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FDA must revisit major drug compounding policy, judge rules

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Signage is seen outside of the Food and Drug Administration (FDA) headquarters in White Oak, Maryland, U.S., August 29, 2020. REUTERS/Andrew Kelly/File Photo

  • Judge remands key FDA policy on compounding pharmacies for further review
  • Case concerned memorandum of understanding between FDA and state pharmacy boards

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(Reuters) - A federal judge dealt the U.S. Food and Drug Administration's oversight of compounding pharmacies a blow by finding a memorandum of understanding with states governing how the companies' drugs are sold interstate was improperly developed.

U.S. District Judge Christopher Cooper in Washington, D.C., on Tuesday ruled that the FDA in developing the policy failed to consider the economic impact on small pharmacies that prepare compounded drugs for individual patients that are not approved by the FDA.

He said such an analysis was required under the Regulatory Flexibility Act after the FDA set down an "arbitrary" 50% limit on the quantity of drugs compounding pharmacies, which are regulated by state pharmacy boards, can ship interstate before facing federal reporting rules.

"Its ultimate decision has significant binding legal consequences for plaintiffs and pharmacies across the country, and it signals a substantive change in the current legal regime governing interstate compounding," Cooper said.

Cooper sent the MOU back to the FDA for further consideration.

Rachael Pontikes, a lawyer at Reed Smith for seven compounding pharmacies that challenged the MOU, did not respond to a request for comment. But an industry trade group, the Alliance for Pharmacy Compounding, hailed the ruling.

"I think it will help bring us to an MOU that’s fairer, and hopefully one APC can wholeheartedly endorse," APC Board Chair Shawn Hodges said in a statement.

The FDA in a statement said it "will continue to evaluate the court's decision and work closely with states and other stakeholders on compounding issues."

Compounded drugs are custom-made medications that traditionally were formulated by state-regulated pharmacies for specific patients.

In recent decades, the practice has mushroomed, with some pharmacies selling thousands of doses of regularly used mixtures for physicians to keep for future use, even across state lines.

In response, Congress in 1997 required the FDA to develop the MOU to set forth when individual state pharmacy boards had to provide the agency information on the interstate sales of drugs.

Pressure to finalize the agreement grew following a deadly fungal meningitis outbreak in 2012 linked to tainted drugs made by Massachusetts compounding pharmacy New England Compounding Center that sickened 793 people, more than 100 of whom died.

That pharmacy shipped drugs to hospitals in multiple states. The outbreak exposed weaknesses in how the FDA and states regulate pharmacies that engage in interstate sales, prompting Congress in 2013 to strengthen the FDA's authority.

Under the 1997 amendment to the Federal Food, Drug, and Cosmetic Act, states that signed onto the MOU would be required to identify and report information to the FDA on pharmacies that distribute "inordinate amounts" of drugs across state lines.

Pharmacies in states that did not sign the eventual MOU would be limited to distributing 5% of their drugs interstate annually. The law did not define "inordinate," leaving that to the FDA.

After several drafts and years of jousting with compounding pharmacies, the FDA in October 2020 unveiled an MOU that would set a ceiling for signatory states' pharmacies at 50%. All but five states were expected to sign.

Seven compounding pharmacies in Alabama, Wisconsin, Colorado, Pennsylvania, California, Utah, and New York sued that month, arguing the FDA failed to follow proper rulemaking procedures and exceeded its authority.

Cooper did not reach the merits of all of the pharmacies' arguments, instead finding only that the FDA should have conducted an analysis of the economic impact of the MOU on small businesses.

The case is Wellness Pharmacy Inc, et al, v. Azar, U.S. District Court for the District of Columbia, No. 20-cv-03082.

For the pharmacies: Rachael Pontikes and James Segroves of Reed Smith

For the FDA: Raquel Toledo of the U.S. Justice Department

(Editor's Note: This story has been updated with a comment from the FDA.)

Related stories:

Pharmacy exec in deadly U.S. meningitis outbreak gets stiffer, 14-1/2 year prison term

Judge rejects drug compounding company's challenge to FDA policy

Reporting by Nate Raymond in Boston

Nate Raymond reports on the federal judiciary and litigation. He can be reached at nate.raymond@thomsonreuters.com.

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