Compounding pharmacies are currently regulated at the state level, where boards of pharmacy oversee everything from licensing
to cleanliness. However, because certain compounders are acting more like manufacturers, states are often ill-equipped to
regulate such facilities. This is especially true in light of many states' tightening budgets. For instance, in Texas (which,
along with Missouri, is one of two states that randomly tests compounded drugs), the number of pharmacies given random safety
tests in the state has dropped by approximately two-thirds since 2010.
Until recently, federal legislation has been strongly opposed by compounding pharmacy stakeholders. An attempt to regulate
compounders under the FDA Modernization Act (FDAMA) in 1997 was challenged in court because one provision in the law prohibited
soliciting prescriptions and advertising any particular compounded drug. In 2002, the Supreme Court agreed that the soliciting
and advertising prohibitions were impermissible restrictions on free speech, but did not decide on whether the remaining portions
of the law that (among other things) prohibited compounders from acting as manufacturers and from making copies of FDA-approved
products, could stand.
As a result, the decision of the Ninth Circuit (which heard the case before its Supreme Court appeal) striking down the remaining
regulations on compounders became the national standard. In 2008, the Fifth Circuit took up the issue, and came to a different
conclusion—that the compounding regulations that did not relate to advertising were enforceable. However, this holding applies
only in the Fifth Circuit, which covers Texas, Louisiana, and Mississippi.
The regulation of compounding is split between the Fifth Circuit and the rest of the country, where the FDA's authority over
compounders comes in the form of a compliance policy guide issued by the agency after the 2002 Supreme Court case. While it
does not carry the force of law, the guide provides the FDA with the right to take enforcement action over compounders that
cross the line.
The future of federal regulation
On May 15, and after months of committee hearings with FDA and public health officials, members of the Senate Health, Education,
Labor, and Pensions (HELP) Committee introduced the Pharmaceutical Compounding Quality and Accountability Act. The proposed
legislation would create a new class of compounders called "compounding manufacturers," who prepare drugs for shipment in
interstate commerce. So-called compounding manufacturers would be prohibited under the proposed law from, among other things,
preparing drugs that are copies of FDA-approved drugs. In addition, compounding manufacturers would be required to register
with the FDA, and to pay establishment fees starting at $15,000 for fiscal year 2015. This would not only create the first
list of compounding manufacturers—which would provide the FDA with critical information about the facilities that it needs
to inspect—but it would provide the funding necessary for the FDA to regulate such facilities.
The bill also clarifies that compounded products are new drugs subject to the Federal Food, Drug, and Cosmetic Act (FDCA)—the
law that regulates manufactured drugs—and states which provisions of the law apply to compounded products. Under the proposed
law, compounders would not have to comply with all traditional manufacturing regulations, but they would be held to standards
set by the FDA. Finally, the bill would require compounders to investigate and report adverse events.
The recently released bill, which has bipartisan support and has received comparatively little opposition from compounders
in light of the spinal meningitis outbreak, appears to present the best opportunity for federal oversight to date. However,
to become law, the bill requires support in the House, where some members assert that the existing compliance policy guide
provides the FDA with all the oversight authority it needs.
While the fate of federal legislation remains unclear, states have been working to tighten regulation over pharmacy compounders.
For instance, in the fall of 2012, Massachusetts enacted emergency regulations increasing the state board of pharmacy's oversight
of compounders, and requiring board approval of the areas where compounders prepare complex injectable drugs. In March 2013,
Florida changed its definition of "office use" compounding, limiting the amount of compounded products that compounders could
prepare and deliver to physician offices or hospitals in advance of a valid prescription. Finally, in New Jersey, a new statute
and a complete overhaul of compounding regulations have been proposed in recent months, in an attempt to provide clearer,
more comprehensive regulation over compounding pharmacies.
Tighter regulation of compounders could also have an impact on product liability claims, which—in certain cases—can impact
manufacturers as well as compounders. When patients are harmed by a compounded product, the compounding pharmacy can be sued
for product liability. In the case of the NECC, where approximately 50 people have died and more than 700 others have been
treated for fungal infections, the volume of ensuing litigation has played a part in crippling the now-bankrupt facility.
However, the threat of litigation has yet to stop many compounders from pushing the limits of production and crossing the
line into manufacturing.
In certain states, liability does not stop with the compounder. In Tennessee, for instance, a statute permits patients to
sue the sellers of a defective product if the manufacturer of that product is declared insolvent. Drug manufacturers who cooperate
with compounders and provide active ingredients could also be at risk of product liability claims if issues arise with the
As federal and state legislators continue to focus their attention on compounding pharmacies, it's likely that new legislation—particularly
at the state level, where regulations are easier to push through—will be enacted in coming months. Federal legislation is
less of a sure thing, but compounders can count on increased attention from the FDA as the debate about the proper level of
regulation and enforcement continues.
Michelle McGovern is an Associate in the healthcare practice of Manatt, Phelps, & Phillips. She can be reached at email@example.com