Science and Law
1st July 2013

Pharmaceutical Compounding – A Legal Powder Keg

Did you know that physicians can have pharmaceutical products custom made without FDA oversight? It’s surprising, but true. Much like a brew master who plucks commonly used ingredients to create a unique beer, pharmaceutical compounding firms develop custom medications based on a healthcare provider’s specifications.

Pharmaceutical Compounding – A Legal Powder Keg

This post was drafted by David H. Schwartz, a principle at Innovative Science Solutions, and John Clark, MD,MSPH, who provides expertise to ISS in litigation involving pharmacovigilence and adverse event reporting. Dr. Clark has consulted with corporations and defense counsel on mass tort and complex litigation for the past three decades. He has worked with individual clients and industry groups on management of some of the country’s largest and most prominent pharmaceutical issues. Dr. Clark is the president and chief medical officer at PCSglobal, a pharmaceutical, biotechnology and medical device industries consulting company specializing in risk-reduction services.

Did you know that physicians can have pharmaceutical products custom made without FDA oversight? It’s surprising, but true. Much like a brew master who plucks commonly used ingredients to create a unique beer, pharmaceutical compounding firms develop custom medications based on a healthcare provider’s specifications.

For decades, pharmaceutical compounding flew under the radar, attracting minimal attention from regulators, lawmakers and the public. But in October 2012, an outbreak of fungal meningitis that caused nearly 50 deaths and 720 serious injuries was traced back to the New England Compounding Center (NECC) in Framingham, MA. The incident led to intense scrutiny of the pharmaceutical compounding industry, spurring regulatory compliance actions, legislative initiatives, and multiple legal actions. Based on this activity, we anticipate pharmaceutical compounding firms and healthcare providers will rely on legal advisors with expertise in food and drug law for guidance and support. In fact, some firms have already formed practice areas focused on this offering.

Physicians use pharmaceutical compounding for the following reasons:

• To obtain a different formulation (e.g., convert a solid pill into a liquid)

• To eliminate a non-essential ingredient that a patient is allergic to (e.g., a dye)

• To obtain the exact dosage needed or limit dosage strength (e.g., for infants)

• To obtain a drug that has been discontinued

• To address a supply shortage

• To accommodate taste preferences (e.g., for children or animals)

• To administer bioidentical hormone replacement therapy

Pharmaceutical compounding was historically used to create medications for individual patients – a process known as traditional compounding. However, in recent years, non-traditional compounding has been used to provide medications for larger groups of patients at the request of hospital formularies and other healthcare providers. Hospitals and big clinic systems purchase these products from compounding pharmacies because they are less expensive than traditional generics manufacturers.

Compounding falls into that gray area between state/local and federal oversight. As with many industries in this gray area, compounding is subject to little or no effective regulation. According to a recent article in the NEJM: “Traditional compounding pharmacies are not registered with the FDA as drug manufacturers, the agency doesn’t approve their prescriptions before marketing, and related adverse events need not be reported to the FDA. State law generally controls recordkeeping, certifications, and licensing for compounding pharmacies…” However, as noted earlier, the regulatory climate is changing.

Considering that the trend toward non-traditional compounding is escalating, and the legislative and regulatory arena is in a state of flux, we believe law firms can provide valuable support to the compounding industry. Not only will compounding pharmacies require legal advice and representation, but also healthcare providers who use compounding pharmacies will seek legal support because their level of responsibility for ensuring the quality of these products remains unclear.

We expect that lawmakers and the FDA will eventually devise a regulatory format that treats compounding pharmacies like drug manufacturers, requiring that they adhere to standards or face penalties. But it is unclear when new regulations and laws will emerge. The FDA is currently inspecting compounding facilities, but appears uncertain of its regulatory obligations. Meanwhile, the House recently tabled an initiative addressing compounding pharmacies.

Written standard operating procedures (SOPs) and operational audits must be established to ensure the quality of products produced by compounding pharmacies. Neither is currently well-defined. However, an ISS partner, PCSglobal, is developing an auditing offering for compounding pharmacies that will provide an initial framework for developing SOPs and audits. This service will offer hospitals, clinic systems, and other medical service providers a quality-control framework for products made by compounding pharmacies, limiting exposure to potentially huge liabilities. Large compounding services, such as those operating as part of larger national pharmacy chains, will also benefit from an established SOP and auditing system.

The new regulatory and legislative environment relevant to pharmaceutical compounding will take many years to emerge. During this time, we anticipate that legal firms with expertise in food and drug law will play an important role in helping organizations navigate this complex landscape. These opportunities will range from providing counsel on the development of appropriate and effective SOPs to the legal representation of hospitals, pharmacies, and other players embroiled in the litigation.

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