Pharmacy Compounding: What's Ahead for Manufacturers

Jun 01, 2013
By Pharmaceutical Executive

In October 2012, a spinal meningitis outbreak caused by a tainted steroid rocked the country, and drew national attention to the Massachusetts compounding pharmacy that prepared the drug. Ever since the incident, federal and state legislators have been struggling to determine whether they should ramp up regulation of compounding pharmacies—a debate resulting in new state legislation and the introduction of the Pharmaceutical Compounding Quality and Accountability Act in the US Senate on May 15. As laws are debated at the national and local level, drug manufacturers are also evaluating the impact that increased regulation of compounders will have.

The pharmacy that caused the deadly outbreak is the New England Compounding Center (NECC), which was preparing injectable drugs despite having been cited in the past for cleanliness and safety issues. The incident shined a light on the federal regulatory landscape—and, importantly, the lack of regulation over compounders preparing high-risk drugs.

Traditional compounding

Under the traditional definition of compounding, a compounder prepares products for patients who cannot take a drug in its FDA-approved form; for instance, patients who are allergic to an inactive ingredient, or patients who cannot take the drug as prepared by a manufacturer. Traditional compounding, which takes place in state-licensed and -regulated facilities, calls for drugs to be prepared based on individual, valid prescriptions.

Because traditional compounders prepare drugs in individual batches, it is difficult to regulate their products in the same way as manufactured drugs. Compounded preparations are patient-specific and each patient has a different set of needs. Therefore, it would be nearly impossible to require a new drug application (NDA) for each drug prepared by a compounder. For this reason, and because compounders have been successful in stymieing regulation at the federal level, the FDA has unclear and limited authority to oversee compounders. In fact, at this time, there is no federal registry of compounding pharmacies—many operate outside of the FDA's notice or reach.

In certain cases, compounders have used the lack of federal regulation to act as de facto manufacturers, preparing large batches of unapproved drugs without FDA oversight. Facilities have engaged in practices that are clearly outside of the bounds of traditional, patient-specific drug preparation: preparing drugs before receiving individual prescriptions, or making compounds that are essentially copies of FDA-approved products.

Impact on manufacturers

Compounders acting as manufacturers have long competed with drug manufacturers preparing FDA-approved products, which are patented and enjoy a period of market exclusivity. Since compounded products do not have to undergo the NDA process—and because the FDA does not have clear authority to dictate their ingredients—certain compounders prepare copies of FDA-approved products for far cheaper than their manufactured counterparts.

Increased use of compounded products comes at the expense of manufactured drugs' market share—particularly in the case of costly, complex drugs. The lure of compounded products is only strengthened by ever-tightening hospital budgets. As payers shift to capitated models, hospital purchasers are looking to cut back on costs—compounded drugs can be an easy way to achieve savings.