Recent Health Policy Briefs: Regulating Compounding Pharmacies and Basic Health Program Update

The latest Health Policy Brief from Health Affairs and the Robert Wood Johnson Foundation examines the Compounding Quality Act, a law signed by President Obama in November 2013, which seeks to fill the gaps in the Food and Drug Administration’s (FDA’s) inspection and enforcement oversight of compounding pharmacies.

This law was enacted in the wake of a 2012 fungal meningitis outbreak, linked to a Massachusetts drug compounding company. The outbreak caused more than 700 people to become ill and left sixty-four dead. Before the new law was passed, compounding pharmacies were primarily regulated by states, not the FDA.

The compounding pharmacy industry initially catered to patients with specialized needs. Since the 1990s, many compounding pharmacies have also begun engaging in what is now called nontraditional compounding: manufacturing certain drugs in large quantities for sale to doctors’ offices and hospitals. This health policy brief traces the evolution of compounding pharmacies and the changes brought to this industry by the new law.

In April Health Affairs also posted an update to an earlier brief that provides more information on the issues surrounding the Basic Health Program and outlines options for states.

Health Policy Briefs are aimed at policy makers, congressional staffers, and others needing short, jargon-free explanations of health policy basics. Sign up for an e-mail alert about upcoming briefs. The briefs are also available from the Robert Wood Johnson Foundation’s website. Please feel free to forward the briefs to any of your colleagues who are tracking health issues. And after you’ve taken a look, we welcome your feedback at: hpbrief@healthaffairs.org.

Regulating Compounding Pharmacies. Topics covered in this brief include:

• What’s the background? As the brief explains, compounding pharmacists, like almost all licensed medical professions, are regulated by states, not the federal government. However, the FDA has historically maintained that compounded drugs are “new drugs” under the Federal Food, Drug, and Cosmetic (FD&C) Act, which has always allowed the agency to loosely retain compounding pharmacies under its scrutiny. As the brief points out, the FDA has for many years known about serious illnesses and deaths associated with improperly compounded medicine, but little was done to punish offending pharmacies. According to the brief, Congress made its first effort in 1997 to bring compounding into a federal regulatory framework. A wave of court cases followed, leaving the legal landscape a patchwork of different standards. As the brief suggests, the events that transpired during the fall of 2012 was a crisis waiting to happen.
• What’s in the law? “It is Congress’ job to fix the law when it is inadequate,” declared Rep. Henry Waxman (D-CA) during a 2013 House Energy and Commerce subcommittee hearing. “We must do more than blame the FDA but give it the clear authority it needs.” The brief explains that the Compounding Quality Act provides two major changes: It sets up a voluntary category known as “outsourcing facilities,” (section 503B of FD&C Act) that allows compounders to sell unlimited quantities of drugs on the FDA’s drug shortage list, provided that the companies follow a set of new procedures and pay a $15,000 annual fee to the FDA. The brief also explains how the new law makes it possible for the FDA to distinguish between traditional compounders and companies that produce large quantities of compounded drugs.
• What’s next? With the new rules in place, implementation lies ahead. The drug compounding community is waiting for more detailed guidance later this year from the FDA on several questions the law has left unresolved, which the brief details. How well the new law is working will be assessed by a mandatory report, to be published within the next three years by the Government Accountability Office. The real tests, however, will be how many large companies register under section 503B—and whether New England Compounding Center–like catastrophes are prevented.