II 
Calendar No. 236 
113TH CONGRESS 
1ST SESSION H. R. 3204 
IN THE SENATE OF THE UNITED STATES 
SEPTEMBER 30, 2013 
Received 
NOVEMBER 4, 2013 
Read the first time 
NOVEMBER 5, 2013 
Read the second time and placed on the calendar 
AN ACT 
To amend the Federal Food, Drug, and Cosmetic Act with 
respect to human drug compounding and drug supply 
chain security, and for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Drug Quality and Se-
curity Act’’. 
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SEC. 2. REFERENCES IN ACT; TABLE OF CONTENTS. 
(a) REFERENCES IN ACT.—Except as otherwise spec-
ified, amendments made by this Act to a section or other 
provision of law are amendments to such section or other 
provision of the Federal Food, Drug, and Cosmetic Act 
(21 U.S.C. 301 et seq.). 
(b) TABLE OF CONTENTS.—The table of contents of 
this Act is as follows: 
Sec. 1. Short title. 
Sec. 2. References in Act; table of contents. 
TITLE I—DRUG COMPOUNDING 
Sec. 101. Short title. 
Sec. 102. Voluntary outsourcing facilities. 
Sec. 103. Penalties. 
Sec. 104. Regulations. 
Sec. 105. Enhanced communication. 
Sec. 106. Severability. 
Sec. 107. GAO study. 
TITLE II—DRUG SUPPLY CHAIN SECURITY 
Sec. 201. Short title. 
Sec. 202. Pharmaceutical distribution supply chain. 
Sec. 203. Enhanced drug distribution security. 
Sec. 204. National standards for prescription drug wholesale distributors. 
Sec. 205. National standards for third-party logistics providers; uniform na-
tional policy. 
Sec. 206. Penalties. 
Sec. 207. Conforming amendment. 
Sec. 208. Savings clause. 
TITLE I—DRUG COMPOUNDING 
SEC. 101. SHORT TITLE. 
This Act may be cited as the ‘‘Compounding Quality 
Act’’. 
SEC. 102. VOLUNTARY OUTSOURCING FACILITIES. 
(a) IN GENERAL.—Subchapter A of chapter V (21 
U.S.C. 351 et seq.) is amended— 
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(1) by redesignating section 503B as section 
503C; and 
(2) by inserting after section 503A the fol-
lowing new section: 
‘‘SEC. 503B. OUTSOURCING FACILITIES. 
‘‘(a) IN GENERAL.—Sections 502(f)(1), 505, and 582 
shall not apply to a drug compounded by or under the 
direct supervision of a licensed pharmacist in a facility 
that elects to register as an outsourcing facility if each 
of the following conditions is met: 
‘‘(1) REGISTRATION
AND
REPORTING.—The 
drug is compounded in an outsourcing facility that 
is in compliance with the requirements of subsection 
(b). 
‘‘(2) BULK DRUG SUBSTANCES.—The drug is 
compounded in an outsourcing facility that does not 
compound using bulk drug substances (as defined in 
section 207.3(a)(4) of title 21, Code of Federal Reg-
ulations (or any successor regulation)), unless— 
‘‘(A)(i) the bulk drug substance appears on 
a list established by the Secretary identifying 
bulk drug substances for which there is a clin-
ical need, by— 
‘‘(I) publishing a notice in the Federal 
Register proposing bulk drug substances to 
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be included on the list, including the ra-
tionale for such proposal; 
‘‘(II) providing a period of not less 
than 60 calendar days for comment on the 
notice; and 
‘‘(III) publishing a notice in the Fed-
eral Register designating bulk drug sub-
stances for inclusion on the list; or 
‘‘(ii) the drug compounded from such bulk 
drug substance appears on the drug shortage 
list in effect under section 506E at the time of 
compounding, distribution, and dispensing; 
‘‘(B) if an applicable monograph exists 
under the United States Pharmacopeia, the Na-
tional Formulary, or another compendium or 
pharmacopeia recognized by the Secretary for 
purposes of this paragraph, the bulk drug sub-
stances each comply with the monograph; 
‘‘(C) the bulk drug substances are each 
manufactured by an establishment that is reg-
istered under section 510 (including a foreign 
establishment that is registered under section 
510(i)); and 
‘‘(D) the bulk drug substances are each ac-
companied by a valid certificate of analysis. 
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‘‘(3) INGREDIENTS (OTHER THAN BULK DRUG 
SUBSTANCES).—If any ingredients (other than bulk 
drug substances) are used in compounding the drug, 
such ingredients comply with the standards of the 
applicable United States Pharmacopeia or National 
Formulary monograph, if such monograph exists, or 
of another compendium or pharmacopeia recognized 
by the Secretary for purposes of this paragraph if 
any. 
‘‘(4) DRUGS
WITHDRAWN
OR
REMOVED
BE-
CAUSE UNSAFE OR NOT EFFECTIVE.—The drug does 
not appear on a list published by the Secretary of 
drugs that have been withdrawn or removed from 
the market because such drugs or components of 
such drugs have been found to be unsafe or not ef-
fective. 
‘‘(5) ESSENTIALLY A COPY OF AN APPROVED 
DRUG.—The drug is not essentially a copy of one or 
more approved drugs. 
‘‘(6) DRUGS PRESENTING DEMONSTRABLE DIF-
FICULTIES FOR COMPOUNDING.—The drug— 
‘‘(A) is not identified (directly or as part 
of a category of drugs) on a list published by 
the Secretary, through the process described in 
subsection (c), of drugs or categories of drugs 
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that 
present 
demonstrable 
difficulties 
for 
compounding that are reasonably likely to lead 
to an adverse effect on the safety or effective-
ness of the drug or category of drugs, taking 
into account the risks and benefits to patients; 
or 
‘‘(B) is compounded in accordance with all 
applicable conditions identified on the list de-
scribed in subparagraph (A) as conditions that 
are necessary to prevent the drug or category of 
drugs from presenting the demonstrable dif-
ficulties described in subparagraph (A). 
‘‘(7) ELEMENTS TO ASSURE SAFE USE.—In the 
case of a drug that is compounded from a drug that 
is the subject of a risk evaluation and mitigation 
strategy approved with elements to assure safe use 
pursuant to section 505–1, or from a bulk drug sub-
stance that is a component of such drug, the out-
sourcing facility demonstrates to the Secretary prior 
to beginning compounding that such facility will uti-
lize controls comparable to the controls applicable 
under the relevant risk evaluation and mitigation 
strategy. 
‘‘(8) PROHIBITION
ON
WHOLESALING.—The 
drug will not be sold or transferred by an entity 
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other than the outsourcing facility that compounded 
such drug. This paragraph does not prohibit admin-
istration of a drug in a health care setting or dis-
pensing a drug pursuant to a prescription executed 
in accordance with section 503(b)(1). 
‘‘(9) FEES.—The drug is compounded in an 
outsourcing facility that has paid all fees owed by 
such facility pursuant to section 744K. 
‘‘(10) LABELING OF DRUGS.— 
‘‘(A) LABEL.—The label of the drug in-
cludes— 
‘‘(i) the statement ‘This is a com-
pounded drug.’ or a reasonable comparable 
alternative statement (as specified by the 
Secretary) that prominently identifies the 
drug as a compounded drug; 
‘‘(ii) the name, address, and phone 
number of the applicable outsourcing facil-
ity; and 
‘‘(iii) with respect to the drug— 
‘‘(I) the lot or batch number; 
‘‘(II) the established name of the 
drug; 
‘‘(III) the dosage form and 
strength; 
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‘‘(IV) the statement of quantity 
or volume, as appropriate; 
‘‘(V) the date that the drug was 
compounded; 
‘‘(VI) the expiration date; 
‘‘(VII) storage and handling in-
structions; 
‘‘(VIII) the National Drug Code 
number, if available; 
‘‘(IX) the statement ‘Not for re-
sale’, and, if the drug is dispensed or 
distributed other than pursuant to a 
prescription for an individual identi-
fied patient, the statement ‘Office Use 
Only’; and 
‘‘(X) subject to subparagraph 
(B)(i), a list of active and inactive in-
gredients, identified by established 
name and the quantity or proportion 
of each ingredient. 
‘‘(B) CONTAINER.—The container from 
which the individual units of the drug are re-
moved for dispensing or for administration 
(such as a plastic bag containing individual 
product syringes) shall include— 
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‘‘(i) the information described under 
subparagraph (A)(iii)(X), if there is not 
space on the label for such information; 
‘‘(ii) the following information to fa-
cilitate 
adverse 
event 
reporting: 
www.fda.gov/medwatch and 1–800–FDA– 
1088 (or any successor Internet Web site 
or phone number); and 
‘‘(iii) directions for use, including, as 
appropriate, dosage and administration. 
‘‘(C) 
ADDITIONAL
INFORMATION.—The 
label and labeling of the drug shall include any 
other information as determined necessary and 
specified in regulations promulgated by the Sec-
retary. 
‘‘(11) 
OUTSOURCING
FACILITY
REQUIRE-
MENT.—The drug is compounded in an outsourcing 
facility in which the compounding of drugs occurs 
only in accordance with this section. 
‘‘(b) REGISTRATION OF OUTSOURCING FACILITIES 
AND REPORTING OF DRUGS.— 
‘‘(1) REGISTRATION OF OUTSOURCING FACILI-
TIES.— 
‘‘(A) 
ANNUAL
REGISTRATION.—Upon 
electing and in order to become an outsourcing 
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facility, and during the period beginning on Oc-
tober 1 and ending on December 31 of each 
year thereafter, a facility— 
‘‘(i) shall register with the Secretary 
its name, place of business, and unique fa-
cility identifier (which shall conform to the 
requirements for the unique facility identi-
fier established under section 510), and a 
point of contact email address; and 
‘‘(ii) shall indicate whether the out-
sourcing facility intends to compound a 
drug that appears on the list in effect 
under section 506E during the subsequent 
calendar year. 
‘‘(B) AVAILABILITY OF REGISTRATION FOR 
INSPECTION; LIST.— 
‘‘(i) REGISTRATIONS.—The Secretary 
shall make available for inspection, to any 
person so requesting, any registration filed 
pursuant to this paragraph. 
‘‘(ii) LIST.—The Secretary shall make 
available on the public Internet Web site of 
the Food and Drug Administration a list 
of the name of each facility registered 
under this subsection as an outsourcing fa-
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cility, the State in which each such facility 
is located, whether the facility compounds 
from bulk drug substances, and whether 
any such compounding from bulk drug 
substances is for sterile or nonsterile 
drugs. 
‘‘(2) DRUG REPORTING BY OUTSOURCING FA-
CILITIES.— 
‘‘(A) IN
GENERAL.—Upon initially reg-
istering as an outsourcing facility, once during 
the month of June of each year, and once dur-
ing the month of December of each year, each 
outsourcing facility that registers with the Sec-
retary under paragraph (1) shall submit to the 
Secretary a report— 
‘‘(i) identifying the drugs compounded 
by such outsourcing facility during the pre-
vious 6-month period; and 
‘‘(ii) with respect to each drug identi-
fied under clause (i), providing the active 
ingredient, the source of such active ingre-
dient, the National Drug Code number of 
the source drug or bulk active ingredient, 
if available, the strength of the active in-
gredient per unit, the dosage form and 
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route of administration, the package de-
scription, the number of individual units 
produced, and the National Drug Code 
number of the final product, if assigned. 
‘‘(B) FORM.—Each report under subpara-
graph (A) shall be prepared in such form and 
manner as the Secretary may prescribe by regu-
lation or guidance. 
‘‘(C) 
CONFIDENTIALITY.—Reports 
sub-
mitted under this paragraph shall be exempt 
from inspection under paragraph (1)(B)(i), un-
less the Secretary finds that such an exemption 
would be inconsistent with the protection of the 
public health. 
‘‘(3) ELECTRONIC REGISTRATION AND REPORT-
ING.—Registrations and drug reporting under this 
subsection (including the submission of updated in-
formation) shall be submitted to the Secretary by 
electronic means unless the Secretary grants a re-
quest for waiver of such requirement because use of 
electronic means is not reasonable for the person re-
questing waiver. 
‘‘(4) RISK-BASED INSPECTION FREQUENCY.— 
‘‘(A) IN
GENERAL.—Outsourcing facili-
ties— 
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‘‘(i) shall be subject to inspection pur-
suant to section 704; and 
‘‘(ii) shall not be eligible for the ex-
emption under section 704(a)(2)(A). 
‘‘(B) RISK-BASED
SCHEDULE.—The Sec-
retary, acting through one or more officers or 
employees duly designated by the Secretary, 
shall inspect outsourcing facilities in accordance 
with a risk-based schedule established by the 
Secretary. 
‘‘(C) RISK FACTORS.—In establishing the 
risk-based schedule, the Secretary shall inspect 
outsourcing facilities according to the known 
safety risks of such outsourcing facilities, which 
shall be based on the following factors: 
‘‘(i) The compliance history of the 
outsourcing facility. 
‘‘(ii) The record, history, and nature 
of recalls linked to the outsourcing facility. 
‘‘(iii) The inherent risk of the drugs 
compounded at the outsourcing facility. 
‘‘(iv) The inspection frequency and 
history of the outsourcing facility, includ-
ing whether the outsourcing facility has 
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been inspected pursuant to section 704 
within the last 4 years. 
‘‘(v) Whether the outsourcing facility 
has registered under this paragraph as an 
entity that intends to compound a drug 
that appears on the list in effect under sec-
tion 506E. 
‘‘(vi) Any other criteria deemed nec-
essary and appropriate by the Secretary 
for purposes of allocating inspection re-
sources. 
‘‘(5) ADVERSE EVENT REPORTING.—Outsourc-
ing facilities shall submit adverse event reports to 
the Secretary in accordance with the content and 
format requirements established through guidance or 
regulation under section 310.305 of title 21, Code of 
Federal Regulations (or any successor regulations). 
‘‘(c) REGULATIONS.— 
‘‘(1) IN GENERAL.—The Secretary shall imple-
ment the list described in subsection (a)(6) through 
regulations. 
‘‘(2) 
ADVISORY
COMMITTEE
ON 
COMPOUNDING.—Before issuing regulations to im-
plement subsection (a)(6), the Secretary shall con-
vene and consult an advisory committee on 
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compounding. The advisory committee shall include 
representatives from the National Association of 
Boards of Pharmacy, the United States Pharma-
copeia, pharmacists with current experience and ex-
pertise in compounding, physicians with background 
and knowledge in compounding, and patient and 
public health advocacy organizations. 
‘‘(3) INTERIM LIST.— 
‘‘(A) IN
GENERAL.—Before the effective 
date of the regulations finalized to implement 
subsection (a)(6), the Secretary may designate 
drugs, categories of drugs, or conditions as de-
scribed such subsection by— 
‘‘(i) publishing a notice of such sub-
stances, drugs, categories of drugs, or con-
ditions proposed for designation, including 
the rationale for such designation, in the 
Federal Register; 
‘‘(ii) providing a period of not less 
than 60 calendar days for comment on the 
notice; and 
‘‘(iii) publishing a notice in the Fed-
eral Register designating such drugs, cat-
egories of drugs, or conditions. 
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‘‘(B) SUNSET
OF
NOTICE.—Any notice 
provided under subparagraph (A) shall not be 
effective after the earlier of— 
‘‘(i) the date that is 5 years after the 
date of enactment of the Compounding 
Quality Act; or 
‘‘(ii) the effective date of the final reg-
ulations issued to implement subsection 
(a)(6). 
‘‘(4) UPDATES.—The Secretary shall review, 
and update as necessary, the regulations containing 
the lists of drugs, categories of drugs, or conditions 
described in subsection (a)(6) regularly, but not less 
than once every 4 years. Nothing in the previous 
sentence prohibits submissions to the Secretary, be-
fore or during any 4-year period described in such 
sentence, requesting updates to such lists. 
‘‘(d) DEFINITIONS.—In this section: 
‘‘(1) The term ‘compounding’ includes the com-
bining, admixing, mixing, diluting, pooling, reconsti-
tuting, or otherwise altering of a drug or bulk drug 
substance to create a drug. 
‘‘(2) The term ‘essentially a copy of an ap-
proved drug’ means— 
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such drugs have been found to be unsafe or not ef-
fective. 
‘‘(4)(A) The term ‘outsourcing facility’ means a 
facility at one geographic location or address that— 
‘‘(i) is engaged in the compounding of ster-
ile drugs; 
‘‘(ii) has elected to register as an outsourc-
ing facility; and 
‘‘(iii) complies with all of the requirements 
of this section. 
‘‘(B) An outsourcing facility is not required to 
be a licensed pharmacy. 
‘‘(C) An outsourcing facility may or may not 
obtain prescriptions for identified individual pa-
tients. 
‘‘(5) The term ‘sterile drug’ means a drug that 
is intended for parenteral administration, an oph-
thalmic or oral inhalation drug in aqueous format, 
or a drug that is required to be sterile under Federal 
or State law.’’. 
‘‘(d) OBLIGATION TO PAY FEES.—Payment of the fee 
under section 744K, as described in subsection (a)(9), 
shall not relieve an outsourcing facility that is licensed as 
a pharmacy in any State that requires pharmacy licensing 
fees of its obligation to pay such State fees.’’. 
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(b) FEES.—Subchapter C of chapter VII (21 U.S.C. 
379f et seq.) is amended by adding at the end the fol-
lowing: 
‘‘PART 9—FEES RELATING TO OUTSOURCING 
FACILITIES 
‘‘SEC. 744J. DEFINITIONS. 
‘‘In this part: 
‘‘(1) The term ‘affiliate’ has the meaning given 
such term in section 735(11). 
‘‘(2) The term ‘gross annual sales’ means the 
total worldwide gross annual sales, in United States 
dollars, for an outsourcing facility, including the 
sales of all the affiliates of the outsourcing facility. 
‘‘(3) The term ‘outsourcing facility’ has the 
meaning given to such term in section 503B(d)(4). 
‘‘(4) The term ‘reinspection’ means, with re-
spect to an outsourcing facility, 1 or more inspec-
tions conducted under section 704 subsequent to an 
inspection conducted under such provision which 
identified noncompliance materially related to an ap-
plicable requirement of this Act, specifically to deter-
mine whether compliance has been achieved to the 
Secretary’s satisfaction. 
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‘‘SEC. 744K. AUTHORITY TO ASSESS AND USE OUTSOURC-
ING FACILITY FEES. 
‘‘(a) ESTABLISHMENT AND REINSPECTION FEES.— 
‘‘(1) IN GENERAL.—For fiscal year 2015 and 
each subsequent fiscal year, the Secretary shall, in 
accordance with this subsection, assess and collect— 
‘‘(A) an annual establishment fee from 
each outsourcing facility; and 
‘‘(B) a reinspection fee from each out-
sourcing facility subject to a reinspection in 
such fiscal year. 
‘‘(2) MULTIPLE REINSPECTIONS.—An outsourc-
ing facility subject to multiple reinspections in a fis-
cal year shall be subject to a reinspection fee for 
each reinspection. 
‘‘(b) ESTABLISHMENT AND REINSPECTION FEE SET-
TING.—The Secretary shall— 
‘‘(1) establish the amount of the establishment 
fee and reinspection fee to be collected under this 
section for each fiscal year based on the method-
ology described in subsection (c); and 
‘‘(2) publish such fee amounts in a Federal 
Register notice not later than 60 calendar days be-
fore the start of each such year. 
‘‘(c) AMOUNT OF ESTABLISHMENT FEE AND REIN-
SPECTION FEE.— 
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‘‘(1) IN GENERAL.—For each outsourcing facil-
ity in a fiscal year— 
‘‘(A) except as provided in paragraph (4), 
the amount of the annual establishment fee 
under subsection (b) shall be equal to the sum 
of— 
‘‘(i) $15,000, multiplied by the infla-
tion adjustment factor described in para-
graph (2); plus 
‘‘(ii) the small business adjustment 
factor described in paragraph (3); and 
‘‘(B) the amount of any reinspection fee (if 
applicable) under subsection (b) shall be equal 
to $15,000, multiplied by the inflation adjust-
ment factor described in paragraph (2). 
‘‘(2) INFLATION ADJUSTMENT FACTOR.— 
‘‘(A) IN GENERAL.—For fiscal year 2015 
and subsequent fiscal years, the fee amounts es-
tablished in paragraph (1) shall be adjusted by 
the Secretary by notice, published in the Fed-
eral Register, for a fiscal year by the amount 
equal to the sum of— 
‘‘(i) 1; 
‘‘(ii) the average annual percent 
change in the cost, per full-time equivalent 
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position of the Food and Drug Administra-
tion, of all personnel compensation and 
benefits paid with respect to such positions 
for the first 3 years of the preceding 4 fis-
cal years, multiplied by the proportion of 
personnel compensation and benefits costs 
to total costs of an average full-time equiv-
alent position of the Food and Drug Ad-
ministration for the first 3 years of the 
preceding 4 fiscal years; plus 
‘‘(iii) the average annual percent 
change that occurred in the Consumer 
Price Index for urban consumers (U.S. 
City Average; Not Seasonally Adjusted; All 
items; Annual Index) for the first 3 years 
of the preceding 4 years of available data 
multiplied by the proportion of all costs 
other than personnel compensation and 
benefits costs to total costs of an average 
full-time equivalent position of the Food 
and Drug Administration for the first 3 
years of the preceding 4 fiscal years. 
‘‘(B) COMPOUNDED
BASIS.—The adjust-
ment made each fiscal year under subparagraph 
(A) shall be added on a compounded basis to 
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the sum of all adjustments made each fiscal 
year after fiscal year 2014 under subparagraph 
(A). 
‘‘(3) SMALL BUSINESS ADJUSTMENT FACTOR.— 
The small business adjustment factor described in 
this paragraph shall be an amount established by 
the Secretary for each fiscal year based on the Sec-
retary’s estimate of— 
‘‘(A) the number of small businesses that 
will pay a reduced establishment fee for such 
fiscal year; and 
‘‘(B) the adjustment to the establishment 
fee necessary to achieve total fees equaling the 
total fees that the Secretary would have col-
lected if no entity qualified for the small busi-
ness exception in paragraph (4). 
‘‘(4) EXCEPTION FOR SMALL BUSINESSES.— 
‘‘(A) IN GENERAL.—In the case of an out-
sourcing facility with gross annual sales of 
$1,000,000 or less in the 12 months ending 
April 1 of the fiscal year immediately preceding 
the fiscal year in which the fees under this sec-
tion are assessed, the amount of the establish-
ment fee under subsection (b) for a fiscal year 
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HR 3204 PCS 
packager, wholesale distributor, or dispenser 
transfers direct ownership of a product; or 
‘‘(B) a third-party logistics provider from 
whom a manufacturer, repackager, wholesale 
distributor, or dispenser accepts direct posses-
sion of a product or to whom a manufacturer, 
repackager, wholesale distributor, or dispenser 
transfers direct possession of a product. 
‘‘(24) TRANSACTION.— 
‘‘(A) IN GENERAL.—The term ‘transaction’ 
means the transfer of product between persons 
in which a change of ownership occurs. 
‘‘(B) EXEMPTIONS.—The term ‘trans-
action’ does not include— 
‘‘(i) intracompany distribution of any 
product between members of an affiliate or 
within a manufacturer; 
‘‘(ii) the distribution of a product 
among hospitals or other health care enti-
ties that are under common control; 
‘‘(iii) the distribution of a product for 
emergency medical reasons including a 
public health emergency declaration pursu-
ant to section 319 of the Public Health 
Service Act, except that a drug shortage 
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