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

Letter

Background

Drug Compounding by Pharmacies

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.

State Regulation of Pharmacy Practice

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.

FDA Regulation of Drug Compounding

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.

Unclear Federal Authority and Lack of Consensus on When Drug Compounding Becomes Manufacturing

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. ..

FDA Lacks Reliable and Timely Data on Compounding Pharmacies, but Has Found Problems through Its Limited Oversight

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.

FDA Has Not Collected Reliable and Timely Data on Compounded Drugs and the Entities That Prepare Them

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.

Oversight of Drug Compounders Has Been Limited, but FDA Has Recently Increased Its Efforts

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.

States and National Organizations Have Taken Various Actions to Strengthen Oversight of Drug Compounding

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.

The Four States Reviewed Have Taken Actions, Including Increased Inspections, to Strengthen Oversight of Drug Compounding

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.

States May Leverage National Organizations’ Efforts to Enhance Oversight of Drug Compounding

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.

Resource Constraints and Other Factors May Affect States’ Ability to Oversee Drug Compounding

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.

Conclusions

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.

Matter for Congressional Consideration

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.

Recommendations for Executive Action

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.

Agency Comments and Our Evaluation

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.

Appendix I: Information on Selection Criteria for Four States

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.

Appendix II: History of the Food and Drug Administration’s (FDA) Authority over Drug Compounding and Approach to Oversight

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.

1992-1997: Administrative Framework Established for Drug Compounding Oversight

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.

1997-2001: Statutory Framework Established for Drug Compounding Oversight

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.

1999-2002: Judicial Developments in the Ninth Circuit

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.

2002: Revised Administrative Framework for Drug Compounding Oversight

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.

2006-2008: Judicial Developments in the Fifth Circuit

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.

2008-Present: FDA’s Different Oversight Approaches Following a Circuit Split

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.

Appendix III: Comments from the Department of Health and Human Services

Appendix IV: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

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.