To amend the Federal Food, Drug, and Cosmetic Act to provide for the compounding of drug products.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Verifying Authority and Legality In 
Drug Compounding Act of 2012''.

SEC. 2. APPLICATION OF FEDERAL LAW TO PRACTICE OF PHARMACY COMPOUNDING.

    (a) Amendment.--Section 503A of the Federal Food, Drug, and 
Cosmetic Act (21 U.S.C. 353a) is amended to read as follows:

``SEC. 503A. PHARMACY COMPOUNDING.

    ``(a) In General.--Sections 501(a)(2)(B) and 505 shall not apply 
with respect to a drug product if each of the following applies:
            ``(1) The drug product is compounded for an identified 
        individual patient based on the receipt of--
                    ``(A) a valid prescription order; or
                    ``(B) a notation, approved by the prescribing 
                practitioner, on the prescription order that a 
                compounded product is necessary for the identified 
                patient.
            ``(2) The drug product is compounded by a licensed 
        pharmacist in a State-licensed pharmacy or a Federal facility, 
        or by a licensed physician, pursuant to such prescription order 
        or notation.
            ``(3) The drug product is compounded exclusively from--
                    ``(A) ingredients that comply with the standards of 
                an applicable United States Pharmacopoeia or National 
                Formulary monograph; or
                    ``(B) if such a monograph does not exist, 
                ingredients that are ingredients in a drug--
                            ``(i) for which an approval of an 
                        application filed under subsection (b) or (j) 
                        of section 505 is in effect; or
                            ``(ii) that may be lawfully marketed in the 
                        United States without such an approval pursuant 
                        to the definition of a new drug in section 201.
            ``(4) Any bulk substance used for purposes of compounding 
        the drug product--
                    ``(A) is manufactured by an establishment that is 
                registered under section 510 (including a foreign 
                establishment that is registered under section 510(i)); 
                and
                    ``(B) is accompanied by valid certificates of 
                analysis.
            ``(5) The pharmacist or physician compounding the drug 
        product complies with the standards of any applicable United 
        States Pharmacopoeia chapters on pharmacy compounding.
            ``(6) The drug product, including the dosage form and any 
        ingredient thereof, is not included in the list under 
        subsection (b).
            ``(7) The drug product is not a copy of a commercially 
        available drug.
    ``(b) List of Drug Products That Should Not Be Compounded.--
            ``(1) In general.--For purposes of subsection (a)(6), the 
        Secretary shall--
                    ``(A) develop and maintain a list of drug products 
                that should not be compounded, including any 
                categories, dosage forms, or ingredients of such drug 
                products; and
                    ``(B) include on such list, at a minimum--
                            ``(i) drug products (or categories, dosage 
                        forms, or ingredients thereof) whose 
                        compounding is reasonably likely to cause an 
                        adverse effect on safety or effectiveness of 
                        such drug product; and
                            ``(ii) drug products (or categories, dosage 
                        forms, or ingredients thereof) that have been 
                        withdrawn or removed from the market because 
                        they have been found to be unsafe or not 
                        effective.
            ``(2) Initial publication; updates.--The Secretary shall--
                    ``(A) not later than 1 year after the date of the 
                enactment of the Verifying Authority and Legality In 
                Drug Compounding Act of 2012, publish an initial list 
                under paragraph (1); and
                    ``(B) not less frequently than every year 
                thereafter, review and, as appropriate, update the list 
                under paragraph (1).
            ``(3) Availability.--The Secretary shall make the list 
        under paragraph (1) available on the public Web site of the 
        Food and Drug Administration.
            ``(4) Transmission to state regulatory agencies.--Upon 
        publication of the initial list under paragraph (1), and upon 
        each update to the list, the Secretary shall transmit an up-to-
        date copy of the list to the agency in each State with primary 
        responsibility for regulating the compounding of drugs.
    ``(c) Waiver of Requirement of Individually Identified Patient for 
Specified Drug Products.--
            ``(1) Waiver authority.--The Secretary may, with respect to 
        a drug product sold or dispensed by a pharmacy or pharmacist, 
        waive the requirement of subsection (a)(1) that the drug 
        product be compounded for an individually identified patient if 
        the Secretary determines that compounding the drug product is 
        necessary--
                    ``(A) to address a drug shortage; or
                    ``(B) to protect public health or well-being.
            ``(2) Duration.--The duration of a waiver under paragraph 
        (1) shall not exceed 1 year, unless the Secretary determines 
        that an extension is necessary to continue--
                    ``(A) to address the drug shortage for which such 
                waiver was originally approved; or
                    ``(B) to protect public health or well-being.
            ``(3) Waivers by states prohibited.--The Secretary may not 
        authorize any State to grant waivers under this subsection.
    ``(d) Waiver of Requirement of Individually Identified Patient for 
Specified Pharmacies and Pharmacists.--
            ``(1) Waiver authority.--The Secretary may waive the 
        requirement of subsection (a)(1) that the drug product be 
        compounded for an individually identified patient if the 
        pharmacy or pharmacist--
                    ``(A) submits an application that meets the 
                requirements of paragraph (5)(A) and is satisfactory to 
                the Secretary (or, subject to paragraph (3), the 
                State); and
                    ``(B) agrees to comply with any condition of 
                operation and any limitations specified by the 
                Secretary as a requirement for such waiver, including 
                the conditions and limitations specified under 
                paragraph (5).
            ``(2) Ineligible pharmacies.--A pharmacy or pharmacist 
        required to be registered under section 510 for purposes of 
        compounding a drug product is not eligible for a waiver under 
        this subsection for such purposes.
            ``(3) Types of pharmacies eligible for waiver.--Subject to 
        paragraph (2), the Secretary shall specify types of pharmacies 
        and pharmacists that are eligible for a waiver under this 
        subsection, and shall include the following types:
                    ``(A) Any pharmacy or pharmacist within a hospital 
                system that is compounding drug products exclusively 
                for dispensing to patients within that hospital system.
                    ``(B) Any pharmacy or pharmacist that compounds 
                sterile drug products.
                    ``(C) Any pharmacy or pharmacist that compounds 
                drug products in limited quantities before the receipt 
                of a valid prescription for an individual patient who 
                is located in the same State as the pharmacy or 
                pharmacist, based on a history of the pharmacy or 
                pharmacist receiving such valid prescription.
            ``(4) Waivers by states allowed.--
                    ``(A) Memorandum of understanding.--The Secretary 
                may authorize a State to grant waivers under paragraph 
                (1) to pharmacies and pharmacists in such State 
                pursuant to a memorandum of understanding entered into 
                between the Secretary and the State--
                            ``(i) ensuring, to the Secretary's 
                        satisfaction, that the State's program for 
                        granting waivers will be implemented in 
                        accordance with the requirements of this 
                        section (including the application of different 
                        requirements for different types of pharmacies, 
                        as specified under paragraph (5)(B)); and
                            ``(ii) including such other information and 
                        assurances as the Secretary may require.
                    ``(B) Determination.--The Secretary shall establish 
                criteria and a process for determining whether to 
                authorize a State to grant waivers under paragraph (1).
                    ``(C) Scope of authorization.--In authorizing a 
                State to grant waivers under subparagraph (A), the 
                Secretary may limit such authority to apply only with 
                respect to certain types of pharmacies and pharmacists 
                specified under paragraph (3).
                    ``(D) Limitation.--A waiver granted by a State to a 
                pharmacy or pharmacist under subparagraph (A) shall 
                only apply with respect to compounded drug products 
                sold or dispensed within such State.
            ``(5) Applications; requirements.--
                    ``(A) In general.--For each type of pharmacy or 
                pharmacist specified under paragraph (3), the Secretary 
                shall specify, in the regulations under subsection (j), 
                the following:
                            ``(i) The information that is required to 
                        be included in an application for a waiver 
                        under paragraph (1).
                            ``(ii) The circumstances necessary to 
                        support the approval of such an application by 
                        the Secretary, or by a State that is authorized 
                        to grant waivers under paragraph (4), including 
                        the criteria that shall be used to evaluate 
                        such an application.
                            ``(iii) The conditions of operation, 
                        including good manufacturing practices and 
                        requirements for third-party testing, 
                        applicable to the compounding of drugs under 
                        such a waiver.
                            ``(iv) Any limitations on the activities 
                        that a pharmacy or pharmacist may engage in 
                        under such a waiver.
                            ``(v) The duration (and renewability) of 
                        such a waiver.
                    ``(B) Specificity to types of pharmacies and 
                pharmacists.--In establishing requirements under 
                subparagraph (A), the Secretary shall make the 
                requirements specific to each type of pharmacy and 
                pharmacist specified by the Secretary under paragraph 
                (3).
    ``(e) Waiver of Requirement Regarding Copies of Commercially 
Available Drug.--
            ``(1) Waiver authority.--The Secretary may, with respect to 
        a drug product sold or dispensed by a pharmacy or pharmacist, 
        waive the requirement of subsection (a)(7) if the Secretary 
        determines that compounding the drug product is necessary to 
        protect public health or well-being.
            ``(2) Duration.--The duration of a waiver under paragraph 
        (1) shall not exceed 1 year, unless the Secretary determines 
        that an extension is necessary to protect public health or 
        well-being.
            ``(3) Waivers by states prohibited.--The Secretary may not 
        authorize any State to grant waivers under this subsection.
    ``(f) Inspections.--The facilities of any pharmacy or pharmacist 
compounding drug products pursuant to a waiver under subsection (c), 
(d), or (e) shall be subject to inspection under section 704 for 
purposes of determining compliance with the provisions of this Act 
applicable to such compounding.
    ``(g) Cancellation of Waiver.--
            ``(1) In general.--The Secretary shall publish notice at 
        least 30 days before cancelling a waiver under subsection (c), 
        (d), or (e).
            ``(2) Exception for public health and safety.--The 
        Secretary may cancel a waiver without regard to paragraph (1) 
        in order to prevent an adverse impact on public health or 
        safety.
    ``(h) Labeling.--The labeling of any drug product compounded 
pursuant to subsection (a) shall include the following statement: `This 
drug has not been tested for safety and effectiveness and is not 
approved by the FDA. Serious adverse reactions to this drug should be 
reported to the pharmacy where it was received and the FDA at _____.' 
The blank shall specify a phone number and a Web site, to be provided 
by the Secretary for purposes of this subsection.
    ``(i) Reporting by Pharmacists and Physicians.--
            ``(1) Adverse event.--If a pharmacist or physician 
        compounding a drug product pursuant to this section becomes 
        aware of any adverse event associated with the use of such 
        product, not later than 10 calendar days after becoming so 
        aware, the pharmacist or physician shall report such adverse 
        event to the Secretary.
            ``(2) Information related to risk of injury or death.--If a 
        pharmacist or physician compounding a drug product pursuant to 
        this section becomes aware of information concerning any 
        bacteriological, fungal, or other contamination; any 
        significant chemical, physical, or other change; or any 
        deterioration of a compounded drug product that has already 
        been distributed by the pharmacist or physician, that could 
        cause serious injury or death, not later than 5 calendar days 
        after becoming so aware, the pharmacist or physician shall 
        report such information to the Secretary.
    ``(j) Regulations.--The Secretary shall promulgate regulations for 
carrying out this section, which shall include the following:
            ``(1) The types of pharmacies and pharmacists specified 
        pursuant to subsection (d)(3).
            ``(2) The criteria and process for determining whether a 
        State may provide a waiver under subsection (d)(4).
            ``(3) The information specified under subsection (d)(5)(A).
            ``(4) The requirements applicable to different types of 
        pharmacies and pharmacists under subsection (d)(5).
            ``(5) The requirements for inspections under subsection 
        (f).
    ``(k) Definitions.--In this section:
            ``(1) The term `copy of a commercially available drug 
        product' does not include a drug product in which there is a 
        change, made for an identified individual patient, which 
        produces for that patient a significant difference, as 
        determined by the prescribing practitioner, between the 
        compounded drug and the comparable commercially available drug 
        product.
            ``(2) The term `compounding' does not include mixing, 
        reconstituting, or other such acts that are performed in 
        accordance with directions contained in approved labeling 
        provided by the product's manufacturer and other manufacturer 
        directions consistent with that labeling.''.
    (b) Misbranding.--Section 502 of the Federal Food, Drug, and 
Cosmetic Act (21 U.S.C. 352) is amended by adding at the end the 
following:
    ``(bb) If it is a drug product compounded pursuant to section 503A 
and its labeling does not include the statement required by section 
503A(h).''.
    (c) Conforming Amendment.--Section 704(a)(2)(A) of the Federal 
Food, Drug, and Cosmetic Act (21 U.S.C. 374(a)(2)(A)) is amended by 
inserting ``subject to section 503A,'' before ``pharmacies which 
maintain establishments''.
    (d) Regulations.--Not later than 1 year after the date of the 
enactment of this Act, the Secretary shall promulgate final regulations 
for carrying out the amendments made by subsections (a), (b), and (c).
    (e) Effective Date.--The amendments made by subsections (a), (b), 
and (c) shall take effect on the date that is 1 year after the date of 
the enactment of this Act.

SEC. 3. REGISTRATION AND INSPECTION OF MANUFACTURERS COMPOUNDING DRUG 
              PRODUCTS.

    (a) Registration.--Section 510(g) of the Federal Food, Drug, and 
Cosmetic Act (21 U.S.C. 360(g)) is amended by adding at the end the 
following: ``With respect to compounding drugs, the exemption in 
paragraph (1) does not apply with respect to any pharmacy to the extent 
to which the pharmacy is, in effect, manufacturing such drugs, as 
determined by the Secretary, taking into consideration the extent to 
which such pharmacy sells the drugs across State lines, the quantity of 
the drugs sold, and any other factors determined appropriate by the 
Secretary.''.
    (b) Inspection.--Section 704(a)(2) of the Federal Food, Drug, and 
Cosmetic Act (21 U.S.C. 374(a)(2)) is amended by adding at the end the 
following flush text:
        ``With respect to compounding drugs, the exemption in 
        subparagraph (A) does not apply with respect to any pharmacy to 
        the extent to which the pharmacy is, in effect, manufacturing 
        such drugs, as determined by the Secretary, taking into 
        consideration the extent to which such pharmacy sells the drugs 
        across State lines, the quantity of the drugs sold, and any 
        other factors determined appropriate by the Secretary.''.
    (c) Regulations.--Not later than 1 year after the date of the 
enactment of this Act, the Secretary of Health and Human Services shall 
promulgate regulations for carrying out the amendments made by 
subsections (a) and (b).
    (d) Effective Date.--The amendment made by subsection (a) shall 
take effect on the date that is 1 year after the date of the enactment 
of this Act.

Summary: Verifying Authority and Legality In Drug Compounding Act of 2012 - Amends the Federal Food, Drug, and Cosmetic Act (FFDCA) with respect to the regulation of compounding drugs. Eliminates authority for compounding pharmacies to: (1) compound drugs before the receipt of a valid prescription order, or (2) compound any drug product that is a copy of a commercially available drug. Requires the Secretary of Health and Human Services (HHS) to develop, maintain and transmit to the appropriate state agencies a list of drug products that should not be compounded, including: (1) drug products whose compounding is reasonably likely to cause an adverse effect on their safety or effectiveness. And (2) drug products that have been withdrawn or removed from the market because they have been found to be unsafe or not effective. Authorizes the Secretary to waive the requirement that a drug product must be compounded for an individually identified patient based on a valid prescription order or similar notation if compounding the drug product is necessary to address a drug shortage, or to protect public health or well-being. Prohibits the Secretary from authorizing a state to grant such waivers. Authorizes the Secretary to waive the requirement that a drug product must be compounded for an individually identified patient based on a valid prescription order or similar notation if the pharmacy or pharmacist: (1) submits a satisfactory application to the Secretary. And (2) agrees to comply with any condition or limitation specified by the Secretary. Makes a pharmacy or pharmacist required to be registered under the FFDCA as a drug producer ineligible for a waiver. Permits the Secretary to authorize a state to grant such waivers applicable to compounded drug products sold or dispensed within the state pursuant to a memorandum of understanding between the Secretary and the state. Authorizes the Secretary to waive the prohibition against compounding any drug product that is a copy of a commercially available drug if it is necessary to protect public health or well-being. Prohibits the Secretary from authorizing a state to waive such prohibition. Subjects the facilities of any pharmacy receiving a waiver under this Act to inspection to determine compliance with this Act. Requires the Secretary to publish notice at least 30 days before cancelling a waiver, unless it is necessary to prevent an adverse impact on public health or safety. Sets forth a required label statement for any drug compounded pursuant to this Act. Requires a pharmacist or physician compounding a drug product to report any adverse event associated with the use of the product within a specified time frame.