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United States Government Accountability Office: 
GAO: 

Report to Congressional Requesters: 

July 2013: 

Drug Compounding: 

Clear Authority and More Reliable Data Needed to Strengthen FDA 
Oversight: 

GAO-13-702: 

GAO Highlights: 

Highlights of GAO-13-702, a report to congressional requesters. 

Why GAO Did This Study: 

Drug compounding is the process by which a pharmacist combines, mixes,
or alters ingredients to create a drug tailored to the medical needs 
of an individual. An outbreak of fungal meningitis in 2012 linked to
contaminated compounded drugs has raised concerns about state and
federal oversight of drug compounding. GAO was asked to update its 2003
testimony on drug compounding. Specifically, this report addresses (1) 
the status of FDA’s authority to oversee drug compounding, and the
gaps, if any, between state and federal authority; (2) how FDA has 
used its data and authority to oversee drug compounding; and (3) the 
actions taken or planned by states or national pharmacy organizations 
to improve oversight of drug compounding. GAO reviewed relevant 
statutes and guidance; reviewed FDA data; and interviewed officials 
from FDA, national pharmacy organizations, and four states with varied 
geography, population, and pharmacy regulations. 

What GAO Found: 

The authority of the Food and Drug Administration (FDA), an agency 
within the Department of Health and Human Services (HHS), to oversee 
drug compounding is unclear. Two federal circuit court decisions have 
resulted in differing FDA authority in different parts of the country. 
According to FDA officials, these inconsistent decisions and the 
agency’s limited inspection authority over pharmacies have created 
challenges in FDA’s ability to inspect and take enforcement action 
against entities engaging in drug compounding. For example, from 2002 
through 2012, in order to inspect some facilities engaged in drug
compounding, FDA officials said they had to obtain 11 warrants to gain 
access to drug compounders’ facilities that had challenged FDA’s 
inspection authority. GAO also found that while FDA and national 
pharmacy organization officials generally agreed that states regulate 
the practice of pharmacy and FDA regulates drug manufacturing, there 
was no consensus on whether compounding drugs in large quantities—-in 
anticipation of individual prescriptions or without prescriptions-—and 
selling those drugs across state lines falls within the practice of 
pharmacy or is a type of drug manufacturing that should be overseen by 
FDA. This lack of consensus and differing FDA authority to oversee 
compounded drugs across the country has resulted in gaps in oversight 
of drug compounding. 

FDA lacks timely and reliable information to oversee the entities that 
compound drugs, but has found problems through its limited oversight. 
Specifically, FDA’s inspection database cannot identify all of the 
agency’s inspections of compounding pharmacies, or the final 
classification of inspection results, for all of the inspections. 
Until 2013, FDA limited its inspections of compounding pharmacies to 
those conducted in response to complaints or adverse events. However, 
the agency recently inspected compounding pharmacies that it 
identified as posing a significant threat to public health from poor 
sterile drug production practices in the past and found problems, such 
as concerns about a lack of sterility, which resulted in recalls of 
compounded drugs. In addition, drug manufacturers are required to 
register with FDA and are subject to FDA’s inspection and drug 
approval processes; pharmacies meeting certain requirements are 
generally exempt from registration. However, some compounding 
pharmacies may have registered with FDA to market themselves as “FDA-
registered” which may lead some purchasers to assume that FDA has
inspected or approved their compounded drugs; whereas, according to FDA
officials, this is generally not the case. 

The states GAO reviewed-—California, Connecticut, Florida, and Iowa-—
have each taken actions to enhance their oversight of drug 
compounding. For example, Florida required all pharmacies—both those 
located in the state and out-of-state that sell drugs in Florida—to 
notify the board of their compounding activities. In addition, 
national pharmacy organizations have undertaken efforts to help states 
oversee drug compounding. For example, a national pharmacy 
organization is working with Iowa to inspect out-of-state pharmacies 
that ship drugs into the state. However, according to national 
pharmacy organizations and officials from state boards of pharmacy, 
some states do not have the resources to inspect pharmacies on a 
regular basis. Instead, these states inspect pharmacies only in 
response to a complaint or a reported adverse drug event. 

What GAO Recommends: 

To help ensure that the entities that compound drugs have appropriate
oversight, Congress should consider clarifying FDA’s authority to 
oversee drug compounding. In addition, FDA should ensure its databases 
collect reliable and timely data on inspections associated with 
compounded drugs, and differentiate drug compounders from 
manufacturers. HHS's comments support the need to clarify FDA's
authority, and stated that the information in its inspection database
could be improved and that it would consider whether it can 
differentiate compounding pharmacies from manufacturers. 

View [hyperlink, http://www.gao.gov/products/GAO-13-702]. For more 
information, contact Marcia Crosse at (202) 512-7114 or 
crossem@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Unclear Federal Authority and Lack of Consensus on When Drug 
Compounding Becomes Manufacturing: 

FDA Lacks Reliable and Timely Data on Compounding Pharmacies, but Has 
Found Problems through Its Limited Oversight: 

States and National Organizations Have Taken Various Actions to 
Strengthen Oversight of Drug Compounding: 

Conclusions: 

Matter for Congressional Consideration: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Information on Selection Criteria for Four States: 

Appendix II: History of the Food and Drug Administration's (FDA) 
Authority over Drug Compounding and Approach to Oversight: 

Appendix III: Comments from the Department of Health and Human 
Services: 

Appendix IV: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Characteristics Considered in Selecting Four States for 
Inclusion in Review of State Oversight of Compounding Pharmacies: 

Table 2: Comparison of the Food and Drug Administration's (FDA) 
Authority and Oversight of Drug Compounding under Section 503A of the 
Federal Food, Drug, and Cosmetic Act (FDCA) and FDA's 2002 Compliance 
Policy Guide: 

Figure: 

Figure 1: Food and Drug Administration (FDA) Oversight of Drug 
Compounding: 

Abbreviations: 

FACTS: Field Accomplishments and Compliance Tracking System: 

FDA: Food and Drug Administration: 

FDAMA: Food and Drug Administration Modernization Act of 1997: 

FDCA: Federal Food, Drug, and Cosmetic Act: 

HHS: Department of Health and Human Services: 

NABP: National Association of Boards of Pharmacy: 

OIG: Office of Inspector General: 

PCAB: Pharmacy Compounding Accreditation Board: 

USP: The United States Pharmacopeial Convention: 

[End of section] 

GAO:
United States Government Accountability Office: 
441 G St. N.W. 
Washington, DC 20548: 

July 31, 2013: 

The Honorable Elijah Cummings: 
Ranking Member: 
Committee on Oversight and Government Reform: 
House of Representatives: 

The Honorable John Tierney: 
Ranking Member: 
Subcommittee on National Security: 
Committee on Oversight and Government Reform: 
House of Representatives: 

Drug compounding is the process by which a pharmacist or doctor 
combines, mixes, or alters ingredients to create a drug tailored to 
the medical needs of an individual patient. Compounding, a traditional 
component of the practice of pharmacy, is typically used to prepare 
drugs that are not commercially available, such as a drug for a 
patient who is allergic to an ingredient in a mass-produced 
pharmaceutical product.[Footnote 1] Traditionally, state pharmacy 
regulatory bodies (e.g., boards of pharmacy) regulate pharmacy 
practice, including drug compounding activities, through state laws 
and regulations. The Food and Drug Administration (FDA) is the agency 
within the Department of Health and Human Services (HHS) responsible 
for assuring the safety and effectiveness of drugs marketed in the 
United States.[Footnote 2] Under the Federal Food, Drug, and Cosmetic 
Act (FDCA), and its implementing regulations, FDA approves new drugs 
and regulates the manufacture, marketing, and distribution of 
pharmaceutical products.[Footnote 3] 

An outbreak of fungal meningitis in 2012 linked to contaminated 
compounded drugs--resulting in over 60 deaths and hundreds of people 
becoming ill--has led to questions about the safety and quality of 
compounded drugs, and raised concerns about state and federal 
oversight of drug compounding.[Footnote 4] Concerns have also been 
raised by FDA and others, including members of Congress and public 
health advocates, that some pharmacies are going beyond traditional 
drug compounding by producing large quantities of compounded drugs 
without prescriptions for individual patients, and selling those 
compounded drugs to facilities in multiple states. Many believe that 
these types of pharmacies are manufacturing drugs under the guise of 
compounding without meeting safety and other requirements with which 
drug manufacturers must comply. 

You asked us to update our 2003 testimony on drug compounding. 
[Footnote 5] Specifically, this report addresses (1) the status of 
FDA's authority to oversee drug compounding, and the gaps, if any, 
between state and federal authority to oversee drug compounding; (2) 
how FDA has used its data and authority to oversee drug compounding; 
and (3) the actions taken or planned by states or national pharmacy 
organizations to improve oversight of drug compounding. 

To describe the status of FDA's authority to oversee drug compounding 
and any gaps between state and federal authority, we reviewed FDCA 
provisions pertaining to drug compounding and other relevant federal 
statutes, regulations, and guidance documents on federal oversight of 
drug compounding, including FDA's 2002 compliance policy guide on drug 
compounding. We also reviewed other relevant FDA documents, and 
interviewed FDA officials on any gaps or proposed actions to address 
gaps, or to clarify federal and state authority. We selected four 
states--California, Connecticut, Florida, and Iowa--and reviewed 
documents, and interviewed officials from state regulatory bodies in 
each of these states.[Footnote 6] (App. I contains information on the 
four states.) In addition, we reviewed documents, and interviewed 
officials from national organizations representing pharmacies and 
pharmacists--including the American Pharmacists Association, American 
Society of Health-System Pharmacists, International Academy of 
Compounding Pharmacists, and National Community Pharmacists 
Association--and other organizations, including the National 
Association of Boards of Pharmacy (NABP) and the United States 
Pharmacopeial Convention (USP).[Footnote 7] We also reviewed reports 
and studies related to oversight of drug compounding, and interviewed 
officials involved in those studies, including those from the 
Congressional Research Service and the HHS Office of Inspector General 
(OIG). 

To examine how FDA has used its data and authority to oversee drug 
compounding, we reviewed documents and interviewed FDA officials--
including officials in the Center for Drug Evaluation and Research, 
Office of Regulatory Affairs, and Office of the Chief Counsel--
regarding data FDA collects on compounded drugs, the entities that 
compound them, and FDA inspections of those entities. Specifically, we 
examined data related to drug compounding from (1) FDA's Drug 
Registration and Listing System on entities that compound drugs that 
registered with FDA in its drug manufacturer database, and (2) FDA's 
Field Accomplishments and Compliance Tracking System (FACTS) on 
inspections of entities that compound drugs. We also interviewed FDA 
officials on the availability and limitations of FDA's data on adverse 
events associated with compounded drugs. We compared FDA's data on 
compounded drugs and the entities that compound them, including FDA's 
inspections and outcomes of those inspections, to standards described 
in Standards for Internal Control in the Federal Government--which 
specifies that relevant, reliable, and timely information be available 
for management decision making and external reporting 
purposes.[Footnote 8] We also reviewed information on FDA's efforts in 
2013 to conduct inspections of entities that, according to the agency, 
were known to have produced sterile compounded drugs in the past. To 
assess the reliability of the FDA data, we reviewed FDA guidance and 
related documentation; interviewed knowledgeable agency officials; and 
viewed data FDA made available from these databases on its website. We 
determined that the data were sufficiently reliable for purposes of 
our report. 

To identify actions planned or taken by states or national pharmacy 
organizations, we reviewed state laws and regulations, and proposed 
changes to state laws and regulations, in the four states we selected. 
For each state, we reviewed documents and interviewed representatives 
of the states' pharmacy regulatory bodies regarding actions taken or 
planned relating to the oversight of drug compounding, the 
implications of existing and proposed state laws and regulations, and 
the challenges state regulatory bodies face in overseeing drug 
compounding. We also discussed the states' pharmacy inspection and 
enforcement activities, as well as state efforts to collect pharmacy 
data. In addition, we reviewed surveys of states--for example, results 
of surveys of states to determine the number requiring compliance with 
USP provisions for sterile compounding. We also reviewed documents and 
interviewed officials from national pharmacy organizations, including 
NABP, regarding the actions planned or taken by these national 
pharmacy organizations related to the oversight of drug compounding. 

We conducted this performance audit from February 2013 to July 2013 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Background: 

Drug Compounding by Pharmacies: 

Traditionally, a drug is compounded, through the process of mixing, 
combining, or altering ingredients, to create a customized drug 
tailored to the medical needs of an individual patient upon receipt of 
a prescription. For example, a pharmacist may tailor a drug for a 
patient who is allergic to an ingredient in a manufactured drug or 
prepare a liquid formulation for a patient who has difficulty 
swallowing pills. Some pharmacies also compound drugs in advance of 
receiving individual patient prescriptions in anticipation of 
receiving prescriptions based on historical prescribing patterns, a 
practice referred to as anticipatory compounding. Compounded drugs 
include nonsterile preparations, such as capsules, ointments, creams, 
gels, and suppositories; and sterile preparations, including 
intravenously administered fluids and injectable drugs. Compounded 
sterile drugs pose special risks of contamination if not made properly 
and require special safeguards to prevent injury or death to patients 
receiving them. 

Drug compounding is an integral part of the pharmacy profession and is 
practiced in a variety of settings, including hospital pharmacies, 
community pharmacies, chain drug store pharmacies, and home infusion 
settings. The exact proportion of all prescriptions filled by 
compounded drugs is unknown. In 2003, we reported that estimates 
ranged from 1 percent to 10 percent.[Footnote 9] More recently, in 
2013, the International Academy of Compounding Pharmacists estimated 
that the compounding industry made up 1 to 3 percent of the U.S. 
prescription drug market. 

The exact number of pharmacies that compound drugs is also unknown. In 
2013, the International Academy of Compounding Pharmacists provided 
the following estimates: 

* About 26,000 community-based pharmacies reported that they provide 
some sort of prescription compounding services, based on information 
from the National Council of Prescription Drug Program's database on 
pharmacies. 

* Of those 26,000 community-based pharmacies, about 7,500 pharmacies 
specialize in compounding. 

* Of those 7,500 community-based pharmacies that specialize in 
compounding, about 3,000 pharmacies compound both sterile and 
nonsterile preparations. 

* In addition, there are about 8,200 hospital pharmacies in the United 
States, and all of them are likely conducting some sort of 
compounding, both sterile and nonsterile. 

A recent report indicates that there has been an increase in the 
outsourcing of drug compounding in the last decade, primarily by 
hospitals. In April 2013, the HHS-OIG reported that nearly all (92 
percent) of surveyed hospitals that participated in Medicare reported 
using compounded sterile products, and that more than three-fourths of 
these hospitals (77 percent) purchased some of these compounded drugs 
from at least one outside pharmacy.[Footnote 10] The HHS-OIG found 
factors that hospitals cited for outsourcing included the need to 
ensure a ready supply of products in the event of shortages and the 
need for products with extended shelf lives, which require 
sophisticated equipment and testing to prepare these products that may 
not be readily available on the hospital premises. 

State Regulation of Pharmacy Practice: 

State pharmacy regulatory bodies are responsible for oversight of the 
practice of pharmacy. All 50 states describe drug compounding in their 
state laws and regulations on pharmacy practice, although specific 
statutes or regulations vary across states, according to NABP. 

USP is involved in setting standards that affect compounding.[Footnote 
11] According to USP, compounding standards help practitioners adhere 
to widely acknowledged, scientifically sound procedures and best 
practices, and facilitate the delivery of consistent and good-quality 
prepared medicines to patients. Twenty-five state pharmacy regulatory 
bodies reported that they require compliance with USP's chapter on 
sterile compounding, according to the NABP's 2013 survey of pharmacy 
law.[Footnote 12] 

FDA Regulation of Drug Compounding: 

FDA considers compounded drugs to be "new drugs" subject to FDA 
oversight; however, the agency has acknowledged that it is not 
practicable for pharmacies to complete and obtain approval for a new 
drug application for each compounded drug prepared for an individual 
patient.[Footnote 13] In 1992, FDA, through guidance, and, in 1997, 
Congress, through legislation, attempted to clarify when compounded 
drugs will be exempt from certain requirements of the FDCA, including 
new drug approval requirements. Specifically, the Food and Drug 
Administration Modernization Act of 1997 (FDAMA) enacted section 503A 
of the FDCA. This section exempted drug products compounded by a 
pharmacist or physician based on a valid prescription for a compounded 
product that is necessary for the identified patient from three key 
provisions of the FDCA that are otherwise applicable to drugs, 
provided the pharmacy had, among other conditions, not solicited 
prescriptions or advertised or promoted the compounded drugs.[Footnote 
14] 

In 2001, however, the United States Court of Appeals for the Ninth 
Circuit struck down all of the advertising, promotion, and 
solicitation provisions of section 503A of the FDCA because those 
provisions violated the Free Speech Clause of the First Amendment. The 
court also held that, because these provisions could not be severed 
from the remainder of section 503A, all of section 503A was invalid. 
In 2002, the United States Supreme Court struck down the law's 
advertising, promotion, and solicitation restrictions without 
addressing whether the rest of section 503A remained law. As a result, 
FDA issued a revised version of its compliance policy guide on drug 
compounding in 2002, which provides guidance, in light of the Ninth 
Circuit and Supreme Court decisions, on the types of factors the 
agency will consider in determining whether to take enforcement action 
against drug compounders for violations of the FDCA. These factors 
include activities, such as offering compounded drug products at 
wholesale, that suggest a drug compounder is engaged in drug 
manufacturing, rather than drug compounding. Subsequently, in 2005, 
the United States Court of Appeals for the Fifth Circuit issued a 
decision holding that, although section 503A's advertising, promotion, 
and solicitation restrictions were invalid, these restrictions could 
be severed from the rest of section 503A and, therefore, the law's 
remaining drug compounding provisions remain valid. See appendix II 
for details about these developments and how they have affected FDA's 
authority to oversee drug compounding. 

The FDCA provides FDA authority to inspect pharmacies that compound 
drugs; however, this authority is limited. Generally, FDA's inspection 
authority does not extend to a pharmacy's records if the pharmacy 
meets certain requirements.[Footnote 15] While FDA has not routinely 
inspected compounding pharmacies, FDA has used its authority to 
conduct some inspections in recent years, generally in response to 
complaints. These inspections have resulted in FDA issuing inspection 
observation reports, which are called FDA form 483s, and, in some 
cases, warning letters.[Footnote 16] FDA's FACTS database contains 
information on these inspections, including the type of inspection 
(e.g., routine or in response to a complaint). 

Under the FDCA, drug manufacturers are required to register with FDA 
and list the drugs they manufacture.[Footnote 17] The FDCA exempts 
from these registration and listing requirements those pharmacies that 
meet certain requirements.[Footnote 18] FDA's Drug Registration and 
Listing System contains information on drug establishments that have 
registered with FDA to market their drugs in the United States. These 
establishments provide information, including company name and 
address, and identify the drugs they manufacture for commercial 
distribution in the United States. 

Unclear Federal Authority and Lack of Consensus on When Drug 
Compounding Becomes Manufacturing: 

Although FDAMA attempted to clarify FDA's authority to oversee drug 
compounding, subsequent court decisions have contributed to a lack of 
clarity regarding the legal standards FDA must apply to oversee drug 
compounding. Specifically, two federal circuit court decisions 
resulted in differing FDA authority over drug compounding in different 
parts of the country, which has affected FDA's ability to oversee drug 
compounding. Section 503A provisions exempting certain compounded 
drugs from the FDCA's good manufacturing practice, certain labeling, 
and new drug and abbreviated new drug application requirements are in 
effect in those states in the Fifth Circuit, in which the U.S. Court 
of Appeals has held that the law, other than its advertising, 
promotion, and solicitation provisions, is valid. However, FDA follows 
its 2002 compliance policy guide in states in the Ninth Circuit, in 
which the U.S. Court of Appeals has held all of the drug compounding 
provisions in section 503A are invalid. In states outside of the Fifth 
and Ninth Circuits, where federal courts have not considered the 
validity of these drug compounding provisions, FDA considers both 
section 503A's drug compounding provisions and its 2002 compliance 
policy guide to guide its oversight. Figure 1 shows how FDA generally 
conducts its oversight of drug compounding in different parts of the 
country based on the differing court decisions. 

Figure 1: Food and Drug Administration (FDA) Oversight of Drug 
Compounding: 

[Refer to PDF for image: interactive U.S. map] 

Interactive instructions: 
Roll over the color legend to the right for information about FDA’s 
authority to oversee drug compounding and how it approaches oversight 
of these drugs. 

Area/Jurisdiction affected: FDA authority in this part of the United 
States; 

Ninth Circuit: 
* Section 503A of the Federal Food, Drug, and Cosmetic Act (FDCA) in 
its entirety is invalid[A]; 
* FDA relies on its 2002 compliance policy guide on drug compounding 
to guide its oversight of drug compounding, according to FDA officials. 

Fifth Circuit: 
* All provisions of section 503A of the Federal Food, Drug and 
Cosmetic Act (FDCA), except the advertising, promotion, and 
solicitation restrictions, are valid; 
* FDA applies the criteria in section 503A of the FDCA, except the 
advertising, promotion, and solicitation restrictions, to determine 
whether certain FDCA requirements apply and to guide its oversight of 
drug compounding, according to FDA officials. 

Remainder of the United States: 
* The advertising, promotion, and solicitation restrictions in section 
503A of the Federal Food, Drug, and Cosmetic Act (FDCA) are invalid. 
Federal courts in these states have not considered the validity of the 
other drug compounding provisions in section 503A; 
* FDA applies the criteria in both section 503A of the FDCA, except 
the advertising, promotion, and solicitation restrictions, and in its 
2002 compliance policy guide on drug compounding, to guide its 
oversight of drug compounding, according to FDA officials. 

Sources: GAO analysis of federal court decisions and interviews with 
FDA officials; Map Resources (map). 

[End of figure] 

Furthermore, according to FDA officials, the agency's inconsistent 
authority to oversee drug compounding and the agency's limited 
inspection authority over pharmacies have led to legal challenges to 
FDA's authority to inspect entities engaging in drug compounding and 
to take appropriate enforcement actions against these entities. For 
example, from 2002 through 2012, FDA had to obtain 11 inspection 
warrants to gain access to drug compounders' facilities and records, 
representing nearly half of the 25 administrative warrants obtained by 
FDA for all FDA-regulated products in that same period, according to 
agency officials.[Footnote 19] FDA officials said that these entities 
refused FDA access to their facilities or records, citing the 
provision of the FDCA that limits the agency's inspection authority 
over a pharmacy that is in compliance with state and local laws. 
[Footnote 20] FDA officials added that if the agency is required to 
obtain a warrant before gaining access, the agency may be delayed in 
its efforts to curb an outbreak or take enforcement action and the 
entity may have time to clean up its facility or alter its records to 
avoid enforcement action. FDA officials also said that if the agency 
finds significant issues during an inspection of a drug compounder, to 
determine whether to take action against the compounder the agency 
must first consider its legal authority in the particular jurisdiction 
in which the compounder operates and whether any FDA action is likely 
to be challenged in court. According to FDA officials, engaging in 
this type of analysis may have resulted in a long lag time between the 
inspection and the issuance of a warning letter. 

In addition, we found a lack of consensus regarding when drug 
compounding becomes drug manufacturing. Officials from FDA and 
national pharmacy organizations we interviewed generally agreed that 
traditional drug compounding involves a patient-specific prescription 
for a customized medication that is not otherwise commercially 
available, and there was agreement that this type of compounding is 
part of the practice of pharmacy and generally overseen by the states. 
Further, there was agreement that FDA has clear authority to oversee 
drug manufacturing and drug manufacturers. However, there was not 
agreement on whether compounding pharmacies that are engaged in large-
scale drug compounding, producing these drugs in anticipation of 
individual prescriptions or without prescriptions, and selling them 
across state lines, are engaged in the practice of pharmacy or are 
engaged in drug manufacturing. As a result, there is a lack of 
consensus regarding whether states should have primary responsibility 
for regulating these entities as pharmacies, or FDA should have 
primary responsibility to regulate them as manufacturers. This lack of 
consensus on who has primary responsibility to regulate entities 
engaged in these practices and differing FDA authority applicable to 
compounded drugs across the country has resulted in gaps in oversight 
of drug compounding. 

Further, according to officials from FDA and most of the organizations 
we spoke with, the line is not clear when anticipatory compounding is 
part of the practice of pharmacy and when anticipatory compounding 
crosses into drug manufacturing. For example, officials from one 
national pharmacy organization said that if a certain number of 
patients come to a pharmacy every month for progesterone suppositories 
and the pharmacy makes enough for a month's supply in advance based on 
the history of these prescriptions, then a pharmacy's compounding of 
the drug in advance should be considered drug compounding and not 
manufacturing. However, these officials added that a pharmacy that 
makes 10,000 sterile compounded injectables in advance of a 
prescription and ships them across 18 states may be engaged in 
manufacturing. 

Noting this lack of clarity regarding when drug compounding becomes 
manufacturing, FDA has been working on a proposal that would create a 
new category of "nontraditional compounding," which would be subject 
to FDA oversight. According to congressional testimony and public 
statements,[Footnote 21] FDA's new category of "nontraditional drug 
compounders" would fall between traditional drug compounding and drug 
manufacturing. FDA officials said they believe this new category would 
subject entities with a higher potential to adversely affect a large 
number of patients to appropriate and effective FDA regulation and 
oversight. FDA's proposal describes an entity as engaging in 
nontraditional compounding if it produces sterile compounded products 
in advance of or without an individual patient prescription, and ships 
these sterile compounded products across state lines. Under FDA's 
proposal, state pharmacy regulatory bodies would continue to have 
primary responsibility to oversee traditional drug compounding and FDA 
would have express statutory authority to oversee this new category of 
nontraditional drug compounding.[Footnote 22] 

Some national pharmacy organizations said that the creation of a new 
category of nontraditional drug compounding is not necessary because 
they believe drug compounding and drug manufacturing are already 
distinct. For example, officials from one national pharmacy 
organization we interviewed said the establishment of a new category 
of nontraditional drug compounding could create more confusion between 
drug compounding and manufacturing, unless this new category is 
carefully crafted. These officials said that states should regulate 
drug compounding and FDA should regulate drug manufacturing, and that 
once an entity crosses the line between drug compounding and 
manufacturing, there should be a seamless handoff from the state to 
FDA. However, other organizations we spoke with generally agreed with 
FDA's proposed tiered system and said that entities in this new 
category should be regulated by FDA, not by state pharmacy regulatory 
bodies. 

FDA Lacks Reliable and Timely Data on Compounding Pharmacies, but Has 
Found Problems through Its Limited Oversight: 

FDA lacks reliable information on entities that compound drugs, the 
types of drugs being compounded, and adverse events related to 
compounded drugs. Until 2013, FDA limited its inspections of 
compounding pharmacies to those conducted in response to complaints or 
adverse events, called "for cause" inspections; however, the agency 
has recently conducted inspections of compounding pharmacies that were 
known to produce "high-risk" sterile compounded drugs, and identified 
serious problems. 

FDA Has Not Collected Reliable and Timely Data on Compounded Drugs and 
the Entities That Prepare Them: 

FDA officials, including the FDA Commissioner, have stated that, under 
the FDCA, compounding pharmacies are generally not required to 
register with FDA or list their products, and therefore FDA does not 
know who they are and what they are compounding.[Footnote 23] As a 
result, FDA has stated that one of the reasons it has not routinely 
inspected compounding pharmacies is because the agency does not know 
who they are. 

Officials with some of the organizations we interviewed said there has 
been confusion regarding the extent to which FDA oversees the 
compounding pharmacies that registered with FDA as drug manufacturers. 
Although drug manufacturers are required to register with FDA by 
providing company information such as name, location, and the drugs 
the company manufactures, compounding pharmacies meeting the FDCA's 
registration exemption are not required to register. However, 
according to FDA officials, neither the law nor the agency precludes 
those compounding pharmacies that are exempt from registration from 
voluntarily doing so, and some compounding pharmacies have registered 
with FDA as manufacturers and marketed themselves as "FDA-registered." 
FDA officials told us that registering as a manufacturer does not 
necessarily result in the application of regulatory requirements that 
apply to manufacturers or in FDA inspection for compliance with these 
requirements. For example, a compounding pharmacy may voluntarily 
register with FDA; however, this registration does not by itself give 
FDA authority to require the pharmacy to comply with FDA's good 
manufacturing practices and other requirements that apply to drug 
manufacturers. Nonetheless, these pharmacies appear as registered 
manufacturers in FDA's registration database, the Drug Registration 
and Listing System. 

When entities that compound drugs on a large scale register with FDA 
as manufacturers and market themselves as "FDA-registered," it may 
erroneously convey an endorsement by FDA. As a result, some state 
officials and purchasers may incorrectly assume FDA inspects the 
entities or has reviewed and approved their compounded drugs. 
Officials from one of the national pharmacy organizations told us that 
they recently learned that a pharmacy can be registered with FDA as a 
drug establishment as well as with the state as a pharmacy. They added 
that healthcare professionals and the public may assume that if an 
entity registers with FDA then that means that FDA is in some way 
regulating that entity. In addition, NABP officials noted that they 
were aware of some entities engaged in drug compounding whose drug 
compounding activities are not subject to state oversight because they 
are registered as manufacturers with FDA and the states assume FDA is 
overseeing these activities. Yet, if a compounding pharmacy is 
voluntarily registered with FDA, the agency would not inspect it for 
compliance with good manufacturing practices because it does not 
manufacture FDA-approved drugs. 

Further, FDA lacks reliable data to make decisions to prioritize its 
inspection workload and other follow-up and enforcement actions. 
[Footnote 24] Under standards for internal control in the federal 
government, relevant, reliable, and timely information should be 
available for external reporting purposes and management decision 
making. According to FDA officials, although the agency's FACTS 
database has a code for inspections of compounding facilities, some 
compounding pharmacies could be inspected and coded as either 
manufacturers of human drugs or manufacturers of veterinary drugs, and 
the FACTS database would not identify them as inspections of 
compounding pharmacies. In addition, while FDA can manually look up 
the results of an individual inspection, the agency does not have 
ready access to all of the final classification of inspections for 
those compounding pharmacies it can identify in its FACTS database; in 
these instances, FACTS does not indicate the agency's final 
determination whether an official action was indicated, voluntary 
action was indicated, or if no action was indicated from the 
inspection results.[Footnote 25] According to FDA officials, some of 
the final decisions are in hard copy, and the database includes 
recommendations from the district office inspectors, which may differ 
from the final inspection classifications.[Footnote 26] Without 
reliable, timely data on all inspections conducted and the actions 
required and taken following those inspections, FDA lacks ready access 
to key data to inform its decision making on its oversight priorities 
and to take appropriate action when problems are identified. 

In addition, pharmacies are generally not required to report to FDA 
adverse events regarding compounded drugs they have produced, unlike 
drug manufacturers who are required to report to FDA if they become 
aware of adverse events associated with their products.[Footnote 27] 
Therefore, adverse event data about compounded drugs consists of 
voluntary reports, and FDA officials said that the agency is only 
aware that an adverse event involves a compounded drug if the 
individual voluntarily reporting the adverse event specifies that a 
compounded drug was involved in the event. While FDA's adverse event 
data associated with compounded drugs is limited, a recent report by 
the Pew Charitable Trusts identified 20 pharmacy compounding errors 
associated with 1,022 adverse events, including 75 deaths, since 
2001.[Footnote 28] According to this report, contamination of sterile 
products was the most common compounding error, though some incidents 
were the result of pharmacists' and technicians' miscalculations and 
mistakes in filling prescriptions. 

Oversight of Drug Compounders Has Been Limited, but FDA Has Recently 
Increased Its Efforts: 

Until 2013, FDA limited its inspections of compounding pharmacies to 
those conducted in response to complaints or adverse events, called 
"for cause" inspections;[Footnote 29] however, the agency has recently 
conducted inspections of compounding pharmacies that FDA identified as 
known to produce "high-risk" sterile compounded drugs. From its 
available data, FDA identified 194 "for cause" inspections of 
compounding pharmacies the agency conducted from February 8, 2002, 
through May 11, 2012, under its pharmacy compounding assignment code 
for human drugs.[Footnote 30] Of these 194 inspections, FDA issued 63 
form 483 inspection observation reports outlining significant 
objectionable conditions identified during the inspections. FDA 
subsequently issued at least 31 warning letters to pharmacies as a 
result of these inspections for problems such as bacterial and fungal 
contamination found in sterile clean rooms and in finished product 
samples, improper hygiene and garbing procedures (e.g., putting on 
gowns, gloves, and shoe covers), failure to conduct appropriate 
laboratory testing on drug products, and inadequate ventilation. 
However, FDA has not taken any enforcement actions against the 31 
entities where the agency found problems significant enough to send 
warning letters, according to FDA officials. Further, we found that 19 
of the 194 compounding pharmacies were registered with FDA as drug 
manufacturers. 

While FDA policy requires that the final inspection classification 
(which states whether official action, voluntary action, or no action 
was indicated based on the inspection findings) be entered into the 
agency's FACTS database, FDA officials said they could not readily 
provide the final inspection classification for the 194 inspections of 
compounding pharmacies. The officials said that in some cases the 
database included FDA district officials' recommendations for 
inspection classification rather than the final inspection 
classification. As a result, we could not ascertain how many of the 
194 inspections of compounding pharmacies found problems that were 
significant enough for FDA to determine that official action was 
indicated. 

More recently, FDA began inspecting compounding pharmacies in February 
2013 that, according to the agency, were known to produce "high-risk" 
sterile compounded drugs.[Footnote 31] These inspections were not the 
for-cause inspections that FDA has typically done in the past when 
inspecting compounding pharmacies. Rather, FDA's objective was to 
determine whether certain pharmacies that were known to have produced 
high-risk sterile drug products in the past posed a significant threat 
to public health from poor production practices. According to FDA 
officials, the agency identified 31 compounding pharmacies to inspect 
using criteria that included whether a warning letter had been issued 
to the pharmacy in the past 10 years, whether the pharmacy compounded 
sterile injectable drugs, whether there were adverse drug events 
reported, or whether there were complaints received from the FDA 
district office or others. FDA officials said they also reviewed 
related congressional committee reports that mentioned specific 
pharmacies and reviewed pharmacy websites. In summarizing these 
efforts, FDA reported that pharmacies meeting at least two of FDA's 
criteria were included in the inspections.[Footnote 32] 

As of April 29, 2013, FDA had issued form 483 inspection observation 
reports to 30 of the 31 compounding pharmacies it inspected as part of 
its recent inspections.[Footnote 33] FDA's observations included 
inappropriate or inadequate, or both, clothing for sterile processing, 
lack of appropriate air filtration systems, insufficient 
microbiological testing, and other practices that create risk of 
contamination. 

As of May 21, 2013, 7 of the 31 compounding pharmacies had voluntarily 
recalled some or all of their sterile compounded products as a result 
of observations from these recent FDA inspections.[Footnote 34] For 
example: 

* FDA sampled a compounded sterile injectable solution during one of 
its inspections in March 2013 and found bacteria in the product, which 
resulted in the compounding pharmacy immediately announcing a 
nationwide recall of all of its sterile compounded products, which 
included over 50 sterile drug products. 

* Another compounding pharmacy recalled its sterile drug products that 
had not yet reached the expiration date listed on the product because 
of a lack of sterility assurance. This recall included approximately 
95 dosage units of various sterile compounded drugs that the pharmacy 
supplied to the offices of licensed medical professionals located 
within its state; however, some patients that received products from 
those medical professionals may live in other states. 

Further, according to our analysis, 10 of the 31 high-risk compounding 
pharmacies that FDA inspected were also registered in FDA's drug 
manufacturer database. Even though these compounding pharmacies were 
registered with FDA, agency officials said the agency does not 
routinely inspect these pharmacies despite their registration because 
registration alone does not trigger a routine inspection. 
Additionally, 8 of the 10 were individual facilities of two different 
larger compounding pharmacies, both of which had websites advertising 
they were FDA-registered. 

States and National Organizations Have Taken Various Actions to 
Strengthen Oversight of Drug Compounding: 

The four states we reviewed--California, Connecticut, Florida, and 
Iowa--have each recently taken actions, such as working with national 
pharmacy organizations, to improve their oversight of drug 
compounding. In addition, national pharmacy organizations have 
undertaken efforts to help states oversee drug compounding. However, 
some states may lack the resources to provide the necessary oversight 
of drug compounding. 

The Four States Reviewed Have Taken Actions, Including Increased 
Inspections, to Strengthen Oversight of Drug Compounding: 

All four of the states we reviewed recently took steps to potentially 
strengthen their oversight of drug compounding. These steps included 
developing an inspection program for sterile drug compounders that 
dispense drugs in the state, but are located outside of the state, and 
drafting new legislation to require the board of pharmacy to conduct 
on-site inspections prior to licensing a pharmacy. Examples of actions 
taken by each of the four states we reviewed follow: 

California: On May 29, 2013, the California Senate passed legislation 
that would prohibit any pharmacy from compounding or dispensing, and 
any nonresident pharmacy from compounding for shipping into the state, 
sterile compounded drug products unless the pharmacy has obtained a 
sterile compounding pharmacy license from the California Board of 
Pharmacy; require inspection of resident and nonresident pharmacies by 
the board prior to licensure; require resident and nonresident 
pharmacies to report adverse events for compounded drugs to both the 
California State Board of Pharmacy and MedWatch, FDA's adverse event 
reporting system; and require resident and nonresident pharmacies to 
submit a list of all sterile medications compounded by the pharmacy 
during the prior 12 months before obtaining an annual renewal of the 
sterile compounding license, among other requirements. Currently, 
California law requires that a pharmacy that compounds sterile 
injectable drug products in California, or that ships sterile 
injectable products into California, obtain a special license issued 
by the board; however, the law exempts from this licensure requirement 
certain pharmacies that have current accreditation from a private 
accreditation agency approved by the board.[Footnote 35] California 
pharmacies that obtain licensure by the board are subject to 
prelicensure inspections, as well as annual inspections prior to 
renewal of the license. Nonresident pharmacies must provide a copy of 
a recent inspection report issued by the pharmacy's licensing agency, 
or a recent report from a private accrediting agency approved by the 
board, documenting the pharmacy's compliance with board regulations 
regarding the compounding of injectable sterile drug products. In 
describing the board's support of the proposed legislation, a 
California State Board of Pharmacy official told us that the board 
believed it important that all California and nonresident pharmacies 
compounding sterile injectable drugs be subject to state inspections, 
including those with an accreditation. As of June 14, 2013, the 
legislation was pending before a California State Assembly committee. 

Connecticut: An official from Connecticut's Drug Control Division--
which conducts inspections of pharmacies in the state and houses the 
Commission of Pharmacy Board Administrator, which oversees pharmacy 
licensing--told us that, as of April 2013, the state was working to 
tighten its regulations and implement inspection practices regarding 
in-state sterile drug compounders. For example, the state plans to 
begin conducting more thorough pharmacy inspections in which the 
inspectors consider additional attributes, such as compliance with USP 
standards on sterile compounding, the physical environment where the 
facility is located, and the number of sales representatives employed 
by the pharmacy. In addition, the Drug Control Division is working to 
propose new regulations to allow the state to better track and 
regulate the sale of compounded sterile medications produced by 
resident and nonresident sterile drug compounders. However, the 
details of these proposed regulations were not available as of June 
2013.[Footnote 36] 

Florida: On November 20, 2012, the Florida Board of Pharmacy issued an 
emergency rule requiring all resident pharmacies and nonresident 
pharmacies that ship drugs to Florida to immediately notify the board 
of their compounding activities.[Footnote 37] More than half (55 
percent) of the 8,193 responding pharmacies reported that they 
compound nonsterile products, such as ointments or tablets; and 12 
percent reported that they compound sterile products, such as 
injectable and ophthalmic solutions. Florida found that about one-
third (32 percent) of the 946 pharmacies that perform sterile 
compounding were nonresident pharmacies.[Footnote 38] One goal of 
Florida's emergency rule was to determine the scope of sterile and 
nonsterile compounding within Florida's resident and nonresident 
licensed pharmacies. According to Florida Board of Pharmacy officials, 
prior to the emergency rule, the board did not know how many 
pharmacies compounded drugs, how many nonresident pharmacies shipped 
compounded drugs into the state, or whether they compounded nonsterile 
or sterile drugs. According to these officials, the board intends to 
use this newly acquired information to improve the board's oversight 
activities, such as to identify and inspect compounding pharmacies. As 
of May 2013, the Florida Board of Pharmacy was considering whether to 
require pharmacies to complete an updated survey biennially in order 
to renew their pharmacy licenses. 

Iowa: Iowa is inspecting drug compounders that are licensed by the 
state as nonresident pharmacies and dispensing compounded drugs in 
Iowa. Iowa established a consultancy services agreement with NABP in 
December 2012, and inspectors from NABP began inspecting the 581 
nonresident pharmacies identified by the state at that time. The 
results of these inspections are expected to reveal whether the 
selected pharmacies are compounding drugs in compliance with state 
regulations. According to Iowa Board of Pharmacy officials, the state 
does not have information on the extent that Iowa's licensed 
nonresident pharmacies compound drugs, how many nonresident pharmacies 
ship compounded drugs into the state, or whether they compound 
nonsterile or sterile drugs. However, NABP's inspections have begun to 
provide some of this information. As of April 2013, Iowa's Board of 
Pharmacy had taken six formal disciplinary actions against five out-of-
state compounding pharmacies following NABP inspections and, according 
to an Iowa Board of Pharmacy official, the board anticipates more 
disciplinary actions during the remainder of 2013 and early 2014. By 
the end of 2013 or early in 2014, an Iowa Board of Pharmacy official 
anticipates that NABP inspectors would visit all nonresident 
pharmacies licensed by the state. 

States May Leverage National Organizations' Efforts to Enhance 
Oversight of Drug Compounding: 

At the national level, pharmacy organizations have undertaken a number 
of efforts to help states oversee drug compounding. For example, 
national pharmacy organizations have developed standards for 
compounded drugs that could be adopted by states. The following are 
examples of efforts undertaken by national pharmacy organizations. 

The National Association of Boards of Pharmacy (NABP): NABP has 
initiated the Compounding Action Plan to identify and inspect 
compounding pharmacies. It includes continued collaboration on the 
Iowa nonresident inspection program, discussed above, and the sharing 
of inspection results and related actions. Through this plan, NABP 
intends to collect data on the number of compounding pharmacies, 
including their scope of operations, in all states, and inspect these 
pharmacies. NABP officials said they believe that many of the 581 
nonresident pharmacies licensed and identified by the Iowa Board of 
Pharmacy also hold licenses with many, if not all, of the other states 
requiring nonresident licensure. Using the Iowa nonresident licensed 
pharmacy list as a starting point, NABP sent Iowa's list to each state 
to confirm information regarding these pharmacies, such as whether the 
pharmacy has been disciplined, whether it is engaged in sterile 
compounding, or whether it is engaged in "nontraditional" compounding 
activities. In addition, NABP asked all states to identify any known 
or suspected compounding pharmacies in their state that are not on the 
Iowa nonresident pharmacy list. As a result, NABP officials told us 
that NABP added some additional pharmacies to Iowa's original 
inspection list. As of June 2013, NABP had inspected 215 pharmacies. 
[Footnote 39] In addition to its Compounding Action Plan, NABP created 
and continues to maintain a Model State Pharmacy Act and Model Rules 
for states to use when developing new pharmacy laws and regulations, 
including rules specific to sterile compounding. According to NABP 
officials, each state has adopted aspects of NABP's model act and 
model rules.[Footnote 40] 

The Pharmacy Compounding Accreditation Board (PCAB): In 2006, eight 
national pharmacy organizations established the PCAB, a voluntary 
accrediting organization for sterile and nonsterile drug compounders. 
[Footnote 41] According to an organization official, PCAB's national 
standards are based on the consensus of industry experts of those 
elements that should exist in a pharmacy that adheres to high quality 
standards. PCAB accreditation indicates that the staff involved in 
compounding have proper and ongoing training; that the pharmacy uses 
active pharmaceutical ingredients and inactive materials from 
appropriate suppliers; that all compounding procedures are fully 
documented and carried out in conformance with established formulas; 
and USP standards for compounding. According to a PCAB official, as of 
June 26, 2013, 176 drug compounding pharmacies received PCAB 
accreditation, and 124 additional drug compounding pharmacies have 
applied for PCAB accreditation.[Footnote 42] 

Resource Constraints and Other Factors May Affect States' Ability to 
Oversee Drug Compounding: 

Some states may lack the fiscal or staff resources to provide the 
necessary oversight of drug compounding. A number of officials from 
state boards of pharmacy attending a December 2012 meeting conducted 
by FDA expressed confidence that their states had adequate resources 
to oversee drug compounders, but were concerned about resources in 
other states. They explained that, until recently, they depended on 
the states where the pharmacies were located to license and regulate 
those pharmacies. However, many state budgets have been cut and it is 
uncertain whether all states have the resources or qualified staff to 
inspect and otherwise appropriately oversee their licensed pharmacies. 
The effect of limited state resources may reach across state lines, 
and it may not be correct to assume that a pharmacy licensed by 
another state is being regulated adequately. 

In addition, differences in pharmacy inspection practices among states 
may affect oversight of drug compounding in other states. For example, 
each of the four states we reviewed require licensure or registration 
of nonresident pharmacies that provide pharmacy services to users in 
the state, and they require nonresident pharmacies applying for a 
license or registration to have a current license, permit, or 
registration issued by the regulatory authority of their home state. 
The states in our review also have generally relied on the home states 
of the nonresident pharmacies to inspect these pharmacies on a regular 
basis. However, state officials and officials from national pharmacy 
organizations we interviewed told us that the frequency of pharmacy 
inspections and the qualifications of the pharmacy inspectors vary 
widely among states, and it is uncertain whether all nonresident 
pharmacies receive adequate oversight from their home states. Of the 
four states in our review, one required annual inspections of all 
pharmacies located in the state and one required annual inspections of 
all sterile drug compounding pharmacies located in the state, while 
another required routine inspections of retail pharmacies in the state 
once every 4 years. In addition, three of the four states required all 
pharmacy inspectors to have a license to practice pharmacy in that 
state, while one state reported having some inspectors without 
pharmacist licenses. 

Officials representing several national pharmacy organizations that we 
interviewed also expressed concerns regarding whether states have 
enough resources to regulate and inspect pharmacies on a timely basis. 
Instead, some states inspect pharmacies only in response to a problem 
they become aware of through a complaint or adverse drug event. Some 
of these officials also expressed concern regarding FDA's resources to 
oversee drug compounding. For example, officials from NABP told us 
that both FDA and the state boards of pharmacy need more resources for 
the oversight of drug compounding. Recognizing the need for additional 
resources to oversee drug compounders, the bill that the California 
legislature is considering--a bill that would require nonresident 
pharmacies shipping sterile compounded drugs into the state to have an 
on-site inspection by the California Board of Pharmacy prior to 
licensure--would also require those pharmacies to pay for inspection-
related travel expenses. 

Conclusions: 

To ensure that compounding pharmacies receive adequate oversight, it 
is essential to have clear roles for FDA and states regarding the 
regulation and oversight of drug compounding. The inconsistent federal 
circuit court decisions complicate FDA's ability to oversee drug 
compounding by requiring FDA to approach the regulation of drug 
compounding differently in different parts of the country. In 
addition, state approaches to the oversight of pharmacies, including 
compounding pharmacies, vary depending upon each state's regulations 
and the resources each state devotes to licensing and inspecting its 
pharmacies. Taken together, the different regulatory approaches FDA 
must take and the variation in how states oversee drug compounding, 
create gaps in oversight, which could lead to inadequate assurance 
that public health is protected. 

To adequately carry out the oversight of compounded drugs, FDA must 
have data systems in place to produce timely, reliable information on 
inspections, the findings of those inspections, and enforcement 
actions taken related to compounded drugs. Without reliable, timely 
data, the agency will not have the information needed to intercede and 
protect Americans from unnecessary harm when problems are identified. 
Recent FDA inspections of 31 entities that produce compounded drugs 
and the subsequent drug recalls highlight the potential risk to public 
health of failing to oversee these types of entities. 

At the same time that FDA lacks complete information on inspections 
and enforcement actions taken related to compounded drugs, entities 
that compound drugs may register as manufacturers in the agency's 
registration database, and some advertise themselves as FDA-
registered. As a result, states and purchasers may incorrectly assume 
that FDA has approved the products and inspected the facilities for 
compliance with good manufacturing practices. 

Matter for Congressional Consideration: 

To help ensure appropriate oversight of the safety of products from 
the entities that prepare and distribute compounded drugs that have a 
high potential to adversely affect public health, Congress should 
consider clarifying FDA's authority to regulate entities that compound 
drugs. 

Recommendations for Executive Action: 

We recommend that the Secretary of Health and Human Services direct 
the Commissioner of the FDA to: 

* take steps to consistently collect reliable and timely information 
in FDA's existing databases on inspections and enforcement actions 
associated with compounded drugs, and: 

* clearly differentiate in FDA's database, those manufacturers of FDA-
approved drugs that FDA inspects for compliance with good 
manufacturing practices from those entities compounding drugs that are 
not FDA-approved and that FDA does not routinely inspect. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to HHS, which oversees FDA, for 
comment. HHS provided written comments, which are reprinted in 
appendix III, and technical comments, which we incorporated as 
appropriate. HHS stated that our report accurately details the 
limitations associated with FDA's current authority to oversee drug 
compounding. HHS's comments also support the Matter for Congressional 
Consideration that Congress should consider clarifying FDA's authority 
to oversee entities that compound drugs. 

HHS neither agreed nor disagreed with our recommendations. Regarding 
our first recommendation to direct FDA to consistently collect 
reliable and timely information in FDA's existing databases on 
inspections and enforcement actions associated with compounded drugs, 
HHS stated that although FDA's FACTS database can be improved to 
better aggregate data and to facilitate evaluation of compounding 
pharmacy activities, these deficiencies do not materially impact FDA's 
ability to protect the public from harm when problems are identified. 
We understand that FDA has the ability to access the data associated 
with compounded drugs by searching under a company name or requesting 
information across FDA centers and offices; however, as our report 
notes, FDA lacks ready access to all of the data and lacks the ability 
to run queries or aggregate the data. For example, when we requested 
the final inspection classifications for 194 inspections of 
compounding pharmacies, FDA could not provide this information 
because, according to FDA officials, the FACTS database does not 
contain all of the final decisions and obtaining all of the final 
inspection classifications would require time-consuming manual 
searches of information maintained in hard copy. As a result, we could 
not ascertain how many of these inspections found problems that were 
significant enough for FDA to determine that official action was 
indicated. Therefore, we continue to believe that FDA should take 
steps to consistently collect reliable and timely information in its 
databases on inspections and enforcement actions associated with 
compounded drugs. Doing so would provide the agency with ready access 
to key data to inform its decision making on its oversight priorities 
and allow it to take appropriate action when problems are identified. 
In its comments, HHS stated that FDA will take steps to further 
improve its databases to ensure that inspections and actions regarding 
compounding going forward are coded consistently and are more readily 
identifiable through electronic searches, and that the final 
classification for inspections of drug compounders are entered into 
the FACTS database. These steps are consistent with our recommendation. 

Regarding our second recommendation, HHS stated that FDA will consider 
whether it would be possible or appropriate to differentiate in its 
database those compounding pharmacies that register voluntarily from 
conventional manufacturers of FDA-approved drugs that are required to 
register. These conventional manufacturers are already subject to 
routine inspections by FDA and are required to list the FDA-approved 
products they manufacture. Therefore, these entities should already be 
known to FDA. HHS also commented that FDA will provide information to 
the public about what it means--and does not mean--to voluntarily 
register with FDA. HHS further stated that FDA has recommended that 
Congress require pharmacies engaged in nontraditional compounding in 
the United States to register with FDA and list the drugs they are 
compounding, all of which is consistent with our recommendation. 

As agreed with your offices, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from the report date. At that time, we will send copies of this report 
to the Secretary of Health and Human Services, appropriate 
congressional committees, and other interested parties. In addition, 
the report will be available at no charge on the GAO Web site at 
[hyperlink, http://www.gao.gov]. 

If you or your staffs have any questions about this report, please 
contact me at (202) 512-7114 or crossem@gao.gov. Contact points for 
our Offices of Congressional Relations and Public Affairs are on the 
last page of this report. GAO staff who made major contributions to 
this report are listed in appendix IV. 

Signed by: 

Marcia Crosse: 
Director, Health Care: 

[End of section] 

Appendix I: Information on Selection Criteria for Four States: 

To identify actions planned or taken by states, we interviewed 
representatives of the state pharmacy regulatory bodies from four 
states: California, Connecticut, Florida, and Iowa. We chose these 
states to provide insight into how a range of states approach the 
oversight of drug compounding; however, the approaches and experiences 
of these states are not generalizable to all 50 states. 

We selected these states to reflect a range of characteristics, 
including census region, population, number of licensed pharmacies, 
and variation in compounding regulations. Table 1 lists select data 
for each selected state. 

Table 1: Characteristics Considered in Selecting Four States for 
Inclusion in Review of State Oversight of Compounding Pharmacies: 

State: California; 
Census region[A]: West, Pacific; 
2010 population (in millions)[B]: 37.3; 
Number of compliance officers/inspectors: 37[E]; 
Number of state licensed pharmacies: 7,352 (of which 482 are 
nonresident)[E]; 
Number of pharmacy license categories[C]: 6; 
Anticipatory compounding requirements[D]: May compound in advance of 
receipt of a patient-specific prescription based on a documented 
history of prescriptions for the individual patients in that patient 
population, but only in amounts necessary to ensure continuity of care 
for that patient population. 

State: Connecticut; 
Census region[A]: Northeast, New England; 
2010 population (in millions)[B]: 3.6; 
Number of compliance officers/inspectors: 10 (8 inspectors and 2 
supervisors)[E]; 
Number of state licensed pharmacies: 1,301 (of which 624 are 
nonresident)[E]; 
Number of pharmacy license categories[C]: 6; [Empty]; 
Anticipatory compounding requirements[D]: May compound in anticipation 
of prescriptions based on routine, regularly-observed prescribing 
patterns. 

State: Florida; 
Census region[A]: South, South Atlantic; 
2010 population (in millions)[B]: 18.8; 
Number of compliance officers/inspectors: 20[F]; 
Number of state licensed pharmacies: 8,050 (of which 754 are 
nonresident)[F]; 
Number of pharmacy license categories[C]: 16; 
Anticipatory compounding requirements[D]: May compound in anticipation 
of prescriptions based on routine regularly-observed prescribing 
patterns. 

State: Iowa; 
Census region[A]: Midwest, West, North Central; 
2010 population (in millions)[B]: 3.0; 
Number of compliance officers/inspectors: 7[F]; 
Number of state licensed pharmacies: 1,510 (of which 567 are 
nonresident)[F,G]; 
Number of pharmacy license categories[C]: 4; 
Anticipatory compounding requirements[D]: May compound drugs prior to 
receiving a valid prescription based on a history of receiving valid 
prescriptions generated solely within an established pharmacist/ 
patient/prescriber relationship. 

Source: GAO analysis of U.S. Census Bureau, the National Association 
of Boards of Pharmacy, and state pharmacy law data. 

[A] U.S. Census Bureau, Census Regions. 

[B] U.S. Census Bureau, 2010 state demographic profiles. 

[C] The National Association of Boards of Pharmacy 2013 Survey of 
Pharmacy Law. 

[D] Analysis of state pharmacy laws and regulations. 

[E] As of April 2013. 

[F] As of May 2013. 

[G] The number of licensed nonresident pharmacies varies over time as 
new pharmacies are licensed by the state and as licensed pharmacies go 
out of business or otherwise discontinue their licenses. 

[End of table] 

[End of section] 

Appendix II: History of the Food and Drug Administration's (FDA) 
Authority over Drug Compounding and Approach to Oversight: 

Amendments to the Federal Food, Drug, and Cosmetic Act (FDCA) enacted 
in 1997, and a series of federal court decisions regarding the 
validity of those amendments, have resulted in several significant 
shifts in FDA's authority and approach to the regulation of drug 
compounding over the last two decades. Differences in these court 
decisions have resulted in inconsistent FDA authority to oversee drug 
compounding, which, according to the agency, has prompted it to apply 
three different regulatory approaches to compounded drugs depending 
upon the federal court jurisdiction in which the drugs are compounded. 
This appendix describes these legal developments. 

1992-1997: Administrative Framework Established for Drug Compounding 
Oversight: 

In 1992, FDA issued a compliance policy guide that articulated the 
agency's approach to applying the FDCA's new drug, adulteration, and 
misbranding provisions to compounded drugs.[Footnote 43] FDA noted its 
longstanding policy of deferring to state regulation of pharmacies 
engaged in traditional compounding activities, but that it was issuing 
the compliance policy guide to identify those circumstances under 
which the agency believed establishments with retail pharmacy licenses 
were engaged in "manufacturing, distributing, and promoting unapproved 
new drugs" in a manner outside the traditional pharmacy practice of 
compounding.[Footnote 44] According to the 1992 compliance policy 
guide, the agency might exercise its enforcement discretion to take 
action against such establishments for violations of the FDCA's new 
drug approval, adulteration, and misbranding provisions. 

1997-2001: Statutory Framework Established for Drug Compounding 
Oversight: 

In 1997, Congress passed and the President signed into law the Food 
and Drug Administration Modernization Act of 1997 (FDAMA) that, among 
other things, amended the FDCA to expressly permit drug compounding 
under certain conditions and to exempt compounded drugs meeting these 
conditions from certain provisions of the FDCA. In particular, under 
section 503A of the FDCA, as enacted by FDAMA, compounded drugs 
meeting these conditions were expressly exempt from the requirement 
that a drug be manufactured in conformity with current good 
manufacturing practice; that a drug's labeling carry adequate 
directions for use; and that the drug is the subject of an approved 
new drug application. To qualify for these exemptions, the pharmacist, 
physician, or pharmacy compounding the drug had to meet certain 
criteria, including refraining from advertising, promoting, or 
soliciting prescriptions for the compounding of any drug. 

1999-2002: Judicial Developments in the Ninth Circuit: 

Shortly after FDAMA's enactment, a group of seven pharmacies 
challenged section 503A's advertising, promotion, and solicitation 
restrictions in federal district court, alleging that these 
restrictions violated the Free Speech Clause of the First Amendment. 
Agreeing with the plaintiffs, the U.S. District Court for the District 
of Nevada invalidated section 503A's advertising, promotion, and 
solicitation restrictions, severing these restrictions from the 
remainder of section 503A.[Footnote 45] In 2001, the U.S. Court of 
Appeals for the Ninth Circuit affirmed the district court's First 
Amendment holding; however, the Ninth Circuit took the view that 
Congress would not have enacted section 503A without the advertising, 
promotion, and solicitation provisions and, therefore, the law's 
advertising, promotion, and solicitation provisions were not 
severable. As a result, it held that section 503A, in its entirety, 
was invalid.[Footnote 46] In April 2002, the United States Supreme 
Court in Thompson v. Western States Medical Center affirmed the Ninth 
Circuit's ruling invalidating section 503A's advertising, promotion, 
and solicitation provisions.[Footnote 47] Because neither the 
government nor the pharmacies appealed the Ninth Circuit's 
severability ruling, the Supreme Court declined to address the 
validity of the remaining nonadvertising portions of section 503A. 
[Footnote 48] 

2002: Revised Administrative Framework for Drug Compounding Oversight: 

One month after the Supreme Court's ruling in Western States, FDA 
revised its longstanding 1992 Compliance Policy Guide on pharmacy 
compounding to provide "immediate guidance on what types of 
compounding might be subject to enforcement action under current law." 
[Footnote 49] In that guidance, FDA took the position based on the 
Ninth Circuit's and Supreme Court's Western States Medical Center 
decisions, that "all of section 503A is now invalid." Accordingly, the 
agency determined it was necessary to issue guidance outlining the 
factors the agency would consider in taking enforcement action against 
a compounding pharmacy for violations of the FDCA. In particular, the 
agency stated that it would continue to defer to state pharmacy 
authorities for "less significant" violations of the FDCA but that 
when a pharmacy's activities resemble those of a drug manufacturer it 
would consider enforcement action. The compliance policy guide 
provides a nonexhaustive list of such activities. The compliance 
policy guide reflected FDA's view that, even if a compounding pharmacy 
has not engaged in these activities, the drugs it compounded would be 
subject to all of the FDCA's requirements that apply to manufactured 
drugs; in the compliance policy guide FDA simply outlined those 
circumstances under which the agency would actually enforce these 
requirements against a compounding pharmacy. 

2006-2008: Judicial Developments in the Fifth Circuit: 

Four years later, in 2006, a group of 10 pharmacies challenged FDA's 
authority to regulate compounded drugs. In that case, FDA asserted 
that compounded drugs fall within the FDCA's definition of "new drug" 
and, therefore, are subject to those provisions of the act that apply 
to such drugs.[Footnote 50] The U.S. District Court for the Western 
District of Texas disagreed with the agency, holding that compounded 
drugs when created for an individual patient pursuant to a 
prescription from a licensed practitioner "are implicitly exempt" from 
the FDCA's new drug definition and the new drug approval process. 
[Footnote 51] On appeal, the U.S. Court of Appeals for the Fifth 
Circuit reversed the district court's determination and held that 
compounded drugs are "new drugs" under the FDCA.[Footnote 52] The 
court reasoned that Congress would not have enacted FDAMA's provisions 
exempting compounded drugs from certain of the FDCA's "new drug" 
requirements had these provisions not applied to compounded drugs in 
the first instance.[Footnote 53] To reach this conclusion, the Fifth 
Circuit considered the severability of section 503A's nonadvertising 
provisions.[Footnote 54] Disagreeing with the Ninth Circuit's Western 
States reasoning that Congress would not have enacted section 503A 
without the advertising provisions, the Fifth Circuit found that the 
FDCA contained a severability provision and that this provision 
applied to section 503A. Finding no strong evidence that Congress 
would not have enacted section 503A without the advertising 
provisions, the court ruled that the law's nonadvertising provisions 
were severable from its unconstitutional provisions.[Footnote 55] The 
result of the Fifth Circuit's decision is that--at least in the Fifth 
Circuit--compounded drugs are, in fact, "new drugs" under the FDCA; 
however, these drugs are expressly exempt from certain requirements 
that apply to "new drugs"--namely, compliance with current good 
manufacturing practice, certain labeling requirements, and new drug 
approval requirements--if they comply with the nonadvertising 
conditions set forth in section 503A.[Footnote 56] 

2008-Present: FDA's Different Oversight Approaches Following a Circuit 
Split: 

The Ninth Circuit Court of Appeals' 2001 Western States decision 
invalidating all of section 503A and the Fifth Circuit Court of 
Appeals' 2008 Medical Center Pharmacy decision holding that all of 
section 503A other than the advertising, promotion, and solicitation 
restrictions is valid are directly at odds. As a result of these 
decisions, section 503A is invalid in those states in the Ninth 
Circuit (Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, 
Oregon, and Washington) and in full force and effect in those states 
in the Fifth Circuit (Louisiana, Mississippi, and Texas). FDA 
officials described the agency's approach to regulating compounded 
drugs under this incongruous legal landscape as follows: 

* In the Ninth Circuit, the agency takes the approach that all 
compounded drugs are "new drugs" under the FDCA, and the agency 
determines whether to consider taking enforcement action against a 
compounding pharmacy based on whether the pharmacy engages in any of 
the activities outlined in the agency's 2002 compliance policy guide 
on drug compounding. Even if a compounding pharmacy has not engaged in 
the activities outlined in the compliance policy guide, the drugs it 
compounds are, as a legal matter, subject to all of the FDCA 
requirements that apply to "new drugs"; the compliance policy guide 
simply outlines those circumstances under which the agency will 
consider enforcing these requirements against a compounding pharmacy. 
[Footnote 57] 

* In the Fifth Circuit, FDA determines whether a compounded drug meets 
section 503A's exemption from certain FDCA requirements that would 
preclude the agency from taking enforcement action against a drug 
compounder for noncompliance with these requirements. 

* For compounding pharmacies outside of the Fifth and Ninth Circuits, 
which is the majority of the country, the agency applies the criteria 
in both section 503A and its 2002 compliance policy guide to determine 
whether to take enforcement action. 

Table 2 identifies the criteria that a compounded drug must meet to 
qualify for the exemption under section 503A of the FDCA from certain 
of the law's requirements and the criteria in FDA's 2002 compliance 
policy guide, which the agency considers in determining whether to 
take enforcement action against an entity engaged in drug compounding. 

Table 2: Comparison of the Food and Drug Administration's (FDA) 
Authority and Oversight of Drug Compounding under Section 503A of the 
Federal Food, Drug, and Cosmetic Act (FDCA) and FDA's 2002 Compliance 
Policy Guide: 

Section 503A: A drug compounded according to each of the criteria is 
exempt from three key requirements under the FDCA.[A]: Compounds 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 drug is 
necessary for the patient. If compounding occurs in anticipation of a 
prescription, it is based on a history of valid prescription orders 
for the compounding of the drug product, which orders have been 
generated solely within an established relationship between the 
pharmacy and the prescriber or patient; 
2002 Compliance Policy Guide: In determining whether to initiate 
enforcement action against a compounding pharmacy, FDA considers 
whether the compounding pharmacy has engaged in any of these 
activities[B,C,D]: Compounding in anticipation of receiving 
prescriptions, except in very limited quantities in relation to the 
amounts of drugs compounded after receiving valid prescriptions. 

Section 503A: A drug compounded according to each of the criteria is 
exempt from three key requirements under the FDCA.[A]: Does not 
compound a drug product that appears on a list published by the 
Secretary of drug products withdrawn or removed from the market 
because such drug product or their components have been found to be 
unsafe or not effective; 
2002 Compliance Policy Guide: In determining whether to initiate 
enforcement action against a compounding pharmacy, FDA considers 
whether the compounding pharmacy has engaged in any of these 
activities[B,C,D]: Compounding drugs withdrawn or removed from the 
market for safety reasons. 

Section 503A: A drug compounded according to each of the criteria is 
exempt from three key requirements under the FDCA.[A]: Compounds using 
ingredients (other than bulk drug substances) that comply with an 
applicable monograph; 
2002 Compliance Policy Guide: In determining whether to initiate 
enforcement action against a compounding pharmacy, FDA considers 
whether the compounding pharmacy has engaged in any of these 
activities[B,C,D]: Receiving, storing, or using drug components not 
meeting official compendia requirements. 

Section 503A: A drug compounded according to each of the criteria is 
exempt from three key requirements under the FDCA.[A]: Compounds using 
bulk drug substances that comply with an applicable compendia 
monograph if one exists; if one does not exist, uses bulk drug 
substances that are components of FDA-approved drugs or that appear on 
a list developed by the agency[E]; 
2002 Compliance Policy Guide: In determining whether to initiate 
enforcement action against a compounding pharmacy, FDA considers 
whether the compounding pharmacy has engaged in any of these 
activities[B,C,D]: Compounding finished drugs from certain bulk active 
ingredients that are not components of FDA approved drugs without an 
investigational new drug application. 

Section 503A: A drug compounded according to each of the criteria is 
exempt from three key requirements under the FDCA.[A]: Compounds with 
bulk drug substances that were made in an FDA-registered facility, 
each of which is accompanied by valid certificates of analysis; 
2002 Compliance Policy Guide: In determining whether to initiate 
enforcement action against a compounding pharmacy, FDA considers 
whether the compounding pharmacy has engaged in any of these 
activities[B,C,D]: Receiving, storing, or using drugs substances 
without obtaining assurance they were made in an FDA-registered 
facility. 

Section 503A: A drug compounded according to each of the criteria is 
exempt from three key requirements under the FDCA.[A]: Compounds in a 
state that has entered into a memorandum of understanding with the 
Secretary that addresses the distribution of inordinate amounts of 
compounded drug products interstate and provides for appropriate 
investigation by a state agency of complaints relating to compounded 
drug products distributed outside of the state; in the alternative, 
less than 5 percent of the compounding individual's or entity's total 
prescription orders are for compounded products distributed out of the 
state; 
2002 Compliance Policy Guide: In determining whether to initiate 
enforcement action against a compounding pharmacy, FDA considers 
whether the compounding pharmacy has engaged in any of these 
activities[B,C,D]: Compounding drugs for third parties who resell to 
individual patients or at wholesale to other persons or entities or 
using commercial scale manufacturing or testing equipment for 
compounding drug products. 

Section 503A: A drug compounded according to each of the criteria is 
exempt from three key requirements under the FDCA.[A]: Does not 
compound regularly or in inordinate amounts (as defined by the 
Secretary) any drug products that are essentially copies of a 
commercially-available drug product[F]; 
2002 Compliance Policy Guide: In determining whether to initiate 
enforcement action against a compounding pharmacy, FDA considers 
whether the compounding pharmacy has engaged in any of these 
activities[B,C,D]: Compounding drugs that are commercially available 
or that are essentially copies of commercially-available FDA-approved 
drug products, except in certain limited circumstances. 

Section 503A: A drug compounded according to each of the criteria is 
exempt from three key requirements under the FDCA.[A]: Does not 
compound any drug that is identified by the Secretary by regulation as 
a drug that presents demonstrable difficulties for compounding that 
reasonably demonstrate an adverse effect on the safety or 
effectiveness of that drug; 
2002 Compliance Policy Guide: In determining whether to initiate 
enforcement action against a compounding pharmacy, FDA considers 
whether the compounding pharmacy has engaged in any of these 
activities[B,C,D]: No comparable criterion. 

Section 503A: A drug compounded according to each of the criteria is 
exempt from three key requirements under the FDCA.[A]: The compounding 
is performed by a licensed pharmacist in a state licensed pharmacy or 
by a licensed physician; 
2002 Compliance Policy Guide: In determining whether to initiate 
enforcement action against a compounding pharmacy, FDA considers 
whether the compounding pharmacy has engaged in any of these 
activities[B,C,D]: Failing to operate in conformance with applicable 
state pharmacy laws. 

Source: GAO analysis. 

Notes: Data are from section 503A of the Federal Food, Drug, and 
Cosmetic Act and FDA's 2002 compliance policy guide on drug 
compounding. 

Section 503A's advertising, promotion, and solicitation restrictions 
are not presented here, as the United States Supreme Court declared 
these provisions unconstitutional. Thompson v. W. States Med. Ctr., 
535 U.S. 357 (2002). 

[A] FDA applies these criteria to drugs compounded in states other 
than those in the Ninth Circuit, where section 503A is invalid, to 
determine whether these drugs are exempt from certain FDCA 
requirements. 

[B] FDA applies these criteria in states outside of the Fifth Circuit 
to determine whether to initiate enforcement action against a 
compounding pharmacy in such a state. 

[C] For compounding pharmacies outside of the Fifth and Ninth 
Circuits, FDA applies the criteria in both section 503A and the 2002 
compliance policy guide to determine whether to take enforcement 
action. 

[D] In addition to the specific factors outlined in the 2002 
compliance policy guide, according to FDA, the agency also considers 
whether a licensed practitioner has extemporaneously compounded a drug 
upon receipt of a valid prescription for an individually identified 
patient in considering whether to take enforcement action. 

[E] FDA issued a proposed rule on January 7, 1999, containing a list 
of bulk drug substances that the agency proposed to permit for use in 
drug compounding. 64 Fed. Reg. 996 (Jan. 7, 1999). According to FDA, 
the agency never issued a final rule because of the Ninth Circuit's 
and Supreme Court's Western States decisions. Since the Fifth Circuit 
Court of Appeals' 2008 Medical Center Pharmacy decision, the agency 
has considered whether to maintain such a list. 

[F] The term "essentially a copy of a commercially-available drug 
product" does not include a drug product in which there is a change, 
made for an identified individual patient, which produces for that 
patient a significant difference, as determined by the prescribing 
practitioner, between the compounded drug and the comparable 
commercially available drug product. 

[End of table] 

[End of section] 

Appendix III: Comments from the Department of Health and Human 
Services: 

Department of Health & Human Services: 
Office of The Secretary: 
Assistant Secretary for Legislation
Washington, DC 20201 

July 12, 2013: 

Marcia Crosse: 
Director, Health Care: 
U.S. Government Accountability Office: 
441 G Street NW: 
Washington, DC 20548: 

Dear Ms. Crosse: 

Attached are comments on the U.S. Government Accountability Office's 
(GAO) report entitled, "Drug Compounding: Clear Authority and More 
Reliable Data Needed to Strengthen FDA Oversight" (GAO 13-702).
The Department appreciates the opportunity to review this report prior 
to publication. 

Sincerely, 

Signed by: 

Jim R. Esquea: 
Assistant Secretary for Legislation: 

Attachment: 

General Comments Of The Department Of Health And Human Services (HHS) 
On The Government Accountability Office's (GAO) Draft Report Entitled, 
"Drug Compounding: Clear Authority And More Reliable Data Needed To 
Strengthen FDA Oversight" (GAO 13702): 

The Department appreciates the opportunity to review and comment on 
this draft report. The report accurately details the limitations 
associated with FDA's current authority. FDA's current authority does 
not provide the agency with the tools suited to effectively regulate 
certain drug compounding operations, and the findings in the report 
support the need for legislation to allow FDA to appropriately 
regulate this evolving industry. 

As GAO notes, in 1997, section 503A of the Federal Food, Drug, and 
Cosmetic Act attempted to clarify the status of pharmacy compounding 
under federal law, but subsequent conflicting court decisions resulted 
in FDA applying different authorities in different parts of the 
country, and created uncertainty regarding how courts would rule on 
section 503A in other parts of the country. These court rulings, 
combined with the perceived limitations and ambiguities in the law, 
have made difficult and vulnerable to legal challenge FDA's attempts 
to apply its regulatory and inspectional authority over pharmacies 
that compound drugs. Similarly, the current patchwork of state laws 
that differ in prescription requirements and quality control rules 
also hamper the states' oversight of compounding pharmacies. As GAO 
notes, differences in inspection practices among states, such as 
inconsistent requirements regarding the frequency of pharmacy 
inspections and the qualifications of pharmacy inspectors, and in some 
cases the lack of fiscal and staff resources, indicate that states 
lack uniform, consistent, and national standards and adequate 
resources to provide the necessary oversight of drug compounding. 

Since the 1990s, a new breed of specialty pharmacy compounding has 
evolved that has outgrown the law, and can pose a threat to the health 
of the public. These pharmacies produce medications in advance of or 
without obtaining a prescription and distribute them across the 
country. They make drug products that are intended to be sterile and 
must be made to exacting standards to prevent dangerous contamination. 
The magnitude and complexity of these operations have outpaced FDA's 
authorities, which are not the right fit for FDA to provide 
appropriate and efficient oversight of this growing industry. 

The fungal meningitis outbreak of 2012 serves as a cautionary tale of 
the public health dangers posed by practices in compounding 
pharmacies. Tragically, this is only the latest major public health 
incident relating to pharmacy compounding. These incidents are 
emblematic of longstanding issues associated with the practice of 
compounding and highlight the need for appropriate authorities for FDA 
to effectively protect the public health. 

Since the fungal meningitis outbreak, incidents related to unsafe 
pharmacy compounding practices, including observed contaminated 
products and patient injuries, recalls of sterile compounded products, 
and documentation of sterile processing concerns in numerous 
compounding pharmacies, demonstrate that action must be taken. As GAO 
notes, in response to this public health threat, FDA used its existing 
resources and authorities to conduct proactive inspections of 31 firms 
that are known to have produced sterile compounded drugs in the past. 
FDA identified these firms using a risk-based model that included 
factors such as serious adverse event reports, historical inspection 
data, and reports of product quality problems. The inspections 
specifically focused on each firm's processing of sterile drugs to 
identify firms that may pose a higher risk of producing contaminated 
sterile products. During these proactive inspections, as well as over 
30 for-cause inspections conducted recently, FDA documented 
significant lapses in sterility practices, inappropriate conditions 
for sterile processing, and other practices that create risk of 
contamination. FDA has conducted 62 inspections so far in fiscal year 
2013 and issued inspection observation reports (FDA Form 483s) on 52 
of those that list objectionable conditions observed at the 
facilities. As noted on some of these 483s, select FDA observations 
during the inspections include: unidentified black particles floating 
in vials of supposedly sterile medicine; rust and mold in "clean 
rooms" where sterile injectable medications were produced; technicians 
handling supposedly sterile products with bare hands; and employees 
wearing non-sterile lab coats. In part, due to FDA's observations 
noted during the inspections, several firms have voluntarily recalled 
their products, and others temporarily suspended production of their 
products intended to be sterile while they correct deficiencies found 
by the investigators. 

Even in light of the recent tragic events, some of these firms 
challenged FDA's authority to conduct these inspections. In at least 
six instances, firms delayed the inspections or denied FDA inspectors 
full access to records or observation of their sterile processing 
activities at some of these facilities, After some initial delay, and 
in some instances, discussion with the firms' legal counsels, these 
firms eventually provided the investigators the necessary access to 
inspect their facilities. In two other instances, FDA had to get 
administrative warrants from the courts, resulting in U.S. Marshals 
accompanying FDA inspectors back to the firms so FDA could complete 
the inspections. 

The agency is currently evaluating the information obtained during the 
inspections and where applicable, will apply its existing legal 
authority to protect the public health, but it is unclear whether FDA 
will be successful in obtaining appropriate corrective actions in all 
cases. The Administration is committed to working with Congress to 
address the threat to public health from limitations in authorities 
for effective oversight of certain compounding practices. To that end, 
FDA has developed a framework that could serve as the basis for the 
development of a risk-based program to protect the public health. 

Risk-Based Framework: 

Recognizing the history of compounding practice, FDA supports the long-
standing policy that all compounding should be performed in a licensed 
pharmacy by a licensed pharmacist (or a licensed physician), and that 
there must be a medical need for the compounded drug.
Further, we believe there should be a distinction between two 
categories of compounding: traditional and non-traditional. 
Traditional compounding would include the combining, mixing, or 
altering of ingredients to create a customized medication for an 
individual patient with an individualized medical need for the 
compounded product, in response to a valid patient-specific 
prescription or order from a licensed practitioner documenting such 
medical need. Traditional compounding, while posing some risk, plays 
an important role in the health care system, and should remain the 
subject of state regulation of the practice of pharmacy. 

Non-traditional compounding would include certain types of compounding 
for which there is a medical need, but that pose higher risks. FDA 
proposes working with Congress to define nontraditional compounding 
based on factors that make the product higher risk, such as any 
sterile compounding in advance of or without receiving a prescription, 
where the drug is distributed out of the state in which it was 
produced. Non-traditional compounding would be subject to federal 
standards adequate to ensure that the compounding could be performed 
without putting patients at undue risk, and FDA would inspect against 
and enforce these federal standards. Such a definition focuses on the 
highest risk activities and offers a uniform degree of protection 
across all 50 states, for highest-risk compounding activities. 

Non-traditional compounding should, because of the higher risk 
presented, be subject to a greater degree of oversight. Sterile 
products produced in advance of or without a prescription and shipped 
interstate should be subject to the highest level of controls, 
established by FDA and appropriate to the activity, similar to current 
Good Manufacturing Practice (cGMP) standards applicable to 
conventional drug manufacturers. 

In addition, FDA believes that with noted exceptions, certain products 
are not appropriate for compounding under any circumstances. These 
products would include: I) what are essentially copies of FDA-approved 
drugs, absent the drug appearing on FDA's shortage list; and 2) 
complex dosage forms such as extended release products; transdermal 
patches; liposomal products; most biologics; and other products as 
designated by FDA. Producing complex dosage forms would require an 
approved application and compliance with cGMP standards, along with 
other requirements applicable to manufactured drug products. 

FDA believes that there are other authorities that would be important 
to support this new regulatory paradigm. For example, FDA should have 
clear ability to collect and test samples of compounded drugs and to 
examine and collect records in a compounding pharmacy, just as the 
agency does when inspecting other manufacturers. FDA should also have 
clear ability to examine records such as records of prescriptions 
received, products shipped, volume of operations, and operational 
records such as batch records, product quality test results, and 
stability testing results. Such inspections are necessary to determine 
when a pharmacy exceeds the bounds of traditional compounding, to 
respond to public health threats, and to enforce federal standards. 

FDA also believes that an accurate inventory of pharmacies engaged in 
non-traditional compounding would facilitate appropriate oversight and 
coordination with state regulators. In addition, FDA looks forward to 
working with the Congress on potential improvements that may include 
label statements and adverse event reporting that have proven useful 
in other areas. A user-fee-funded regulatory program may be 
appropriate to support the inspections and other oversight activities 
outlined in this framework. We look forward to working with Congress 
to explore the appropriate funding mechanisms to support this work, 
which could include registration or other fees, as Congress has 
authorized and FDA has successfully implemented in other settings. 

Response to GAO Conclusions and Recommendations: 

In this report, GAO raises concerns about FDA's inspection database, 
the Field Accomplishments and Compliance Tracking System (FACTS), and 
states that "FDA lacks reliable data to make decisions to prioritize 
its inspection workload and other follow-up and enforcement actions" 
with respect to compounding pharmacies. Specifically, GAO states that 
the coding of some inspections of compounding pharmacies as 
manufacturers or veterinary drug compounders and the absence of ready 
access in the FACTS database to all of the final inspection 
classification decisions, would have a significant impact on the 
agency's ability to "make decisions on its oversight priorities and to 
take appropriate action when problems are identified." GAO concludes 
that, because FDA does not have timely and reliable access to the data 
available in FACTS, the agency is unable to "intercede and protect 
Americans from unnecessary harm when problems are identified." 

Although FDA recognizes that the FACTS database can be improved to 
better aggregate data and facilitate evaluation of compounding 
pharmacy activities across the limited universe of compounding 
pharmacies in the database, FDA maintains that the database 
deficiencies cited by GAO in this report do not materially impact the 
agency's ability to protect the public from harm when problems are 
identified. As GAO notes in its report, compounding pharmacies that 
meet certain criteria are generally not required to register with FDA 
or list their products, and, therefore, FDA does not know who they are 
and what they are compounding. FDA has recommended that Congress 
require pharmacies engaged in non-traditional compounding in the 
United States to register with FDA and list the drugs they are 
compounding so that FDA has information about who is doing this 
compounding and what they are producing. FDA would use this 
information to prioritize inspections using a risk based model so that 
it could appropriately focus its regulatory activities on the highest 
risk compounding. This would greatly enhance the agency's ability to 
provide appropriate oversight of non-traditional compounding practices 
and help to protect the public health. 

Even with the database as it is currently configured, however, the 
agency is able to access the data it has gathered through its 
inspectional and investigational activities to inform its inspectional 
priorities and decision-making regarding compounding pharmacies. FDA 
employees can access the inspectional data in FACTS by searching the 
database using the firm name rather than a program assignment code, 
and the database will provide all of the inspectional data on that 
firm, regardless of whether an inspection was coded as involving a 
manufacturer, veterinary compounder or as an investigation. 
Additionally, the collaboration between FDA's Center for Drug 
Evaluation and Research (CDER) and its Office of Regulatory Affairs 
(ORA) for inspections and/or investigations of a compounding pharmacy, 
assures that all relevant data gathered by FDA is made available to 
the decision-makers. For example, CDER makes the final classification 
decision on inspections. If the final decision is not in the FACTS 
database, the investigator(s) can request that information from CDER 
as part of their pre-inspection review of the firm's compliance 
history, and CDER is able to provide that information from its files. 

GAO specifically recommends that FDA take steps to consistently 
collect reliable information in its databases on inspections and 
enforcement actions, and that it differentiate in its databases those 
manufacturers of FDA-approved drugs that it inspects for compliance 
with good manufacturing practices from those manufacturers compounding 
drugs that are not FDA-approved and that FDA does not routinely 
inspect. 

As noted above, FDA is working with Congress on legislation to require 
non-traditional compounders to register and list. In addition, FDA 
will take steps to further improve its databases to ensure that 
inspections and actions regarding compounding going forward are coded 
consistently and are more readily identifiable through electronic 
searches, and that the final classification for inspections of drug 
compounders are entered into the FACTS database. FDA also wilt 
consider whether it would be possible and appropriate to differentiate 
in its database those compounding pharmacies that register voluntarily 
from conventional manufacturers that are required to register, and 
will provide information to the public about what it means and does 
not mean to voluntarily register with the FDA. 

[End of section] 

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Marcia Crosse, (202) 512-7114 or crossem@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Kim Yamane, Assistant 
Director; Matthew Byer; Sandra George; Drew Long; and Lisa A. Lusk 
made key contributions to this report. 

[End of section] 

Footnotes: 

[1] While drug compounding is often referred to as "pharmacy 
compounding," physicians may compound drugs in certain instances. The 
focus of this review is drug compounding by pharmacies. 

[2] FDA is responsible for assuring the safety and effectiveness of 
these drugs regardless of whether they are manufactured in the United 
States or abroad. 

[3] 21 U.S.C. §§ 301 et seq. 

[4] The contaminated product was traced to a compounding pharmacy in 
Massachusetts, which had shipped approximately 17,000 vials of a 
contaminated injectable steroid to 23 states. According to the Centers 
for Disease Control and Prevention, as of July 1, 2013, 749 
individuals who received the contaminated steroid injections became 
ill with fungal meningitis or other types of infections, and 61 of 
them have died. 

[5] See GAO, Prescription Drugs: State and Federal Oversight of Drug 
Compounding by Pharmacies, [hyperlink, 
http://www.gao.gov/products/GAO-04-195T] (Washington, D.C.: Oct. 23, 
2003). 

[6] We selected four states based on variations in geography, 
population, organization of pharmacy regulatory bodies, and pharmacy 
compounding laws and regulations. 

[7] NABP is a professional association that assists its member state 
boards of pharmacy and jurisdictions in developing, implementing, and 
enforcing uniform standards for the purpose of protecting the public 
health. USP is a scientific nonprofit organization that sets standards 
for the identity, strength, quality, and purity of medicines, food 
ingredients, and dietary supplements. For this report, we refer to 
these organizations, including those representing pharmacies and 
pharmacists, as national pharmacy organizations. 

[8] These standards provide an overall framework for establishing and 
maintaining internal controls; and for identifying and addressing 
major performance and management challenges, and areas at greatest 
risk of fraud, waste, abuse, and mismanagement. See GAO, Standards for 
Internal Control in the Federal Government, [hyperlink, 
http://www.gao.gov/products/GAO/AIMD-00-21.3.1] (Washington, D.C.: 
November 1999), and its supplemental guide, Internal Control 
Management and Evaluation Tool, [hyperlink, 
http://www.gao.gov/products/GAO-01-1008G] (Washington, D.C.: August 
2001). 

[9] [hyperlink, http://www.gao.gov/products/GAO-04-195T]. 

[10] Department of Health and Human Services, Office of Inspector 
General, High-Risk Compounded Sterile Preparations and Outsourcing by 
Hospitals That Use Them (Washington, D.C.: Apr. 10, 2013). 

[11] USP's current suite of General Chapters for compounding includes: 
Chapter 797 Pharmaceutical Compounding--Sterile Preparations, which 
provides procedures and requirements for compounding sterile 
preparations; Chapter 795 Pharmaceutical Compounding--Nonsterile 
Preparations, which provides guidance on applying good compounding 
practices in the preparation of nonsterile compounded formulations for 
dispensing and/or administration to humans or animals; Chapter 1160--
Pharmaceutical Calculations in Prescription Compounding; Chapter 1163-
-Quality Assurance in Pharmaceutical Compounding; and Chapter 1176--
Prescription Balances and Volumetric Apparatus. According to USP 
officials, these compounding chapters reference an additional 48 USP 
chapters. In addition to setting standards that affect compounding, 
USP, through the United States Pharmacopeia-National Formulary, a 
compendium of public pharmacopeial standards, provides monographs for 
drug articles, including ingredients used in compounded preparations, 
and monographs for the compounded preparations themselves, comprising 
standards of identity, quality, purity, strength, packaging, and 
labeling. 

[12] National Association of Boards of Pharmacy, Survey of Pharmacy 
Law--2013 (Mount Prospect, IL: 2013). The pharmacy regulatory bodies 
of Guam and Puerto Rico also reported that they require compliance 
with USP's standards on sterile compounding. 

[13] The FDCA defines "new drug" as "Any drug … the composition of 
which is such that such drug is not generally recognized, among 
experts qualified by scientific training and experience to evaluate 
the safety and effectiveness of drugs, as safe and effective for use 
under the conditions prescribed, recommended, or suggested in the 
labeling thereof. . . . ." 21 U.S.C. § 321(p)(1). Drug manufacturers 
submit new drug applications to FDA to seek approval to market and 
sell a new pharmaceutical drug product in the United States. In 
addition, abbreviated new drug applications are submitted to FDA to 
seek approval to market a generic version of a drug after the period 
of exclusivity and any patents for a brand-name drug expire. In fiscal 
year 2013, user fees for new drug applications ranged from $979,400 to 
$1,958,800, depending on whether or not the application required 
clinical data, and were $51,520 for abbreviated new drug applications. 

[14] Pub. L. No. 105-115, § 127, 111 Stat. 2296, 2328 (Nov. 21, 1997). 
Compounded drug products that met these requirements did not have to 
comply with good manufacturing practices, label drugs with adequate 
directions for use, or have an FDA-approved new drug or abbreviated 
new drug application. References to section 503A in this report are to 
section 503A of the FDCA, as codified at 21 U.S.C. § 353a. 

[15] A pharmacy's records are exempt from FDA's inspection authority 
if the pharmacy is in compliance with any applicable local laws 
regulating the practice of pharmacy and medicine, regularly engages in 
dispensing drugs upon a prescription from a licensed practitioner, and 
does not manufacture, prepare, or compound drugs for sale other than 
during the regular course of its business of dispensing or selling 
drugs at retail. 21 U.S.C. § 374(a)(2)(A). 

[16] An FDA form 483 is an inspection observation report that lists 
objectionable conditions observed at the facilities. An FDA warning 
letter is a correspondence that notifies a responsible individual or 
firm that the agency considers one or more products, practices, 
processes, or other activities to be in violation of the FDCA, its 
implementing regulations, and other federal statutes. 

[17] 21 U.S.C. § 360. 

[18] A pharmacy is exempt from these registration and listing 
requirements if the pharmacy is in compliance with any applicable 
local laws regulating the practice of pharmacy and medicine, regularly 
engages in dispensing drugs upon a prescription from a licensed 
practitioner, and does not manufacture, prepare, or compound drugs for 
sale other than during the regular course of its business of 
dispensing or selling drugs at retail. 21 U.S.C. § 360(g)(1). 

[19] According to FDA officials, the agency typically seeks inspection 
warrants when inspection has been refused completely or when refusals 
have been encountered in limited areas (e.g., when a firm has refused 
to allow FDA to take photographs or collect samples). FDA officials 
also reported having to obtain warrants to inspect 2 of 31 compounding 
pharmacies it inspected in 2013. 

[20] 21 U.S.C. § 374(a)(2)(A). 

[21] For example, Statement of Janet Woodcock, M.D., Director, Center 
for Drug Evaluation and Research, FDA, before the Senate Committee on 
Health, Education, Labor, and Pensions, 113th Cong., May 9, 2013. 

[22] On June 19, 2013, the Senate Committee on Health, Education, 
Labor and Pensions reported out of committee a bill that would create 
a new category of "compounding manufacturer," which is similar in some 
respects to FDA's proposed category of "nontraditional drug 
compounder." Pharmaceutical Compounding Quality and Accountability 
Act, S. 959, 113th Cong. (1st Sess. 2013). In addition, on May 23, 
2013, a bill was introduced in the House of Representatives, H.R. 
2186, to strengthen federal oversight of drug compounding. VALID 
Compounding Act, H.R. 2186, 113th Cong. (1st. Sess. 2013). 

[23] Pharmacies are not required to register with FDA if they follow 
any applicable local laws regulating the practice of pharmacy and 
medicine, regularly engage in dispensing drugs upon a prescription 
from a licensed practitioner, and do not manufacture, prepare, or 
compound drugs for sale other than during the regular course of their 
business of dispensing or selling drugs at retail. 21 U.S.C. § 
360(g)(1). 

[24] We have previously reported on weaknesses in the data FDA uses to 
prioritize its inspection workload, including FACTS. See, for example, 
GAO, Drug Safety: Better Data Management and More Inspections Are 
Needed to Strengthen FDA's Foreign Drug Inspection Program, 
[hyperlink, http://www.gao.gov/products/GAO-08-970] (Washington, D.C.: 
Sept. 22, 2008). 

[25] FDA classifies an inspection as "official action indicated" if 
objectionable conditions were found that warrant regulatory action by 
the agency. A classification of "voluntary action indicated" means 
that objectionable conditions were identified but any corrective 
actions are left to the establishment to take voluntarily. A 
classification of "no action indicated" means that no objectionable 
conditions or practices were found during the inspection (i.e., 
conditions or practices that violate current good manufacturing 
practices), or if the significance of the documented objectionable 
conditions found does not justify further FDA action. 

[26] According to FDA officials, the agency does not have ready access 
to all of the final inspection classifications as some of the records 
are in hard copy and it would be difficult and time consuming to 
review the inspection reports and any associated documentation to 
evaluate and determine why certain final decisions were made or not 
made. Agency officials told us that reasons why a final decision was 
not entered into its FACTS database include, but are not limited to, 
the difficulty of the agency to come to a final classification 
determination on an inspection due to the complexity of legal issues 
associated with the regulation of compounded drugs and compounding 
pharmacies or failure to enter the data. 

[27] Generally, if a manufacturer receives drug-or certain device-
related adverse event reports, it must send them to FDA. Health care 
professionals and consumers can voluntarily file adverse event reports 
with FDA and may also report these events to the products' 
manufacturers. User facilities (e.g., hospitals and nursing homes) 
must report certain device-related--but not drug-related--adverse 
events to FDA as well. 21 C.F.R. §§ 314.80(c), 803.30, 803.50. 

[28] The Pew Charitable Trusts is an independent, nonprofit research 
and public policy organization. Pew Charitable Trusts, American 
Society of Health-System Pharmacists, American Hospital Association, 
Pharmacy Sterile Compounding Summit: Summary of a Stakeholder Meeting 
(Washington D.C.: Apr. 15, 2013). 

[29] FDA's inspection plan for fiscal year 2011 called for five full-
time equivalent staff to inspect compounding pharmacies, and its plan 
for fiscal year 2012 called for two full-time equivalent investigator 
staff for these inspections. 

[30] FDA officials noted that this is likely an incomplete list of 
inspections of compounding pharmacies. That is, they said that the 
agency could have conducted additional inspections of compounding 
pharmacies; but they could only identify 194 of them because of 
limitations in FDA's inspections database. According to FDA officials, 
additional inspections may have been coded as investigations rather 
than inspections (although they involved inspectional activity as part 
of the investigation) and some inspections of compounding pharmacies 
could have been coded as inspections of human drug manufacturers. 

[31] For FDA's summary describing these inspections, see Food and Drug 
Administration, Summary: 2013 FDA Pharmacy Inspection Assignment, 
accessed April 30, 2013, [hyperlink, 
http://www.fda.gov/Drugs/GuidanceComplianceRegulatoryInformation/Pharmac
yCompounding/ucm347722.htm]. FDA officials told us that to conduct 
these inspections of compounding pharmacies the agency had to take 
inspectors off other assignments. 

[32] According to FDA officials, the agency used a risk-based model to 
identify the pharmacies and 15 of the 31 pharmacies had at least one 
reported death and, thus, were included in FDA's inspections 
regardless of whether they met any of the other criteria. 

[33] According to FDA officials, 1 of the 31 pharmacies the agency 
inspected did not receive an FDA form 483, and this pharmacy was not 
compounding sterile drugs. Four of the 31 pharmacies were individual 
facilities of one pharmacy firm, and 4 others were individual 
facilities of another firm; however, FDA counted each facility as a 
separate compounding pharmacy. 

[34] In addition, as of May 30, 2013, four other compounding 
pharmacies that were not part of the 31 pharmacies inspected by FDA 
initiated voluntary recalls of their sterile compounded products 
because of concerns of a lack of sterility assurance. FDA identified 
bacterial and fungal growth in samples of a sterile compounded drug in 
a subsequent inspection of one of these compounding pharmacies. 

[35] Resident pharmacies operated by entities that are licensed by 
either the board or the California Department of Health and 
nonresident pharmacies operated by entities that are licensed as a 
hospital, home health agency, or a skilled nursing facility are 
eligible for such exemption. Cal. Bus. & Prof. Code §§ 4127.1, 4127.2. 
In contrast to current law, which imposes special licensure 
requirements only on pharmacies compounding injectable sterile drugs, 
the proposed legislation would require pharmacies compounding all 
types of sterile drugs to meet such requirements. 

[36] In Connecticut, pharmacy licensure and pharmacy inspections are 
handled separately. The state's Commission of Pharmacy, which is 
administered by the Department of Consumer Protection, is responsible 
for approval of new licenses. The commission also adjudicates cases 
involving pharmacists, pharmacies, and pharmacy technicians brought 
before it. The Department of Consumer Protection's Licensing Division 
handles the clerical aspects of licensing pharmacists and pharmacies 
while the state's Department of Consumer Protection, Drug Control 
Division, conducts pharmacy inspections and implements enforcement 
actions. Connecticut has 10 drug control agents who conduct pharmacy 
inspections, all of whom are licensed pharmacists. 

[37] Specifically, Florida's emergency rule required resident 
pharmacies with state pharmacy permits and nonresident pharmacies 
registered with the state to immediately notify the board of their 
sterile and nonsterile compounding activities, the types of drugs they 
compound, and whether they compound drugs in bulk. In addition, the 
emergency rule required Florida's board of pharmacy to use the 
information on compounding activities to place a high priority on 
inspecting high-risk pharmacies such as those that compound sterile 
drugs. The emergency rule also required all nonresident registered 
pharmacies to provide a copy of their last two inspection reports as 
provided by the state in which the pharmacies are physically located 
and licensed. 

[38] Florida Department of Health, Division of Medical Quality 
Assurance, Florida Board of Pharmacy Compounding Survey Report 
(Tallahassee, FL: Jan. 23, 2013). 

[39] NABP will also assist the New Jersey Division of Consumer Affairs 
with inspections of New Jersey pharmacies engaged in the practice of 
compounding under a recently reached agreement with the New Jersey 
Division of Consumer Affairs and the state's Attorney General. New 
Jersey licenses approximately 40 retail pharmacies that perform 
sterile compounding and 109 hospital pharmacies that may compound 
sterile products. NABP inspectors will assist the division in 
performing field inspections at compounding pharmacies, detailed 
audits of their records, and in-depth analysis of inspection findings. 
In addition, NABP inspectors will assist with investigations into 
complaints about compounding pharmacies, and in bringing charges 
against any found to be noncompliant. 

[40] NABP's Model State Pharmacy Act and Model Rules (Model Act) 
provide state boards of pharmacy with model language that may be used 
when developing state laws or board rules. The Model Act includes 
sections on the boards of pharmacy, licensing (pharmacists, 
technicians, and facilities), and discipline. NABP last updated the 
Model State Pharmacy Act and Model Rules in August 2012. 

[41] The following national pharmacy organizations established PCAB 
and, with the exception of the National Association of Boards of 
Pharmacy, currently make up PCAB's Board of Directors: American 
College of Apothecaries, National Community Pharmacists Association, 
American Pharmacists Association, National Alliance of State Pharmacy 
Associations, International Academy of Compounding Pharmacists, 
National Home Infusion Association, National Association of Boards of 
Pharmacy, and the United States Pharmacopeial Convention. 

[42] According to a PCAB official, as of June 24, 2013, 176 PCAB-
accredited pharmacies were located in 41 states and no state or other 
entity required PCAB accreditation for a pharmacy to compound drugs. 

[43] FDA, Compliance Policy Guides, § 460.200 Manufacture, 
Distribution, and Promotion of Adulterated, Misbranded, or Unapproved 
New Drugs for Human Use by State-Licensed Pharmacies (Mar. 16, 1992). 

[44] The compliance policy guide describes such traditional 
compounding to include compounding of "reasonable quantities of drugs 
upon receipt of a valid prescription for an individually identified 
patient from a licensed practitioner." 

[45] W. States Med. Ctr. v. Shalala, 69 F. Supp. 2d 1288 (D. Nev. 
Sept. 16, 1999). 

[46] W. States Med. Ctr. v. Shalala, 238 F.3d 1090 (9th Cir. Feb. 6, 
2001). 

[47] Thompson v. W. States Med. Ctr., 535 U.S. 357 (2002). 

[48] Id. at 360. 

[49] FDA, Compliance Policy Guide § 460.200 Pharmacy Compounding (May 
29, 2002). 

[50] Section 201(p) of the FDCA defines "new drug" as "Any drug … the 
composition of which is such that such drug is not generally 
recognized, among experts qualified by scientific training and 
experience to evaluate the safety and effectiveness of drugs, as safe 
and effective for use under the conditions prescribed, recommended, or 
suggested in the labeling thereof." 21 U.S.C. § 321(p). 

[51] Med. Ctr. Pharmacy v. Gonzales, 451 F. Supp. 2d 854, 863, 865 
(D.W.D. Tex. Aug. 30, 2006). 

[52] The Fifth Circuit vacated the district court's judgment and 
remanded the case to the district court for further proceedings. Med. 
Ctr. Pharmacy v. Mukasey, 536 F.3d 383, 409 (5th Cir. Jul. 18, 2008). 

[53] Id. at 400 ("In 1997, Congress enacted FDAMA as an amendment to 
the FDCA. That amendment provides considerable evidence that Congress 
sought to address pharmacy compounding directly and that it did so 
with the assumption that the 'new drug' provision applies to drugs 
created through pharmacy compounding.") 

[54] Id. at 401 ("[T]o rely on FDAMA in construing the 'new drug' 
definition, we first must address FDAMA's validity.") 

[55] Id. at 402, 404-05. 

[56] Id. at 405. 

[57] The Ninth Circuit Court of Appeals decision also applies to FDA's 
authority over certain compounding pharmacies located in Colorado, New 
Jersey, Tennessee, Texas, and Wisconsin, as these pharmacies were 
party to the Western States lawsuit. 

[End of section] 

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