Stakeholders disagree on FDA’s approach to wholesaling compounded drugs

While outsourcing facilities that make compounded drugs are asking the US Food and Drug Administration (FDA) to relax a draft guidance on the prohibition of wholesaling compounded drugs, a group representing pharmacists and a drugmaker are asking the agency to tighten restriction on wholesaling such products.

FDA published a draft guidance in June that explains its interpretation of the limits on wholesaling compounded drugs under section 503B of the Federal Food, Drug, and Cosmetic (FD&C) Act.

Compared to traditional 503A compounding pharmacies, outsourcing facilities regulated under section 503B are allowed to sell large batches of their products to healthcare facilities without requiring prescriptions. However, outsourcing facilities are prohibited from wholesaling compounded drugs under section 503B.

“The statutory prohibition on wholesaling in section 503B(a)(8) of the FD&C Act helps to ensure that compounding is based on individual patient need, which, in turn, reduces the overall risk of patient harm and helps to preserve the integrity of the U.S. drug approval process,” said FDA. “It also helps to preserve the integrity of the U.S. drug supply chain.”

“This prohibition, like other conditions in section 503B of the FD&C Act, preserves important distinctions between outsourcing facilities, which are intended to compound drugs for patients whose medical needs cannot be met by approved drugs, from conventional manufacturers, which generally engage in mass manufacturing of FDA-approved drug products,” the agency added.

FDA also argued that Congress looks at how money changes hands during the sale or transfer of compounded drugs to determine which entities in the process qualify for regulatory exemptions.

“FDA generally does not intend to apply this provision in instances when a common carrier that has experience in safely and securely delivering drug products to health care providers, which does not take ownership of a product, takes physical possession of a drug compounded by an outsourcing facility but only provides transportation services by delivering the drug to the outsourcing facility’s customers,” said the agency. “Additionally, FDA generally does not intend to apply this provision when an outsourcing facility uses an authorized third-party logistics provider (3PL), which also does not take ownership of products, to provide or coordinate warehousing or other logistics services for the compounded drug on behalf of the outsourcing facility.”

Several law firms that represent outsourcing facilities have written to FDA disagreeing with its interpretation of which entities fall within the scope of the guidance and how it defines certain terminology.

In their comments, Hyman, Phelps, and McNamara argued that outsourcing facilities should be allowed to transfer or distribute compounded formulations made with bulk substances that a 503A pharmacy could compound and dispense to such a facility. Based on its reading of the guidance, the firm noted that outsourcing facilities are not prohibited from selling compounded drugs to 503A facilities for the purpose of dispensing the product to an individual patient to fill a valid prescription.

“Assuming this is the case, it follows that a 503B outsourcing facility should be permitted to compound formulations for further transfer or distribution to a 503A compounding pharmacy using bulk substances that a 503A pharmacy would otherwise be permitted to compound and dispense,” the law firm said.

Chicago-based law firm Reed Smith, also wrote to FDA, arguing the agency’s definition of the word “sold” is different from what Congress intended and needs to be redefined. In particular, the firm argued that the guidance uses a broad definition of what is considered "prohibited sales and transfer" under statute and could include situations where an entity that does not take ownership or possession of the compounded drug would be regulated.

"The agency should clarify that the word 'sold' as used by section 503B(a)(8) requires the passage of title. There is no indication in section 503B that Congress intended to use anything other than the ordinary meaning of the word 'sold,'" said Reed Smith. "Providing the above clarification would also be consistent with the ostensible policy purposes served by the wholesaling prohibition in the view of FDA.

"According to the Agency, the wholesaling prohibition helps to preserve the integrity of the drug supply chain and ensures that compounding is based on individual patients’ needs," it added.

Using the same rationale, Reed Smith argued FDA's proposal to regulate third-party marketing firms or website operators for advertising an outsourcing facility's products goes beyond what the law allows.

Another law firm, Boesen and Snow, agreed that oversight of third-party marketing firms is unwarranted. The Arizona-based firm argued that since a marketing firm or website operator never takes possession of the compounded drugs, there is no concern over supply chain security or integrity of the drug approval process that should require regulating them. On the contrary, it said that they can help ensure compounded drugs get to patients more efficiently.

“The use of these marketing firms and websites by the outsourcing facility enables everyone involved to be able to respond quickly when a patient requires a compounded drug,” said Boesen and Snow. “Without these marketing firms or websites being available to an outsourcing facility, a doctor or pharmacy may need to spend considerable expense in time and money to determine which outsourcing facility has the required compounded drug.

“Furthermore, the outsourcing facility will have a much easier time reaching prescribers, and in turn, patients and pharmacies with the use of these websites and marketing firms,” it added.

On the other side of the debate, drugmaker Pacira Biosciences argued the proposed oversight of outsourcing facilities is too lax and may put patients at risk. The company said putting limits on how drug compounders operate is not only critical to the integrity of the new drug approval process, but also ensures patients are given safe treatments and drug supply chains are secure.

“Securing FDA approval for a new drug is costly and time-consuming, requiring the manufacturer to conduct clinical trials and complete a rigorous application process to demonstrate that the drug is safe and effective for public consumption,” said Pacira. “Compounded drugs do not have to meet these requirements, leaving Section 503B vulnerable to misuse by compounders looking for a less expensive way to produce and market their unapproved drugs.”

Pacira said FDA needs to remove language that excludes third-party logistic providers (3PLs) from entities that are exempt from oversight. The company argued that, in practice 3PLs could have arrangements with outsourcing facilities to coordinate logistics, market products and facilitate payments that create a loophole that could put patients at risk.

"The use of 3PLs in this manner compromises the integrity of the drug approval process because it opens the door for the distribution of compounded drug products based on the impermissible considerations of cost or ease of administration rather than individual patient need,” said Pacira. “It also undermines the integrity of the drug supply chain by increasing the risk of contamination or diversion of unapproved drug products.

“Overall, the agency’s proposal is beyond the FDA’s authority to implement the statute and would not survive judicial scrutiny, and, accordingly, the decision to exempt 3PLs from the definition of ‘sold or transferred’ must be removed from the draft guidance,” it added.

The National Community Pharmacists Association (NCPA) also raised concerns that FDA’s proposed guidance is too lax and may endanger patients. The organization argued that traditionally, pharmacists who compound drugs know the patient's and their prescriber's needs. It is worried that FDA's new framework for outsourcing facilities means pharmacists will be ignorant of critical details, ingredients that may affect the patient, and their appropriateness.

NCPA is also concerned that outsourcing facilities will have an upper hand over smaller compounding pharmacies, which could put many of them out of business and deprive patients who rely on them.

“FDA’s policy is likely to create patient access challenges for low volume compounded medications,” said NCPA. “If outsourcing facilities are selling manufactured-scale compounded products to state-licensed pharmacies, 503A compounders will likely reduce or cease compounding activities.

“Patients who rely on compounded therapies which may not be suitable for scale production will suffer because without larger volume prescriptions, 503A pharmacies can no longer invest in the quality systems and laboratory to provide the personalized medications for the smaller demand patient populations,” it added.

FDA draft guidance

Stakeholders disagree on FDA’s approach to wholesaling compounded drugs

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