Congress’ New Drug Safety Priority: FDA’s Authority Over Compounders

The meningitis outbreak caused by contaminated injectable steroids from a Massachusetts pharmacy is prompting lawmakers to pursue legislation that would clarify FDA’s authority over compounders. The challenge for FDA Commissioner Hamburg is convincing Congress to act, but not deliver an unfunded mandate. One thing is clear: it won’t be a quiet start to 2013 in biopharma legislation.

The year following the reauthorization of the Prescription Drug User Fee Act is traditionally a quiet one when it comes to legislative activity related to pharmaceuticals. After multiple congressional hearings on prescription drug and biotechnology regulation – this fifth cycle also included generic drug and biosimilar user fees – the Food & Drug Administration can usually settle down to focus on implementation rather than new ideas for legislation.

Not this year.

Just two weeks after PDUFA V went into effect, FDA Commissioner Margaret Hamburg was back on Capitol Hill testifying in two lengthy and contentious hearings into a meningitis outbreak caused by contaminated injectable steroids from a compounding facility in Massachusetts.

The House Energy & Commerce Committee hearing was especially tough, with lawmakers from both sides of the aisle criticizing FDA for failing to adequately regulate the facility. The meningitis outbreak, caused by products from the Framingham, Mass.-based New England Compounding Center (NECC), has resulted in 541 cases and 36 deaths as of December 9, according to the Centers for Disease Control & Prevention.

The House hearing – and to a lesser extent, the Senate Health Committee hearing that followed – involved a lot of finger-pointing over who was responsible for regulating NECC. Republican lawmakers (and some Democrats) put the blame on FDA for being “slow to act” in response to concerns about the company, and questioned why the agency did not seize contaminated product or shut down the facility over a 10-year period of violations.

Hamburg, in what was essentially a defense of the actions of her predecessors, repeatedly argued that FDA’s current authority over compounders is “limited, unclear and contested,” and that gaps and ambiguities in the Food, Drug & Cosmetic Act – caused in part by inconsistent court rulings – have hampered the agency’s ability to prevent safety problems, rather than just react after they occur. (Also see "FDA and Compounding: A Risk-Based Regulatory Framework" - Pink Sheet, 19 Nov, 2012.)

Hamburg prefers a “tiered” approach to clarifying FDA’s authority, under which “traditional” compounders would remain under the purview of the states, while higher-risk “non-traditional” compounders would have to adhere to federal standards. And FDA wants the authority to access records, mandate adverse event reporting and require product labeling on those higher-risk compounded products.

But many congressional members, especially on the Republican side of the aisle, believe that FDA already has all the authority it needs to shut down a large-scale facility like the New England Compounding Center. And Hamburg didn’t do herself any favors, at times frustrating even FDA’s most staunch supporters with indirect answers to what lawmakers saw as straightforward questions.

Should Congress decide to move forward, there are a couple of likely legislative pathways. Rep. Edward Markey (D-Mass.), and Reps. Rosa DeLauro (D-Conn.) and Nita Lowey (D-N.Y.) have already introduced bills that would grant FDA many of the new authorities that Commissioner Hamburg outlined in her testimony. Under that blueprint, FDA would have direct authority over large-scale compounding facilities, while preserving state regulatory authority for traditional small compounding pharmacy activities.

But action seems more likely on the Democratically-controlled Senate, where the Health Committee leadership expressed a willingness to get legislation passed in the near term. The prospects for bipartisan cooperation are high, with Sen. Lamar Alexander (R-Tenn.), who is expected to become the Ranking Member of the Health panel in 2013, taking a lead role on the issue. Alexander, however, is suggesting what appears to be a slightly different strategy from the Markey bill: FDA would delegate authority to regulate large-scale compounders to all 50 state boards of pharmacy, with the right to remove that authority should the state fail to meet federal standards.

For drug manufacturers, additional FDA authority over compounded products would be welcomed – especially if legislation requires that the agency develop a list of products that could not be compounded. But the question is whether the Democrats have the political muscle to get something passed. Republicans at both hearings spoke of “bipartisan cooperation” on the issue, but at the same time argued that FDA could have taken action without any changes to the agency’s authority.

In the end, the question is whether Congress will choose to blame the regulators for the outbreak – or a “limited, unclear and contested” law.

Hazy History of Compounding Regulation

Pharmacy compounding involves the creation of a customized medication for an individual patient whose needs cannot be met by manufactured drugs – for example, converting an oral pill to a liquid form for an elderly patient who has trouble swallowing, or removing an inactive ingredient that might cause an allergic reaction in a particular individual.

It is a common, long-standing practice. Almost as long-standing is the question of how to draw a line between appropriate pharmacy compounding and illegal drug manufacturing. (Also see "FDA’s Mermaid Problem: Makena and Pharmaceutical Half-Breeds" - Pink Sheet, 1 Aug, 2012.)

Prior to the FDA Modernization Act in 1997, there was very little statutory guidance on how to draw that line. FDAMA specifically exempted compounded drugs from most manufacturing regulations, so long as they were made by a licensed provider and prescribed for an “identified individual patient.” FDAMA also prohibited pharmacies from advertising their compounding services, and directed FDA to develop a list of products that could not be compounded.

But things got tricky once the FDAMA provisions were challenged in court.

In 1998, seven compounding pharmacies filed suit against the federal government in Western States Medical Center, arguing that the FDAMA provisions found in section 503(a) were an unconstitutional restriction of speech. The Ninth Circuit Court of Appeals ultimately struck down the advertising provisions, and, in finding that the various provisions of the law could not be considered separately, invalidated the entire statute.

In 2002, the Supreme Court upheld the Ninth Circuit’s decision to invalidate the advertising provision for compounded drugs, but, in a move that further complicated the issue, did not address the severability question. FDA’s interpretation of that decision, as outlined in a guidance document to the compounding industry and other communications, is that the entire compounding section is invalid. (Also see "Supreme Court Reaffirms Least Restrictive Standard For Ad Controls" - Pink Sheet, 6 May, 2002.)

In the guidance document, FDA said it would generally “continue to defer to state authorities regarding less significant violations of the Act related to pharmacy compounding of human drugs.” The agency added that “in such cases, cooperative efforts between the states and the Agency will result in coordinated investigations, referrals, and follow-up actions by the states.”

“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 the new drug, adulteration, or misbranding provisions of the Act, FDA has determined that it should seriously consider enforcement action.” Those activities include compounding drugs in “anticipation” of a prescription, using large-scale manufacturing equipment, or compounding drugs that are commercially available in the marketplace.

The Ninth Circuit’s decision went unanswered until 2008, when Fifth Circuit Court of Appeals ruled against that precedent and confirmed the validity of FDAMA’s drug compounding restriction. The appeals court found in Medical Center Pharmacy v. Mukasey that compounded drugs should be considered "new drugs.” But in yet another wrinkle that complicated the landscape for FDA, the court held that compounders are entitled to the “safe harbor” protections under FDAMA. (Also see "Compounded Drugs May Return To Supreme Court After 5th Circuit Backs FDAMA" - Pink Sheet, 18 Aug, 2008.)

“A Crazy Quilt of Legal Authority”

That split in the Circuits – in addition to a handful of conflicting lower court decisions that followed – has left FDA unsure of the extent of its authority over compounding pharmacies. In the case of NECC, FDA took some action against the company – manufacturing inspections in 2002 and 2004, and a warning letter in 2006 – but says it was constantly under the threat of a lawsuit.

“Our authority over compounding is limited, unclear and contested, and in the face of differing views within Congress and the courts about FDA’s authority, and continuing challenges by industry, the agency has struggled with how to chart an effective course to protect the public health,” FDA Commissioner Hamburg said during a House Energy & Commerce hearing into the meningitis outbreak on November 14.

Pointing to a U.S. map that illustrated the result of the split Circuit Court decisions, Hamburg told lawmakers that “unfortunately, we have an unclear, fragmented legal/regulatory framework that makes it very hard to understand how best to exercise” the agency’s authority.

In the western states covered by the Ninth Circuit, the FDAMA compounding provisions are not effective, while the opposite is true within the Fifth Circuit’s jurisdiction of Texas, Louisiana and Mississippi. The “ambiguities in the law and a crazy quilt of legal authority has required us to be very reactive responding to those serious public health threats and selective,” Commissioner Hamburg said.

House reactions to Hamburg’s testimony were, somewhat predictably, split down party lines. (See Exhibit 1.) Rep. Diana DeGette (D-Colo.), for example, was sympathetic to FDA’s argument.

“When you have an emergency like [NECC], you’re going to act aggressively, but you’re afraid you’re going to be hauled into court,” she told Hamburg. The unclear lines of authority mean that “evil-doers like [NECC] don’t feel like they have to listen to the FDA, they don’t feel like they have to produce the documents when they are requested, and they sue….It ties the FDA’s hands when they want to take enforcement action.”

Still, FDA did take some enforcement action against NECC, including the warning letter in 2006. That, unfortunately for the agency, makes all too clear that FDA was aware of the facility and concerned about its practices before the fatal outbreak.

The first inspection came in response to a MedWatch report concerning betamethasone, and the second inspection and subsequent warning letter detailed citations related to activities more in keeping with a drug manufacturer:

• compounding trypan blue ophthalmic solution and 20% aminolevulinic acid solution, both of which are FDA-approved and commercially available drugs;
• compounding a potentially toxic topical anesthetic and marketing that product to physicians with “courtesy prescriptions” (i.e. samples); and
• repackaging Genentech’s oncologic Avastin into syringes for subsequent promotion and sale to health professionals.

But without explicit authority from Congress, Hamburg said the agency can only go so far in regulating compounding pharmacies, and often faces resistance and legal challenges.

“Even on much smaller regulatory actions, the FDA’s authority to act was contested. Even going into NECC to do that inspection in 2004, we did not get access to the records that we needed,” Commissioner Hamburg testified during the House hearing. “Our authority to provide oversight of drug manufacturers is very different than our authority over compounding pharmacies, which are exempted from important aspects of FDA law,” she said. “Every effort is resource-intensive, and often will end up in litigation.”

Republicans generally had little patience for those arguments. Energy & Commerce Oversight & Investigations Subcommittee Chairman Rep. Cliff Stearns (R-Fla.), for example, disagreed that the split court decision left FDA without any authority. “I don’t think that it creates such a division that the FDA had their hands tied,” he said. The court decisions still left the “integrity” of the law intact, and FDA should have been able to determine “who they had jurisdiction over.” (Stearns is leaving Congress at the end of the term.)

Rep. Michael Burgess (R-Tex.) agreed with that sentiment, arguing that FDA had the authority to shut down NECC a long time ago. “This company was bad news from the day it started,” he told Hamburg. “The FDA has assembled a 10- or 15-year history of repeated violations and areas where this company has shown itself to be unsafe. So if you want to have a risk-based system, this company’s too risky.”

Rep. Henry Waxman (D-Calif.), who along with Rep. DeGette pushed the Republican leadership to hold the hearings, was among Hamburg’s biggest defenders. “We want appropriate government involvement to stop these things from happening....If there is some ambiguity, it’s our job to clear it up,” he said.

Exhibit 1

On Party Lines: House Energy & Commerce

Democrats on Committee	Quote from E&C Committee Hearing
Rep. Kathy Castor (D-Fla.)	“The law with regard to compounding pharmacies was last written in 1997. It is out of date. To my colleague from Texas [Rep. Burgess], there is ambiguity here. Great ambiguity. And it is made even more convoluted due to these court cases.”
Rep. Diana DeGette (D-Colo.)	“The FDA tells us that they were hobbled by questions about whether they had the legal authority to address the problems at the NECC. If this is true, Mr. Chairman, this is a problem that demands this full committee’s immediate attention. We need to clarify the Food, Drug and Cosmetic Act, which apparently limits the FDA’s jurisdiction over compounding pharmacies.”
Rep. John Dingell (D-Mich.)	“I’m sure this committee…intends to work…on both sides of the aisle to find out how new FDA authorities can address the issue before us with proper expansions of regulatory authority….I am fearful that this problem is something which will require fairly strong legislation, but I am satisfied that it is fairly easily done.”
Rep. Gene Green (D-Tex.)	“This subcommittee doesn’t do legislation, but believe me, the Health subcommittee can. And I don’t know if we can do it by the end of the term…but I would hope that we could…correct this problem. Because if you’re a compounding manufacturer in Texas and selling in interstate commerce, it ought to be federal law.”
Rep. Edward Markey (D-Mass.)	“That clear statement [in the FD&C Act] that exempts pharmacies from FDA jurisdiction….That’s just loaded with potential for lawsuits, for questions than can be raised about your authority....The whole area is just rife with ambiguity.”
Rep. Henry Waxman (D-Calif.)	“You’re being criticized, Dr. Hamburg as the head of the FDA, for the problems that were primarily the responsibility of the state of Massachusetts….If we expect you to do more, we better be sure that the statutory law gives you enough authority to do your job.”
Republicans on Committee	Quote From E&C Committee Hearing
Rep. Fred Upton (R-Mich.)	“If you don’t have the authority, we need to make sure that it’s there. It seems pretty reasonable to me that, in fact, you did have the authority to not only have unannounced inspections, but to come in and correct it so that it didn’t get to this stage.”
Rep. Joe Barton (R-Tex.)	“FDA has decided that this is something that they can use to be able to get more authority….We ought to work on using the authority we have, as opposed to trying to get additional authority at the federal level.”
Rep. Marsha Blackburn (R-Tenn.)	“We are incredibly concerned about the ineffectiveness of the bureaucracy, and it doesn’t matter which Administration. It is the lack of attention by this agency to a situation that has gotten out of hand.”
Rep. Michael Burgess (R-Tex.)	“This company was bad news from the day it started….The FDA has assembled a 10- or 15-year history of repeated violations…. We’re not buying it. We’re just not buying it, Dr. Hamburg….There is no ambiguity.”
Rep. Phil Gingery (R-Ga.)	“If we’re going to change the law…then we have to get this right. I have some grave concerns that we might not get it right in regard to overreacting in regulating compounding pharmacies.”
Rep. Morgan Griffith (R-Va.)	“Somebody wasn’t paying attention. This was not your small compounding pharmacy. These were, in fact, manufacturers. I understand that they were violating the law, but it’s very frustrating when you come in here and say ‘our authority wasn’t clear.’”
Rep. Cliff Stearns* (R-Fla.)	“What assurances do we have…that the FDA is going to prevent this from happening today? Because we might not get legislation. This is a lame-duck session. The Republicans control the House and the Democrats control the Senate. It’s going to be very difficult to get legislation through.”
Rep. Lee Terry (R-Neb.)	“Is the issue that the definition of manufacturing isn’t clear…enough for the FDA? Because it seems to me if you’re mass-producing, you’re sending it into interstate commerce and it’s not for a specific patient, that that’s not compounding. That’s manufacturing.”

*Defeated in the Republican primary; will not return for 113th Congress.

The RPM Report

Regulating An “Evolving” Industry

Legislation clarifying FDA’s role in regulating compounders is also needed, Hamburg testified, because the industry has evolved past the original concept of small, local pharmacies that create customized medications on-site for their patients.

“The industry has moved well beyond the neighborhood pharmacist,” she said in testimony to the Energy & Commerce Committee. In particular, Hamburg said, the movement by many hospitals to outsource pharmacy compounding “has created a market for compounding operations that produce drugs that reach far larger numbers of patients.”

“When these facilities operate well, they may serve an important function in terms of safety and efficiency. However, when they fail to follow safety and quality standards, many patients may be harmed,” she said. Compounders aren’t required to register with FDA, but the agency estimates that there are “thousands” in the U.S., many of which have the potential to generate a tragedy like the NECC meningitis outbreak.

“The current oversight framework…fails to address the complex issues raised by a changing industry,” Hamburg said. “Stronger, clearer authority would enable more effective regulation of the drug compounding industry, especially when it has been evolving so significantly.”

To that end, FDA is proposing a legislative framework that would tier the degree of oversight to the risk posed by the type of product and practices. “Traditional compounders,” Hamburg said, “would remain the purview of the states. The higher risk posed by non-traditional compounding would be addressed by federal standards, including standards for quality control.” And certain products carrying the highest risk could not be compounded at all, but only be made under standards currently met by drug manufacturers.

Hamburg is also seeking expanded authorities, including clear authority to access records, additional registration requirements, clear labeling statements on compounded products, and new funding to support inspections and other oversight activities. Many of these activities would continue to be performed at the state level, so FDA would work closely with state boards of pharmacy – starting with an all-day meeting with all 50 state board of pharmacy in Washington, D.C. on December 19.

Rep. Kathy Castor (D-Fla.) was among those most open to Hamburg’s arguments. Some compounders are “very sophisticated enterprises that are shipping all over the place, and they’ve outgrown the 1997 law,” she said. “So now we have to decide how we’re going to update it to address the sophistication of compounders out there and then go after those bad actors” that are taking advantage of the gaps in regulatory authority.

But lawmakers on both sides of the aisle cautioned Hamburg that until legislation is passed, FDA needs to use all existing regulatory authority to go after bad actors, and that the agency would use any new authorities to the fullest extent.

“The questioning that you’re seeing here reflects a skepticism…about whether the FDA will use this enhanced authority more effectively than it has used the authority that is has had up to date,” Sen. Richard Blumenthal (D-Conn.) said during the Senate Health Committee hearing on November 15. “The assurance that the FDA now has to give is that it will be vigorous and zealous in using new authority.”

Finding a Legislative Fix

Sen. Lamar Alexander (R-Tenn.) is likely to take a lead role in the Senate in developing new legislation. Tennessee was one of the states hardest hit by the meningitis outbreak, with 88 cases as of December 9 (second only to Michigan) and the highest numbers of deaths (13). Sen. Alexander is also expected to take over as the Ranking Member of the HELP Committee, which would put him in a position to work directly with Chairman Tom Harkin (D-Iowa) on bipartisan legislation.

Sen. Alexander used his time with Commissioner Hamburg to explore what legislation could look like, and expressed concern that the formula she proposes – giving FDA direct authority over high-risk compounders – could be too big of a job for the agency. There are an estimated 7,500 pharmacies with advanced compounding in the U.S., including 3,000 sterile facilities.

Noting that FDA already regulates and inspects 6,500 drug manufacturing facilities, Sen. Alexander suggested to Hamburg that if the agency were to assume responsibility for “several thousand” compounding pharmacies, “maybe you don’t have the capacity to do that.”

Hamburg acknowledged that “it would certainly enormously expand what we do presently.” Taking on full responsibility of several thousand compounding facilities would be a “real challenge,” she added, noting that FDA’s other inspection activities are paid for by user fees.

Sen. Alexander suggested a slightly different approach: Using the model of the Nuclear Regulatory Commission to establish clear lines of responsibility between FDA and state boards of pharmacies to regulate pharmacy compounders. The problem to date, he said, is that there isn’t anyone “on the flagpole” with the ultimate responsibility to regulate compounding facilities. (Also see "Compounding The Problem: Congress, FDA Argue Over Regulatory Responsibility" - Pink Sheet, 19 Nov, 2012.)

“Would it be conceivable,” Sen. Alexander asked Hamburg, “that there could be a system where you have the responsibility, but you are able to delegate that responsibility to some states that are willing to meet standards, and your job would be more like the Nuclear Regulatory Commission.”

“It wouldn’t be your job to regulate. You wouldn’t regulate the facilities, but you’d basically be regulating the states that took on that function in addition to their supervision of traditional pharmacies,” he said. So in a case like NECC, FDA “would have the authority to go to Massachusetts, and take away their authority, completely, to deal with sterile compounding, because of failure of incompetence to meet federal standards.”

“That would be one model,” Hamburg responded, but she added that Congress would also need to establish clear federal compounding standards for the states to follow. “I think it is well worth exploring all the different ways that we could improve this system [and] make sure that it is fully coordinated and provide a safety net to protect health.”

On the House side, Rep. Markey has already introduced a bill (the Verifying Authority and Legality in Drug Compounding Act of 2012) that would give FDA many of the authorities it is seeking. He used his time with Commissioner Hamburg to get her support of many of the proposal outlined in that legislation, including mandatory inspections, adverse event reporting and product labeling.

Reps. Rosa DeLauro (D-Conn.) and Nita Lowey (D-N.Y.) introduced a bill December 5 that would require compounding pharmacies to register their facility with FDA and establish a database of information for the agency and state regulators. The bill (Supporting Access to Formulated and Effective Compounded Drugs Act) would also ask FDA to set minimum production standards and offer training opportunities for state regulators.

The passage of compounding legislation is not likely in the near-term. House Democrats – especially Rep. Waxman – seemed eager to get a bill passed before the end of the year, but are unlikely to convince the Republican leadership of that deadline. On the other hand, Senate HELP committee leadership appeared committed to getting a bill through, but Chairman Harkin said it would likely roll over into the next session. That timeline seems much more likely, especially given the congressional focus on the fiscal cliff in the remaining weeks of 2012.

There is at least a potential vehicle for enactment of another FDA law next year: while most of the agency’s user fees were reauthorized in 2012, the animal drug fee program is up for reauthorization in 2013.

Whatever the form of the final language, lawmakers will need to carefully balance any additional authorities – especially over time-consuming responsibilities like inspections of compounding facilities – with funding to support those activities. An unfunded mandate is the last thing that FDA needs, although given the current fiscal climate, it is likely exactly what it can expect.