Recent public discussion about the federal role in regulating compounding pharmacies has focused on compounded drugs for human use. Compounded drugs are also vital to companion animal health (like pets).1 In the world of animal compounding, the legality of compounding animal drugs from bulk ingredients, alongside the U.S. Food and Drug Administration's (FDA) power to enjoin compounding from bulk, has been hotly debated. As set forth below in this Alert, nothing in the Federal Food, Drug, and Cosmetic Act (FDCA), its accompanying regulations or the case law declares compounding animal drugs from bulk ingredients illegal.

The FDCA does not contain a provision that regulates compounding of animal drugs. The Animal Medicinal Drug Use Clarification Act (AMDUCA),2 which was passed in 1994, does not regulate animal compounding. AMDUCA allowed a veterinarian to prescribe an approved human or animal drug for off-label use. AMDUCA was enacted to expand the availability of medication to animals. Under earlier FDCA provisions, a drug was deemed unsafe unless it was used exactly as indicated on the label, meaning the drug had to be used for the specific species and disease—and in the specified dose and delivery format. To give animals better access to medication, AMDUCA allowed conditions under which the veterinarians could use approved animal and human drugs for different conditions on different species outside of what was specified on the label.

Although Congress did not grant FDA authority over animal compounding via AMDUCA, FDA promulgated a regulation under AMDUCA entitled "[e]xtra label use from compounding of approved new animal and approved human drugs."3 FDA authority to enact such a regulation is questionable, as AMDUCA did not give FDA authority to regulate compounding of animal drugs. Nevertheless, the language of the regulation does not seem to lead to the conclusion that compounding from bulk drugs is illegal. The regulation applies to "compounding of a product from approved animal or human drugs," so "[n]othing in this part shall be construed as permitting compounding from bulk drugs."4 This means that the regulation addresses compounding only from approved products; the last sentence is simply confirmation that this regulation does not address compounding from bulk drugs.

FDA has agreed that AMDUCA and this regulation do not give FDA the authority to prohibit compounding from bulk ingredients. In United States v. Franck's Lab Inc., the only case where a court has squarely considered if FDA can prohibit veterinary compounding from bulk, FDA sought to enjoin a pharmacist from compounding veterinarian-prescribed medication from bulk.5 Before the Franck's court, FDA argued the plain language of the FDCA gave FDA authority to enjoin compounding from bulk. As for AMDUCA and its regulation, FDA took the position outline above—that the statute and its regulation could not be the source of FDA authority to enjoin compounding from bulk, as they only apply to compounding from approved drugs. FDA also argued that its 2003 compliance policy guide could not give it authority to enjoin a pharmacist from compounding from bulk, as it is "nothing more than an expression of non-binding policy on enforcement discretion."6

FDA asked the Franck's court to take a very literal view of the FDCA to give it the power to prohibit compounding from bulk. FDA argued that animal compounds prepared from bulk drugs are new animal drugs under the plain language of the FDCA and no statutory exceptions applied that exempt animal compounds from the FDCA's misbranding and misadulteration provisions. As FDA has the authority to enforce the new animal drug approval scheme, it can enforce its regulatory authority over animal compounds as new animal drugs, and prohibit animal compounding from bulk.7

The Franck's court rejected FDA's literal reading of the FDCA based on three basic principles of statutory interpretation: (1) Congress will not hide an elephant in a mouse-hole, i.e., Congress does not delegate decisions of economic and political significance to an agency in a vague or cryptic fashion; (2) Congress must speak clearly when it intends to displace traditional state regulation of a particular practice (i.e., the state regulation of pharmacy practices); and (3) if a statute carries criminal penalties, it must be interpreted in favor of the defendant to avoid punishing conduct more severely than Congress intended. The Franck's court concluded that Congress would not hide the elephant—its intention to regulate pharmacy compounding—in the mouse-hole of the new drug approval process; FDCA does not show congressional intention to displace traditional state regulation of pharmacy practices; and as the FDCA carries criminal penalties, FDA's literal read would punish conduct more severely than Congress intended.8

The Franck's decision was subsequently vacated. While on appeal, the pharmacy sold its assets and ceased to function as a compounding pharmacy, which rendered the case moot.9 The reasoning of the Franck's court, however, is sound. A literal read of the FDCA that prohibits animal compounding from bulk ingredients does not make sense, especially considering that the FDCA, via the Food and Drug Administration Modernization Act (FDAMA), allows compounding for humans from bulk ingredients.10 A statute that regulates public health, like the FDCA, must be read in context and as a whole. A literal reading of FDCA that results in allowing a practice in human drugs (presumably because it is safe), but prohibiting that same practice in animal drugs, distorts the statute.