On November 27, 2013, the President signed the Drug Quality and Security Act (H.R. 3204) into law. This legislation is designed to clarify the Food and Drug Administration’s (FDA) oversight authority over drug compounding and modernize the federal drug tracking and tracing system.
The House passed H.R. 3204 on September 28, 2013. The Senate passed the bill on November 18, 2013, after an uncommonly strong bicameral, bipartisan effort. Senate passage came just over a year after a deadly meningitis outbreak was traced to the New England Compounding Center (NECC), and on the same day another compounding recall was announced.
Title I - Compounding: Title I of H.R. 3204 aims to clarify FDA’s authority over drug compounding by resolving uncertainty regarding the applicability of federal law and introducing the concept of an “outsourcing facility.” To this end, the compounding Title (1) amends Section 503A of the Federal Food, Drug, and Cosmetic Act (FDCA) to eliminate the advertising restrictions held to be unconstitutional in 2001 by the U.S. Supreme Court and establish this new Section 503A as the law of the land; (2) requires FDA to coordinate and engage with States to ensure the safety of compounded drugs; and (3) distinguishes traditional compounders that mix tailored doses of medication in response to specific prescriptions from “outsourcing facilities” that make larger volumes of compounded sterile drugs. Under the Act, compounders who wish to continue traditional compounding practices will remain primarily regulated by State Boards of Pharmacy, while compounders engaged in large-scale compounding operations will be permitted – but not required – to opt into the newly created “outsourcing facilities” category. Companies that do choose to be designated as “outsourcing facilities” will be subject to federal registration, fee and reporting requirements.
Title II - Track and Trace System: Title II of H.R. 3204 aims to reduce drug shortages, theft, counterfeiting and diversion by modernizing existing federal law and replacing the existing patchwork of state track and trace laws with a uniform national framework for tracing drugs throughout the supply chain . More specifically, Title II (1) establishes a unit-level interoperable drug tracing system, to be phased in over the course of 10 years, that will require companies to provide information about each drug to the next party in the supply chain; (2) explicitly preempts state track and trace laws, including Florida’s current law and a California pedigree law that was scheduled to go into effect in 2015, so as to help alleviate drug shortages and cut government-imposed prescription drug costs; (3) formally recognizes third-party logistics providers (3PLs) as part of the drug supply chain; (4) creates minimum and maximum licensure standards for wholesale distributors and 3PLs, but preserves State authority for licensure issuance and fee collection; and (5) requires FDA to keep and make available to the public a database that enables consumers and members of the drug supply chain to identify appropriately licensed wholesalers.
OUTSTANDING ISSUES REGARDING THE ACT:
While a broad range of stakeholders have endorsed H.R. 3204 and the bill has been hailed on Capitol Hill as a major bipartisan accomplishment, many experts and advocates have concerns about the final legislation.
The Cost of Voluntary Registration: Some industry experts are concerned that the bill’s voluntary registration system relies too heavily on market forces and will allow large compounders engaged in non-traditional compounding practices to avoid federal regulation by deciding not to register as an outsourcing facility. Others warn that the bill lacks clarity, provides insufficient oversight authority to FDA and will likely lead to litigation. Some opponents go further, arguing that this bifurcated system with drug manufacturers operating under different sets of quality rules may create an environment that is less safe for patients than the existing one.
These concerns may prove to have merit. Drawing the line between traditional compounders and outsourcing facilities was difficult for legislators. Ultimately, the drafters agreed on a voluntary registration system, and left proposed metrics, more specific definitions and certain FDA authority out of the final compromise bill. The resulting ambiguities – particularly those that relate to the distinction between traditional compounding pharmacies and large-scale compounding operations – may well be tested in court. Only time will tell how this new regulatory structure will impact patient safety.
Because the bill creates a voluntary registration system under which certain compounders will be regulated by FDA and others by State authority, much will depend on whether large-scale compounders choose to register for federal oversight. It remains unclear how many compounders will see FDA oversight as good business practice and actually elect to be subject to risk-based inspections, adverse event reporting and annual user fee payments. It is possible, but by no means certain, that federal regulation will become viewed as a mark of quality or condition of doing business for compounders. Under the legislation, it is also possible that non-traditional compounders will decide against registering for FDA regulation. If this occurs, absent unprecedented coordination between FDA and State Boards of Pharmacy, the same type of confusion over controls that arguably led to the NECC disaster will likely remain under the new framework.
Other Omissions and Unintended Consequences: Going forward, it will be important to monitor a number of other issues which, for the sake of advancing legislative negotiations between the House, Senate and the Administration, were also omitted from the final version of the bill. For example, questions remain about how FDA will interpret the legislation’s silence on office-use compounding and repackaged sterile drugs as well as the regulation of biologics, nuclear pharmacies and animal drug compounding. As recently as last week, concerns about preserving access to compounded drugs prompted key lawmakers to engage FDA officials publicly about the agency’s interpretation of congressional intent and whether, in light of the omissions in the bill, FDA would continue to regulate these areas post-enactment in the same manner it has in the past. Top House and Senate authors have vowed to work closely with FDA and address any unintended consequences of the legislation.
Forthcoming Guidances and Rulemakings: Much uncertainty remains, as enactment begins a substantial rulemaking process that will ultimately define how the law operates. Interested parties should monitor and engage on the numerous guidances and regulations that will be developed over the course of the law’s implementation. Stakeholders may be particularly interested in (1) FDA’s development of a notification system designed to facilitate coordination with State Boards of Pharmacy; and (2) rules outlining drugs that are demonstrably difficult to compound. Coming regulations on (3) adverse event reporting; (4) labeling requirements; (5) tailored GMPs for large-scale compounders; (6) identifying suspect products; (7) package-level tracing; and (8) interoperable electronic data exchange are also likely to require significant stakeholder attention.
TRACK & TRACE
Supply Chain Complexities Abound: As implementation moves forward, there will be no shortage of important supply chain questions to consider and address. Some experts believe that the bill’s drug supply chain provisions will be particularly difficult to implement. Requiring a distinct number to be assigned to each “package or homogeneous case,” the definition of which will also be determined by regulation, will have significant ongoing implications for manufacturers and upstream suppliers, who may be tasked with keeping records of or assigning these numbers. Moreover, developing standards to enable interoperable data exchange will be a challenge. As the lot-level and package/unit-level tracing systems are layered onto product identifier requirements, the level of technical and commercial complexity is likely to increase.
Experts also have many questions about legislative provisions and forthcoming regulations regarding “issues of inference,” the nature and scope of 3PL regulation, regulatory implications for common carriers, product return loopholes and other opportunities for bad actors to avoid or exploit the system.