Senate Sets Sights on Drug Compounding: But Does it Solve the Problems?

As the old Schoolhouse Rock song goes, "I'm Just a Bill, Yes, I'm only a Bill. And I'm sitting here on Capitol Hill." But two bills are no longer just sitting there on Capitol Hill. Currently, the Pharmaceutical Compounding Quality and Accountability Act and the Drug Supply Chain Security Act are on their way to the Senate floor. And drug companies, pharmacies, manufacturers, and wholesalers should pay close attention to their progress.

Background

A national outbreak of a rare form of fungal meningitis surfaced in the summer of 2012. Over the coming months, more than 50 people died and over 700 were hospitalized with severe complications after contracting the disease. This tragedy reignited the debate as to which agency or agencies have the authority over compounding practices. Do the states have sole authority over the practice of pharmacy, which includes compounding? Or does the FDA have a role? Are compounds new drugs that are subject to FDA review and approval? Or are they exempt from the FDA new drug approval process?

In response to this compounding conundrum, on May 22, 2013, the Senate Health, Education, Labor & Pensions ("HELP") Committee passed two bills. The Pharmaceutical Compounding Quality and Accountability Act (Senate Bill 959) and the Drug Supply Chain Security Act (Senate Bill 957). But Congress previously tried to fix the statutory authority by which pharmacists and physicians compound medications. In 1997, Congress passed the Food, Drug, and Cosmetic Act Modernization Act ("FDAMA") to delineate traditional pharmacy compounding and drug manufacturing. The Supreme Court, however, found in 2002 certain provisions of this law unenforceable, and federal circuit courts split over the enforceability of the rest of FDAMA.

Now, it seems that Congress is ready to try again. Senate Bills 959 and 957, if enacted, are poised to bring sweeping changes to the compounding landscape.

The Details

The Pharmaceutical Compounding Quality and Accountability Act

At the committee hearing for Senate Bill 959, Senator Mikulski explained that the "bill aims to establish clear boundaries between state roles and responsibilities over pharmacies and FDA's role. We clarify existing FDA authorities in statute which were challenged in federal court by compounding pharmacies. We prohibit all compounders from making certain drug products that are too difficult to compound or undermine FDA's drug approval process, including asthma inhalers, biologics and copies of FDA approved drugs."

To accomplish this goal, the Bill proposes the following:

• Amending the language found in the Food, Drug, & Cosmetic Act's Section 503A, which is the section of law the Supreme Court found unenforceable. The replacement language preserves much of the FDAMA language that clarifies the role pharmacists and physicians play in compounding medications. It also preserves the exemption for compounded medications from the FDA new drug approval processes.
• Creating, for the first time, a new category of compounding called "compound manufacturing." In its simplest terms, the Bill distinguishes extemporaneous compounding pursuant to a patient-specific prescription from compounding medications for administration in a prescriber's office (so called, "Office Use" compounding). Any entity other than a hospital or health system that pools sterile products or that repackages sterile, preservative-free vials is also considered a compounding manufacturer. And, to promote accountability, compounding manufacturers may not be licensed as pharmacies.
• The Bill would also require companies that make sterile products without a prescription (or in advance of a prescription) and sell those products across state lines to register with the FDA and remain subject to regular inspections.
• The Bill creates a similar structure for oversight of compounded animal drugs, and clarifies the law on compounding from bulk chemicals for animals.

In sum, the Bill attempts to set forth a national, uniform set of rules for compounding manufacturers while preserving the states' primary role in traditional pharmacy regulation.

The Drug Supply Chain Security Act

The companion bill to Senate Bill 959 is the Drug Supply Chain Security Act, Senate Bill 957. According to the CEO of the Healthcare Distribution Management Association, this Bill establishes, "a federal, uniform traceability solution [that] will offer greater regulatory clarity to the healthcare industry and ensure lifesaving medications are delivered safely to those who need them." For years, manufacturers, wholesale distributors, and third-party logistics providers have spent countless dollars responding to the drug distribution traceability requirements (also known as, "pedigree requirements") for each of the 50 states, federal districts, and territories. To alleviate burdensome compliance requirements that vary by jurisdiction, and to strengthen security of the drug supply chain, this Bill proposes the following:

• A national pedigree standard, or a "track and trace" system, offering a uniform set of requirements for those operating in multiple jurisdictions. Section 585 of this Bill makes explicit that the product tracing requirements set forth in this Act pre-empt State product tracing requirements, including paper or electronic pedigree systems.
• Once product is serialized, the Bill would require manufacturers, repackagers, and wholesale distributors to respond to requests to verify product at the unit level in circumstances pertaining to suspect and illegitimate product.
• The Bill would require third-party logistics providers that warehouse or provide other logistics services, but do not take ownership of the product, to accept information from the owner of the product before taking possession, and alert the owner in the case of a suspect or illegitimate product.

Generally speaking, the track and trace law would impose a blend of licensing, reporting, labeling, and coding requirements at each step in the supply chain, from the manufacturer to the patient.

What's Next?

With any new legislation, the inevitable question is raised, "What are the unintended consequences?" What is a "Compounding Manufacturer?" Does my pharmacy fit this definition? If my pharmacy is deemed a compounding manufacturer, what does it mean for my business? Among the unresolved issues is whether a pharmacy compounding "complex dosage forms" and biologics is required to register as a compound manufacturer in all circumstances.

It is also unclear whether the Department of Health and Human Services ("HHS") will exert more Power if the Bills are passed. The Secretary of HHS has the authority to ban the use of certain drugs and other substances in the practice of compounding. But what are the parameters by which the Secretary can add a substance to the "banned list?"

Not new in this legislation, but still uncertain, is the prohibition on the duplication of commercially available drugs. Certainly, the compounding of medications that are copies of a commercially available medication is prohibited if the medication is already available in the market. But what about medications that are similar? The Bill describes compounds that produce a "significant difference" in the patient's outcome. That's fine, but how does a pharmacist establish that the compounded drug meets this standard? Is reliance on the prescriber's professional judgment sufficient?

Finally, despite the Drug Supply Chain Security Act's intent to federalize pedigree implementation, there are considerable questions regarding whether or not the legislation achieves its goal or simply adds more onerous requirements and increases costs.

The Senate HELP Committee intends to put these two bills together in a single package and present it to the full Senate in the near future. Should this Bill make it to the House, it will certainly face copious amendments and debate. And if history is a guide, should the Bills become law, years of legal challenges await. But today, it is still just a Bill…

For more information on Senate Bill 959 and Senate Bill 957, please contact Mark Boesen at (602) 229-5383 / mark.boesen@quarles.com, Amy Cotton at (602) 229-5530 / amy.cotton@quarles.com, or your Quarles & Brady attorney.