On April 15, 2016, the U.S. Food and Drug Administration (FDA) released three draft guidance documents addressing human drug compounding under the Federal Food Drug, and Cosmetic Act (FDCA). FDA issued new policies concerning the prescription requirement under section 503A of the FDCA, human drug compounding in hospitals and health systems, and the facility definition in section 503B of the FDCA. The FDA intends that its clarifying policies will ensure greater protections for patients whose needs cannot be met by an FDA-approved drug product.

Section 503A describes conditions that must be satisfied by a licensed pharmacist in a state licensed pharmacy or Federal facility, or by a licensed physician, to be exempt from certain provisions of the FDCA, including current good manufacturing practices (CGMP), drug labeling with adequate directions for use, and new drug approval. Section 503B enables exemption from similar provisions of the FDCA for registered outsourcing facilities. But, outsourcing facilities must still comply with CGMP requirements.

The elements of a valid prescription order

The FDCA specifies that a compounded drug product may be eligible for certain exemptions under section 503A only if the drug is compounded (1) for an identified individual patient based on receipt of a valid prescription order, or in limited quantities before the receipt of a valid prescription order; and (2) by a licensed pharmacist in a state-licensed pharmacy or a Federal facility, or by a licensed physician.

FDA clarifies that a valid prescription order has three critical components.  The valid prescription order must (1) be issued by a licensed physician or other practitioner who is authorized by law to prescribe the drug, (2) include a notation in the patient’s chart that documents the prescriber’s or physician’s determination that the compounded drug is necessary for the identified individual patient, and (3) identify the patient for whom the compounded drug is being prescribed.

Drug compounding typically occurs “on” (i.e., after) the receipt of a valid prescription order, with one exception.  A drug product may be compounded in limited quantities prior to receipt of a valid prescription order only if: (1) the licensed physician or pharmacist regularly receives valid prescription orders for a specific patient (and thus, can anticipate requiring future orders for compounding); and (2) the prescription orders are generated within the context of an established physician/pharmacist-patient and/or physician/pharmacist-prescriber relationship.

To demonstrate compliance with section 503A, FDA recommends that licensed pharmacists and physicians maintain adequate records of valid prescription orders (that clearly identify that the drug is intended for an identified individual patient) and documentation of the basis for any anticipatory drug compounding.

Valid prescription order requirements for hospitals and health systems are relaxed, but geographically limited

Many hospitals and health systems purchase compounded drug products from compounders that register as outsourcing facilities under section 503B, and in other instances independently register as outsourcing facilities for the purpose of centralizing drug compounding functions within the hospital or health system (with or without first receiving patient-specific prescriptions or orders).

FDA clarifies that where compounding is performed within a hospital or health system (and the hospital or health system has not registered as an outsourcing facility), a licensed pharmacist or a licensed physician must comply with section 503A and must compound drug products for an identified individual patient after receipt of a valid prescription order or in limited quantities in advance of receipt of a valid prescription order.

However, FDA explains that it does not intend to take action if a hospital pharmacy distributes compounded drug products without first receiving a patient-specific prescription or order as required under section 503A, but only if: (1) the drug products are distributed only to healthcare facilities that are owned and controlled by the same entity that owns and controls the hospital pharmacy and are located within a 1-mile radius of the compounding pharmacy; (2) the drug products are only administered within the healthcare facilities to patients within the healthcare facilities, pursuant to a patient-specific prescription or order; and (3) the drug products are compounded in accordance with all other requirements under section 503A and all applicable regulations.

FDA’s policy limits distribution of compounded drugs to a 1-mile radius of the compounding pharmacy to ensure that distribution is confined to hospital campuses and not health systems more generally. By narrowing the geographic scope for approved distribution, FDA hopes to reduce the threat of health systems engaging in large manufacturing operations without proper regulatory oversight.

Outsourcing facilities may not segregate their operations to avoid compliance with CGMP requirements

To be eligible for exemptions as an outsourcing facility under section 503B, a drug product must be compounded in a facility in which all drugs at the facility are compounded in accordance with section 503B.  An outsourcing facility is defined as “a facility at one geographic location or address.”  FDA interprets a facility to mean a business or other entity under one management, whether direct or indirect, engaged in human drug compounding at a geographic location or street address.

Outsourcing facilities are subject to CGMP requirements and greater federal oversight, heightened requirements for which cannot be avoided by segregating or establishing temporary or physical barriers within a single facility for the purpose of conducting patient-specific and non-patient specific compounding in different areas or at different times or days. FDA has expanded the scope of the facility definition to prevent the commingling of compounding activities under sections 503A and 503B at a single geographic location or address.

While section 503A drug products often appear on their face to be indistinguishable from section 503B drug products, section 503A drug products are not required to comply with CGMP requirements. The commingling of these products poses a significant risk to public health, thus prompting the FDA to expand the facility definition to ensure that all drug compounding activities performed in a facility at one geographic location and address (assuming the facility is under one management) comply with section 503B.

*Blake Walsh is admitted only in Tennessee. Her practice is supervised by members of the firm admitted in the District of Columbia.