Download Sealed, Signed, Delivered: End Of Mail

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Sealed, Signed, Delivered: End Of Mail-Order Pharmacies?
Law360, New York (March 13, 2015, 11:19 AM ET) -After over a decade of waiting, on Feb. 19, 2015, the U.S. Food and
Drug Administration finally published a draft memorandum of
understanding for public comment that governs state responsibilities
for monitoring an increasingly critical part of the nation’s medical
supply infrastructure: compounding pharmacies. While the memo
will greatly impact compounding pharmacies, which is expected, it
will also significantly affect the way that supply-chain participants —
from pharmaceutical wholesalers to small, independent retailers to
pharmaceutical benefit managers and insurance plans — can and will
operate.
Compounded Drugs
To most of us, the term “compounded prescription” involves
combining individual ingredients or drugs into a finalized prescription
designed to address an individual patient’s specific medical or
Lee H. Rosebush
pharmaceutical need. Recognizing that a cookie-cutter approach to
regulation of compounding pharmacies would not work, in 1997
Congress amended the Federal Food, Drug, and Cosmetic Act, creating 21 U.S.C. Section 353a (better
known as 503A), which provides compounded drugs with a limited exception from certain federal laws
governing manufacturing, labeling and marketing requirements. Compounded drugs are still subject to
important consumer protection provisions, however, including the requirement that compounding not
be employed for “drug product[s]” that the secretary of the U.S.Department of Health and Human
Services determines are unsafe or ineffective. And the law further provides that states wanting to allow
significant amounts of drug compounding must enter into a memo of understanding with the federal
government that “addresses the distribution of inordinate amounts of compounded drug products
interstate” and “provides for appropriate investigation by a State agency” of complaints related to
interstate distribution of compounded drugs.
Since 2002, the federal government’s implementation of the statute has been subject to conflicting
court decisions that have prevented the memo of understanding's requirement from fully taking force.
But in 2013, Congress amended Section 503A, via the Drug Quality and Security Act to respond to these
court decisions and clear the way for implementation of the memo's requirement. As a result of
Congress' recent legislative changes in the DQSA, the FDA was able to revise the memo and finally
publish it for public comment. The product of this irregular process is a memo of understanding that is
underdetermined, lacks clarity on key issues for pharmaceutical compounders, large and small, and is
itself legally contestable.
One of the primary purposes of the memo is to ensure that states work to “address[]” the “distribution
... interstate” of “inordinate amounts” of compounded drug products. To this end, the memo requires
states that sign it to prohibit a pharmacy from interstate distribution of 30 percent or more of the
“number of units” of all drug products it distributes or dispenses, whether they are distributed or
dispensed within or without the state. But the memo is a misfit with Congress' requirements on several
grounds. First, Congress only directed that the FDA and states work together to address the distribution
of compounded drug products—it did not authorize the FDA to force states to prohibit anything.
Second, Congress only directed the FDA and states to work together to address the distribution of
compounded pharmaceuticals. It did not direct the FDA to do anything with regard to the “dispensing”
of those products, an act with significant potential consequences for mail-order pharmaceutical
companies. Finally, the FDA’s 30 percent threshold is entirely arbitrary and could be read to flatly
prohibit a business model under which a pharmacy does more than a third of its work in compounded
drugs. Even if some cut-off arguably is supported by the statute, the explanations for the 30 percent cap
given in the Federal Register promulgation may potentially be subject to attack as “arbitrary and
capricious.”
Even if the FDA has authority to employ the type of approach exemplified by the memo, it is vague
about the important details that are necessary to make it administrable for compounding pharmacies
and government officials. For example, while the memo prohibits the distribution or dispensing of more
than 30 percent of units of drug products, it is silent on what a “unit” is. Does this mean dosage units
such as tablets, doses or prescriptions? How is this 30 percent calculated among different types of drug
products, which include not only classic “pills” of medicine, but also critical products like intravenous
fluids or injections? Indeed, the memo's lack of detail or notice about such critical details may be
sufficiently profound as to prevent the regulated community from even having adequate notice as to
what the FDA is truly proposing.
Finally, it should not be forgotten that the statutory provision in question had to be revised by Congress
after the U.S. Supreme Court in 2002 found an earlier version unconstitutional. That earlier version,
passed in 1997, prohibited advertising of compounded drugs, which was invalidated as an
unconstitutional restriction on commercial speech that impaired both pharmaceutical compounders and
the patients who are entitled to receive truthful information about their products. Whether the revised
statute or the terms of the draft memo are similarly vulnerable to constitutional challenge under the
First Amendment or on other grounds remains an open question.
Implications
As discussed above, there are several areas where clarification is needed for stakeholders and the
public. It seems likely that without significant revision to the approach that the memo of understanding
takes, pharmacies that use the exceptions under Section 503A of the FFDCA will see limitations placed
on the amount of compounded prescriptions they can dispense to their customers around the country.
Consequently, mail order and compounding pharmacies may need to consider not only regulatory
approaches but current and future potential business models and product lines when submitting
comments. Industry stakeholders that are interested in commenting on the memo have until June 19,
2015, to submit those comments to FDA.
Conclusion
While the FDA is required by 503A to develop a memo of understanding, it is important that the agency
do so in keeping with the statute, in a fair and rational manner, and without unduly interfering with a
vital aspect of both the pharmacy and medical industry. All those with an interest in the compounding of
drug products should consider submitting comments on the draft memo and closely watch the agency’s
response to such comments.
—By Lee H. Rosebush, Mark W. DeLaquil and Justin J. Schwab, Baker & Hostetler LLP
Lee Rosebush and Mark DeLaquil are partners and Justin Schwab is an associate in Baker & Hostetler's
Washington, D.C., office.
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