Top 5 Steps All Compound Pharmacies Should Take in Light of the Fungal Meningitis Outbreak

Compounders already faced attacks from PBM auditing. Now, the tragedy arising from the tainted steroid compounds shipped out of New England Compounding Center (NECC) has brought compounding into the national spotlight. The Centers for Disease Control (CDC) reported this week the fourteenth death from fungal meningitis resulting from the tainted steroid. The CDC has reported over 100 cases of infection from the contaminated epidural steroids, across eleven states. Compounders can anticipate increased scrutiny. It’s time for compounders to self-assess.

As a result of these events, compounding pharmacies nationally are coming under attack by the media and by State and Federal governments. Up until now, there has not been much Federal oversight of compounding pharmacies compared to big drug manufacturers, due in large part to a 2002 Supreme Court decision striking down the FDA’s rules overseeing the practice of compounding. This is all likely to change. As a result of this outbreak, compounding pharmacies across the country will be subject to added attention and scrutiny from governments and regulatory agencies, with several measures already being discussed on Capitol Hill.

Compounding pharmacies must adequately protect themselves immediately. Here are the top five steps a compounding pharmacy must take to ensure compliance in the face of growing scrutiny:

1. Compounders May Not Make Large Batches of Compounds for Storage and Later Use

One of the chief suspected causes of the fungal meningitis contamination in the epidural steroids was NECC’s alleged practice of creating “batches” of compound material and storing the batches until later shipped out of state. Compounding pharmacies are required to mix each individual compound on the prescription order for each individual patient, and are only permitted to make “limited quantities” before the receipt of a valid prescription. See, Food, Drug and Cosmetic Act, 21 U.S.C. §353a(a). Thus, the mass production and storage of an “inordinate amount” of compounded medication for later sale is prohibited. This is what separates compounds from manufactures, and thus avoids heavy regulation by the FDA.  Further, certain prescriptions which are classified as “Immediate-Use” expressly cannot be made in batches and cannot be stored, pursuant to Pharmacy Compounding USP. Already, State and Federal official have taken note of potential violations of these requirements, stating that NECC was “making big batches and selling them out of state as a manufacturer would, and that is certainly outside of their state license.” Therefore, in order to avoid scrutiny and punishment from State and Federal regulators, pharmacies must ensure compliance with these provisions, and Frier Levitt can help. Frier Levitt can provide guidance on the applicable requirements and can develop policies and procedures to ensure compliance.

2. Compliance with State Pharmacy Licensing/Registration Laws

State governments will now be stepping up oversight and enforcement efforts with respect to compounding pharmacies, and will use their pharmacy licensing/registration laws to do so. In order to maintain its licensing, pharmacies must comply with State law. Failure to comply can result in heavy fines and loss of licensure. In particular, it is anticipated that States will increase their scrutiny on pharmacies which ship or mail prescription. Thus, compliance with each States’ mail order procedures (including those States to which pharmacies ship prescriptions) is crucial. Frier Levitt has evaluated many State’s requirements in this regard and can assist your pharmacy in ensuring compliance.

3. Compliance with Pharmacy Benefits Managers’ Manuals

PBMs will likely use these recent events as a boon to their already elevated pressure on compounding pharmacies. Using safety concerns on behalf of their sponsors as a justification, PBMs will increase scrutiny on how a pharmacy compounds prescriptions and bills them to the PBM. PBMs will also seek to enforce various sections of their Manuals, including those relating to regulatory compliance and mail order procedures. Therefore, it is important for pharmacies to ensure compliance with these provisions to avoid audits and recoupments. Frier Levitt provides advice to pharmacies on how to maintain compliance with each PBM Manual’s provisions.

4. Compliance with Federal Laws Including Anti-Kickback Statute and HIPAA Requirements

In addition to increased clinical scrutiny, State and Federal governments will be ratcheting up enforcement of other laws relating to compounding pharmacies, such as the Anti-Kickback Statute and HIPAA regulations.  Because NECC was a large operation shipping medications across the country, which in part may have led to the contamination, governments will be closely examining compound pharmacies’ commercial relationships. Agencies will look for potential kickbacks or prohibited relationships. Many compounders are beginning to use marketing representatives to promote the use of compound prescriptions, and these relationships will surely come under scrutiny. That is why it is extremely important to ensure that these arrangements pass regulatory muster. Frier Levitt has closely examined these issues and can assist your pharmacy in setting up compliant relationships. Also, regulators will be focusing on HIPAA compliance as another method of overseeing compounders. Frier Levitt can assist in preparing up-to-date, state-specific HIPAA compliance plans to avoid adverse actions.

5. Maintain Adequate Insurance

One thing that can be learned from NECC’s situation is the necessity for pharmacies to maintain adequate liability insurance. NECC’s policy limits will likely be exceeded by the claims filed by the victims of the outbreak, and it is possible that in addition to personal malpractice liability on behalf of the pharmacists, the potential plaintiffs could pierce NECC’s corporate protections and go after the personal assets of the owners. Therefore, the importance of adequate, properly-tailored insurance coverage cannot be overestimated. Frier Levitt possesses experience and knowledge in this field and can assist you in obtaining the necessary coverage.

Frier Levitt recommends that all compound pharmacies engage in a “Legal Audit” as a protective measure to safeguard against adverse regulatory action or recoupment. The value of this exercise is multiplied given the increased scrutiny likely to befall compound pharmacies in the immediate future. Pharmacies need to evaluate their practices and maintain compliance. Frier Levitt can provide these “Legal Audits” for pharmacies and assist them in evaluating compliance with Federal and State laws and regulations, and establishing and maintaining proper mail delivery procedures, including compliance with PBM Manuals. Contact Frier Levitt for more information.

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