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Important legal issues with hospitals and compounded medications

May 2014
BY Mary M. Bearden and Elizabeth H. Jepson, Brown & Fortunato, P.C.

Utilization of compounded medications, such as chemotherapy and other intravenous therapy drugs, is common in hospitals. In response to the recent and highly publicized fungal meningitis outbreak in 2012 caused by contaminated injections compounded at the New England Compounding Center, federal legislation was enacted to afford greater oversight to compounding activities. It is vital that a hospital understands the current laws governing compounding and ensures that the hospital, and the companies from which they purchase compounded medications, are compliant with the laws.

Compounding is a process in which a pharmacist or other authorized individual combines, mixes, or alters ingredients to create a customized medication that is tailored to the needs of a particular patient. Compounded medications may be used for patients unable to tolerate commercially available drugs due to allergies, dosage forms, or other concerns. Compounding certain medications may also be necessary because of drug shortages. Hospitals have relied on compounded medications over the years for certain drugs and treatments, including chemotherapy and intravenous therapy.

to approval by the U.S. Food and Drug Administration (FDA) for safety or efficacy. Historically, compounding had been a matter for regulation and enforcement by state boards of pharmacy. However, under the federal compounding law known as the Compounding Quality Act (CQA), the FDA has increased authority over compounding facilities.

On November 27, 2013, the Drug Quality and Security Act, which includes the compounding provisions of the CQA, was signed into law by the President. In general, the CQA amends section 503A of the federal Food, Drug, and Cosmetic Act (FDCA), which affects traditional compounding pharmacies engaged in patient-specific compounding, and creates section 503B of the FDCA, which establishes a voluntary registration program for outsourcing facilities.

Section 503A applies to all licensed physicians and pharmacies engaged in compounding for individual patients based on valid prescriptions. Compounded medications that are prepared in accordance with the requirements of section 503A are exempt from the majority of the FDA’s requirements applicable to commercially manufactured prescription drugs. To be exempt, the compounded medication (among other requirements) must: (i) be compounded for an individual patient based on a valid prescription; (ii) be compounded by a licensed individual, either based on a prescription for an individual patient or in anticipation of receipt of a valid prescription based on historical prescribing practices; and (iii) utilize bulk chemicals that meet United States Pharmacopeia or National Formulary standards, are components of an FDA-approved drugs, or appear on a list developed by the FDA through regulation.

Compounding pharmacies may not compound drugs: (i) removed from the market for safety or efficacy reasons, (ii) that appear on “do not compound lists,” or (iii) that are essentially a copy of commercially available medications without changes producing a significant difference between the compounded medication and the commercially available medication based on the needs of an identified individual.

Finally, section 503A allows a state to enter into a Memorandum of Understanding (MOU) with the FDA to address the interstate distribution of compounded medications. If a state fails to enter into an MOU, then a pharmacy in that state may not compound and dispense more than five percent of its total prescription orders outside the state.

Importantly, section 503B allows compounders of sterile medications to voluntarily register with the FDA as an “outsourcing facility.” Outsourcing facilities may compound medications without patient-specific prescriptions, but must meet a number of FDA requirements for registration. An outsourcing facility does not have to be a licensed pharmacy, but must comply with current good manufacturing practices and be inspected by the FDA. Additionally, any compounding done at an outsourcing facility must be done by, or be supervised by, a licensed pharmacist.

Section 503B imposes a number of restrictions on outsourcing facilities. Many of the same restrictions that are applicable to compounding pharmacies under section 503A, such as the inability to compound medications that have been withdrawn from the market for safety or efficacy reasons, are also applicable to outsourcing facilities. However, section 503B limits the bulk chemical ingredients with which an outsourcing facility may compound to those that appear on the FDA’s drug shortage list or are included on the “clinical need” list established by the FDA. A compounded medication may not be transferred or sold by anyone other than the outsourcing facility that compounded the medication, except for compounded medications administered in a health care setting or dispensed pursuant to a prescription. Additionally, an outsourcing facility must comply with specified labeling requirements, including the requirement that all compounded medications be labeled with information identifying the outsourcing facility that compounded the medication and a statement that the medication is a compound and not for resale.

An outsourcing facility that is appropriately registered with the FDA and complies with the requirements of section 503B may engage in large-scale compounding of medications without a prescription and without any limits on out-of-state distribution. As of May 1, 2014, only 38 entities were registered with the FDA as outsourcing facilities.

As compounding pharmacies and outsourcing facilities are increasingly regulated, hospitals must stay abreast of changes in the law and regulations promulgated by the FDA. Additionally, hospitals must ensure that quality compounded medications are utilized. If the hospital is unable to have pharmacy compounding operations in-house due to cost or other concerns, the hospital must ensure that compounded medications are purchased from reputable, appropriately licensed pharmacies and outsourcing facilities.