is compounded using bulk drug substances that are accompanied by valid certificates of analysis for each bulk drug substance.
    • The drug product is compounded using ingredients (other than bulk drug substances) that comply with the standards of an applicable USP or NF monograph, if one exists, and the USP chapters on pharmacy compounding.
    • The drug product does not appear on the list, published at 21 CFR 216.24, that includes drug products that have been withdrawn or removed from the market because such drug products or components of such drug products have been found to be unsafe or not effective.
    • The licensed pharmacist or licensed physician does not compound regularly or in inordinate amounts any drug products that are essentially copies of commercially available drug products.
    • The drug product is not a drug product identified by FDA by regulation as a drug product that presents demonstrable difficulties for compounding that reasonably demonstrate an adverse effect on the safety or effectiveness of that drug product.
    • The drug product is compounded in a State that has entered into a memorandum of understanding (MOU) with FDA that addresses the distribution of inordinate amounts of compounded drug products interstate and provides for appropriate investigation by a State agency of complaints relating to compounded drug products distributed outside such State; or in States that have not entered into such an MOU with FDA, the pharmacy does not distribute, or cause to be distributed, compounded drug products out of the State in which they are compounded, more than 5% of the total prescription orders dispensed or distributed by such pharmacy.

According to the FDA, even if the conditions of section 503A are met, the compounded drugs are only exempt from the three provisions of the FDCA noted above (e.g., CGMP requirements, new drug registration requirements, and labeling requirements to indicate adequate directions for use).  All other applicable provisions of the FDCA remain in effect for compounded drugs (i.e., compounded drugs cannot be contaminated or made under insanitary conditions).

While the FDA has stated that Section 503A immediately applies nationwide, the FDA has announced its intentions to provide further information implementing the Section. In order to implement the revived Section 503A in the interim while the FDA drafts new regulations, the FDA has issued for public comment a draft guidance (see below) that describes the FDA’s intention with regard to the provisions of section 503A that will require rulemaking or other action to implement. As part of this, the FDA has withdrawn CPG 460.200, issued in 2002, and the guidance “Enforcement Policy During Implementation of Section 503A of the Federal Food, Drug, and Cosmetic Act,” published in November 1998.

In addition, the new law requires the FDA to establish a mechanism to receive submissions from State boards of pharmacy concerning certain actions taken against compounding pharmacies or expressing concerns that a compounding pharmacy may be acting contrary to section 503A. This will also include a mechanism for notification to the State Boards of Pharmacy when a pharmacy is acting contrary to Section 503A. This section is to be implemented in consultation with the National Association of Boards of Pharmacy (NABP). Until the final mechanism is implemented, States wishing to provide this information to the FDA can email StateCompounding@fda.hhs.gov, a dedicated mailbox created facilitate this communication.

Outsourcing Facilities

As for “non-traditional” compounders, Section 503B affords “outsourcing facilities” exemptions from two sections of the FDCA requiring: (i) FDA approval prior to marketing and (ii) labeling with adequate directions for use. However, unlike Section 503A, Section 503B does not exempt outsourcing facilities from the current good manufacturing (CGMP) requirements. Thus, Section 503B affords a second form of an exemption to compounders, concurrently with Section 503A.

In order to satisfy the exemption available to outsourcing facilities, compounders must comply with numerous requirements and conditions. Most notably, this includes a requirement that the outsourcing facility register with the FDA, pay annual fees, and comply with reporting and inspection requirements. A more detailed description of the requirements applicable to pharmacies that elect to register as outsourcing facilities can be found in our prior article [Senate Passes the Drug Quality and Security Act (H.R. 3204), Awaits Signature by President]. Now that the law has been implemented, outsourcing facilities may register and operate as outsourcing facilities without paying a fee until September 30, 2014.

Given that there are many new burdens applicable to outsourcing facilities, it follows that there should be certain added benefits available to outsourcing facilities as compared to traditional compounders. In this vein, the FDA takes the position that if compounders register with the FDA as outsourcing facilities, hospitals and other health care providers “can provide their patients with drugs that were compounded in outsourcing facilities.” This could give the compounders the ability to compound in advance of or in the absence of a prescription for an identified patient, and could permit routine compounding for in office use. 

However, registration as an outsourcing facility is not required, even for a compounder that does sterile compounding. If a compounder chooses not to register as an outsourcing facility and qualify for the exemptions under section 503B, the compounder could still nonetheless qualify for the exemptions under section 503A of the FDCA, so long as it satisfies those above-mentioned ten conditions.

The FDA has now stated its interpretation of certain case law and affirms the position that compounded drugs are “new drugs,” but are exempt from the registration requirements, labeling requirements, and CGMP requirements if they comply with the conditions set forth in 503A. Based on Section 503A and 503B working in tandem, a compounding pharmacy has two exemptions to the new drug requirements that it can comply with. However, if a compounder does not register with FDA as an outsourcing facility, it will not qualify for the section 503B exemption from the FDA approval requirements and the requirement to label products with adequate directions for use. If that compounder also fails to satisfy the conditions for the section 503A exemption, it will be subject to all of the requirements of the FDCA that are applicable to drugs made by conventional manufacturers, including the new drug approval, adequate directions for use, and CGMP requirements.

Implementing the Revived Section 503A – Draft Guidance

Because the FDA had viewed Section 503A as having been struck down in its entirety, the FDA had not promulgated in-depth regulations implementing its sections. Now that Section 503A has been reinstated by the Compounding Quality Act, the FDA has determined that there are several provisions of the Section which require rulemaking and consultation with a Pharmacy Advisory Committee to implement. In the interim, before final regulations are drafted and published, the Office of Compliance, Center for Drug Evaluation and Research within the FDA has prepared a Draft Guidance to explain how the provisions of Section 503A will be applied pending formal regulations. 

The guidance documents, which were issued on December 2, 2013, are meant to describe the FDA’s current thinking on various topics and are to be viewed only as recommendations. At this point, these are draft guidances, and comments and suggestions regarding this draft document may be submitted within 60 days of publication of this draft guidance. The provisions contained in the draft guidance explicitly do not operate to bind the FDA or the public, and pharmacies are permitted to utilize alternative approaches, if such approaches satisfy the requirements of the applicable statutes and regulations.

In the draft guidance relating to Section 503A, the FDA includes explanation of provisions of Section 503A that the FDA believes require regulations or other FDA actions to implement. Specifically, the guidance lists four parts of Section 503A which will require additional regulation or rulemaking by the FDA, and therefore, require immediate, interim pronouncement by the FDA. 

Withdrawn or Removed List – the provision relating to the list of bulk drug substances that have been “withdrawn or removed” due to safety or efficacy (21 CFR 216.24) will require additional action, as the FDA is to periodically update the list. 

Bulk Drug Substances List – a provision of 503A provides that a drug product may be compounded using bulk drug substances that do not have an applicable USP or NF monograph and are not components of FDA-approved drugs if the bulk drug substances appear on a list developed by the FDA through regulations. In 1999, the FDA published a proposed rule listing bulk drug substances that may be used in pharmacy compounding. The FDA intends to reconsider the bulk drug substances that were proposed for inclusion on the list and that do not have an applicable USP or NF monograph due to the time lapse since the last proposal. The FDA plans to seek additional nominations and propose an updated list.

“Demonstrable Difficulties” for Compounding – given that such a list had not been previously maintained, the FDA has stated that this provision will not be enforceable until the FDA promulgates an implementing regulation identifying drugs that pose a demonstrable difficulty for compounding.

Memorandum of Understanding (MOU) Between the FDA and the States – Section 503A(b)(3) of the FDCA states that FDA, in consultation with the National Association of Boards of Pharmacy (NABP) will develop a standard MOU for use between FDA and the States that will address the interstate distribution of inordinate amounts of compounded drug products and provide for appropriate investigation by a State agency of complaints relating to compounded drug products distributed outside that State. In 1999, around the time the FDCA had initially been enacted, the FDA had published a notice in the Federal Register announcing the availability of a draft standard MOU, developed in consultation with the NABP. This draft MOU was not finalized. The FDA had indicated that it intends to publish a new draft MOU for comment that will replace the January 1999 draft. In addition, because this draft was not finalized, many States did not adopt a MOU prior to the time Section 503A was struck down by the Supreme Court. The current language of Section 503A states that an individual or firm in a State that does not enter into an MOU with FDA that distributes, or causes to be distributed, compounded drug products out of the State in which they are compounded, can compound for interstate distribution outside the state only 5% of the total prescription orders dispensed or distributed by the individual or firm (the “Five Percent Rule”). The FDA has stated that it does not intend to enforce the 5% limitation on interstate distribution until 90 days after the FDA has finalized a standard MOU and made it available to the States for their consideration and signature. Therefore, pharmacies likely have a significant amount of time before they will be subject to any enforcement involving the Five Percent Rule.

In addition to clarifying interim positions on measures that will ultimately require regulations or further action by the FDA, the draft guidance provides insight and explanation on the FDA’s views of its regulatory authority over traditional compounders. The FDA states that in order to fall into the exemptions, drug products must meet the conditions of Section 503A andits associated regulations. To that end, the FDA states that pharmacies may be subject to a warning letter, seizure of product, injunction, and/or criminal prosecution for violations of other requirements of the FDCA, including violations related to:

  1. drug products containing filthy, putrid, or decomposed substances or drug products compounded under insanitary conditions
  2. drug products that fall short of or fail to comply with compendium standards for strength, quality or purity
  3. drug products that are not packaged and labeled as prescribed in a compendium
  4. drug products containing labeling, advertising, or promotion which is false or misleading

Additionally, the FDA contemplates additional potential for enforcement action against a traditional compounder when a drug does not meet the conditions of Section 503A. In this regard, if the FDA determines that a pharmacy compounds a drug product that does not meet the conditions of section 503A, then the pharmacy may be subject to a warning letter, seizure of product, injunction, and/or criminal prosecution for: (i) Producing Adulterated Drugs (drugs must conform with current good manufacturing practice), (ii) Producing Unapproved New Drugs; and (iii) Producing Misbranded Drugs (drugs not labeled with adequate directions for use are misbranded). Further, the FDA states that it expects to employ a risk-based enforcement approach with respect to violative compounded drugs, giving the highest enforcement priority to compounded drugs and violations of the FDCA and FDA regulations that pose the greatest public health risks

Together, these statements by the FDA amount to a large usurpation of authority on part of the FDA to now regulate traditional compounders engaged in traditional compounding, a prerogative that is not explicitly set forth in the statute. It will likely depend on the process of rulemaking and the comment period that will determine the FDA’s ultimate authority and role with respect to traditional compounders. However, in light of the impetus behind this legislation and in the wake of NECC, it is likely that the pragmatic effect will be an increased focus on non-traditional, high-risk, sterile compounders, rather than the traditional compounding pharmacy, who will likely remain subject to oversight by the State Boards of Pharmacy.

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