Outsourcing Facilities (503B)

The Drug Quality and Security Act (DQSA), enacted in November 2013, created, in addition to other provisions, a new section 503B to the Food Drug & Cosmetics Act (FDCA). 503B established a new type of registration known as an “Outsourcing Facility.” Outsourcing Facilities are essentially hybrids, filling a void between FDA licensed manufacturers and traditional state licensed pharmacies. Outsourcing Facilities are allowed to ship products via interstate commerce without the need for specific patient prescriptions or instructional labels, generally required by the FDCA , as long as the Outsourcing Facility complies with the standards set forth in Section 503B. However, an Outsourcing Facility is NOT exempt from cGMP, and, in fact, a drug compounded by an Outsourcing Facility, will be deemed adulterated if not prepared in conformity with cGMP. An Outsourcing Facility must report to the Food and Drug Administration (FDA) certain information about the products it compounds, and is subject to inspection by the FDA according to a risk-based schedule. Outsourcing Facilities are prohibited from compounding drugs for resale. And any drug prepared by the Outsourcing Facility must be labeled “Not for resale.”

The ability to compound for in-office use pursuant to 503B (compounding without patient-specific prescriptions ordered by a prescribing practitioner) provides Outsourcing Facilities with the unique opportunity to distribute compounded drugs without the limitation placed on traditional compounding pharmacies. Moreover, compliance with cGMP provides Outsourcing Facilities with an opportunity to hold themselves out as compounding to a higher standard than a typical pharmacy, thereby providing patients and other end users a level of assurance of the quality of drugs that they are receiving from the Outsourcing Facility.

Another important aspect of an Outsourcing Facility is the ability to compound FDA approved drugs that are on the FDA “short supply list.” Many commonly used drugs appear on the short supply list, with some being critical to the operation of hospitals and ambulatory surgery centers. Common drugs such as lidocaine and magnesium sulfate are currently on the list, as of this writing. Drugs frequently end up on the short supply list because big pharmaceutical manufacturers halt production in favor of drugs which provide higher profit margins.

While these opportunities present many benefits, they also subject an Outsourcing Facility to FDA compliance, oversight and inspection, as well as cGMP rules and regulations, all of which allow authorized personnel to enter and inspect an Outsourcing Facility at any reasonable times.

Important to note is that the FDCA does not require an Outsourcing Facility to be a pharmacy, though the applicability of this allowance is not yet clear, as specific state laws regarding out-of-state pharmacy registration may require an Outsourcing Facility choosing to register in that state to comply with certain elements analogous to pharmacy registration. According to the DQSA, registration as an Outsourcing Facility allows a sterile compounder to ship products via interstate commerce without the need for specific patient prescriptions.

Frier Levitt has assisted, and continues to assist, many clients in the planning and development of Outsourcing Facilities. If you have questions or need help with an Outsourcing Facility, contact Frier Levitt today.

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