Drug Compounding: Clear Authority and More Reliable Data Needed to Strengthen FDA Oversight
Published: 2013-07-31T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Drug compounding is the process by which a pharmacist combines, mixes, or alters ingredients to create a drug tailored to the medical needs of an individual. An outbreak of fungal meningitis in 2012 linked to contaminated compounded drugs has raised concerns about state and federal oversight of drug compounding. GAO was asked to update its 2003 testimony on drug compounding. Specifically, this report addresses (1) the status of FDA's authority to oversee drug compounding, and the gaps, if any, between state and federal authority; (2) how FDA has used its data and authority to oversee drug compounding; and (3) the actions taken or planned by states or national pharmacy organizations to improve oversight of drug compounding. GAO reviewed relevant statutes and guidance; reviewed FDA data; and interviewed officials from FDA, national pharmacy organizations, and four states with varied geography, population, and pharmacy regulations.
section_title: What GAO Recommends
paragraphs: To help ensure that the entities that compound drugs have appropriate oversight, Congress should consider clarifying FDAs authority to oversee drug compounding. In addition, FDA should ensure its databases collect reliable and timely data on inspections associated with compounded drugs, and differentiate drug compounders from manufacturers. HHS's comments support the need to clarify FDA's authority, and stated that the information in its inspection database could be improved and that it would consider whether it can differentiate compounding pharmacies from manufacturers.

section_title: Letter
paragraphs: Drug compounding is the process by which a pharmacist or doctor  combines, mixes, or alters ingredients to create a drug tailored to the  medical needs of an individual patient. Compounding, a traditional  component of the practice of pharmacy, is typically used to prepare drugs  that are not commercially available, such as a drug for a patient who is  allergic to an ingredient in a mass-produced pharmaceutical product.  Traditionally, state pharmacy regulatory bodies (e.g., boards of  pharmacy) regulate pharmacy practice, including drug compounding  activities, through state laws and regulations. The Food and Drug  Administration (FDA) is the agency within the Department of Health and  Human Services (HHS) responsible for assuring the safety and  effectiveness of drugs marketed in the United States. Under the Federal  Food, Drug, and Cosmetic Act (FDCA), and its implementing regulations,  FDA approves new drugs and regulates the manufacture, marketing, and  distribution of pharmaceutical products.
An outbreak of fungal meningitis in 2012 linked to contaminated  compounded drugs—resulting in over 60 deaths and hundreds of people  becoming ill—has led to questions about the safety and quality of  compounded drugs, and raised concerns about state and federal  oversight of drug compounding. Concerns have also been raised by FDA  and others, including members of Congress and public health advocates,  that some pharmacies are going beyond traditional drug compounding by  producing large quantities of compounded drugs without prescriptions for  individual patients, and selling those compounded drugs to facilities in  multiple states. Many believe that these types of pharmacies are  manufacturing drugs under the guise of compounding without meeting  safety and other requirements with which drug manufacturers must  comply.
You asked us to update our 2003 testimony on drug compounding. Specifically, this report addresses (1) the status of FDA’s authority to  oversee drug compounding, and the gaps, if any, between state and  federal authority to oversee drug compounding; (2) how FDA has used its  data and authority to oversee drug compounding; and (3) the actions  taken or planned by states or national pharmacy organizations to improve  oversight of drug compounding.
See GAO, Prescription Drugs: State and Federal Oversight of Drug Compounding by  Pharmacies, GAO-04-195T (Washington, D.C.: Oct. 23, 2003). representing pharmacies and pharmacists—including the American  Pharmacists Association, American Society of Health-System  Pharmacists, International Academy of Compounding Pharmacists, and  National Community Pharmacists Association—and other organizations,  including the National Association of Boards of Pharmacy (NABP) and the  United States Pharmacopeial Convention (USP). We also reviewed  reports and studies related to oversight of drug compounding, and  interviewed officials involved in those studies, including those from the  Congressional Research Service and the HHS Office of Inspector  General (OIG).
To examine how FDA has used its data and authority to oversee drug  compounding, we reviewed documents and interviewed FDA officials— including officials in the Center for Drug Evaluation and Research, Office  of Regulatory Affairs, and Office of the Chief Counsel—regarding data  FDA collects on compounded drugs, the entities that compound them,  and FDA inspections of those entities. Specifically, we examined data  related to drug compounding from (1) FDA’s Drug Registration and Listing  System on entities that compound drugs that registered with FDA in its  drug manufacturer database, and (2) FDA’s Field Accomplishments and  Compliance Tracking System (FACTS) on inspections of entities that  compound drugs. We also interviewed FDA officials on the availability  and limitations of FDA’s data on adverse events associated with  compounded drugs. We compared FDA’s data on compounded drugs  and the entities that compound them, including FDA’s inspections and  outcomes of those inspections, to standards described in Standards for  Internal Control in the Federal Government—which specifies that  relevant, reliable, and timely information be available for management  decision making and external reporting purposes. We also reviewed information on FDA’s efforts in 2013 to conduct inspections of entities  that, according to the agency, were known to have produced sterile  compounded drugs in the past. To assess the reliability of the FDA data,  we reviewed FDA guidance and related documentation; interviewed  knowledgeable agency officials; and viewed data FDA made available  from these databases on its website. We determined that the data were  sufficiently reliable for purposes of our report.
To identify actions planned or taken by states or national pharmacy  organizations, we reviewed state laws and regulations, and proposed  changes to state laws and regulations, in the four states we selected. For  each state, we reviewed documents and interviewed representatives of  the states’ pharmacy regulatory bodies regarding actions taken or  planned relating to the oversight of drug compounding, the implications of  existing and proposed state laws and regulations, and the challenges  state regulatory bodies face in overseeing drug compounding. We also  discussed the states’ pharmacy inspection and enforcement activities, as  well as state efforts to collect pharmacy data. In addition, we reviewed  surveys of states—for example, results of surveys of states to determine  the number requiring compliance with USP provisions for sterile  compounding. We also reviewed documents and interviewed officials  from national pharmacy organizations, including NABP, regarding the  actions planned or taken by these national pharmacy organizations  related to the oversight of drug compounding.
We conducted this performance audit from February 2013 to July 2013 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
subsections: section_title: Drug Compounding by Pharmacies
paragraphs: Traditionally, a drug is compounded, through the process of mixing,  combining, or altering ingredients, to create a customized drug tailored to  the medical needs of an individual patient upon receipt of a prescription.  For example, a pharmacist may tailor a drug for a patient who is allergic  to an ingredient in a manufactured drug or prepare a liquid formulation for  a patient who has difficulty swallowing pills. Some pharmacies also  compound drugs in advance of receiving individual patient prescriptions in  anticipation of receiving prescriptions based on historical prescribing  patterns, a practice referred to as anticipatory compounding.  Compounded drugs include nonsterile preparations, such as capsules,  ointments, creams, gels, and suppositories; and sterile preparations,  including intravenously administered fluids and injectable drugs.  Compounded sterile drugs pose special risks of contamination if not  made properly and require special safeguards to prevent injury or death  to patients receiving them.
Drug compounding is an integral part of the pharmacy profession and is  practiced in a variety of settings, including hospital pharmacies,  community pharmacies, chain drug store pharmacies, and home infusion  settings. The exact proportion of all prescriptions filled by compounded  drugs is unknown. In 2003, we reported that estimates ranged from   1 percent to 10 percent. More recently, in 2013, the International  Academy of Compounding Pharmacists estimated that the compounding  industry made up 1 to 3 percent of the U.S. prescription drug market.
The exact number of pharmacies that compound drugs is also unknown.  In 2013, the International Academy of Compounding Pharmacists  provided the following estimates:
About 26,000 community-based pharmacies reported that they  provide some sort of prescription compounding services, based on  information from the National Council of Prescription Drug Program’s  database on pharmacies.
Of those 26,000 community-based pharmacies, about 7,500  pharmacies specialize in compounding.
Of those 7,500 community-based pharmacies that specialize in  compounding, about 3,000 pharmacies compound both sterile and  nonsterile preparations.
In addition, there are about 8,200 hospital pharmacies in the United  States, and all of them are likely conducting some sort of  compounding, both sterile and nonsterile.
A recent report indicates that there has been an increase in the  outsourcing of drug compounding in the last decade, primarily by  hospitals. In April 2013, the HHS-OIG reported that nearly all (92 percent)  of surveyed hospitals that participated in Medicare reported using  compounded sterile products, and that more than three-fourths of these  hospitals (77 percent) purchased some of these compounded drugs from  at least one outside pharmacy. The HHS-OIG found factors that  hospitals cited for outsourcing included the need to ensure a ready supply  of products in the event of shortages and the need for products with  extended shelf lives, which require sophisticated equipment and testing to  prepare these products that may not be readily available on the hospital  premises.
section_title: State Regulation of Pharmacy Practice
paragraphs: State pharmacy regulatory bodies are responsible for oversight of the  practice of pharmacy. All 50 states describe drug compounding in their  state laws and regulations on pharmacy practice, although specific  statutes or regulations vary across states, according to NABP.
USP is involved in setting standards that affect compounding.to USP, compounding standards help practitioners adhere to widely  acknowledged, scientifically sound procedures and best practices, and  facilitate the delivery of consistent and good-quality prepared medicines  to patients. Twenty-five state pharmacy regulatory bodies reported that   According  they require compliance with USP’s chapter on sterile compounding,  according to the NABP’s 2013 survey of pharmacy law.
section_title: FDA Regulation of Drug Compounding
paragraphs: FDA considers compounded drugs to be “new drugs” subject to FDA  oversight; however, the agency has acknowledged that it is not  practicable for pharmacies to complete and obtain approval for a new  drug application for each compounded drug prepared for an individual  patient. In 1992, FDA, through guidance, and, in 1997, Congress,  through legislation, attempted to clarify when compounded drugs will be  exempt from certain requirements of the FDCA, including new drug  approval requirements. Specifically, the Food and Drug Administration  Modernization Act of 1997 (FDAMA) enacted section 503A of the FDCA.  This section exempted drug products compounded by a pharmacist or  physician based on a valid prescription for a compounded product that is  necessary for the identified patient from three key provisions of the FDCA  that are otherwise applicable to drugs, provided the pharmacy had,  among other conditions, not solicited prescriptions or advertised or  promoted the compounded drugs.
In 2001, however, the United States Court of Appeals for the Ninth Circuit  struck down all of the advertising, promotion, and solicitation provisions of  section 503A of the FDCA because those provisions violated the Free  Speech Clause of the First Amendment. The court also held that,  because these provisions could not be severed from the remainder of  section 503A, all of section 503A was invalid. In 2002, the United States  Supreme Court struck down the law’s advertising, promotion, and  solicitation restrictions without addressing whether the rest of   section 503A remained law. As a result, FDA issued a revised version of  its compliance policy guide on drug compounding in 2002, which provides  guidance, in light of the Ninth Circuit and Supreme Court decisions, on  the types of factors the agency will consider in determining whether to  take enforcement action against drug compounders for violations of the  FDCA. These factors include activities, such as offering compounded  drug products at wholesale, that suggest a drug compounder is engaged  in drug manufacturing, rather than drug compounding. Subsequently, in  2005, the United States Court of Appeals for the Fifth Circuit issued a  decision holding that, although section 503A’s advertising, promotion, and  solicitation restrictions were invalid, these restrictions could be severed  from the rest of section 503A and, therefore, the law’s remaining drug  compounding provisions remain valid. See appendix II for details about  these developments and how they have affected FDA’s authority to  oversee drug compounding.
The FDCA provides FDA authority to inspect pharmacies that compound  drugs; however, this authority is limited. Generally, FDA’s inspection  authority does not extend to a pharmacy’s records if the pharmacy meets  certain requirements. While FDA has not routinely inspected  compounding pharmacies, FDA has used its authority to conduct some  inspections in recent years, generally in response to complaints. These  inspections have resulted in FDA issuing inspection observation reports,  which are called FDA form 483s, and, in some cases, warning letters.  FDA’s FACTS database contains information on these inspections,  including the type of inspection (e.g., routine or in response to a  complaint).
Under the FDCA, drug manufacturers are required to register with FDA  and list the drugs they manufacture. The FDCA exempts from these  registration and listing requirements those pharmacies that meet certain  requirements. FDA’s Drug Registration and Listing System contains  information on drug establishments that have registered with FDA to  market their drugs in the United States. These establishments provide  information, including company name and address, and identify the drugs  they manufacture for commercial distribution in the United States.
section_title: Unclear Federal Authority and Lack of Consensus on When Drug Compounding Becomes Manufacturing
paragraphs: Although FDAMA attempted to clarify FDA’s authority to oversee drug  compounding, subsequent court decisions have contributed to a lack of  clarity regarding the legal standards FDA must apply to oversee drug  compounding. Specifically, two federal circuit court decisions resulted in  differing FDA authority over drug compounding in different parts of the  country, which has affected FDA’s ability to oversee drug compounding.  Section 503A provisions exempting certain compounded drugs from the  FDCA’s good manufacturing practice, certain labeling, and new drug and  abbreviated new drug application requirements are in effect in those  states in the Fifth Circuit, in which the U.S. Court of Appeals has held that  the law, other than its advertising, promotion, and solicitation provisions,  is valid. However, FDA follows its 2002 compliance policy guide in states  in the Ninth Circuit, in which the U.S. Court of Appeals has held all of the  drug compounding provisions in section 503A are invalid. In states  outside of the Fifth and Ninth Circuits, where federal courts have not  considered the validity of these drug compounding provisions, FDA  considers both section 503A’s drug compounding provisions and its 2002  compliance policy guide to guide its oversight. Figure 1 shows how FDA  generally conducts its oversight of drug compounding in different parts of  the country based on the differing court decisions. ..
section_title: FDA Lacks Reliable and Timely Data on Compounding Pharmacies, but Has Found Problems through Its Limited Oversight
paragraphs: FDA lacks reliable information on entities that compound drugs, the types  of drugs being compounded, and adverse events related to compounded  drugs. Until 2013, FDA limited its inspections of compounding pharmacies  to those conducted in response to complaints or adverse events, called  “for cause” inspections; however, the agency has recently conducted  inspections of compounding pharmacies that were known to produce  “high-risk” sterile compounded drugs, and identified serious problems.
subsections: section_title: FDA Has Not Collected Reliable and Timely Data on Compounded Drugs and the Entities That Prepare Them
paragraphs: FDA officials, including the FDA Commissioner, have stated that, under  the FDCA, compounding pharmacies are generally not required to  register with FDA or list their products, and therefore FDA does not know  who they are and what they are compounding. As a result, FDA has  stated that one of the reasons it has not routinely inspected compounding  pharmacies is because the agency does not know who they are.
Officials with some of the organizations we interviewed said there has  been confusion regarding the extent to which FDA oversees the  compounding pharmacies that registered with FDA as drug  manufacturers. Although drug manufacturers are required to register with  FDA by providing company information such as name, location, and the  drugs the company manufactures, compounding pharmacies meeting the  FDCA’s registration exemption are not required to register. However,  according to FDA officials, neither the law nor the agency precludes those  compounding pharmacies that are exempt from registration from  voluntarily doing so, and some compounding pharmacies have registered  with FDA as manufacturers and marketed themselves as “FDA- registered.” FDA officials told us that registering as a manufacturer does  not necessarily result in the application of regulatory requirements that  apply to manufacturers or in FDA inspection for compliance with these  requirements. For example, a compounding pharmacy may voluntarily  register with FDA; however, this registration does not by itself give FDA  authority to require the pharmacy to comply with FDA’s good  manufacturing practices and other requirements that apply to drug  manufacturers. Nonetheless, these pharmacies appear as registered  manufacturers in FDA’s registration database, the Drug Registration and  Listing System.
When entities that compound drugs on a large scale register with FDA as  manufacturers and market themselves as “FDA-registered,” it may  erroneously convey an endorsement by FDA. As a result, some state  officials and purchasers may incorrectly assume FDA inspects the entities  or has reviewed and approved their compounded drugs. Officials from  one of the national pharmacy organizations told us that they recently  learned that a pharmacy can be registered with FDA as a drug  establishment as well as with the state as a pharmacy. They added that  healthcare professionals and the public may assume that if an entity  registers with FDA then that means that FDA is in some way regulating  that entity. In addition, NABP officials noted that they were aware of some  entities engaged in drug compounding whose drug compounding  activities are not subject to state oversight because they are registered as  manufacturers with FDA and the states assume FDA is overseeing these  activities. Yet, if a compounding pharmacy is voluntarily registered with  FDA, the agency would not inspect it for compliance with good  manufacturing practices because it does not manufacture FDA-approved  drugs.
Further, FDA lacks reliable data to make decisions to prioritize its  inspection workload and other follow-up and enforcement actions.  Under standards for internal control in the federal government, relevant,  reliable, and timely information should be available for external reporting  purposes and management decision making. According to FDA officials,  although the agency’s FACTS database has a code for inspections of  compounding facilities, some compounding pharmacies could be  inspected and coded as either manufacturers of human drugs or  manufacturers of veterinary drugs, and the FACTS database would not  identify them as inspections of compounding pharmacies. In addition,  while FDA can manually look up the results of an individual inspection,  the agency does not have ready access to all of the final classification of  inspections for those compounding pharmacies it can identify in its  FACTS database; in these instances, FACTS does not indicate the  agency’s final determination whether an official action was indicated,  voluntary action was indicated, or if no action was indicated from the  inspection results.
According to FDA officials, some of the final  decisions are in hard copy, and the database includes recommendations  from the district office inspectors, which may differ from the final  inspection classifications. Without reliable, timely data on all inspections  conducted and the actions required and taken following those  inspections, FDA lacks ready access to key data to inform its decision  making on its oversight priorities and to take appropriate action when  problems are identified.
Generally, if a manufacturer receives drug- or certain device-related adverse event  reports, it must send them to FDA. Health care professionals and consumers can  voluntarily file adverse event reports with FDA and may also report these events to the  products’ manufacturers. User facilities (e.g., hospitals and nursing homes) must report  certain device-related—but not drug-related—adverse events to FDA as well. 21 C.F.R.  §§ 314.80(c), 803.30, 803.50. pharmacists’ and technicians’ miscalculations and mistakes in filling  prescriptions.
section_title: Oversight of Drug Compounders Has Been Limited, but FDA Has Recently Increased Its Efforts
paragraphs: Until 2013, FDA limited its inspections of compounding pharmacies to  those conducted in response to complaints or adverse events, called “for  cause” inspections; however, the agency has recently conducted  inspections of compounding pharmacies that FDA identified as known to  produce “high-risk” sterile compounded drugs. From its available data,  FDA identified 194 “for cause” inspections of compounding pharmacies  the agency conducted from February 8, 2002, through May 11, 2012,  under its pharmacy compounding assignment code for human drugs. Of  these 194 inspections, FDA issued 63 form 483 inspection observation  reports outlining significant objectionable conditions identified during the  inspections. FDA subsequently issued at least 31 warning letters to  pharmacies as a result of these inspections for problems such as  bacterial and fungal contamination found in sterile clean rooms and in  finished product samples, improper hygiene and garbing procedures  (e.g., putting on gowns, gloves, and shoe covers), failure to conduct  appropriate laboratory testing on drug products, and inadequate  ventilation. However, FDA has not taken any enforcement actions against  the 31 entities where the agency found problems significant enough to  send warning letters, according to FDA officials. Further, we found that 19  of the 194 compounding pharmacies were registered with FDA as drug  manufacturers.
While FDA policy requires that the final inspection classification (which  states whether official action, voluntary action, or no action was indicated  based on the inspection findings) be entered into the agency’s FACTS  database, FDA officials said they could not readily provide the final  inspection classification for the 194 inspections of compounding  pharmacies. The officials said that in some cases the database included  FDA district officials’ recommendations for inspection classification rather  than the final inspection classification. As a result, we could not ascertain  how many of the 194 inspections of compounding pharmacies found  problems that were significant enough for FDA to determine that official  action was indicated.
More recently, FDA began inspecting compounding pharmacies in  February 2013 that, according to the agency, were known to produce  “high-risk” sterile compounded drugs. These inspections were not the  for-cause inspections that FDA has typically done in the past when  inspecting compounding pharmacies. Rather, FDA’s objective was to  determine whether certain pharmacies that were known to have produced  high-risk sterile drug products in the past posed a significant threat to  public health from poor production practices. According to FDA officials,  the agency identified 31 compounding pharmacies to inspect using  criteria that included whether a warning letter had been issued to the  pharmacy in the past 10 years, whether the pharmacy compounded  sterile injectable drugs, whether there were adverse drug events reported,  or whether there were complaints received from the FDA district office or  others. FDA officials said they also reviewed related congressional  committee reports that mentioned specific pharmacies and reviewed  pharmacy websites. In summarizing these efforts, FDA reported that  pharmacies meeting at least two of FDA’s criteria were included in the  inspections.
As of April 29, 2013, FDA had issued form 483 inspection observation  reports to 30 of the 31 compounding pharmacies it inspected as part of its  recent inspections.inadequate, or both, clothing for sterile processing, lack of appropriate air  filtration systems, insufficient microbiological testing, and other practices  that create risk of contamination.
FDA’s observations included inappropriate or  As of May 21, 2013, 7 of the 31 compounding pharmacies had voluntarily  recalled some or all of their sterile compounded products as a result of  observations from these recent FDA inspections. For example:
FDA sampled a compounded sterile injectable solution during one of  its inspections in March 2013 and found bacteria in the product, which  resulted in the compounding pharmacy immediately announcing a  nationwide recall of all of its sterile compounded products, which  included over 50 sterile drug products.
Another compounding pharmacy recalled its sterile drug products that  had not yet reached the expiration date listed on the product because  of a lack of sterility assurance. This recall included approximately   95 dosage units of various sterile compounded drugs that the  pharmacy supplied to the offices of licensed medical professionals  located within its state; however, some patients that received products  from those medical professionals may live in other states.
Further, according to our analysis, 10 of the 31 high-risk compounding  pharmacies that FDA inspected were also registered in FDA’s drug  manufacturer database. Even though these compounding pharmacies  were registered with FDA, agency officials said the agency does not  routinely inspect these pharmacies despite their registration because  registration alone does not trigger a routine inspection. Additionally, 8 of  the 10 were individual facilities of two different larger compounding  pharmacies, both of which had websites advertising they were FDA- registered.
section_title: States and National Organizations Have Taken Various Actions to Strengthen Oversight of Drug Compounding
paragraphs: The four states we reviewed—California, Connecticut, Florida, and  Iowa—have each recently taken actions, such as working with national  pharmacy organizations, to improve their oversight of drug compounding.  In addition, national pharmacy organizations have undertaken efforts to  help states oversee drug compounding. However, some states may lack  the resources to provide the necessary oversight of drug compounding.
subsections: section_title: The Four States Reviewed Have Taken Actions, Including Increased Inspections, to Strengthen Oversight of Drug Compounding
paragraphs: All four of the states we reviewed recently took steps to potentially  strengthen their oversight of drug compounding. These steps included  developing an inspection program for sterile drug compounders that  dispense drugs in the state, but are located outside of the state, and  drafting new legislation to require the board of pharmacy to conduct on- site inspections prior to licensing a pharmacy. Examples of actions taken  by each of the four states we reviewed follow:  California: On May 29, 2013, the California Senate passed legislation that  would prohibit any pharmacy from compounding or dispensing, and any  nonresident pharmacy from compounding for shipping into the state,  sterile compounded drug products unless the pharmacy has obtained a  sterile compounding pharmacy license from the California Board of  Pharmacy; require inspection of resident and nonresident pharmacies by  the board prior to licensure; require resident and nonresident pharmacies  to report adverse events for compounded drugs to both the California  State Board of Pharmacy and MedWatch, FDA’s adverse event reporting  system; and require resident and nonresident pharmacies to submit a list  of all sterile medications compounded by the pharmacy during the prior  12 months before obtaining an annual renewal of the sterile compounding  license, among other requirements. Currently, California law requires that  a pharmacy that compounds sterile injectable drug products in California,  or that ships sterile injectable products into California, obtain a special  license issued by the board; however, the law exempts from this licensure  requirement certain pharmacies that have current accreditation from a  private accreditation agency approved by the board.pharmacies that obtain licensure by the board are subject to prelicensure  inspections, as well as annual inspections prior to renewal of the license.  Nonresident pharmacies must provide a copy of a recent inspection  report issued by the pharmacy’s licensing agency, or a recent report from  a private accrediting agency approved by the board, documenting the  pharmacy’s compliance with board regulations regarding the  compounding of injectable sterile drug products. In describing the board’s  support of the proposed legislation, a California State Board of Pharmacy  official told us that the board believed it important that all California and  nonresident pharmacies compounding sterile injectable drugs be subject  to state inspections, including those with an accreditation. As of June 14,  2013, the legislation was pending before a California State Assembly  committee.
Connecticut: An official from Connecticut’s Drug Control Division—which  conducts inspections of pharmacies in the state and houses the  Commission of Pharmacy Board Administrator, which oversees pharmacy  licensing—told us that, as of April 2013, the state was working to tighten  its regulations and implement inspection practices regarding in-state  sterile drug compounders. For example, the state plans to begin  conducting more thorough pharmacy inspections in which the inspectors  consider additional attributes, such as compliance with USP standards on  sterile compounding, the physical environment where the facility is  located, and the number of sales representatives employed by the  pharmacy. In addition, the Drug Control Division is working to propose  new regulations to allow the state to better track and regulate the sale of  compounded sterile medications produced by resident and nonresident  sterile drug compounders. However, the details of these proposed  regulations were not available as of June 2013.
Florida: On November 20, 2012, the Florida Board of Pharmacy issued an  emergency rule requiring all resident pharmacies and nonresident  pharmacies that ship drugs to Florida to immediately notify the board of  their compounding activities.  More than half (55 percent) of the 8,193  responding pharmacies reported that they compound nonsterile products,  such as ointments or tablets; and 12 percent reported that they  compound sterile products, such as injectable and ophthalmic solutions.  Florida found that about one-third (32 percent) of the 946 pharmacies that   One goal of  perform sterile compounding were nonresident pharmacies.Florida’s emergency rule was to determine the scope of sterile and  nonsterile compounding within Florida’s resident and nonresident  licensed pharmacies. According to Florida Board of Pharmacy officials,  prior to the emergency rule, the board did not know how many  pharmacies compounded drugs, how many nonresident pharmacies  shipped compounded drugs into the state, or whether they compounded  nonsterile or sterile drugs. According to these officials, the board intends  to use this newly acquired information to improve the board’s oversight  activities, such as to identify and inspect compounding pharmacies. As of  May 2013, the Florida Board of Pharmacy was considering whether to  require pharmacies to complete an updated survey biennially in order to  renew their pharmacy licenses.
Iowa: Iowa is inspecting drug compounders that are licensed by the state  as nonresident pharmacies and dispensing compounded drugs in Iowa.  Iowa established a consultancy services agreement with NABP in  December 2012, and inspectors from NABP began inspecting the 581  nonresident pharmacies identified by the state at that time. The results of  these inspections are expected to reveal whether the selected  pharmacies are compounding drugs in compliance with state regulations.  According to Iowa Board of Pharmacy officials, the state does not have  information on the extent that Iowa’s licensed nonresident pharmacies  compound drugs, how many nonresident pharmacies ship compounded  drugs into the state, or whether they compound nonsterile or sterile drugs.  However, NABP’s inspections have begun to provide some of this  information. As of April 2013, Iowa’s Board of Pharmacy had taken six  formal disciplinary actions against five out-of-state compounding  pharmacies following NABP inspections and, according to an Iowa Board  of Pharmacy official, the board anticipates more disciplinary actions  during the remainder of 2013 and early 2014. By the end of 2013 or early  in 2014, an Iowa Board of Pharmacy official anticipates that NABP  inspectors would visit all nonresident pharmacies licensed by the state.
section_title: States May Leverage National Organizations’ Efforts to Enhance Oversight of Drug Compounding
paragraphs: At the national level, pharmacy organizations have undertaken a number  of efforts to help states oversee drug compounding. For example, national  pharmacy organizations have developed standards for compounded  drugs that could be adopted by states. The following are examples of  efforts undertaken by national pharmacy organizations.
The National Association of Boards of Pharmacy (NABP): NABP has  initiated the Compounding Action Plan to identify and inspect  compounding pharmacies. It includes continued collaboration on the Iowa  nonresident inspection program, discussed above, and the sharing of  inspection results and related actions. Through this plan, NABP intends to  collect data on the number of compounding pharmacies, including their  scope of operations, in all states, and inspect these pharmacies. NABP  officials said they believe that many of the 581 nonresident pharmacies  licensed and identified by the Iowa Board of Pharmacy also hold licenses  with many, if not all, of the other states requiring nonresident licensure.  Using the Iowa nonresident licensed pharmacy list as a starting point,  NABP sent Iowa’s list to each state to confirm information regarding these  pharmacies, such as whether the pharmacy has been disciplined,  whether it is engaged in sterile compounding, or whether it is engaged in  “nontraditional” compounding activities. In addition, NABP asked all states  to identify any known or suspected compounding pharmacies in their  state that are not on the Iowa nonresident pharmacy list. As a result,  NABP officials told us that NABP added some additional pharmacies to  Iowa’s original inspection list. As of June 2013, NABP had inspected 215  pharmacies. In addition to its Compounding Action Plan, NABP created  and continues to maintain a Model State Pharmacy Act and Model Rules  for states to use when developing new pharmacy laws and regulations,  including rules specific to sterile compounding. According to NABP  officials, each state has adopted aspects of NABP’s model act and model  rules.
The Pharmacy Compounding Accreditation Board (PCAB): In 2006, eight  national pharmacy organizations established the PCAB, a voluntary  accrediting organization for sterile and nonsterile drug compounders.  According to an organization official, PCAB’s national standards are  based on the consensus of industry experts of those elements that should  exist in a pharmacy that adheres to high quality standards. PCAB  accreditation indicates that the staff involved in compounding have proper  and ongoing training; that the pharmacy uses active pharmaceutical  ingredients and inactive materials from appropriate suppliers; that all  compounding procedures are fully documented and carried out in  conformance with established formulas; and USP standards for  compounding. According to a PCAB official, as of June 26, 2013,   176 drug compounding pharmacies received PCAB accreditation, and  124 additional drug compounding pharmacies have applied for PCAB  accreditation.
section_title: Resource Constraints and Other Factors May Affect States’ Ability to Oversee Drug Compounding
paragraphs: Some states may lack the fiscal or staff resources to provide the  necessary oversight of drug compounding. A number of officials from  state boards of pharmacy attending a December 2012 meeting conducted  by FDA expressed confidence that their states had adequate resources to  oversee drug compounders, but were concerned about resources in other  states. They explained that, until recently, they depended on the states  where the pharmacies were located to license and regulate those  pharmacies. However, many state budgets have been cut and it is  uncertain whether all states have the resources or qualified staff to  inspect and otherwise appropriately oversee their licensed pharmacies.  The effect of limited state resources may reach across state lines, and it  may not be correct to assume that a pharmacy licensed by another state  is being regulated adequately.
In addition, differences in pharmacy inspection practices among states  may affect oversight of drug compounding in other states. For example,  each of the four states we reviewed require licensure or registration of  nonresident pharmacies that provide pharmacy services to users in the  state, and they require nonresident pharmacies applying for a license or  registration to have a current license, permit, or registration issued by the  regulatory authority of their home state. The states in our review also  have generally relied on the home states of the nonresident pharmacies  to inspect these pharmacies on a regular basis. However, state officials  and officials from national pharmacy organizations we interviewed told us  that the frequency of pharmacy inspections and the qualifications of the  pharmacy inspectors vary widely among states, and it is uncertain  whether all nonresident pharmacies receive adequate oversight from their  home states. Of the four states in our review, one required annual  inspections of all pharmacies located in the state and one required annual  inspections of all sterile drug compounding pharmacies located in the  state, while another required routine inspections of retail pharmacies in  the state once every 4 years. In addition, three of the four states required  all pharmacy inspectors to have a license to practice pharmacy in that  state, while one state reported having some inspectors without  pharmacist licenses.
Officials representing several national pharmacy organizations that we  interviewed also expressed concerns regarding whether states have  enough resources to regulate and inspect pharmacies on a timely basis.  Instead, some states inspect pharmacies only in response to a problem  they become aware of through a complaint or adverse drug event. Some  of these officials also expressed concern regarding FDA’s resources to  oversee drug compounding. For example, officials from NABP told us that  both FDA and the state boards of pharmacy need more resources for the  oversight of drug compounding. Recognizing the need for additional  resources to oversee drug compounders, the bill that the California  legislature is considering—a bill that would require nonresident  pharmacies shipping sterile compounded drugs into the state to have an  on-site inspection by the California Board of Pharmacy prior to  licensure—would also require those pharmacies to pay for inspection- related travel expenses.
section_title: Conclusions
paragraphs: To ensure that compounding pharmacies receive adequate oversight, it is  essential to have clear roles for FDA and states regarding the regulation  and oversight of drug compounding. The inconsistent federal circuit court  decisions complicate FDA’s ability to oversee drug compounding by  requiring FDA to approach the regulation of drug compounding differently  in different parts of the country. In addition, state approaches to the  oversight of pharmacies, including compounding pharmacies, vary  depending upon each state’s regulations and the resources each state  devotes to licensing and inspecting its pharmacies. Taken together, the  different regulatory approaches FDA must take and the variation in how  states oversee drug compounding, create gaps in oversight, which could  lead to inadequate assurance that public health is protected.
To adequately carry out the oversight of compounded drugs, FDA must  have data systems in place to produce timely, reliable information on  inspections, the findings of those inspections, and enforcement actions  taken related to compounded drugs. Without reliable, timely data, the  agency will not have the information needed to intercede and protect  Americans from unnecessary harm when problems are identified. Recent  FDA inspections of 31 entities that produce compounded drugs and the  subsequent drug recalls highlight the potential risk to public health of  failing to oversee these types of entities.
At the same time that FDA lacks complete information on inspections and  enforcement actions taken related to compounded drugs, entities that  compound drugs may register as manufacturers in the agency’s  registration database, and some advertise themselves as FDA-registered.  As a result, states and purchasers may incorrectly assume that FDA has  approved the products and inspected the facilities for compliance with  good manufacturing practices.
section_title: Matter for Congressional Consideration
paragraphs: To help ensure appropriate oversight of the safety of products from the  entities that prepare and distribute compounded drugs that have a high  potential to adversely affect public health, Congress should consider  clarifying FDA’s authority to regulate entities that compound drugs.
section_title: Recommendations for Executive Action
paragraphs: We recommend that the Secretary of Health and Human Services direct  the Commissioner of the FDA to  take steps to consistently collect reliable and timely information in  FDA’s existing databases on inspections and enforcement actions  associated with compounded drugs, and  clearly differentiate in FDA’s database, those manufacturers of FDA- approved drugs that FDA inspects for compliance with good  manufacturing practices from those entities compounding drugs that  are not FDA-approved and that FDA does not routinely inspect.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to HHS, which oversees FDA, for  comment. HHS provided written comments, which are reprinted in  appendix III, and technical comments, which we incorporated as  appropriate. HHS stated that our report accurately details the limitations  associated with FDA’s current authority to oversee drug compounding.  HHS’s comments also support the Matter for Congressional  Consideration that Congress should consider clarifying FDA’s authority to  oversee entities that compound drugs.
HHS neither agreed nor disagreed with our recommendations. Regarding  our first recommendation to direct FDA to consistently collect reliable and  timely information in FDA’s existing databases on inspections and  enforcement actions associated with compounded drugs, HHS stated that  although FDA’s FACTS database can be improved to better aggregate  data and to facilitate evaluation of compounding pharmacy activities,  these deficiencies do not materially impact FDA’s ability to protect the  public from harm when problems are identified. We understand that FDA  has the ability to access the data associated with compounded drugs by  searching under a company name or requesting information across FDA  centers and offices; however, as our report notes, FDA lacks ready  access to all of the data and lacks the ability to run queries or aggregate  the data. For example, when we requested the final inspection  classifications for 194 inspections of compounding pharmacies, FDA  could not provide this information because, according to FDA officials, the  FACTS database does not contain all of the final decisions and obtaining  all of the final inspection classifications would require time-consuming  manual searches of information maintained in hard copy. As a result, we  could not ascertain how many of these inspections found problems that  were significant enough for FDA to determine that official action was  indicated. Therefore, we continue to believe that FDA should take steps  to consistently collect reliable and timely information in its databases on  inspections and enforcement actions associated with compounded drugs.  Doing so would provide the agency with ready access to key data to  inform its decision making on its oversight priorities and allow it to take  appropriate action when problems are identified. In its comments, HHS  stated that FDA will take steps to further improve its databases to ensure  that inspections and actions regarding compounding going forward are  coded consistently and are more readily identifiable through electronic  searches, and that the final classification for inspections of drug  compounders are entered into the FACTS database. These steps are  consistent with our recommendation.
Regarding our second recommendation, HHS stated that FDA will  consider whether it would be possible or appropriate to differentiate in its  database those compounding pharmacies that register voluntarily from  conventional manufacturers of FDA-approved drugs that are required to  register. These conventional manufacturers are already subject to routine  inspections by FDA and are required to list the FDA-approved products  they manufacture. Therefore, these entities should already be known to  FDA. HHS also commented that FDA will provide information to the public  about what it means—and does not mean—to voluntarily register with  FDA. HHS further stated that FDA has recommended that Congress  require pharmacies engaged in nontraditional compounding in the United  States to register with FDA and list the drugs they are compounding, all of  which is consistent with our recommendation.
As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the  Secretary of Health and Human Services, appropriate congressional  committees, and other interested parties. In addition, the report will be  available at no charge on the GAO Web site at http://www.gao.gov.
If you or your staffs have any questions about this report, please contact  me at (202) 512-7114 or crossem@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs are on the last page  of this report. GAO staff who made major contributions to this report are  listed in appendix IV.
section_title: Appendix I: Information on Selection Criteria for Four States
paragraphs: To identify actions planned or taken by states, we interviewed  representatives of the state pharmacy regulatory bodies from four states:  California, Connecticut, Florida, and Iowa. We chose these states to  provide insight into how a range of states approach the oversight of drug  compounding; however, the approaches and experiences of these states  are not generalizable to all 50 states.
We selected these states to reflect a range of characteristics, including  census region, population, number of licensed pharmacies, and variation  in compounding regulations. Table 1 lists select data for each selected  state.
section_title: Appendix II: History of the Food and Drug Administration’s (FDA) Authority over Drug Compounding and Approach to Oversight
paragraphs: Amendments to the Federal Food, Drug, and Cosmetic Act (FDCA)  enacted in 1997, and a series of federal court decisions regarding the  validity of those amendments, have resulted in several significant shifts in  FDA’s authority and approach to the regulation of drug compounding over  the last two decades. Differences in these court decisions have resulted  in inconsistent FDA authority to oversee drug compounding, which,  according to the agency, has prompted it to apply three different  regulatory approaches to compounded drugs depending upon the federal  court jurisdiction in which the drugs are compounded. This appendix  describes these legal developments.
subsections: section_title: 1992-1997: Administrative Framework Established for Drug Compounding Oversight
paragraphs: In 1992, FDA issued a compliance policy guide that articulated the  agency’s approach to applying the FDCA’s new drug, adulteration, and  misbranding provisions to compounded drugs. FDA noted its  longstanding policy of deferring to state regulation of pharmacies  engaged in traditional compounding activities, but that it was issuing the  compliance policy guide to identify those circumstances under which the  agency believed establishments with retail pharmacy licenses were  engaged in “manufacturing, distributing, and promoting unapproved new  drugs” in a manner outside the traditional pharmacy practice of  compounding.agency might exercise its enforcement discretion to take action against  such establishments for violations of the FDCA’s new drug approval,  adulteration, and misbranding provisions.
section_title: 1997-2001: Statutory Framework Established for Drug Compounding Oversight
paragraphs: In 1997, Congress passed and the President signed into law the Food  and Drug Administration Modernization Act of 1997 (FDAMA) that, among  other things, amended the FDCA to expressly permit drug compounding  under certain conditions and to exempt compounded drugs meeting these  conditions from certain provisions of the FDCA. In particular, under  section 503A of the FDCA, as enacted by FDAMA, compounded drugs  meeting these conditions were expressly exempt from the requirement  that a drug be manufactured in conformity with current good  manufacturing practice; that a drug’s labeling carry adequate directions  for use; and that the drug is the subject of an approved new drug  application. To qualify for these exemptions, the pharmacist, physician, or  pharmacy compounding the drug had to meet certain criteria, including  refraining from advertising, promoting, or soliciting prescriptions for the  compounding of any drug.
section_title: 1999-2002: Judicial Developments in the Ninth Circuit
paragraphs: Shortly after FDAMA’s enactment, a group of seven pharmacies  challenged section 503A’s advertising, promotion, and solicitation  restrictions in federal district court, alleging that these restrictions violated  the Free Speech Clause of the First Amendment. Agreeing with the  plaintiffs, the U.S. District Court for the District of Nevada invalidated  section 503A’s advertising, promotion, and solicitation restrictions,  severing these restrictions from the remainder of section 503A. In 2001,  the U.S. Court of Appeals for the Ninth Circuit affirmed the district court’s  First Amendment holding; however, the Ninth Circuit took the view that  Congress would not have enacted section 503A without the advertising,  promotion, and solicitation provisions and, therefore, the law’s  advertising, promotion, and solicitation provisions were not severable. As  a result, it held that section 503A, in its entirety, was invalid. In April  2002, the United States Supreme Court in Thompson v. Western States  Medical Center affirmed the Ninth Circuit’s ruling invalidating section   Because  503A’s advertising, promotion, and solicitation provisions.neither the government nor the pharmacies appealed the Ninth Circuit’s  severability ruling, the Supreme Court declined to address the validity of  the remaining nonadvertising portions of section 503A.
section_title: 2002: Revised Administrative Framework for Drug Compounding Oversight
paragraphs: One month after the Supreme Court’s ruling in Western States, FDA  revised its longstanding 1992 Compliance Policy Guide on pharmacy  compounding to provide “immediate guidance on what types of  compounding might be subject to enforcement action under current law.”In that guidance, FDA took the position based on the Ninth Circuit’s and  Supreme Court’s Western States Medical Center decisions, that “all of  section 503A is now invalid.” Accordingly, the agency determined it was  necessary to issue guidance outlining the factors the agency would  consider in taking enforcement action against a compounding pharmacy  for violations of the FDCA. In particular, the agency stated that it would  continue to defer to state pharmacy authorities for “less significant”  violations of the FDCA but that when a pharmacy’s activities resemble  those of a drug manufacturer it would consider enforcement action. The  compliance policy guide provides a nonexhaustive list of such activities.  The compliance policy guide reflected FDA’s view that, even if a  compounding pharmacy has not engaged in these activities, the drugs it  compounded would be subject to all of the FDCA’s requirements that  apply to manufactured drugs; in the compliance policy guide FDA simply  outlined those circumstances under which the agency would actually  enforce these requirements against a compounding pharmacy.
section_title: 2006-2008: Judicial Developments in the Fifth Circuit
paragraphs: Four years later, in 2006, a group of 10 pharmacies challenged FDA’s  authority to regulate compounded drugs. In that case, FDA asserted that  compounded drugs fall within the FDCA’s definition of “new drug” and,  therefore, are subject to those provisions of the act that apply to such  drugs. The U.S. District Court for the Western District of Texas disagreed  with the agency, holding that compounded drugs when created for an  individual patient pursuant to a prescription from a licensed practitioner  “are implicitly exempt” from the FDCA’s new drug definition and the new  drug approval process. On appeal, the U.S. Court of Appeals for the Fifth  Circuit reversed the district court’s determination and held that  compounded drugs are “new drugs” under the FDCA. The court  reasoned that Congress would not have enacted FDAMA’s provisions  exempting compounded drugs from certain of the FDCA’s “new drug”  requirements had these provisions not applied to compounded drugs in  the first instance. To reach this conclusion, the Fifth Circuit considered  the severability of section 503A’s nonadvertising provisions.  Disagreeing with the Ninth Circuit’s Western States reasoning that  Congress would not have enacted section 503A without the advertising  provisions, the Fifth Circuit found that the FDCA contained a severability  provision and that this provision applied to section 503A. Finding no  strong evidence that Congress would not have enacted section 503A  without the advertising provisions, the court ruled that the law’s  nonadvertising provisions were severable from its unconstitutional  provisions. The result of the Fifth Circuit’s decision is that—at least in  the Fifth Circuit—compounded drugs are, in fact, “new drugs” under the  FDCA; however, these drugs are expressly exempt from certain  requirements that apply to “new drugs”—namely, compliance with current  good manufacturing practice, certain labeling requirements, and new drug  approval requirements—if they comply with the nonadvertising conditions  set forth in section 503A.
section_title: 2008-Present: FDA’s Different Oversight Approaches Following a Circuit Split
paragraphs: The Ninth Circuit Court of Appeals’ 2001 Western States decision  invalidating all of section 503A and the Fifth Circuit Court of Appeals’  2008 Medical Center Pharmacy decision holding that all of section 503A  other than the advertising, promotion, and solicitation restrictions is valid  are directly at odds. As a result of these decisions, section 503A is invalid  in those states in the Ninth Circuit (Alaska, Arizona, California, Hawaii,  Idaho, Montana, Nevada, Oregon, and Washington) and in full force and  effect in those states in the Fifth Circuit (Louisiana, Mississippi, and  Texas). FDA officials described the agency’s approach to regulating  compounded drugs under this incongruous legal landscape as follows:  In the Ninth Circuit, the agency takes the approach that all  compounded drugs are “new drugs” under the FDCA, and the agency  determines whether to consider taking enforcement action against a  compounding pharmacy based on whether the pharmacy engages in  any of the activities outlined in the agency’s 2002 compliance policy  guide on drug compounding. Even if a compounding pharmacy has  not engaged in the activities outlined in the compliance policy guide,  the drugs it compounds are, as a legal matter, subject to all of the  FDCA requirements that apply to “new drugs”; the compliance policy  guide simply outlines those circumstances under which the agency  will consider enforcing these requirements against a compounding  pharmacy.
In the Fifth Circuit, FDA determines whether a compounded drug  meets section 503A’s exemption from certain FDCA requirements that  would preclude the agency from taking enforcement action against a  drug compounder for noncompliance with these requirements.
For compounding pharmacies outside of the Fifth and Ninth Circuits,  which is the majority of the country, the agency applies the criteria in  both section 503A and its 2002 compliance policy guide to determine  whether to take enforcement action.
Table 2 identifies the criteria that a compounded drug must meet to  qualify for the exemption under section 503A of the FDCA from certain of  the law’s requirements and the criteria in FDA’s 2002 compliance policy  guide, which the agency considers in determining whether to take  enforcement action against an entity engaged in drug compounding.
section_title: Appendix III: Comments from the Department of Health and Human Services
section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Kim Yamane, Assistant Director;  Matthew Byer; Sandra George; Drew Long; and Lisa A. Lusk made key  contributions to this report.