September 23, 2016

Should my compounding pharmacy become a registered outsourcing facility?

cure-1006812_1920In the nearly three years since the Drug Quality and Security Act of 2013 (DQSA) created a new level of fees, inspections and exemptions for registered outsourcing facilities, compounding pharmacy owners have been faced with the question of whether they should embrace the Food and Drug Administration’s registration and inspection procedures.

Their answer has been a resounding “no,” choosing instead to face the legal uncertainties and increased scrutiny under existing rules. Nationwide, only 63 outsourcing facilities have registered, and none of those are located in Georgia.

The Process

Under Section 503B of the federal Food, Drug, and Cosmetic Act, facilities that compound human drugs may qualify for exemptions from the FDA’s drug approval requirements and the adequate-directions-for-use provisions. An outsourcing facility is defined as one that:

  • is engaged in the compounding of sterile drugs,
  • complies with all of the requirements of section 503B,
  • pays the registration and re-registration fees,
  • undergoes FDA inspections according to a “risk-based schedule,”
  • may or may not be a licensed pharmacy, but drug compounding must be performed by or under the direct supervision of a licensed pharmacist.

Most significantly, registered outsourcing facilities may or may not fill prescriptions for identified individual patients. After registration, it is exempt from the new drug approval and adequate-directions-for-use requirements.

As government forms go, the FDA’s basic registration form is relatively simple. The information required includes:

  • the name of the facility,
  • the geographic location of the business,
  • a “unique facility identifier,”
  • a point of contact, email address, and telephone number,
  • a statement of whether the facility compounds from bulk drug substances, and if so, whether it compounds sterile or nonsterile drugs from bulk drug substances,
  • a statement of whether the facility intends to compound products on the FDA’s Drug Shortage List,
  • a list of drugs compounded within the previous six months, along with the National Drug Code (NDC) number of the final product, if one has been assigned,
  • the active ingredient and strength of active ingredient per unit,
  • the NDC number of the source drug or bulk active ingredient,
  • if available, the source of the active ingredient,
  • the dosage form and route of administration,
  • the package description, and
  • a statement of the number of individual units produced.

If the FDA determines the required information has been provided, the outsourcing facility will be considered “registered.” After the initial registration, an outsourcing facility must re-register annually, during the registration period between October 1 and December 31.

What Are the Costs of Registration?

A cost/benefit analysis of converting to a registered outsourcing facility includes substantial registration and re-registration fees, costs associated with each separate facility and the costs associated with future risk-based inspections. But the greatest potential capital costs arise from compliance with the new section 503B.

  1. Registration Fees

Outsourcing facilities are required to pay a fee at the time of registration.

The annual establishment fee is paid at the time of registration and is equal to $15,000, multiplied by an inflation adjustment factor, plus the small business adjustment factor. The re-inspection fee will be equal to $15,000 multiplied by the inflation adjustment factor. The inflation-adjusted re-inspection fee for each Financial Year is published in the Federal Register not later than 60 calendar days before the start of each Financial Year.

Certain small businesses can qualify for a reduction, which is only one-third of the annual establishment fee. The reduction is available only if a request is submitted before April 30 of the year before the compounding pharmacists wishes to use the reduction. Gross worldwide sales (not profits) must be less than $1,000,000.

  1. Expenses Generated by Inspection

Once an outsourcing facility is registered, the facility is subject to inspection by the FDA according to “a risk-based schedule.” Depending on the number of outsourcing facility registrants and other inspection priorities, the FDA has indicated that it will inspect newly registered outsourcing facilities within two months of initial registration, if the facility has not been previously inspected.

Subsequent inspections will depend on the findings from the first inspection and other risk-based factors including but not limited to:

  • the compliance history of the outsourcing facility,
  • the record, history, and nature of recalls linked to the outsourcing facility,
  • the inherent risk of the drugs compounded at the outsourcing facility,
  • the inspection frequency and history of the outsourcing facility, including whether the outsourcing facility has been inspected within the last four years, and
  • whether the facility has registered as one that intends to compound drugs in shortage.
  1. Facilities, Not Companies, Register, Thus Increasing Costs

    Registration fees and inspections are facility specific and do not apply to all facilities under common ownership and control. Each outsourcing facility is at a separate geographic location and each must register separately.
  1. Compliance with Section 503B Any drug that is not manufactured in conformity with Current Good Manufacturing Practice (CGMP) is considered to be “adultered.” The FDA has provided detailed regulations to ensure that drugs meet their required purity, strength and nature. The FDA intends to develop specific CGMP regulations applicable to outsourcing facilities. Until those new regulations are released, the FDA has provided a draft formal guidance describing the FDA’s expectations.

The guidance is formidable in its breadth and specificity. It prescribes laboratory controls, release testing, production and process controls, equipment, containers, environmental and personnel monitoring, control systems, facility design and more in 791 lines of regulation spanning 25 pages. The standards for air quality alone consume more than 100 lines of highly prescriptive mandates. Sterile drugs must be produced in controlled environments that have defined particulate counts normally associated with “clean rooms.” The regulations encompass full-scale pharmaceutical manufacturing and likely will discourage any compounding pharmacy contemplating conversion to a registered outsourcing facility.

The “Meaning” of Registration

In the marketplace, registration means only that the FDA has received the registration information. It does not mean that the facility is making FDA-approved drugs. The FDA is clear that drugs from outsourcing facilities have not undergone the same premarket review as approved drugs and lack an FDA review of safety, efficacy and of manufacturing quality. Similarly, the FDA is adamant that registration does not mean that the facility is, in fact, in compliance with CGMP requirements. Compliance is required, but registration or even an inspection does not mean that the facility is compliant.

The FDA has made one statement that could be useful in marketing by compounding pharmacies. Although the compounded drugs will not be FDA approved, purchasers of drugs compounded at a registered outsourcing facility that has had a recent satisfactory FDA inspection will have some assurance that the conditions at that facility met applicable CGMP Standards at the time of the inspection, and the compounded drugs are labeled with the required information.

For drugs compounded by registered outsourcing facilities that are on the FDA’s Drug Shortage List, the drug must be compounded after the drug is placed on the drug shortage list and may not be dispensed or administered to a patient after it has been removed from the drug shortage list. Therefore, compounding pharmacies may place shorter beyond use or expiration dates on such products to ensure that they will be used within this period and compounding pharmacies and purchasers will not be left with inventory of drugs that cannot be used because they are no longer in shortage.

Compounding pharmacies aim to provide safe, effective medications to their communities, designed for patients whose individualized needs that are not met by the international pharmaceutical cartels. So far, the compounding pharmacy industry has not embraced the promised safe harbor of the registered outsourcing facility concept.

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