Healthcare Law Blog

Controlling Compounding: The Drug Quality and Security Act, Part II

Earlier this week we discussed the new Drug Quality and Security Act (“DQSA”) that establishes and regulates a new class of compounding pharmacies called “outsourcing facilities.”  To qualify as an “outsourcing facility”, the entity must compound sterile drugs with or without patient prescriptions and comply with the DQSA’s new rules, including registering with the FDA.  An outsourcing facility is not required to be a licensed pharmacy.  Registering as an outsourcing facility is completely voluntary, but entities that do not register may be prohibited from compounding drugs for office use and will be required to obtain prescriptions for individual patients.

Annual registration as an outsourcing facility is required and is accompanied by a $15,000 registration fee (unless the facility has under $1 million dollars in sales, in which case the fee is $5,000). The facility must report the drugs that are being compounded to the FDA in June and December of each year. Facilities that do not register will be subject to the FDA rules on new drug application and approval, adequate use directions, and drug supply chain security requirements.

The FDA will conduct “risk-based” inspections of outsourcing facilities to determine inspection frequency based on several factors, such as the facility’s compliance and recall history or inherent risk of drugs being compounded. If a facility is subject to reinspection more than once in any given fiscal year, a fee will be required. Failure to pay the registration or reinspection fee will result in all drugs compounded by the facility being deemed “misbranded” under the Food Drug and Cosmetics Act.

Outsourcing facilities are prohibited from compounding certain drugs. Any drugs compounded by the facilities must be labeled in a manner that prominently identifies the drug as a compound drug product. The facilities are subject to the same record retention and adverse event reporting requirements as traditional drug manufacturers.

The DQSA does not regulate traditional pharmacy compounding of non-sterile drugs pursuant to patient prescription and state boards of pharmacy will retain their oversight authority of such activity.  To monitor the interplay between FDA and State regulation of compounding pharmacies, the DQSA commissions a Government Accountability Office study to be submitted to Congress within three years that includes a review of pharmacy compounding by state and an evaluation of the effectiveness of the communication between the FDA and state pharmacy boards.

It will be interesting to see if pharmacies believe the benefits of registering as an outsourcing facility are worth the substantial registration fee and additional compliance obligations.  And while the DQSA leaves traditional pharmacy compounding untouched for now, changes in regulations and standards for those facilities may soon be on the horizon.

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This article does not constitute legal advice.