BGOV Bill Summary: H.R. 3204, Drug Compounding and Supply Safety

(Bloomberg) -- The Food and Drug Administration’s oversight of compounded drugs would be expanded and the U.S. for the first time would have uniform standards to monitor drug distribution from factories to pharmacies under H.R. 3204.

The bill, which reflects an informal House-Senate agreement on the issues, would allow the FDA to collect and spend fees to cover the costs of inspecting drug compounding sites and to license programs for providers of logistics services for drugmakers, wholesalers and dispensers.

The measure would impose handling and recordkeeping requirements on drug companies and create notification rules for drugs that are potentially unsuitable for distribution.

The bill responds to regulatory gaps revealed by investigations into 50 meningitis-related deaths last year that resulted from tainted medications linked to a compounding pharmacy. It would replace a patchwork of state laws governing distribution of drugs through about 4 billion prescriptions a year filled by compounding and traditional pharmacies, the Senate Health, Education, Labor and Pensions and House Energy and Commerce committees said in a joint statement.

Compounding Provisions

The FDA has cited conflicting legal decisions about its authority over compounders to deflect criticism that the agency didn’t act quickly to close New England Compounding Pharmacy Inc., the company at the center of the meningitis outbreak in October 2012 that killed more than 50 people. FDA Commissioner Margaret Hamburg has called for legislation to clarify the agency’s role.

Compounding pharmacies traditionally prepare personalized prescriptions, typically by mixing ingredients together, that are sent directly to patients or hospitals and are regulated by state health authorities. The meningitis outbreak revealed that some companies go beyond that task to produce larger amounts of medicines without or in advance of a prescription, acting more like a drugmaker that would be overseen by the FDA.

“This legislation will improve the safety of compounded drugs by clarifying the oversight responsibilities of the FDA over large-volume compounders and by holding facilities to high quality standards,” Iowa Democrat Tom Harkin, who heads the Senate HELP committee, said in the statement. “This bill also calls for an unprecedented tracing system that will track prescription drugs from manufacturing to distribution.”

Manufacturers of traditional drugs that don’t go directly to customers would have to maintain transaction information for at least six years, imprint a product identifier to each package within four years of the bill’s enactment, use only authorized trading partners and set up product verification systems within a year of enactment.

Drugmakers also would need to quarantine illegitimate products, and keep a sample for further testing by the maker or government health officials. Distributors, dispensers, repackagers and third-party logistics providers couldn’t accept products without getting the full transaction history.

The legislation would draw a distinction between traditional compounding, which would still be regulated mainly by state pharmacy boards, and compounding makers that produce sterile products without or ahead of receiving prescriptions and which sell those products across state lines.

The measure would permit drug compounders that practice outside the scope of traditional pharmacy practice of making drugs to fill specific prescriptions to register as outsourcing facilities subject to the FDA oversight. That would enable the FDA to identify providers and products, get reports on adverse reactions and make risk-based inspections.

Starting on Oct. 1, 2014, the Health and Human Services Department would assess and collect fees. Inspection fees for outsourcers would be $15,000 multiplied by an inflation adjustment factor. Businesses with less than $1 million in annual sales could apply to have their fees reduced to a third of the amount paid by larger businesses.

Supply Chain

The measure would create a uniform federal standard for tracking drugs to replace state laws that would result in electronic, interoperable unit-level drug tracking for the country in 10 years.

A unit-level system would require each bottle or vial to have an identifier; that’s different than a lot-level approach in which each unit produced in the same manufacturing lot would have the same identifier.

Drugmakers would be required to imprint lot-level product identifiers on all drug packages within four years of the bill becoming law. Within five years of the bill’s enactment, repackagers would be prohibited from accepting a shipment that doesn’t include identifiers.

Pharmacies would be barred from accepting drug shipments that lack identifiers within seven years of enactment.

An existing California law set to go into effect in January 2015 has many of the same requirements as the proposed national standard. The implementation of strict traceability standards in the most populous state would make many drugmakers and wholesalers act as if such a national standard were in place anyway, according to Brian Rye, a Bloomberg Government senior health-care analyst.

CBO Estimate

The measure would increase revenue and direct spending from criminal and civil penalties by less than $500,000 per year, with “negligible net effects” on the deficit, according to the Congressional Budget office cost estimate.

CBO said that the bill would result in net discretionary outlays of $27 million from fiscal 2014 through 2018.

Group Positions

SUPPORTERS include businesses such as United Parcel Service Inc. and pharmaceutical maker Perrigo Co. that benefit from prescriptions filled by mail, the 32-member Healthcare Distribution Management Association and the National Community Pharmacists Association trade groups, and more than a dozen patient advocacy organizations such as the Susan G. Komen Advocacy Alliance, the Prevent Cancer Foundation and the Lymphoma Research Foundation.

The bill “helps Perrigo, our Michigan-based manufacturing facilities and our employees avoid millions of dollars’ worth of duplicative government regulation and red tape by imposing a nationally uniform system for tracking and tracing prescription drugs,” the company’s chief financial officer, Judy Brown, said in a letter yesterday.

OPPONENTS include the International Academy of Compounding Pharmacists. The organization said the bill won’t protect the American public, lacks key definitions to govern compounding practice, and doesn’t take into account input from the compounding profession provided to Congress during the past year.

Previous Action

The relevant House and Senate committee chairmen and ranking members announced Sept. 26 they had reached agreement on the compounding and tracking-systems legislation.

The bill, which reflects the agreement, was introduced Sept. 27 by Fred Upton of Michigan, the Republican chairman of the Energy and Commerce Committee.

On May 22, the Senate HELP Committee approved and combined by voice vote two bills: S. 959, which focused on trying to improve compounding pharmacy quality and accountability, and S. 957, dealing with the drug supply chain. On July 24, the panel released an amended version of the bill that modified a handful of provisions. The bill had five co-sponsors, three Democrats and two Republicans, as of Sept. 26.

On June 3, the House passed, by voice vote, H.R. 1919, which would direct the FDA to establish national standards for monitoring the distribution of prescription drugs at the unit level. It was introduced by Ohio Republican Bob Latta. The bill doesn’t address compounding pharmacies.

Prospects

The House is scheduled to consider the bill Sept. 28 under suspension of the rules, which limits debate to 40 minutes, bars amendments, and requires a two-thirds majority for passage.

If passed by the House, the measure would go to the Senate for further action.

The White House hasn’t issued a statement of administration policy on the measure.