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.
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