On September 10, 2018, the federal Food & Drug Administration (”FDA”) released its revised draft standard Memorandum of Understanding (“MOU”) between states and the FDA addressing the interstate distribution of compounded drug products.  See 83 Fed. Reg. 175, 45631 et seq. (Sept. 10, 2018). The draft is the latest in the FDA’s decades-long effort to clarify state and federal roles in investigating and responding to complaints related to compounded drug products shipped between states.

Section 503A of the Food, Drug, & Cosmetic Act (“FDCA”) sets forth conditions that must be satisfied for drug products compounded by a licensed pharmacist or licensed physician to be exempt from sections of the FDCA. To qualify for exemption under Section 503A, the drug product must be compounded in a state that has entered into an MOU with the FDA. If the state has not entered into the MOU, then compounders may only dispense up to 5 percent of their compounded products interstate to remain qualified for exemption.

The FDA first published its draft standard MOU, which was developed in consultation with the National Association of Boards of Pharmacy, on January 21, 1999. Challenges to the constitutionality of the advertising, promotion, and solicitation provision in Section 503A of the FDCA delayed further implementation efforts until Section 503A was amended in 2013 by the Drug Quality & Security Act. After Section 503A’s amendment, the FDA withdrew its 1999 draft standard MOU and replaced it with a revised version on February 19, 2015. After receiving more than 3,000 comments on the 2015 draft standard MOU, the FDA published the current September 10, 2018 version while simultaneously withdrawing its 2015 draft.

Notable changes from the 2015 draft standard MOU

The proposed draft standard MOU continues to outline the responsibilities of signatory states to investigate and respond to complaints surrounding compounded drug products. Notable changes from the 2015 draft standard MOU include the following:

  • Inordinate Amount: The 2018 draft standard MOU changes what the FDA considers to be an “inordinate amount” of compounded product shipped interstate. Under the current draft, the FDA considers a pharmacy or physician to have distributed an inordinate amount of compounded drug products interstate if the number of prescription orders for the compounded drug products distributed interstate during any calendar month is greater than 50 percent of the number of prescription orders for compounded drug products dispensed or distributed both interstate and intrastate. This “50 percent threshold” reflects the FDA’s shift to a more lenient perspective than past Administrations, which proposed 20 and 30 percent thresholds under the 1999 and 2015 draft standard MOUs, respectively.
  • Enforcement: The FDA indicated that it does not intend to take action against a compounder located in a state that has entered into the MOU on the sole basis that a compounder’s interstate distribution of compounded drug products exceeds the 50 percent threshold. Rather, the FDA stated that it will perform a risk-based assessment that utilizes information collected by the states under the MOU to “inform inspectional priorities.” In addition, the FDA signaled its intention to further delay enforcement of Section 503A’s 5 percent interstate distribution limit against compounders in states that do not sign the final standard MOU. The proposed 180-day grace period, up from the previously proposed 90 days, would provide additional time for these compounders to fall under the 5 percent limit or comply with the FDCA’s requirements.
  • Distribution: The FDA has also revised its definition of “distribution” for purposes of the draft standard MOU to mean that “a compounder has sent a compounded drug pr­oduct out of the facility in which the drug was compounded.” Under the revised definition, “distribution” excludes situations in which the transaction is completed between the compounder and the patient without the compounded drug leaving the facility where it was prepared, regardless of whether the product subsequently leaves the state. Consequently, compounded drug products that are dispensed at the facility and later taken across state lines would not count toward the 50 percent threshold. Likewise, complaints associated with these products would not be subject to the complaint investigation provisions of the MOU.

The Takeaway

The FDA’s more lenient perspective may provide compounders with some comfort, as pharmacies may have greater opportunities to dispense compounded drug products out of state without facing the restrictive requirements of certain sections of the FDCA. Conversely, critics may fear that the FDA is lessening its oversight over what many consider a high-risk industry. It remains to seen whether the FDA will adopt its draft standard MOU without further revision or if it will continue to modify the draft in light of public comments.