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From the Townsend Letter
October 2014

Drug Quality and Security Act: How It's Changing the Practice of Pharmacy and Medicine
by Ronald M. McGuff
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Physicians, pharmacists, patients, state regulators, and many others are unsure how the federal Drug Quality and Security Act (DQSA) will change the practice of pharmacy and medicine. We are a compounding pharmacy, and we receive numerous questions about DQSA from our physicians and patients.
The purpose for this article is to provide a more open setting to share what we believe are practical answers to the questions that our physicians have asked about this new regulatory era.
We are not attorneys, but we have studied this topic as a compounding pharmacy and as a FDA-approved manufacturer with a separate regulatory affairs department. With all of this, we can only render our opinion of what the federal DQSA means.
Our attempt to inform you will conform to the aspirations of one of our favorite quotable persons – Albert Einstein: "Make everything as simple as possible, but not simpler."
Our attempt here, therefore, is to reveal only the parts of the law that are relevant to answer the questions posed. In our attempt for simplicity, we purposely do not include parts of the law that do not directly relate to the questions being asked.
Several sections of the DQSA relate to compounding, but two have great importance: 503A and 503B.

So What Does 503A Do?
503A permits a pharmacy to compound drugs if the pharmacy follows certain statutory requirements.1
The most important requirement that affects physicians, pharmacies, and patients is found in the very first paragraph of 503A: "Sections 351(a)(2)(B), 352(f)(1) and 355 of this title shall not apply to a drug product if the drug product is compounded for an identified individual patient based on the receipt of a valid prescription order or a notation, approved by the prescribing practitioner, on the prescription order that a compounded product is necessary for the identified patient …"2
This means that a pharmacy is exempt from compliance to a number of Federal Food, Drug and Cosmetic Act (FFDCA) requirements such as Current Good Manufacturing Practices (cGMP), adequate directions for use, and new drug applications if (and only if) " … the drug product is compounded for an identified individual patient and the practitioner adds this statement on the prescription 'a compounded product is necessary for the identified patient.'"3-5
It is important to remember that if a pharmacy operates outside the 503A requirements, not only will it will be required to comply with all of the requirements of the FFDCA noted above, but it also may be subject to the possible issuance of an FDA Warning Letter stating that the drug products compounded at that facility are adulterated and/or "new drugs" or may be subject to enforcement actions such as an injunction or product seizure. This is something that could cause a ruinous outcome for the pharmacy and distressing impact for its physician and patient customers.

503A also designates other requirements of pharmacy and FDA.
Bulk drug substances used by pharmacy must:

  • meet standards of an applicable United States Pharmacopoeia (USP) or
  • National Formulary (NF) monograph or
  • be a component of an approved drug or
  • appear on a list developed by the Secretary (FDA approved list)

Ingredients used in compounding (other than bulk drug substances) must:

  • meet standards of an applicable USP/ NF monograph, if one exists
  • be on a FDA list of bulk drug substances not included in the USP/NF monographs

There are two FDA "do not compound" lists that restrict compounding pharmacies from compounding certain identified drug products:

  • The FDA must create a list that identifies drug products that are deemed unsafe or not effective;
  • The FDA must create a list of drug products that presents demonstrable difficulties for compounding that reasonably demonstrate an adverse effect on the safety or effectiveness of the drug product.

Prohibition on compounding essential copies of commercial drugs:

  • A pharmacy may not compound drug products that are essentially copies of a commercially available drug product.

Memorandum of Understanding (MOU):

  • limits interstate distribution of compounded drugs to 5% of a pharmacy's total prescription orders dispensed or distributed.

What Does Drug Quality and Security Act, Section 503B Outsourcing Facilities, Mean to Me?
This section of the law creates a new entity known as an "Outsourcing Facility" that can produce drug products. The first paragraph of section 503B states: "(a) In General – Sections 502(f)(1), 505, and 582 shall not apply to a drug compounded by or under the direct supervision of a licensed pharmacist in a facility that elects to register as an Outsourcing Facility if each of the following conditions is met. … "6
The term Outsourcing Facility means a facility at one geographic location or address that:

  • is engaged in the compounding of sterile drugs;
  • has elected to register as an Outsourcing Facility; and
  • "An Outsourcing Facility may or may not obtain prescriptions for identified individual patients."7

Outsourcing Facilities may provide drug products by dispensing (via receipt of a prescription) or distribution (other than by prescription). Customers may be physicians, clinics, hospitals, and so on, but the drug products cannot be resold, which means that the Outsourcing Facility will not be able to sell drug products to wholesalers.
An Outsourcing Facility is not required to be a licensed pharmacy; a 503B entity only requires supervision of a licensed pharmacist.
An Outsourcing Facility may not compound a drug substance unless:

  • the bulk drug substance appears on a list established by the FDA identifying bulk drug substances for which there is a clinical need. (Note: at the time of this writing the definition of clinical need has not yet been codified or defined.);
  • "the drug compounded from such bulk drug substance appears on the FDA (commercial) drug shortage list … at the time of compounding, distribution or dispensing."8

This is very important to understand. Until FDA creates a list of approved bulk drug substances for which it has declared that there is a clinical need, Outsourcing Facilities may only compound drug products that appear on the FDA's commercial drug shortage list.
Outsourcing Facilities are further restricted to the same FDA lists that limit 503A pharmacies, such as:

  • drugs withdrawn or removed because unsafe or not effective
  • drugs presenting demonstrable difficulties for compounding

When Did DQSA Go into Effect?
The DQSA was signed by President Barack Obama on November 27, 2013.

Office Use for Compounded Drugs: Is It Gone Forever?
Maybe not … but for now, it's gone.
"Office use" is the practice of a physician's ordering compounded drugs to be distributed to the physician's office in order for the physician to dispense the drug to a patient. Prior to the enforcement of 503A, each state determined if "office use" was appropriate. Currently, if a pharmacy compounds as a 503A pharmacy, it must do so based on the receipt of a valid prescription.9 In general, current state laws require drugs ordered by prescription to be dispensed to the individual patient by a pharmacist.
Yet, there is still confusion surrounding the application of the Section 503A MOU with regard to allowance for "office use" distribution of drug products. Some may argue that the MOU allows 5% of the valid prescriptions dispensed and distributed to be distributed interstate. Clearly federal law indicates a pharmacy may distribute 5% of drug products to "office use" states. But we have to remember that federal 503A requires a valid prescription in order for a pharmacy to compound drugs and generally, by state law, a prescription received by a pharmacist must be dispensed to the patient. Here, federal intent is negated by current state law.
However, if the pharmacy is registered as a 503B Outsourcing Facility, it could theoretically deliver compounded drugs for office use because a prescription is not required under federal law. However, because Outsourcing Facilities are currently limited to producing commercial drugs on the FDA's commercial drug shortage list, they are of little help to physicians who need compounded drugs for their patients.
To add further uncertainty, we do not know how the FDA will apply "clinical need," a requirement for a drug to be included on the approved bulk drug substance list.
So, for now, "office use" is gone unless you are working with a 503B registered Outsourcing Facility that meets cGMP requirements and the drug that you need is on the FDA commercial drug shortage list, and you are licensed in a state that recognizes Outsourcing Facilities and a state that allows for "office use." Congress is already concerned that the FDA is not following congressional intent, especially regarding the office use issue.10,11
Please remember, commercially available drugs that are approved by the FDA and are manufactured continue to be available from a drug wholesaler and may be ordered for office use in those states that allow for office use.

503a Requires a Compounding Pharmacy to Receive a Valid Prescription. What Is a Valid Prescription?
The federal definition of a valid prescription is only found under controlled substance regulations: "A prescription is an order for medication which is dispensed to or for an ultimate user. … To be valid, a prescription for a controlled substance must be issued for a legitimate medical purpose by a registered practitioner acting in the usual course of sound professional practice."12
Please be aware that the authors of 503A intentionally use the words "valid prescription order." We believe that the authors' intent is to make sure that prescriptions do not become pseudoprescriptions for office use.
The authors added teeth to the DQSA to assure that physicians write "valid" prescriptions for an individual patient and prohibit a prescriber from writing a false prescription.
Be aware! DQSA (federal law) now contains potential penalties for any prescriber that issues an intentionally false prescription.

(a) PROHIBITED Acts. – Section 301 (21 U.S.C. 331) is amended by adding at the end the following: …(2) With respect to a drug to be compounded pursuant to section 503A or 503B, the intentional falsification of a prescription, as applicable.13

There is a difference between a physician's communicating information that meets the valid prescription requirements and prescription information needed by a pharmacist to dispense a prescription under state law.

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