Reimbursement Questions Add To Compounding Regulation Debate

Public Citizen asks whether CMS policy could have helped prevent the drug contamination at New England Compounding Center as Senate committee wants more information on states’ regulatory practices.

Reimbursement policy appears to be the next frontier in the effort to enhance federal regulation of large-scale compounding.

Senators and advocates now are asking whether the Centers for Medicare and Medicaid Services could have helped mitigate or prevent the contamination in steroid injections produced at the New England Compounding Center, which were linked to a meningitis outbreak that killed 34 people.

Legislation making changes to federal compounding regulation appears likely in the Senate, but it is unclear whether reimbursement adjustments will be included. The bill also should be shaped by regulatory practices at state boards of pharmacy, which are expected to work with FDA to police compounders.

However, prospects may be altogether different in the House. Legislators have said they are agreeable to increasing FDA authority over compounding, but do not appear convinced it is necessary. They continue to demand documents and other information related to how FDA exercised its existing authority to justify any changes.

Whether Congress eventually passes any legislation could also depend on what role the Congressional delegation from Tennessee, one of the states hardest hit by the infected products, plays on the committees addressing the issue (“FDA Compounding Legislation Looks More Likely Given Congressional Reshuffling,” The RPM Report FIRST TAKE, Nov. 11, 2012).

CMS Policy Created Compounding “Incentives”

Public Citizen argued in a Nov. 19 letter to Health and Human Services Secretary Kathleen Sebelius that CMS’ inconsistent reimbursement policies have created “inadvertent financial incentives for inappropriate use of compounded drugs” and again called on HHS to have its inspector general investigate.

The group said that because CMS policies do not permit coverage of compounded drugs manufactured in violation of pre-market approval and manufacturing requirements of the Food, Drug and Cosmetic Act, CMS could have restricted large-scale production of compounded drugs.

Public Citizen said CMS used existing legal authority in 2007 to issue simultaneous local coverage determinations that denied reimbursement for compounded inhalation drugs administered with nebulizer devices.

That decision dramatically decreased the wide-scale production of compounded inhalation drugs, the group said.

“The local Medicare carriers noted that compounded inhalational drugs were not tested for safety and effectiveness, and therefore had the potential of putting patients at increased risk of injury, illness or death,” Public Citizen said in the letter. “This rationale is clearly applicable to many other compounded drugs administered to Medicare beneficiaries that were produced on a large scale by compounding pharmacies over the past decade.”

CMS did not respond to a request for comment.

Four Democratic Senators also asked CMS how often it has stopped payment for compounded drugs, as well as to outline its communication with FDA regarding compounding issues, in a Nov. 15 letter.

The letter, from Sens. Richard Blumenthal of Connecticut, Dianne Feinstein of California, Al Franken of Minnesota and Debbie Stabenow of Michigan, also requested that CMS explain whether it tracks the use of compounded drugs in Medicare Part D plans.

Reimbursement policy did not come up during recent House and Senate hearings on the outbreak at NECC and may prove difficult to include in any compounding legislation.

Policy adjustments likely would have to be crafted with the agreement of dispensers, who are concerned that any new regulation could be an overreach and limit patient access.

Reimbursement policy has now entered multiple pharma-related debates. Draft legislation that would have increased reimbursement rates for drugs chronically in shortage was circulated in early 2012 as an option to entice more manufacturers to enter the market (Also see "Drug Shortages Proposal From Sen. Hatch Offers 7-Year Economic Incentives" - Pink Sheet, 23 Apr, 2012.).

The idea was not added to the shortage mitigation package in the FDA Safety and Innovation Act, but the agency was required to study whether reimbursement and other policies cause shortages (Also see "FDASIA Study Mandates Focus On Performance, But Could Slow Reviews" - Pink Sheet, 20 Aug, 2012.).

State Regulation May Inform Federal Changes

Senate legislation also may be shaped by the extent of existing state compounding oversight.

The Health, Education, Labor and Pensions Committee sent letters on Nov. 19 to the 50 state boards of pharmacy and asked them several questions about their regulatory practices.

Responses should help determine what oversight duties states already are capable of handling and which should be given to FDA. It also will help gauge the number of large compounding pharmacies in the country.

States were asked about their record-keeping practices, such as how they ensure compliance with U.S. Pharmacopeia standards and prescription requirements. Committee members also want to know how the boards communicate with other states and handle compounding complaints.

The committee requested the names and addresses of all pharmacies allowed “to operate in the absence of providing a full service retail pharmacy” and engage in sterile compounding, hold pharmacy licenses in other states, and compound instead of dispensing drugs, according to the letter.

Compounders are not required to register with FDA. Commissioner Margaret Hamburg admitted to HELP Committee members during a Nov. 15 hearing on the outbreak that the agency is unaware of exactly how many exist.

She said the agency thinks there are about 7,500 pharmacies performing advanced compounding services and 3,000 with sterile compounding operations.

The number likely will affect the extent of the authority FDA would undertake.

FDA proposed a tiered approach, where it would regulate riskier non-traditional compounding, such as operations that make drugs in high volumes or before receiving a prescription. States would maintain their oversight of the traditional practice.

Sen. Lamar Alexander, R-Tenn., wanted to clearly determine which types of compounding would be under the purview of the state and federal regulators. Hamburg said taking on oversight of several thousand compounding pharmacies in addition to its duties for traditional drug manufacturers would be a challenge.

But Alexander suggested FDA could designate states that are willing and able to handle all their compounding oversight duties, which would reduce the number FDA would have to inspect, potentially alleviating the need for additional resources (Also see "Compounding The Problem: Congress, FDA Argue Over Regulatory Responsibility" - Pink Sheet, 19 Nov, 2012.).

No matter the number, FDA may gain a larger job than it can handle, given its current budgetary situation. Senators already indicated the agency likely would need more resources if its compounding duties expand.

However, the pending fiscal cliff and House Republicans’ continued interest in budget cuts likely make passing an increase difficult.

FDA also is in the midst of boosting its resources under new user fee programs to speed facility inspections and application reviews (Also see "GDUFA Guidance Offers Peek At Generic Drug User Fee Levels" - Pink Sheet, 27 Aug, 2012.).

House Wants Documents Before Deciding On Legislation

However, the agency may endanger its chances of getting a bill passed in the House because it has not provided the documentation proving claims that its compounding authority is ambiguous and fragmented.

Five Republican members of the Energy and Commerce Committee: Chairman Fred Upton, Chairman Emeritus Joe Barton, Health Subcommittee Chairman Joe Pitts and Vice Chairman Michael Burgess, and Oversight and Investigations Subcommittee Chairman Cliff Stearns, reiterated a request for FDA documents and communication related to NECC’s regulatory history.

Their Nov. 16 letter to Hamburg said previous requests were not satisfied and the agency has until Nov. 30 to provide the documents requested, including material referring to agency enforcement discretion and authority over compounding.

“Without gaining insight into whether FDA used its existing authority effectively, providing clearer or additional authority to FDA may not solve the actual, underlying problem,” the members wrote.

The request includes information that could explain FDA discussions with the Massachusetts Board of Pharmacy about a “joint strategy for achieving safe compounding practices” at NECC and why FDA did not conduct follow-up inspections of the facility after issuing a warning letter in 2006 threatening regulatory action if problems were not resolved.

During a contentious hearing on compounding with Hamburg and others on Nov. 14, House members argued that because FDA threatened regulatory action, the agency already has the authority it needs.

Hamburg acknowledged that the warning letter should have been sent sooner, but told the House and Senate committees that sending it earlier or more timely inspection follow-up likely would not have prevented the outbreak.

The agency also said the 2006 warning letter was not related to the practices now in question (Also see "FDA’s Compounding Oversight: What Price Safety?" - Pink Sheet, 15 Oct, 2012.).

More House hearings are expected once the committee receives the information it requested (Also see "FDA Wants Compounding Authority Clarified, Congress Not So Sure It’s Necessary" - Pink Sheet, 14 Nov, 2012.).