Congress Clarifies Drug Compounding, Tracking Policies

Public outrage over deaths from contaminated injectibles produced by large compounding pharmacies, along with rising concerns about counterfeit and unauthorized drugs entering the U.S. market, managed to lift the stalemate on Capitol Hill long enough to generate agreement on reform legislation. After months of public hearings and negotiations, Democrat and Republican leaders of the House Energy & Commerce Committee and the Senate Health, Education, Labor and Pensions Committee unveiled a compromise bill last week. No one gets all they wanted from the Drug Quality and Security Act, but it provides more clarity and predictability to drug oversight programs and moves forward initiatives designed to enhance the safety and quality of medicines in the U.S.

Voluntary system

The Compounding Quality section of the bill, first of all, clarifies the authority of the Food and Drug Administration over drug compounding under section 503A of the Food, Drug and Cosmetics Act. Federal courts have issued diverse rulings on this provision, undermining its status and encouraging legal challenges. The lawsuits are not likely to stop, but may be easier for FDA to defend.

Pharmaceutical manufacturers gained language in the legislation specifying that compounders cannot produce drugs that are “essentially a copy of a marketed drug,” nor specific products that raise safety issues and appear on an FDA no-compounding list. There’s an exception, though, for drug shortage situations, where compounders are free to step in.

But efforts to extend FDA oversight to drug “outsourcing facilities,” are voluntary and relatively weak. Instead of setting specific criteria – e.g., sterile drug production or operating across state lines - to differentiate local compounding pharmacies from large commercial operations, the legislation encourages outsourcers to register with FDA, pay required fees and meet drug manufacturing and quality standards on the basis that they will gain a market advantage over unregistered producers. But it remains to be seen if hospitals and clinics are willing to steer purchases to registered compounders and to pay a premium for quality products. The voluntary nature of the program, says Allan Coukell, senior director for drug and medical devices at The Pew Charitable Trusts, means that quality compounders “will have to compete against those operating at lower standards.” The Government Accountability Office will examine how it’s all working after three years.

FDA still will be able to inspect all compounders and take action against those violating standards, but will face many of the same hurdles as it does today in identifying bad actors and enforcing standards.

Pre-empting states

The main gain for manufacturers from the drug supply chain security section of the act is to pre-empt state pedigree laws, including the comprehensive California statute that is slated to go into effect in 2015. The new bill generally follows the Senate’s 10-year time-line for establishing an electronic, interoperable, unit-level drug tracking system. All drug packages will have to carry serial numbers in four years, and FDA will establish verification and traceability standards and provisions for data exchange.

The tracking system will include manufacturers, wholesaler/distributors and pharmacies, with some exceptions for small firms. In addition, third-party logistics providers such as Federal Express and UPS get a pass on keeping records and participating in investigators, which Coukell fears will create serious gaps in the tracking process.

There’s optimism that Congress will approve the legislation fairly quickly. Most interest groups have signed on, and House and Senate agreement should rule out amendments and a conference committee.