Document ID: FDA-2015-N-0030-8455
Agency: fda
Document Type: Notice
Title: Memorandum of Understanding Addressing Certain Distributions of
Compounded Human Drug Products Between the State Board of Pharmacy or Other Appropriate State Agency and the Food and Drug Administration; Availability
Posted Date: 2020-10-27T04:00Z

[Federal Register Volume 85, Number 208 (Tuesday, October 27, 2020)]
[Notices]
[Pages 68074-68082]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-23687]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

[Docket No. FDA-2015-N-0030]

Memorandum of Understanding Addressing Certain Distributions of 
Compounded Human Drug Products Between the State Board of Pharmacy or 
Other Appropriate State Agency and the Food and Drug Administration; 
Availability

AGENCY: Food and Drug Administration, HHS.

ACTION: Notice of availability; withdrawal.

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SUMMARY: The Food and Drug Administration (FDA or the Agency) is 
announcing the availability of a final standard memorandum of 
understanding (MOU) entitled ``Memorandum of Understanding Addressing 
Certain Distributions of Compounded Human Drug Products Between the 
[insert State Board of Pharmacy or Other Appropriate State Agency] and 
the U.S. Food and Drug Administration'' (final standard MOU). The final 
standard MOU describes the responsibilities of a State Board of 
Pharmacy or other appropriate State agency that chooses to sign the MOU 
in investigating and responding to complaints related to drug products 
compounded in such State and distributed outside such State and in 
addressing the interstate distribution of inordinate amounts of 
compounded human drug products.

DATES: The announcement of the MOU is published in the Federal Register 
on October 27, 2020. FDA is withdrawing its revised draft standard MOU 
that published on September 10, 2018 (83 FR 45631), as of October 27, 
2020.

ADDRESSES: Submit electronic comments on the final standard MOU to 
Docket No. FDA-2015-N-0030. Submit written comments on the final 
standard MOU to the Dockets Management Staff (HFA-305), Food and Drug 
Administration, 5630 Fishers Lane, Rm.

[[Page 68075]]

1061, Rockville, MD 20852. All comments should be identified with the 
docket number found in brackets in the heading of this document. Submit 
written requests for single copies of the final standard MOU to the 
Division of Drug Information, Center for Drug Evaluation and Research, 
Food and Drug Administration, 10001 New Hampshire Ave., Hillandale 
Building, 4th Floor, Silver Spring, MD 20993-0002. Send one self-
addressed adhesive label to assist that office in processing your 
requests. See the SUPPLEMENTARY INFORMATION section for electronic 
access to the draft document.

FOR FURTHER INFORMATION CONTACT: Alexandria Fujisaki, Center for Drug 
Evaluation and Research, Food and Drug Administration, 10903 New 
Hampshire Ave., Bldg. 51, Rm. 5169, Silver Spring, MD 20993-0002, 240-
402-4078.

SUPPLEMENTARY INFORMATION: 

I. Background

    Section 503A of the Federal Food, Drug, and Cosmetic Act (FD&C Act) 
(21 U.S.C. 353a) describes the conditions that must be satisfied for 
drug products compounded by a licensed pharmacist or licensed physician 
to be exempt from the following sections of the FD&C Act: (1) Section 
501(a)(2)(B) (21 U.S.C. 351(a)(2)(B)) (concerning current good 
manufacturing practice (CGMP) requirements), (2) section 502(f)(1) (21 
U.S.C. 352(f)(1)) (concerning the labeling of drugs with adequate 
directions for use), and (3) section 505 (21 U.S.C. 355) (concerning 
the approval of drugs under new drug applications or abbreviated new 
drug applications).
    One of the conditions to qualify for the exemptions listed in 
section 503A of the FD&C Act is that (1) the drug product is compounded 
in a State that has entered into an 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 drug products distributed outside such State; 
or (2) if the drug product is compounded in a State that has not 
entered into such an MOU, the licensed pharmacist, pharmacy, or 
physician does not distribute, or cause to be distributed, compounded 
drug products out of the State in which they are compounded in 
quantities that exceed 5 percent of the total prescription orders 
dispensed or distributed by such pharmacy or physician (5 percent 
limit) (see section 503A(b)(3)(B)(i) and (ii) of the FD&C Act). Another 
condition to qualify for the exemptions listed in section 503A of the 
FD&C Act is that the drug is compounded for an identified individual 
patient based on the receipt of a valid prescription order or a 
notation, approved by the prescribing practitioner, on the prescription 
order that a compounded product is necessary for the identified patient 
(section 503A(a) of the FD&C Act). This MOU does not alter this 
condition.
    Section 503A(b)(3)(B) of the FD&C Act directs FDA to develop, in 
consultation with the National Association of Boards of Pharmacy 
(NABP), a standard MOU for use by the States in complying with section 
503A(b)(3)(B)(i).
    FDA is withdrawing the revised draft standard MOU entitled 
``Memorandum of Understanding Addressing Certain Distributions of 
Compounded Drug Products Between the State of [insert State] and the 
U.S. Food and Drug Administration,'' which was issued in September 2018 
(2018 revised draft standard MOU). The 2018 revised draft standard MOU 
is superseded by the final standard MOU.

II. Previous Efforts To Develop a Standard MOU

    In the Federal Register of January 21, 1999 (64 FR 3301), FDA 
announced the availability for public comment of a draft standard MOU, 
developed in consultation with NABP (1999 draft standard MOU). Over 
6,000 commenters submitted comments on the 1999 draft standard MOU. 
Because of litigation over the constitutionality of the advertising, 
promotion, and solicitation provision in section 503A of the FD&C 
Act,\1\ the draft standard MOU was not completed. In 2013, section 503A 
of the FD&C Act was amended by the Drug Quality and Security Act (DQSA) 
(Pub. L. 113-54) to remove the advertising, promotion, and solicitation 
provisions that were held unconstitutional, and FDA took steps to 
implement section 503A, including to continue to develop the standard 
MOU. In the Federal Register of February 19, 2015 (80 FR 8874), FDA 
withdrew the 1999 draft standard MOU and issued the 2015 draft standard 
MOU for public comment. FDA received more than 3,000 comments on the 
2015 draft standard MOU. In the Federal Register of September 10, 2018 
(83 FR 45631), FDA withdrew the 2015 draft standard MOU and issued the 
2018 revised draft standard MOU for public comment. FDA received 38 
comments during the comment period on the 2018 revised draft standard 
MOU. By this notice, FDA is withdrawing the 2018 revised draft standard 
MOU and issuing a final standard MOU, which the Agency developed in 
consultation with NABP for use by the States in complying with section 
503A(b)(3)(B).
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    \1\ The conditions of section 503A of the FD&C Act originally 
included restrictions on the advertising or promotion of the 
compounding of any particular drug, class of drug, or type of drug 
and the solicitation of prescriptions for compounded drugs. These 
provisions were challenged in court and held unconstitutional by the 
U.S. Supreme Court in 2002. See Thompson v. Western States Med. 
Ctr., 535 U.S. 357 (2002).
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III. Final Standard MOU

    In consultation with NABP, FDA has developed a final standard MOU. 
FDA considered the comments submitted on the 2015 draft standard MOU 
and 2018 revised draft standard MOU, as well as comments on the MOU 
provisions it received in connection with a draft guidance on section 
503A of the FD&C Act entitled ``Pharmacy Compounding of Human Drug 
Products Under Section 503A of the Federal Food, Drug, and Cosmetic 
Act'' (2013 draft 503A guidance) (see 78 FR 72901, December 4, 2013). 
Below, FDA has summarized and discussed key provisions of the final 
standard MOU and, where appropriate, summarized changes that the Agency 
made in the final standard MOU. Drug products intended for veterinary 
use, repackaged drug products, biological products subject to licensure 
through a biologics license application under section 351 of the Public 
Health Service Act (42 U.S.C. 262), and drug products compounded by 
outsourcing facilities under section 503B of the FD&C Act are not the 
subject of the final standard MOU.

A. Investigation of Complaints Relating to Compounded Human Drug 
Products Distributed Outside the State

    The final standard MOU provides that a State Board of Pharmacy or 
other appropriate State agency that enters into the MOU agrees to:
     Investigate complaints of adverse drug experiences and 
product quality issues relating to human drug products compounded at a 
pharmacy in the State and distributed outside the State. Investigations 
performed by the State Board of Pharmacy or other appropriate State 
agency under this MOU will include taking steps to assess whether there 
is a public health risk associated with the compounded drug product and 
whether such risk is adequately contained. Investigations will be 
performed pursuant to the State Board of Pharmacy's or other 
appropriate State agency's established investigatory policies and 
procedures, including those related to prioritizing complaints, 
provided they are not in conflict with the terms of the MOU;

[[Page 68076]]

     If the complaint is substantiated, take action that the 
State Board of Pharmacy or other appropriate State agency considers to 
be appropriate and warranted, in accordance with and as permitted by 
State law, to ensure that the relevant pharmacy investigates the root 
cause of the problem that is the subject of the complaint and 
undertakes sufficient corrective action to address any identified 
public health risk relating to the problem, including the risk that 
future similar problems may occur;
     Maintain records of the complaints it receives regarding 
adverse drug experiences or product quality issues relating to human 
drug products compounded at a pharmacy, the investigation of each 
complaint, and any response to or action taken as a result of a 
complaint, beginning when the State Board of Pharmacy or other 
appropriate State agency receives notice of the complaint. The State 
Board of Pharmacy or other appropriate State agency will maintain these 
records for at least 3 years. The 3-year period begins on the date of 
final action on a complaint, or the date of a decision that the 
complaint requires no action.
     Notify FDA by submission to an Information Sharing Network 
or by email to StateMOU@fda.hhs.gov as soon as possible, but no later 
than 5 business days, after receiving a complaint involving a serious 
adverse drug experience or serious product quality issue relating to a 
human drug product compounded at a pharmacy and distributed outside the 
State, and provide FDA with certain information about the complaint, 
including the following: name and contact information of the 
complainant, if available; name and address of the pharmacy that is the 
subject of the complaint; and a description of the complaint, including 
a description of any compounded human drug product that is the subject 
of the complaint;
     Share with FDA, as permitted by State law, the results of 
the investigation of a complaint after the State Board of Pharmacy or 
other appropriate State agency concludes its investigation of a 
complaint assessed to involve a serious adverse drug experience or 
serious product quality issue. This information includes the following: 
The State Board of Pharmacy's or other appropriate State agency's 
assessment of whether the complaint was substantiated, if available; 
and a description and the date of any actions the State Board of 
Pharmacy or other appropriate State agency has taken to address the 
complaint;
     Notify the appropriate regulator of physicians within the 
State of complaints of which the State Board of Pharmacy or other 
appropriate State agency receives that involve an adverse drug 
experience or product quality issue relating to human drug products 
compounded by a physician and distributed outside the State. The State 
Board of Pharmacy or other appropriate State agency will also notify 
FDA by submission to an Information Sharing Network or by email to 
StateMOU@fda.hhs.gov as soon as possible, but no later than 5 business 
days, after receiving the complaint of the following information, if 
available: Name and contact information of the complainant; name and 
address of the physician that is the subject of the complaint; and 
description of the complaint, including a description of any compounded 
human drug product that is the subject of the complaint.
    The types of complaints of compounded drug products that should be 
investigated include any adverse drug experience and product quality 
issues. Even non-serious adverse drug experiences and product quality 
issues can be indicative of problems at a compounding facility that 
could result in product quality defects leading to serious adverse drug 
experiences if not corrected. For example, inflammation around the site 
of an injection can indicate drug product contamination from inadequate 
sterile practices at the compounding pharmacy. If the pharmacy or 
physician has inadequate sterile practices, other more serious 
contamination could result in serious adverse drug experiences.
    The final standard MOU does not include specific directions to the 
State Boards of Pharmacy or other appropriate State agencies relating 
to how to conduct their investigation of complaints. Rather, as 
recommended by comments submitted to FDA previously, the details of 
such investigations are left to the State Board of Pharmacy's or other 
appropriate State agency's discretion. For example, a State Board of 
Pharmacy or other appropriate State agency may review an incoming 
complaint describing an adverse drug experience and determine that such 
a complaint does not warrant further investigation. In other cases, a 
State Board of Pharmacy or other appropriate State agency may determine 
that an incoming complaint contains insufficient information and 
investigate further to determine appropriate action.
    The State Board of Pharmacy or other appropriate State agency 
signing the final standard MOU would agree to notify FDA about certain 
complaints and provide FDA with certain information about the 
complaints so FDA could investigate the complaints itself, or take 
other appropriate action. The 2018 revised draft standard MOU provided 
that notification would occur as soon as possible, but no later than 3 
business days of receipt of the complaint. The final standard MOU 
provides that notification will occur as soon as possible, but no later 
than 5 business days after the State Board of Pharmacy or other 
appropriate State agency receives the complaint. This period will 
continue to facilitate early Federal/State collaboration on serious 
adverse drug experiences and serious product quality issues that have 
the potential to affect patients in multiple States, while providing 
for notification in a timeframe that is more feasible for the State 
Boards of Pharmacy or other appropriate State agencies. FDA increased 
the time for notifying FDA in the final standard MOU in response to 
comments expressing concern about having sufficient time to process 
complaints and notify FDA. We note that FDA has staff on call 24 hours 
a day to receive information in emergency situations.
    Comments on the 2015 draft MOU expressed concern with certain 
provisions regarding States entering into the MOU and agreeing to take 
action not permitted by State law or implying that, after taking 
action, the State made a legal determination that a complaint had been 
resolved. The revised draft standard MOU clarified that the State 
should investigate and take action that the State considers to be 
appropriate with respect to the complaint in accordance with and as 
permitted by State law. FDA also clarified that, by signing the MOU, 
the State agrees to take steps to assess whether there is a public 
health risk associated with the compounded drug product and whether 
such risk is adequately contained rather than make definitive 
determinations of risk or confirm containment. The final standard MOU 
retains these revisions that addressed the concerns from comments on 
the 2015 draft.

B. Distribution of Inordinate Amounts of Compounded Human Drug Products 
Interstate

    For purposes of the final standard MOU, a pharmacy has distributed 
an inordinate amount of compounded human drug products interstate if 
the number of prescription orders for compounded human drug products 
that the pharmacy distributed interstate during any calendar year is 
greater than 50 percent of the sum of the number of prescription orders 
for compounded human drug products that the pharmacy sent out of (or 
caused to be sent out of)

[[Page 68077]]

the facility in which the drug products were compounded during that 
same calendar year and the number of prescription orders for compounded 
human drug products that were dispensed (e.g., picked up by a patient) 
at the facility in which they are compounded during that same calendar 
year (Fig. 1). This concept is called the 50 percent threshold.
[GRAPHIC] [TIFF OMITTED] TN27OC20.000

    The final standard MOU provides that State Boards of Pharmacy or 
other appropriate State agencies that enter into the MOU will agree to:
     On an annual basis, identify, using surveys, reviews of 
records during inspections, data submitted to an Information Sharing 
Network, or other mechanisms available to the State Board of Pharmacy 
or other appropriate State agency, pharmacies that distribute 
inordinate amounts of compounded human drug products interstate.
     For pharmacies that have been identified as distributing 
inordinate amounts of compounded human drug products interstate during 
any calendar year, the State Board of Pharmacy or other appropriate 
State agency will identify, using data submitted to the Information 
Sharing Network or other available mechanisms, during that same 
calendar year:
    [cir] The total number of prescription orders for sterile 
compounded human drug products distributed interstate;
    [cir] The names of States in which the pharmacy is licensed;
    [cir] The names of States into which the pharmacy distributed 
compounded human drug products; and,
    [cir] Whether the State inspected for and found during its most 
recent inspection that the pharmacy distributed compounded human drug 
products without valid prescription orders for individually identified 
patients.
     Within 30 business days of identifying a pharmacy that has 
distributed inordinate amounts of compounded human drug products 
interstate, the State Board of Pharmacy or other appropriate State 
agency will notify FDA, by submission to an Information Sharing Network 
or by email to StateMOU@fda.hhs.gov, and will include the following 
information:
    [cir] Name and address of the pharmacy that distributed inordinate 
amounts of compounded human drug products interstate;
    [cir] The number of prescription orders for compounded human drug 
products that the pharmacy sent out of (or caused to be sent out of) 
the facility in which the drug products were compounded during that 
same calendar year;
    [cir] The number of prescription orders for compounded human drug 
products that were dispensed (e.g., picked up by a patient) at the 
facility in which they are compounded during that same calendar year;
    [cir] Total number of prescription orders for compounded human drug 
products distributed interstate during that same calendar year;
    [cir] Total number of prescription orders for sterile compounded 
human drug products distributed interstate during that same calendar 
year;
    [cir] The names of States in which the pharmacy is licensed as well 
as the names of States into which the pharmacy distributed compounded 
human drug products during that same calendar year; and
    [cir] Whether the State Board of Pharmacy or other appropriate 
State agency inspected for and found during its most recent inspection 
that the pharmacy distributed compounded human drug products without 
valid prescriptions for individually identified patients during that 
same calendar year.
     If the State Board of Pharmacy or other appropriate State 
agency becomes aware of a physician who is distributing any amount of 
compounded human drug products interstate, it will notify the 
appropriate regulator of physicians within the State. The State Board 
of Pharmacy or other appropriate State agency will, within 30 days of 
identifying a physician who is distributing any amount of compounded 
human drug products interstate, also notify FDA by submission to an 
Information Sharing Network or by email to StateMOU@fda.hhs.gov.
    Section 503A of the FD&C Act reflects Congress' recognition that 
compounding may be appropriate when it is based on receiving a valid 
prescription order or notation approved by the prescribing practitioner 
for an identified individual patient. However, drug products compounded 
under section 503A are not required to demonstrate that they are safe 
or effective, have labeling that bears adequate directions for use, or

[[Page 68078]]

conform to CGMP. Congress, therefore, imposed strict limitations on the 
distribution of drug products compounded under section 503A to protect 
the public health and the integrity of the drug approval process.
    In particular, Congress did not intend for compounders operating 
under these statutory provisions to grow into conventional 
manufacturing operations making unapproved drugs, operating a 
substantial proportion of their business interstate, without adequate 
oversight. Although other provisions of the FD&C Act (e.g., the 
adulteration provisions regarding drugs prepared, packed, or held under 
insanitary conditions) apply to drugs compounded by State-licensed 
pharmacies and physicians that may qualify for the exemptions under 
section 503A of the FD&C Act, and although FDA may take action in 
appropriate cases against compounders whose drugs violate these 
provisions or that operate outside of the conditions in section 503A, 
Congress recognized that these compounders are primarily overseen by 
the States. However, if a substantial proportion of a compounder's drug 
products are distributed outside a State's borders, adequate regulation 
of those drug products poses significant challenges to State 
regulators. States face logistical, regulatory, and financial 
challenges inspecting compounders located outside of their 
jurisdiction. In addition, if a compounder distributes drug products to 
multiple States, it can be very difficult to gather the scattered 
information about possible adverse drug experiences or product quality 
issues associated with those drug products, connect them to the 
compounder, and undertake coordinated action to address a potentially 
serious public health problem.
    Therefore, as a baseline measure, section 503A(b)(3)(B)(ii) of the 
FD&C Act limits the distribution of compounded drug products outside of 
the State in which they are compounded to 5 percent of the total 
prescription orders dispensed or distributed by a licensed pharmacist, 
pharmacy, or physician. It then directs FDA, in consultation with NABP, 
to develop a standard MOU 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 
drug products compounded in and distributed outside such State. 
Development of the standard MOU involves FDA describing what inordinate 
amounts means and providing a mechanism for addressing distribution of 
inordinate amounts of compounded human drug products interstate, as 
long as the State agrees to appropriately investigate complaints 
relating to drug products compounded in and distributed out of the 
State. The 5 percent limitation in section 503A(b)(3)(B)(ii) does not 
apply to drug products compounded in a State that has entered into the 
standard MOU under section 503A(b)(3)(B)(i).
    In the 2015 draft standard MOU, FDA proposed that distribution 
interstate up to a 30 percent limit would not be inordinate, and that 
States entering into the MOU would agree to take action regarding 
pharmacists, pharmacies, or physicians that distribute inordinate 
amounts of compounded drug products interstate. FDA received a number 
of comments indicating that certain pharmacies, such as pharmacies 
located near State borders and home infusion pharmacies, distribute 
more than 30 percent of their compounded human drug products to 
patients interstate because, for example, the patients are located in 
another nearby State, or because few pharmacies compound a particular 
drug product to treat an uncommon condition for patients dispersed 
throughout the country. The comments noted that the proposed definition 
of inordinate amounts and the proposed provision in which States agree 
to take action could prevent such pharmacies from fulfilling patients' 
medical needs for the drug products that they supply. Other comments 
expressed concern about instances in which pharmacies are located near 
a State border and distribute compounded drug products to the other 
side of that border. FDA also received general comments questioning the 
Agency's basis for the 30 percent limit and indicating that it was too 
low. Some comments suggested that FDA increase the limit, including a 
suggestion to increase it to 50 percent.
    The 2018 revised draft standard MOU addressed these comments in two 
respects. First, it removed the provision in the 2015 draft standard 
MOU that States agree to take action with respect to the distribution 
of inordinate amounts of compounded human drug products interstate. 
Second, it changed what is considered ``inordinate amounts'' from a 30 
percent limit to a 50 percent threshold. In the final standard MOU, the 
States are not agreeing to take action with respect to distribution of 
inordinate amounts of compounded human drug products interstate, but, 
instead, to notify FDA of pharmacies that have distributed an 
inordinate amount of compounded human drug products interstate. The 
Agency does not intend to take action against a pharmacy located in a 
State that has entered into the MOU solely because the pharmacy has 
exceeded the threshold for inordinate amounts. Rather, the State Board 
of Pharmacy or other appropriate State agency entering into the final 
standard MOU agrees to collect further information on pharmacies that 
have distributed inordinate amounts interstate and provide this 
information to FDA to help inform Agency inspectional priorities. The 
State Board of Pharmacy or other appropriate State agency also agrees 
to notify FDA and the appropriate state regulator of physicians if it 
becomes aware of physicians distributing any amount of compounded human 
drug products interstate.
    We note that States generally have day-to-day oversight 
responsibilities over State-licensed pharmacies, pharmacists, and 
physicians. In general, FDA considers a State-licensed pharmacy or 
physician to be primarily overseen by the State, which is responsible 
both for regulation of the compounder and protection of its citizens 
who receive the compounded drug products. However, as discussed above, 
if a substantial proportion of a compounder's drug products is 
distributed outside a State's borders, adequate regulation of those 
drugs poses significant challenges to State regulators. In such cases, 
although State oversight continues to be critical, additional oversight 
by FDA may afford an important public health benefit.
    As stated above, the final standard MOU uses 50 percent as the 
threshold beyond which the amount of compounded human drug products 
distributed interstate by a pharmacy would be considered inordinate. 
The 50 percent threshold is the threshold that, with regard to 
pharmacies, triggers an information identification and reporting 
obligation once it is reached. The Agency believes that more than 50 
percent is an appropriate measure of ``inordinate amounts'' because it 
marks the point at which pharmacies are distributing the majority of 
their compounded human drug products interstate, and the regulatory 
challenges associated with interstate distributors discussed above 
become more pronounced. At this point, the risk posed by the 
distribution practices of the compounder may weigh in favor of 
additional Federal oversight in addition to State oversight.
    FDA recognizes that, in some cases, pharmacies may distribute more 
than 50 percent of a small quantity of compounded human drug products 
to contiguous States. Although such pharmacies have exceeded the 
inordinate amounts threshold in the final standard MOU, FDA would

[[Page 68079]]

consider other information, such as the number of patients that will 
receive the compounded human drug products, if available, when 
assessing the pharmacy's priority for risk-based inspection. 
Accordingly, when a State Board of Pharmacy or other appropriate State 
agency identifies a pharmacy that distributes an inordinate amount of 
compounded human drug products interstate, the final standard MOU 
provides that the State entity will supply the Agency with certain 
information as described above. In addition, if the State Board of 
Pharmacy or other appropriate State agency becomes aware of a physician 
who is distributing any amount of compounded human drug products 
interstate, the State entity will notify both the appropriate regulator 
of physicians within the State and FDA. FDA intends to use this 
information to prioritize its oversight of compounders based on risk, 
focusing on those that appear likely to distribute large volumes of 
compounded human drug products, particularly when the distribution is 
to multiple States, the drug products are intended to be sterile, and 
there is information about a lack of valid prescriptions for 
individually identified patients.
    The calculation of inordinate amounts in the final standard MOU, 
with clarifying changes to the language, is the same as the calculation 
proposed in the 2018 revised draft standard MOU, with the exception of 
a change in the timeframe used in the calculation from 1 month to 1 
year and removing drugs compounded by physicians from the calculation 
made by the State Board of Pharmacy or other appropriate State agency. 
The 2015 draft standard MOU provided that a compounder is considered to 
have distributed an inordinate amount of compounded drug products 
interstate if the number of units of compounded drug products 
distributed interstate during any calendar month is equal to or greater 
than 30 percent of the number of units of compounded and non-compounded 
drug products distributed or dispensed both intrastate and interstate 
by such compounder during that calendar month. FDA received comments 
noting that because the calculation includes both compounded and non-
compounded drug products, in many cases, a substantial factor in 
whether a compounder has distributed an inordinate amount of compounded 
drug products interstate is whether the compounder offers non-
compounded drug products. For example, under that policy, many 
specialty compounding pharmacies that engage in distribution of 
compounded human drug products interstate and only distribute 
compounded drug products would be able to distribute fewer compounded 
drug products interstate before reaching an inordinate amount than a 
pharmacy that also fills prescriptions for non-compounded drug 
products, even if both pharmacies produced the same amount of 
compounded drug products. After considering the public comments, FDA 
does not believe that including non-compounded drug products within the 
calculation of inordinate amounts would help address the public health 
concerns associated with sending compounded human drug products 
interstate that Congress sought to address in section 503A(b)(3)(B) of 
the FD&C Act. Non-compounded drug products were excluded from the 
calculation of inordinate amounts in the 2018 revised draft MOU. This 
final standard MOU maintains this exclusion.\2\ FDA removed drug 
products compounded by physicians from the inordinate amount 
calculation to clarify that the State Board of Pharmacy or other 
appropriate State agency signing the MOU does not agree to gather 
information about the distribution of compounded drug products 
interstate by physicians or to calculate inordinate amounts of drug 
products compounded by a physician and distributed interstate. Instead, 
the State Board of Pharmacy or other appropriate State agency signing 
the MOU agrees that if it becomes aware that a physician is 
distributing any amount of compounded human drug products interstate it 
will notify the State authority that regulates physicians and FDA. This 
focus on States calculating inordinate amounts of pharmacy compounding 
reflects FDA's understanding and feedback from State regulators that 
the distribution interstate of compounded drug products mainly involves 
pharmacy compounders.
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    \2\ FDA also intends to exclude non-compounded drugs from the 
calculation of the 5 percent limit in section 503A(b)(3)(B)(ii).
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    FDA received comments on the 2018 revised draft MOU expressing 
concern about calculating inordinate amounts by calendar month. After 
considering these comments and recognizing the possibility for 
significant monthly fluctuations, we have provided for annual 
calculation of inordinate amounts in the final standard MOU.
    This 50 percent threshold does not function as a limit on the 
distribution of compounded human drug products interstate, but, 
instead, is a threshold for triggering information gathering about 
pharmacy distribution of compounded drugs by the State Board of 
Pharmacy or other appropriate State agency and provision to FDA. The 
information gathered will be considered by the Agency for the purpose 
of helping to inform its risk-based inspection priorities.

C. Definitions

    Appendix A retains the definitions of ``adverse drug experience,'' 
``serious adverse drug experience,'' ``product quality issue,'' and 
``serious product quality issue'' from the 2018 revised draft standard 
MOU.
    To clarify the meaning of ``distribution of inordinate amounts of 
compounded drug products interstate,'' the proposed definition of 
``distribution'' in the 2018 revised draft standard MOU has been 
omitted and ``distribution of compounded human drug products 
interstate'' and ``inordinate amounts'' are defined. ``Distribution of 
compounded human drug products interstate'' means that a pharmacy or 
physician has sent (or caused to be sent) a compounded drug product out 
of the state in which the drug was compounded. A pharmacy has 
distributed an ``inordinate amount'' of compounded human drug products 
interstate if the number of prescription orders for compounded human 
drug products that the pharmacy distributed interstate during any 
calendar year is greater than 50 percent of the sum of: (1) The number 
of prescription orders for compounded human drug products that the 
pharmacy sent out of (or caused to be sent out of) the facility in 
which the drug products were compounded during that same calendar year; 
plus (2) the number of prescription orders for compounded human drug 
products that were dispensed (e.g., picked up by a patient) at the 
facility in which they were compounded during that same calendar year.
    We received a number of comments on the 2015 draft standard MOU and 
the 2018 revised draft standard MOU stating that distributing and 
dispensing are mutually exclusive activities, such that if a drug 
product is distributed, it is not also dispensed, and vice versa. Some 
comments asserted, in particular, that a compounded drug product should 
not be considered to be ``distributed'' when it is provided pursuant to 
a prescription. Other stakeholders, however, agreed with the inclusion 
of drug products provided pursuant to a prescription within the 
definition of ``distribution'' and maintained that this interpretation 
was important to protect the public health.
    After considering these comments and the public health objectives 
of section 503A(b)(3)(B) of the FD&C Act, FDA

[[Page 68080]]

considers that when a drug is picked up at the facility in which it was 
compounded, dispensing, but not distribution, occurs for purposes of 
503A(b)(3)(B).
    FDA believes that in-person dispensing, where the transaction 
between the compounder and the patient is completed at the facility in 
which the drug product was compounded, is appropriately overseen, 
primarily, by the State outside the context of the MOU, regardless of 
whether the compounded drug product subsequently leaves the State. Such 
an intrastate, local transaction generally indicates a close connection 
among the patient, compounder, and prescriber. By contrast, 
transactions by mail often have a less direct nexus among the patient, 
compounder, and prescriber than in-person pick-ups and would be 
considered ``distribution.''
    Drugs dispensed in-person that are later taken out of State will 
not contribute to reaching the threshold for inordinate amounts under 
the final MOU. Nor will complaints associated with compounded drug 
products dispensed this way and subsequently taken out of State be 
subject to the complaint investigation provisions of the final MOU. FDA 
expects that, in practice, the State in which the initial transaction 
occurred would handle such complaints. The State may, in its 
discretion, notify FDA of the complaint.
    FDA is not persuaded by comments urging the Agency to interpret 
``distribution'' and ``dispensing'' to be entirely separate activities 
for purposes of section 503A(b)(3)(B) of the FD&C Act. These comments 
recommend using definitions for these terms used elsewhere in the FD&C 
Act and FDA regulations, and generally conclude that distribution does 
not include the transfer of a drug pursuant to a prescription.
    The conditions in section 503A, including section 503A(b)(3)(B), 
must be interpreted consistent with the prescription requirement in 
section 503A(a) of the FD&C Act. If we were to interpret the word 
``distribution'' to apply only if a drug is provided without a 
prescription, it would mean that drug products compounded under section 
503A of the FD&C Act are excluded from regulation under the MOU and the 
5 percent limit, because to qualify for the exemptions under section 
503A, a compounder must obtain a valid prescription order for an 
individually identified patient. For the reasons stated previously in 
this document, we believe this would achieve the opposite of what 
Congress intended. A compounded drug product may be eligible for the 
exemptions under section 503A of the FD&C Act only if it is, among 
other things, ``compounded for an identified individual patient based 
on the receipt of a valid prescription order or a notation, approved by 
the prescribing practitioner, on the prescription order that a 
compounded product is necessary for the identified patient.''
    Nor is there anything to suggest that Congress understood 
``distributed'' and ``dispensed'' to be mutually exclusive categories 
rather than overlapping categories for purposes of section 503A. 
Section 503A(b)(3)(B) of the FD&C Act does not define ``distribution'' 
to exclude dispensing, which Congress has done elsewhere when that was 
its intention.\3\ The definition proposed by comments would write an 
exclusion for dispensing, in its entirety, into the statute where 
Congress did not. Indeed, with respect to comments suggesting that 
drugs dispensed pursuant to prescriptions could not also be 
``distributed,'' we note that, in section 503A(b)(3)(B), Congress 
specifically contemplated that prescription orders could be 
``distributed'' when it directed the Agency to count the number of 
prescription orders that pharmacists and prescribers distributed.
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    \3\ In other (non-compounding) contexts, where it would further 
a regulatory purpose, Congress and the Agency have specifically 
defined ``distribute'' to exclude dispensing. See, for example, 
section 581(5) of the FD&C Act (21 U.S.C. 360eee(5)), which applies 
to Title II of the DQSA, and 21 CFR 208.3, which applies to 21 CFR 
part 208. Section 503A of the FD&C Act does not contain a similar 
definition, or a similar specific direction to exclude dispensing 
from the meaning of distribution. We also note that these 
definitions were adopted for provisions that focus on conventionally 
manufactured drug products, which assign different obligations to 
dispensers than to wholesalers, packagers, or other intermediaries 
in light of the different role that dispensers play with respect to 
product labeling and the drug distribution chain. In contrast, 
section 503A of the FD&C Act focuses on compounded drugs, and the 
reasons for defining ``distribution'' to exclude dispensing in Title 
II of the DQSA or part 208 do not apply.
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IV. Other Issues

A. Authority of State Boards of Pharmacy or Other Appropriate State 
Agencies

    The 2018 revised draft standard MOU proposed that ``States'' would 
be the signatories of the MOU. In the final standard MOU, FDA clarifies 
the State party to the agreement, which is described as the ``State 
Board of Pharmacy or other appropriate State agency.'' FDA received 
comments expressing concerns that the State entity signing the MOU 
(e.g., the State Board of Pharmacy) may not have regulatory authority 
over physician compounding and could not agree to the MOU provisions 
regarding physicians as they appeared in the 2018 revised draft 
standard MOU. With regard to physician compounding, FDA has revised 
certain provisions from the 2018 revised draft standard MOU. Under the 
final standard MOU, a State Board of Pharmacy or other appropriate 
State agency would enter into the MOU on behalf of the State and agree 
to (1) notify FDA and the appropriate regulator of physicians within 
the State when it receives a complaint about adverse drug experiences 
or product quality issues associated with a human drug product 
compounded by a physician and distributed outside the State; and (2) if 
it becomes aware of a physician distributing any amount of compounded 
human drug products interstate, notify FDA and the appropriate 
regulator of physicians within the State.

B. Physician Compounding

    It is FDA's understanding that physicians who compound drugs 
generally do so for their own patients, within their own professional 
practice, and provide them intrastate. FDA believes that, generally, 
physicians are not engaged in compounding that results in routine 
distribution of compounded drug products interstate.
    Additionally, several comments advised that State Boards of 
Pharmacy do not oversee physician compounding and would not be able to 
agree to the provisions under the 2018 revised draft standard MOU with 
respect to oversight of physician compounding (collecting additional 
information to identify whether a physician compounder is distributing 
inordinate amounts of compounded drug products interstate, etc.). 
Accordingly, under the final standard MOU, State Boards of Pharmacy or 
other appropriate State agencies would agree to (1) notify FDA and the 
appropriate regulator of physicians within the State when they receive 
complaints about adverse drug experiences or product quality issues 
associated with a human drug product compounded by a physician and 
distributed outside the State; and (2) if they become aware of a 
physician distributing any amount of compounded human drug products 
interstate, notify FDA and the appropriate regulator of physicians 
within the State. The information provided to FDA will help inform 
Agency inspectional priorities with respect to physicians who compound 
human drug products and provide information to State regulators of 
physicians for appropriate action.

[[Page 68081]]

C. Development of a Standard MOU

    A number of comments on the 1999 draft standard MOU, the 2013 draft 
503A guidance, the 2015 draft standard MOU, and the 2018 revised draft 
MOU suggested that FDA negotiate MOUs with individual States, rather 
than develop a standard MOU. Section 503A of the FD&C Act requires the 
Agency to develop a standard MOU for use by the States. Furthermore, it 
would be impractical to develop an individualized MOU with every State, 
and creating individualized MOUs would create a patchwork of regulation 
of distribution of compounded human drug products interstate by 
compounders seeking for their drug products to qualify for the 
exemptions under section 503A of the FD&C Act. This would be confusing 
to the healthcare community, as well as regulators.

D. Exemptions From the Provisions Related to Distribution of Inordinate 
Amounts of Compounded Human Drug Products Interstate

    Some comments on the 2013 draft 503A guidance, the 2015 draft 
standard MOU, and the 2018 revised draft standard MOU requested that we 
consider exempting certain drug products or types of compounding 
entities from the threshold in the MOU and the 5 percent limit. For 
example, some comments recommended that we exempt nonsterile products.
    American consumers rely on the FDA drug approval process to ensure 
that medications have been evaluated for safety and effectiveness 
before they are marketed in the United States. Drugs made by 
compounders, including those made at outsourcing facilities, are not 
FDA-approved. This means that they have not undergone premarket review 
of safety, effectiveness, or manufacturing quality. Therefore, when an 
FDA-approved drug is commercially available, FDA recommends that 
practitioners prescribe the FDA-approved drug rather than a compounded 
drug product unless the prescribing practitioner has determined that a 
compounded product is necessary for the particular patient and would 
provide a significant difference for the patient as compared to the 
FDA-approved commercially available drug product.
    In section 503A of the FD&C Act, Congress enacted several 
conditions to differentiate compounders from conventional manufacturers 
and provided that only if the compounders meet those conditions can 
they qualify for the exemptions from the drug approval requirements in 
section 505 of the FD&C Act. One of those conditions relates to 
limitations and other measures to address distribution of compounded 
drug products interstate, and FDA intends to enforce those provisions 
to differentiate compounding that qualifies for the exemptions from 
conventional manufacturing in the guise of compounding that does not 
and will apply the conditions to all types of drugs and all categories 
of compounding.

E. Information Sharing Between the State Boards of Pharmacy or Other 
Appropriate State Agencies and FDA

    The final standard MOU provides that State Boards of Pharmacy or 
other appropriate State agencies will agree to notify FDA of a 
complaint relating to a compounded human drug product distributed 
outside the State involving a serious adverse drug experience or 
serious product quality issue and provide information about those 
experiences and issues. The final standard MOU also provides that State 
Boards of Pharmacy or other appropriate State agencies will notify FDA 
if they identify a pharmacy that has distributed inordinate amounts of 
compounded human drug products interstate. In addition, State Boards of 
Pharmacy or other appropriate State agencies will notify FDA and the 
appropriate regulator of physicians within the State if the State 
entity becomes aware of a physician who is distributing any amount of 
compounded human drug products interstate, or if the State entity 
receives a complaint involving an adverse experience or product quality 
issue relating to a human drug product compounded by a physician and 
distributed outside the State.
    FDA has entered into a cooperative agreement with NABP to establish 
an information sharing network that is intended to, in part, facilitate 
State information reporting to FDA by State Boards of Pharmacy or other 
appropriate State agencies that enter into the MOU with FDA addressing 
distribution of compounded drugs interstate.\4\ The goal of this 
information-sharing and research initiative is to improve the 
management and sharing of information available to State regulators and 
FDA regarding State-licensed compounders and the distribution of 
compounded human drug products interstate to support better and more 
targeted regulation and oversight of compounding activities to help 
reduce risk to patients. This information will be important to help 
States to focus their limited resources on compounders for which they 
have primary oversight responsibility that present the greatest risk. 
It will also facilitate FDA's ability to determine when additional 
Federal oversight is warranted, such as when a large-scale compounder 
distributes drug products to multiple States, potentially causing 
significant and widespread harm if its products are substandard. FDA 
expects that the information sharing network will be designated by FDA 
for purposes of the MOU to collect, assess, and allow review and 
sharing of information pursuant to the MOU. FDA regularly posts, on its 
compounding website, information about enforcement and other actions 
related to compounders that violate the FD&C Act, and it is obligated 
to share certain information with States under section 105 of the DQSA. 
In addition to these measures, FDA is taking steps to proactively share 
information with States about complaints that it receives regarding 
compounded drug products, consistent with Federal laws governing 
information disclosure.
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    \4\ See RFA-FD-19-025, available at https://grants.nih.gov/grants/guide/rfa-files/RFA-FD-19-025.html.
---------------------------------------------------------------------------

F. Enforcement of the 5 Percent Limit on Distribution of Compounded 
Human Drug Products Out of the State in Which They Are Compounded

    In the 2013 draft 503A guidance, FDA stated that it does not intend 
to enforce the 5 percent limit on distribution of compounded human drug 
products outside of the State in which they are compounded until 90 
days after FDA has finalized a standard MOU and made it available to 
the States for their consideration and signature. Most comments on the 
2013 draft 503A guidance that raised this issue said this period was 
too short but did not recommend a specific alternative. A few comments 
recommended a different timeframe, one recommending 120 days and 
another recommending 365 days. The 1997 Senate Committee Report for the 
Food and Drug Administration Modernization Act suggests that a 180-day 
period for States to decide whether to sign might be appropriate.\5\ In 
the notice of availability for the 2018 revised draft standard MOU, 
consistent with the 2015 draft standard MOU, the Agency proposed a 180-
day period after

[[Page 68082]]

the final standard MOU is made available for signature before FDA will 
enforce the 5 percent limit in States that have not signed the MOU, and 
invited public comment on whether this was an appropriate timeframe. 
Some commenters on the 2018 revised draft standard MOU stated that more 
time may be necessary because some States may be required to enact new 
laws and promulgate new regulations before entering the MOU. Therefore, 
in response to these comments, FDA is providing a 365-day period for 
States to decide whether to sign the MOU before FDA intends to begin 
enforcing the 5 percent limit in States that do not sign. It is FDA's 
understanding that this extended timeframe corresponds to a full 
legislative cycle for most States and should, therefore, afford 
sufficient time for States to modify their laws and regulations, if 
necessary.
---------------------------------------------------------------------------

    \5\ ``[U]ntil the State . . . enters into a memorandum of 
understanding (MOU) with the Secretary or 180 days after the 
development of the standard MOU, whichever comes first, the [section 
503A] exemption shall not apply if inordinate quantities of 
compounded products are distributed outside of the State in which 
the compounding pharmacy or physician is located.'' (U.S. Senate 
Committee Report)
---------------------------------------------------------------------------

V. Paperwork Reduction Act of 1995

    This MOU refers to previously approved collections of information. 
These collections of information are subject to review by the Office of 
Management and Budget (OMB) under the Paperwork Reduction Act of 1995 
(44 U.S.C. 3501-3521). The collections of information have been 
approved under OMB control number 0910-0800.

VI. Electronic Access

    Persons with access to the internet may obtain the final standard 
MOU at either https://www.fda.gov/drugs/human-drug-compounding/regulatory-policy-information, https://www.fda.gov/drugs/guidance-compliance-regulatory-information/guidances-drugs, or https://www.regulations.gov.

    Dated: October 21, 2020.
Lauren K. Roth,
Acting Principal Associate Commissioner for Policy.
[FR Doc. 2020-23687 Filed 10-26-20; 8:45 am]
BILLING CODE 4164-01-P