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The U.S. Food and Drug Administration (FDA) has been busy since the passage of the Drug Quality and Security Act (DQSA) in November 2013. In just five short months, the FDA has issued six warning letters referencing the DQSA’s outsourcing facility provisions, published three draft guidance documents outlining its authority and enforcement priorities under Sections 503A and 503B of the Federal Food, Drug, and Cosmetic Act (FFDCA) and conducted an “Inter-Governmental Working Meeting on Pharmacy Compounding” with officials from state boards of pharmacy and national trade organizations to discuss implementation of the DQSA. The FDA also welcomed the addition of almost 40 newly registered “outsourcing facilities” that have voluntarily registered with the FDA in exchange for the opportunity to compound drugs without a prescription for office use and to ship compounded drugs across state lines without restriction. But this flurry of activity also has resulted in several important unanswered questions under the DQSA, particularly as to where certain entities fit in relation to Section 503A, which governs traditional compounding pursuant to identifiable patient prescriptions, and Section 503B, which governs the newly created outsourcing facilities.

Limitations on Interstate Shipment of Compounded Drugs

One significant area of uncertainty involves the interplay between Section 503A and 503B and a key provision of Section 503A of the FFDCA that limits the amount of compounded prescriptions a traditional compounding pharmacy is permitted to ship across state lines. Specifically, unless the pharmacy is located in a state that has entered into a memorandum of understanding (MOU) with the FDA, Section 503A of the FFDCA prohibits the traditional compounding pharmacy from dispensing or distributing more than five percent of the pharmacy’s total prescription orders to patients outside of the state in which the pharmacy is located. This is often referred to as the “5% Rule.” More specifically, Section 503A states that drugs compounded by a traditional compounding pharmacy only qualify for exemptions from adequate directions for use, new drug application (NDA) requirements/approval and current good manufacturing practice (cGMP) requirements if, among other things, one of the following conditions is met:
<ul>
	<li>The drugs are compounded in a state that has entered into a MOU with the FDA that addresses the distribution of “inordinate amounts” of compounded drug products interstate and provides for appropriate investigation by a state agency of complaints relating to compounded drug products distributed outside such state, or</li>
	<li>If the drugs are compounded in a state that has not entered into a MOU, the drugs are compounded in quantities that do not exceed five percent of the total prescription drug orders dispensed or distributed by the pharmacy or physician.</li>
</ul>
Section 503A, which was enacted in 1997 as part of the Food and Drug Administration Modernization Act, also requires the FDA to consult with the National Associate of Boards of Pharmacy (NABP) to develop a standard MOU for use by the states in lieu of fifty separate MOUs.

Prior FDA Regulatory Efforts and Constitutional Uncertainty 

In January 1999, the FDA, in consultation with the NABP, published a draft standard MOU in the Federal Register and requested comment regarding its provisions. The FDA received over 6,000 comments on the draft MOU. Under the draft MOU, the amount of compounded drug shipped interstate was considered “inordinate” if either of the following conditions were met:
<ul>
	<li>The number of compounded prescriptions distributed interstate was equal to or greater than 20 percent of the total number of compounded prescriptions dispensed or distributed (both intrastate and interstate) annually, or </li>
	<li>The number of compounded prescriptions distributed interstate was less than 20 percent of the total number of prescriptions dispensed, but the total amount of one or more individual compounded drug constituted more than 5 percent of the total number of prescriptions dispensed or distributed. </li>
</ul>
Distribution to patients interstate but within 50 miles of the compounding pharmacy was excluded from the calculation described above, as was compounding in response to an emergency. Additionally, under the draft MOU, the states were responsible for investigating complaints stemming from the interstate shipment of compounded drugs, including reports of serious adverse events, compounding that failed to qualify for Section 503A exemptions or compounding of adulterated or misbranded drugs.

But shortly after publication of the draft MOU, the constitutionality of Section 503A was called into question. Specifically, under Section 503A, only drugs compounded pursuant to an “unsolicited” prescription were eligible for exemptions from adequate directions for use, NDA and GMP requirements. In 1999, a group of pharmacists successfully challenged the constitutionality of this advertising restriction in Western States Medical Center v. Shalala, a decision that was affirmed by the 9th Circuit, which went on to hold that the unconstitutional provision was not severable from the remainder of Section 503A. Shortly thereafter, the 5th Circuit reached the opposite conclusion in Medical Center Pharmacy v. Mukasey, holding that only the advertising restrictions in Section 503A were invalid and that the remaining provisions were severable from the statute. As a result of the uncertainty created by this circuit split, the FDA did not enforce certain provisions of Section 503A, including the 5% Rule, and the draft MOU was never finalized.

The DQSA Brings Both Clarity and Chaos 

The DQSA settled the unconstitutional aspects of Section 503A by striking the term “unsolicited” from the statute and removing the prohibition on advertising. Now, the FDA has indicated that it intends to enforce the 5% Rule, but questions remain as to how and when. In its recently published draft guidance, “Pharmacy Compounding of Human Drug Products Under Section 503A of the [FFDCA],” the FDA attempted to answer some of these questions by stating that it intends to publish a new draft MOU for comment that will replace the 1999 draft and indicating that it does not intend to enforce the 5% Rule until 90 days after the MOU has been finalized. Additionally, the 5% Rule and the MOU were key topics addressed during the Inter-Governmental Working Meeting on Pharmacy Compounding, so much so that Dr. Jane Axelrad, Associate Director for Policy at the FDA’s Center for Drug Evaluation and Research and a key player in compounding pharmacy regulation, prepared a presentation specifically addressing the topic. Her presentation focused on issues that had been left unsettled in 1999, such as how the FDA should define “inordinate amounts” in the MOU and whether the restrictions on interstate distribution should account for contiguous states.

But other questions still remain, particularly for compounding pharmacies that rely on interstate distribution of drugs compounded pursuant to patient prescriptions. Limiting these entities’ distribution of compounded drug product to 5 percent or even 20 percent could be devastating to their business models. Additionally, while registering as an outsourcing facility would allow the entities to distribute compounded drug products interstate without limitation, doing so would require that the entities comply with the cGMP standards, such as batch sterility testing and other manufacturing-oriented standards that may be difficult if not impossible for entities compounding drugs pursuant to specific patient prescriptions to meet. How will the FDA account for these entities? Will they be expected to register as outsourcing facilities? If so, will the FDA create cGMP exemptions for these entities? It will be interesting to see how the FDA balances patient needs (e.g., rare custom mix medication or patients in states that may not have enough compounding pharmacies) with the 5% Rule.

The answers to these and many other questions are coming soon, as the FDA prepares to roll out additional guidance regarding implementation of the DQSA.

FDA Regulation of Compounding Pharmacies: Unsolved Mysteries