oversight

Prescription Drugs: State and Federal Oversight of Drug Compounding by Pharmacies

Published by the Government Accountability Office on 2003-10-23.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                             United States General Accounting Office

GAO                          Testimony
                             Before the Committee on Health,
                             Education, Labor, and Pensions, U.S.
                             Senate

For Release on Delivery
Expected at 10:00 a.m.
Thursday, October 23, 2003   PRESCRIPTION DRUGS
                             State and Federal Oversight
                             of Drug Compounding by
                             Pharmacies
                             Statement of Janet Heinrich 

                             Director, Health Care—Public Health Issues 





GAO-04-195T 

                                                October 23, 2003


                                                PRESCRIPTION DRUGS

                                                State and Federal Oversight of Drug
Highlights of GAO-04-195T, a testimony to       Compounding by Pharmacies
the Committee on Health, Education,
Labor, and Pensions, U.S. Senate




Drug compounding—the process of                 A number of efforts have been taken or are under way both at the state level
mixing, combining, or altering                  and among pharmacy organizations at the national level that may strengthen
ingredients—is an important part                state oversight of drug compounding. Actions among the four states
of the practice of pharmacy                     reviewed included adopting new regulations about compounding and
because there is a need for                     conducting more extensive testing of compounded drugs. For example, the
medications tailored to individual
patient needs. Several recent
                                                pharmacy board in Missouri is starting a program of random testing of
compounding cases that resulted in              compounded drugs for safety, quality, and potency. At the national level,
serious illness and deaths have                 industry organizations are working on standards for compounded drugs that
raised concern about oversight to               could be adopted by the states in their laws and regulations, thereby
ensure the safety and quality of                potentially helping to ensure that pharmacies consistently produce safe,
compounded drugs. These                         high-quality compounded drugs. While these actions may help improve
concerns have raised questions                  oversight, the ability of states to oversee and ensure the quality and safety of
about what states—which regulate                compounded drugs may be affected by state-specific factors such as the
the practice of pharmacy—and the                resources available for inspections and enforcement.
Food and Drug Administration
(FDA) are doing to oversee drug                 FDA maintains that drug compounding activities are generally subject to
compounding. GAO was asked to
examine (1) the actions taken or
                                                FDA oversight, including its authority to oversee the safety and quality of
proposed by states and national                 new drugs. In practice, however, the agency generally relies on states to
pharmacy organizations that may                 regulate the limited compounding of drugs as part of the traditional practice
affect state oversight of drug                  of pharmacy. In 1997, the Congress passed a law exempting drug
compounding, and (2) federal                    compounders that met certain criteria from key provisions of the Federal
authority and enforcement power                 Food Drug and Cosmetic Act (FDCA), including the requirements for the
regarding compounded drugs.                     approval of new drugs. These exemptions, however, were nullified in 2002
                                                when the United States Supreme Court ruled part of the 1997 law to be an
This testimony is based on                      unconstitutional restriction on commercial speech, which resulted in the
discussions with the National                   entire compounding section being declared invalid. Following the court
Association of Boards of Pharmacy               decision in 2002, FDA issued guidance to indicate when it would consider
(NABP) and a GAO review of four
states: Missouri, North Carolina,
                                                taking enforcement actions regarding drug compounding. For example, it
Vermont, and Wyoming. GAO also                  said the agency would defer to states regarding “less significant” violations
interviewed and reviewed                        of the Act, but would consider taking action in situations more analogous to
documents from pharmacist                       drug manufacturing.
organizations, FDA, and others
involved in the practice of
pharmacy or drug compounding.




www.gao.gov/cgi-bin/getrpt?GAO-04-195T.

To view the full product, including the scope
and methodology, click on the link above.
For more information, contact Janet Heinrich
at (202) 512-7119.
Mr. Chairman and Members of the Committee:

I am pleased to be here today as you consider state and federal oversight
to ensure the safety and quality of compounded prescription drugs. Drug
compounding—the process of mixing, combining, or altering ingredients
to create a customized medication for an individual patient—is an
important part of the practice of pharmacy. Common examples of
compounded drugs include tailor-made medications for patients who are
allergic to an ingredient in a manufactured drug. Drug compounding is
part of pharmacy education and, like other aspects of pharmacy practice,
it is regulated by state pharmacy practice acts, which in turn are enforced
by state boards of pharmacy. All 50 states describe drug compounding in
their state laws and regulations on pharmacy practice, although specific
statutes or regulations vary across states. At the federal level, the Food
and Drug Administration (FDA), which oversees the introduction of new
drugs into the marketplace under the Federal Food, Drug and Cosmetic
Act (FDCA),1 maintains that compounded drugs are generally subject to
the act.

While drug compounding is an important part of ensuring that medications
are available to meet individual patient needs, the quality and extent of
drug compounding have surfaced as important issues in recent years. For
example, several compounding cases in the past several years have
resulted in serious illnesses and deaths, raising concern about oversight to
ensure the safety and quality of compounded drugs. In addition, concerns
have been raised by FDA and others that some pharmacies are going
beyond traditional drug compounding for individual patients by, for
example, compounding and selling large quantities of drugs without
meeting safety and other requirements for new manufactured drugs.
Because both states and the federal government have oversight
responsibilities, you asked us to address (1) the actions taken or proposed
by states and national pharmacy organizations that may affect state
oversight of drug compounding, and (2) federal authority and enforcement
power regarding compounded drugs.

My testimony today is based in part on discussions with the National
Association of Boards of Pharmacy (NABP), as well as a review we
conducted of four states: Missouri, North Carolina, Vermont, and
Wyoming. We selected these states based on their geographic location and


1
 See 21 U.S.C. § 355.




Page 1                                                          GAO-04-195T
variation in compounding regulations. Two of the states came to our
attention as having taken unique steps with regard to oversight of
compounded drugs, and the other two had each adopted new regulations
on drug compounding. For each of the four states, we reviewed state
statutes and regulations, interviewed officials from the state board of
pharmacy, and reviewed relevant documents such as pharmacy inspection
forms. In addition to examining state-level actions, we examined national
industry efforts by interviewing officials from the American Pharmacists
Association, the International Academy of Compounding Pharmacists, the
American Society of Health-System Pharmacists, the National Association
of Chain Drug Stores, and Professional Compounding Centers of America,
which provides training to pharmacists and also sells bulk ingredients for
drug compounding. We also contacted and obtained information from the
United States Pharmacopeia (USP), which is a nonprofit agency that
develops standards for pharmaceuticals. Finally, to examine federal
authority and enforcement power, we reviewed federal statutes, FDA
compliance policy guides, court decisions, and other relevant documents,
and interviewed FDA officials and industry experts. We conducted our
work from August 2003 to October 2003 in accordance with generally
accepted government auditing standards.

In summary, efforts at the state level and among pharmacy organizations
at the national level have been taken or are under way to potentially
strengthen state oversight of drug compounding. Actions among the four
states we reviewed included adopting new statutes and regulations about
compounding, such as requirements for facilities and equipment, and
conducting more extensive testing of compounded drugs. For example,
the pharmacy board in Missouri is starting a program of random testing of
compounded drugs for safety, quality, and potency. At the national level,
industry organizations are working on standards for compounded drugs
that could be adopted by the states in their laws and regulations, thereby
helping to ensure that pharmacies consistently produce safe, high-quality
compounded drugs. While these actions may help improve oversight, the
ability of states to oversee and ensure the quality and safety of
compounded drugs may be affected by state-specific factors such as the
resources available for inspections and enforcement. For example, in
three of the four states we reviewed, pharmacy board officials indicated
that resource limitations affected their ability to conduct routine
inspections.




Page 2                                                         GAO-04-195T
               FDA maintains that drug compounding activities are generally subject to
               its oversight, including its authority to oversee the safety and quality of
               new drugs. In practice, however, the agency generally relies on states to
               regulate the compounding of drugs as part of the traditional practice of
               pharmacy. In 1997, the Congress passed a law exempting drug
               compounders that met certain criteria from key FDCA provisions,
               including safety and efficacy requirements for the approval of new drugs.
               However, the entire section of the law dealing with drug compounding
               was nullified in 2002 after the United States Supreme Court ruled that part
               of it was an unconstitutional restriction on commercial speech. Following
               the court decision in 2002, FDA issued guidance to indicate when the
               agency would consider taking enforcement actions regarding drug
               compounding. For example, it said the agency would generally defer to the
               states for “less significant” violations of the FDCA but would consider
               taking action in situations more analogous to drug manufacturing.


               For most people and many pharmacies, filling a prescription is a matter of
Background 	   dispensing a commercially available drug product that has been
               manufactured in its final ready-to-use form. This has been particularly true
               in the United States since the rise of pharmaceutical manufacturing
               companies. In addition to meeting federal safety and efficacy requirements
               before a new drug is marketed, the drugs manufactured by these
               companies are routinely tested by FDA after marketing. According to FDA,
               the testing failure rate for more than 3,000 manufactured drug products
               sampled and analyzed by FDA since fiscal year 1996 was less than 2
               percent. Drug manufacturers are also required to report adverse events
               associated with their drugs, such as illness and death, to FDA within
               specified time frames.

               Drug compounding, which has always been a part of the traditional
               practice of pharmacy, involves the mixing, combining, or altering of
               ingredients to create a customized medication for an individual patient.
               According to the American Pharmacists Association, some of the most
               commonly compounded products include lotions, ointments, creams, gels,
               suppositories, and intravenously administered fluids and medication.
               Some of these compounded drugs, such as intravenously administered
               chemotherapy drugs, are sterile products that require special safeguards to
               prevent injury or death to patients receiving them. For example, sterile
               compounding requires cleaner facilities than nonsterile compounding, as
               well as specific training for pharmacy personnel and testing of the
               compounded drug for sterility.



               Page 3                                                          GAO-04-195T
The extent of drug compounding is unknown, but it appears to be
increasing in the United States. While industry representatives, the media,
and others have cited estimates for the proportion of prescription drugs
that are compounded ranging from 1 percent to 10 percent of all
prescriptions, we found no data supporting most estimates.2 FDA does not
routinely collect data on the quantity of prescriptions filled by
compounded drugs. Similarly, we found no publicly available data, either
from FDA or from industry organizations, on the amount of bulk active
ingredients and other chemicals that are used in drug compounding in the
United States. However, many state officials, pharmacist association
representatives, and other experts we interviewed reported that the
number of compounded prescriptions, which had decreased when
pharmaceutical manufacturing grew in the 1950s and 1960s, has been
increasing over the past decade.

Problems have come to light regarding compounded drugs, some of which
resulted in death or serious injury, because the drugs were contaminated
or had incorrect amounts of the active ingredient. Unlike drug
manufacturers, who are required to report adverse events associated with
the drugs they produce, FDA does not require pharmacies to report
adverse events associated with compounded drugs. Based on voluntary
reporting, media reports, and other sources, FDA has become aware of
over 200 adverse events involving 71 compounded products since about
1990. These incidents, including 3 deaths and 13 hospitalizations following
injection of a compounded drug that was contaminated with bacteria in
2001, have heightened concern about compounded drugs’ safety and
quality. In addition, a limited survey conducted by FDA’s Division of
Prescription Drug Compliance and Surveillance in 2001 found that nearly
one-third of the 29 sampled compounded drugs were subpotent—that is,
they had less of the active ingredients than indicated.

FDA and others have also expressed concern about the potential for harm
to the public health when drugs are manufactured and distributed in
commercial amounts without FDA’s prior approval. While FDA has stated
that traditional drug compounding on a small scale in response to



2
 A 2001 draft report of a study contracted by FDA included an estimate that about 6 percent
of all prescriptions were compounded but cautioned that there was considerable
uncertainty around this estimate due to limited data. The report acknowledged that
definitive statistics on compounding activities were not available. Eastern Research Group
Inc., Profile of the Pharmaceutical Compounding Industry, draft final report prepared for
the Food and Drug Administration, August 27, 2001.




Page 4                                                                      GAO-04-195T
                              individual prescriptions is beneficial, FDA officials have voiced concern
                              that some establishments with retail pharmacy licenses might be
                              manufacturing new drugs under the guise of drug compounding in order to
                              avoid FDCA requirements.


                              We found efforts at the state level and among national pharmacy
Actions Taken or              organizations to potentially strengthen state oversight of drug
Under Way by States           compounding. Actions among the four states we reviewed included
                              adopting new drug compounding regulations and random testing of
and National                  compounded drugs. At the national level, industry organizations are
Organizations to              working on standards for compounded drugs that could be adopted by
                              states in their laws and regulations. According to experts we interviewed,
Strengthen State              uniform standards for compounded drugs could help ensure that
Oversight of Drug             pharmacists across states consistently produce safe, quality products.
Compounding, but              While these actions may help improve oversight, the ability of states to
                              oversee and ensure the quality and safety of compounded drugs may be
Affect Likely to Vary         affected by their available resources and their ability to adopt new
from State to State           standards and enforce penalties.




Four States Reviewed          The four states we reviewed have taken a variety of approaches to
Have Taken a Variety of       strengthen state oversight.
Approaches to Strengthen
                         •	   Missouri. The pharmacy board in Missouri has taken a different approach
Oversight                     from other states: it is in the process of implementing random batch
                              testing of compounded drugs. No other state has random testing,
                              according to an NABP official. Random testing will include both sterile
                              and nonsterile compounded drugs and the board plans on testing
                              compounded drugs for safety, quality, and potency. A Missouri pharmacy
                              board official said testing will include random samples of compounded
                              drugs in stock in pharmacies in anticipation of regular prescriptions,
                              random selection of prescriptions that were just prepared, and testing of
                              compounded drugs obtained by undercover investigators posing as
                              patients. The official added that random testing will help to ensure the
                              safety and quality of compounded drugs and is also intended to serve as a
                              deterrent for anyone who might consider purposely tampering with
                              compounded prescriptions.

                         •	   North Carolina. North Carolina is the only state in the country that
                              requires mandatory adverse event reporting involving prescription drugs,



                              Page 5                                                         GAO-04-195T
                              including compounded drugs, according to an NAPB official. Regulations
                              in North Carolina require pharmacy managers to report information to the
                              pharmacy board that suggests a probability that prescription drugs caused
                              or contributed to the death of a patient. This reporting system, which does
                              not extend to incidents of illness or injury, allows the board to investigate
                              all prescription-drug-related deaths and determine whether an
                              investigation is warranted.

                         •	   Vermont. The pharmacy board in Vermont overhauled the state’s
                              pharmacy rules in August 2003 to address changes in pharmacy practice,
                              including the increase in Internet and mail-order pharmacies, according to
                              the pharmacy board chairman. For example, the chairman reported that
                              prior to the adoption of the new rules, Vermont had no definition of out-of-
                              state pharmacies and no requirements for these pharmacies to have a
                              Vermont license to do business in the state. The board chairman said that
                              the new rule requiring licensing for out-of-state pharmacies would provide
                              a mechanism to monitor pharmacies that ship prescription drugs,
                              including compounded drugs, into the state. In addition, he added that the
                              board revised the rules for compounding sterile drugs by including
                              specifics on facilities, equipment, and quality assurance measures.

                         •	   Wyoming. Prior to March 2003, Wyoming did not have state laws or rules
                              that established specific guidelines for drug compounding, aside from a
                              definition of drug compounding, according to a pharmacy board official.
                              The new rules include requirements for facilities, equipment, labeling, and
                              record keeping for compounded drugs, as well as a specific section on
                              compounding sterile drugs. In addition, under the new rules, the official
                              added that pharmacy technicians-in-training are no longer allowed to
                              prepare compounded drugs, including sterile products, which is a more
                              complex procedure requiring special equipment to ensure patient safety.


Efforts of National           At the national level, industry organizations are working on uniform
Organizations May Help        practices and guidelines for compounded drugs and a committee of
States Strengthen             national association representatives recently began work on developing a
                              program that would include certification and accreditation for drug
Oversight of Drug             compounding that could be used for state oversight. Groups such as the
Compounding                   NABP concluded that state oversight of drug compounding would be
                              strengthened if the states had uniform standards and other tools that could
                              be adopted to address the quality and safety of compounded drugs.
                              Several experts that we spoke with said national standards for
                              compounding drugs that could be incorporated into state laws and
                              regulations could help to ensure the quality and safety of compounded
                              drugs. One expert noted that an advantage to incorporating compliance


                              Page 6                                                           GAO-04-195T
                             with national compounding standards into state laws is that it would be
                             easier for states to keep up with updated standards without going through
                             the process of legislative changes.

                             NABP developed and updated a Model State Pharmacy Act that provides
                             standards for states regarding pharmacy practice. Recently revised in
                             2003, the model act includes a definition of drug compounding and a
                             section on good drug compounding practices. According to the executive
                             director of NABP, many states have incorporated portions of the model act
                             into their state pharmacy statutes or regulations by including similar
                             definitions of drug compounding and components of NABP’s good drug
                             compounding practices. For example, officials in Missouri and Wyoming
                             reported using the model act’s good drug compounding practices as a
                             guideline for developing their drug compounding regulations. In addition,
                             USP has established standards and guidelines for compounding nonsterile
                             and sterile drug products, both of which are being updated by expert
                             committees. An official told us that these revisions would be completed
                             early in 2004.

                             In addition, recognizing that there is no coordinated national program to
                             oversee compounding practices and that states’ oversight may vary, NABP
                             recently began working with other national organizations, including the
                             American Pharmacists Association and USP, to create a steering
                             committee to develop a national program to provide a national quality
                             improvement system for compounding pharmacies and the practice of
                             compounding. The committee, which held its second meeting in October
                             2003, is developing a program that is anticipated to include (1) the
                             accreditation of compounding pharmacies, (2) certification of
                             compounding pharmacists, and (3) requirements for compounded
                             products to meet industry standards for quality medications. To strengthen
                             state oversight of drug compounding, these accreditations, certifications,
                             and product standards, once developed, could be adopted by the states
                             and incorporated into their requirements for compounding pharmacists
                             and pharmacies.


Factors Such as Available    Although there are several efforts by states and national organizations that
Resources May Affect         may help strengthen state oversight, some states may lack the resources to
States’ Ability to Oversee   provide the necessary oversight. State pharmacy board officials in three of
                             the four states reported that resources were limited for inspections, for
Compounded Drugs             example:




                             Page 7                                                          GAO-04-195T
•	   The Missouri pharmacy board director reported that pharmacy inspections
     typically occur every 12 to 18 months; however, an increase in complaints
     has resulted in less frequent routine pharmacy inspections, because
     investigating complaints takes priority over routine inspections.

•	   North Carolina has six inspectors for about 2,000 pharmacies, which the
     state pharmacy board director said are inspected at least every 18 months.
     The director added that it is difficult to keep up with this schedule of
     routine inspections with the available resources while also investigating
     complaints, which take first priority.

•	   In Vermont, the pharmacy board chairman reported that, for a period of
     about 8 years until January 2003, pharmacy inspectors were only able to
     respond to complaints and not conduct routine inspections because of a
     shortage of inspectors. Vermont now has four full-time inspectors that
     cover the state’s 120 pharmacies; however, in addition to routine
     pharmacy inspections, the inspectors are also responsible for inspecting
     other facilities such as nursing homes and funeral homes. The chairman
     added that the board would like to have pharmacies inspected annually
     but it is difficult to keep up with the current schedule of inspections once
     every 2 years.

     Since drug compounding may occur in mail-order and Internet
     pharmacies, the compounding pharmacy may be located in a state
     different from the location of the patient or prescribing health
     professional. Three of the four states we reviewed had a large number of
     out-of-state pharmacies that were licensed to conduct business in those
     states, and inspection and enforcement activities may differ for these
     pharmacies. For example, Wyoming has 274 licensed out-of-state
     pharmacies, which is nearly twice as many as the number of in-state
     licensed pharmacies. The four states we reviewed said that they have
     authority to inspect out-of-state pharmacies licensed in their states but
     because of limited resources, they generally leave inspections to the state
     in which the pharmacy is located. Regarding enforcement authority, all
     four states reported having authority to take disciplinary action against
     out-of-state pharmacies licensed in their states.

     While the pharmacy boards in all four states we reviewed can suspend or
     revoke pharmacy licenses or issue letters of censure, enforcement
     mechanisms vary. For example, Missouri and North Carolina are not
     authorized to charge fines for violations; however, Wyoming can fine a
     pharmacist up to $2,000 and Vermont can fine a pharmacy or pharmacist
     $1,000 for each violation. Further, not all state pharmacy boards have the



     Page 8                                                           GAO-04-195T
                      authority to take enforcement action independently. For example, in
                      Missouri when attempting to deny, revoke, or suspend a license through
                      an expedited procedure, the pharmacy board must first file a complaint
                      with an administrative hearing commission. Only after the commission
                      determines that the grounds for discipline exist may the board take
                      disciplinary action.

                      Pharmacy board officials reported relatively few complaints and
                      disciplinary actions involving drug compounding. For example, of the 307
                      complaints received and reviewed by the board of pharmacy against
                      pharmacies and pharmacists in Missouri in fiscal year 2002, only 5 were
                      related to drug compounding.3


                      FDA maintains that drug compounding activities are generally subject to
FDA Asserts           FDA oversight, including the “new drug” requirements and other
Oversight Authority   provisions of the FDCA. In practice, however, the agency generally relies
                      on the states to regulate the traditional practice of pharmacy, including the
Under FDCA but        limited compounding of drugs for the particular needs of individual
Generally Relies on   patients. In recent years, the Congress has attempted to clarify the extent
                      of federal authority and enforcement power regarding drug compounding.
States to Regulate    In 1997, the Congress passed a law that exempted drug compounders from
Drug Compounding      key portions of the FDCA if they met certain criteria. Their efforts,
                      however, were nullified when the Supreme Court struck down a portion of
                      the law’s drug compounding section as an unconstitutional restriction on
                      commercial speech, which resulted in the entire compounding section
                      being declared invalid.4 In response, FDA issued a compliance policy guide
                      to provide the compounding industry with an explanation of its
                      enforcement policy, which included a list of factors the agency would
                      consider before taking enforcement actions against drug compounders.




                      3
                       The state pharmacy board officials that we spoke with reported that most complaints and
                      disciplinary actions cover dispensing errors related to manufactured drugs, such as
                      incorrectly counting the number of pills for a prescription.
                      4
                       Thompson v. Western States Medical Center, 535 U.S. 357 (2002).




                      Page 9                                                                     GAO-04-195T
FDA Asserts Jurisdiction   FDA maintains that FDCA requirements, such as those regarding the
to Regulate Drug           safety and efficacy requirements for the approval of new drugs, are
Compounding Under          generally applicable to pharmacies, including those that compound drugs.
                           The agency recognized in its brief submitted in the 2002 Supreme Court
FDCA                       case that applying FDCA’s new drug approval requirements to drugs
                           compounded on a small scale is unrealistic—that is, it would not be
                           economically feasible to require drug compounding pharmacies to
                           undergo the testing required for the new drug approval process for drugs
                           compounded to meet the unique needs of individual patients. The agency
                           has stated that its primary concern is where drug compounding is being
                           conducted on a scale tantamount to manufacturing in an effort to
                           circumvent FDCA’s new drug approval requirements. FDA officials
                           reported that the agency has generally left regulation of traditional
                           pharmacy practice to the states, while enforcing the act primarily when
                           pharmacies engage in drug compounding activities that FDA determines to
                           be more analogous to drug manufacturing.


FDA Modernization Act      Federal regulatory authority over drug compounding attracted
Exempted Drug              congressional interest in the 1990s, as some in the Congress believed that
Compounders from Some      “clarification is necessary to address current concerns and uncertainty
                           about the Food and Drug Administration’s regulatory authority over
FDCA Requirements but      pharmacy compounding.”5 The Congress addressed this and other issues
Was Declared Invalid       when it passed the FDA Modernization Act of 1997 (FDAMA), which
                           included a section exempting drugs compounded on a customized basis
                           for an individual patient from key portions of FDCA that were otherwise
                           applicable to manufacturers.6 According to the congressional conferees, its
                           purpose was to ensure continued availability of compounded drug
                           products while limiting the scope of compounding so as “to prevent
                           manufacturing under the guise of compounding.”7

                           In order to be entitled to the exemption, drug compounders had to meet
                           several requirements, including one that prohibited them from advertising
                           or promoting “the compounding of any particular drug, class of drug, or



                           5
                            S. Rep. No. 105-43, at 67 (1997).
                           6
                            These portions covered “adequate directions for use” labeling, manufacturing, and new
                           drug approval requirements. See former 21 U.S.C. § 353a (a). Pub. L. No. 105-115, 111 Stat.
                           2296, former section 503A.
                           7
                            H.R. Conf. Rep. No. 105-399, at 94 (1997).




                           Page 10                                                                       GAO-04-195T
                              type of drug.”8 This prohibition was challenged in court by a number of
                              compounding pharmacies and eventually resulted in a 2002 Supreme Court
                              decision holding that it was unconstitutional. As a result, the entire drug
                              compounding section was declared invalid.9 However, the Court did not
                              address the extent of FDA’s authority to regulate drug compounding.


Current FDA Enforcement       FDA issued a compliance policy guide in May 2002, following the Supreme
Focuses on Drug               Court decision, to offer guidance about when it would consider exercising
Compounding Outside of        its enforcement authority regarding pharmacy compounding.10 In the
                              guide, FDA stated that the traditional practice of drug compounding by
the Traditional Practice of   pharmacies is not the subject of the guidance. The guide further stated
Pharmacy                      that FDA will generally defer to state authorities in dealing with “less
                              significant” violations of FDCA, and expects to work cooperatively with
                              the states in coordinating investigations, referrals, and follow-up actions.
                              However, when the scope and nature of a pharmacy’s activities raise the
                              kinds of concerns normally associated with a drug manufacturer and
                              result in significant violations of FDCA, the guide stated that FDA has
                              determined that it should seriously consider enforcement action and listed
                              factors, such as compounding drug products that are commercially
                              available or using “commercial scale manufacturing or testing equipment,”
                              that will be considered in deciding whether to take action.11




                              8
                               See former 21 U.S.C. § 353a (c).
                              9
                               Both the district and appellate courts held that the prohibition was unconstitutional.
                              However, the district court held that the prohibition was “severable” and that the rest of
                              the pharmacy compounding section remained good law. While the appellate court agreed
                              with the district court on the constitutional question, it disagreed on the severability issue
                              and invalidated the entire section. The Supreme Court agreed with both courts on the
                              constitutional issue, but because the severability decision was not challenged, the Court
                              did not rule on it, and left it in place. See Thompson v. Western States Medical Center; 69 F.
                              Supp. 2d 1288 (D. Nev. 1999), aff’d in part and rev’d in part, 238 F. 3d 1090 (9th Cir. 2001),
                              aff’d, 535 U.S. 357.
                              10
                                This guide was similar to an earlier compliance policy guide published by FDA in 1992.
                              After the drug compounding section of FDAMA was declared invalid, FDA determined that
                              it needed to issue new guidance to the compounding industry on what factors the agency
                              would consider in exercising its enforcement discretion regarding drug compounding.
                              11
                               “Compliance Policy Guide: Compliance Policy Guidance for FDA Staff and Industry”,
                              Chapter 4, Sub Chapter 460, May 2002.




                              Page 11                                                                        GAO-04-195T
               Some representatives of pharmacist associations and others have
               expressed concern that FDA’s compliance policy guide has created
               confusion regarding when FDA enforcement authority will be used. For
               example, some pharmacy associations assert that FDA’s guidance lacks a
               clear description of the circumstances under which the agency will take
               action against pharmacies. In particular, they pointed to terms in the
               guide, such as “very limited quantities” and “commercial scale
               manufacturing or testing equipment” that are not clearly defined, and
               noted that FDA reserved the right to consider other factors in addition to
               those in the guide without giving further clarification. FDA officials told us
               that the guide allows the agency to have the flexibility to respond to a
               wide variety of situations where the public health and safety are issues,
               and that they plan to revisit the guide after reviewing the comments the
               agency received, but did not have a time frame for issuing revised
               guidance.

               In several reported court cases involving FDA’s regulation of drug
               compounders, the courts have generally sided with FDA. Two cases we
               identified involved drug compounders engaged in practices that were
               determined to be more analogous to drug manufacturing. In a district
               court case decided this year, the court upheld FDA’s authority to inspect a
               pharmacy specializing in compounding, noting that it believed that FDA’s
               revised compliance policy guide was a reasonable interpretation of the
               statutory scheme established by FDCA.12


               While drug compounding is important and useful for patient care,
Concluding     problems that have occurred raise legitimate concerns about the quality
Observations   and safety of compounded drugs and the oversight of pharmacies that
               compound them. However, the extent of problems related to compounding
               is unknown. FDA maintains that drug compounding activities are generally
               subject to FDA oversight under its authority to oversee the safety and
               quality of new drugs, but the agency generally relies on states to provide
               the necessary oversight. At the state level, our review provides some
               indication that at least some states are taking steps to strengthen state
               oversight, and national pharmacy organizations are developing standards
               that might help strengthen oversight if the states adopted and enforced
               them. However, the effectiveness of these measures is unknown, and



               12
                In the Matter of Establishment Inspection of Wedgewood Village Pharmacy, Inc., 270 F.
               Supp. 525, 549 (D. N.J. 2003).




               Page 12                                                                  GAO-04-195T
                  factors such as the availability of resources may also affect the extent of
                  state oversight.


                  Mr. Chairman, this completes my prepared statement. I would be happy to
                  respond to any questions you or other Members of the Committee may
                  have at this time.


                  For further information, please contact Janet Heinrich at (202) 512-7119.
Contact and       Individuals making key contributions to this testimony included Matt Byer,
Acknowledgments   Lisa A. Lusk, and Kim Yamane.




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                  Page 13                                                          GAO-04-195T
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