Drug Quality and Security Act: What You Need to Know

What You Need to Know

December 4, 2013

In recent years, Congress and the Food and Drug Administration (FDA) have worked on several legislative measures designed to address weaknesses in the U.S. drug supply. In response to the fungal meningitis outbreak linked to unsanitary conditions at a compounding pharmacy in the Fall of 2012 as well as concerns regarding counterfeit, falsified, substandard and dangerous prescription medication, Congress has voted on several measures. Specifically, the Senate Committee on Health Education, Labor and Pensions (HELP) reported S. 959, the Pharmaceutical Quality, Security, and Accountability Act, legislation aimed at enhancing the regulatory structure for compounded medications. The House of Representatives passed H. R. 1919, Safeguarding America’s Pharmaceuticals Act of 2013, which constituted the House of Representatives’s endeavor to create a more secure drug delivery system. Ultimately, the House and Senate agreed to combine compounding and supply chain security legislation into one proposal and passed H.R. 3204, the Drug Quality and Security Act.

The Drug Quality and Security Act has two distinct and independent acts: 1) the Compounding Quality Act and 2) the Drug Supply Chain Security Act. The Compounding Quality Act creates a voluntary compliance regime where compounding pharmacies that voluntarily register as “outsourcing facilities” will be subject to oversight by the FDA in much of the same way that traditional pharmaceutical manufacturers are monitored. The Drug Supply Chain Security Act requires the FDA to create and implement a national track-and-trace system by which manufacturers must affix product identifiers (bar codes) that are either human-readable or machine-readable to each package or homogenous case of a pharmaceutical product intended to be introduced into the supply chain. President Obama signed the bill into law on Nov. 27, 2013. On Dec. 2, FDA held a press briefing and released several documents regarding the implementation of the Drug Quality and Security Act, and more specifically, the Compounding Quality Act.

Below is an overview of the legislative history, implementation requirements and outstanding issues relevant to each individual act within the Drug Quality and Security Act.

Compounding Quality Act

This legislation represents Congress’s response to the tainted injectable drugs from New England Compounding Center (NECC) in Massachusetts, which caused an outbreak of fungal meningitis resulting in 64 deaths and over 750 cases of fungal meningitis in 20 states. Prior to the passage of the Drug Quality and Security Act, FDA had limited oversight over compounding pharmacies, which were traditionally regulated at the state level. At the same time, a distinct difference had developed among compounding pharmacies: those that compound in small quantities for a local area and those that mass produce compounded medications for sale throughout the United States. The Drug Quality and Security Act, through the Compounding Quality Act, attempts to distinguish between the small compounder and mass-producing compounding pharmacies but will need the support of market forces to be successful.

Outsourcing Facilities

The Compounding Quality Act defines a new type of compounding pharmacy — an “outsourcing facility.” An outsourcing facility is a facility at one geographic location that is engaged in compounding sterile drugs, has elected to register as an outsourcing facility with the FDA and is subject to certain compounding constraints and inspection requirements. A list of facilities registered as outsourcing facilities will be publically available on the FDA website.

Outsourcing facilities will have to register themselves and the products they compound with the FDA. The FDA will collect an establishment fee when the outsourcing facility registers with the FDA. The initial base registration fee is $15,000, subject to adjustment for inflation and small businesses. The FDA may also collect reinspection fees from outsourcing facilities. Further, outsourcing facilities must label their products with a statement that identifies the drug as a compounded drug and other enumerated requirements, including the contact information of the outsourcing facility, the lot number, the date the drug was compounded and the expiration date, storage and handling instructions, a statement that the drug is “not for resale,” and a list of active and inactive ingredients. The FDA will also receive adverse event reports from the outsourcing facilities and be able to conduct risk-based inspections at the outsourcing facilities. Risk-based inspections will be based on factors including the compliance history of the outsourcing facility; the record, history and nature of recalls linked to the outsourcing facility; and the inherent risk of the drugs compounded at the outsourcing facility.

The legislation also requires the GAO to report within 36 months of the passage of the Drug Quality and Security Act on the effectiveness of both the state and federal efforts to assure the safety of compounded drugs and the availability of tools to permit purchasers of compounded drugs to determine the safety and quality of such drugs.

Registration Concerns

The main looming issue with regard to the Compounding Quality Act is, how effective will the voluntary registration system be? Analysts argue that market forces will cause larger compounders to register as outsourcing facilities. The analysts reason that hospitals and other providers will require that compounders be registered as outsourcing facilities and subject to FDA inspection requirements, quality standards and adverse event reporting.

In the Dec. 2 press conference and in an FDA blog post by FDA Commissioner Hamburg, FDA publically encouraged healthcare providers and health networks to purchase products from FDA-registered outsourcing facilities. Other analysts, however, argue that the voluntary registration requirement is a loophole. All the while, the International Academy of Compounding Pharmacists (IACP) maintains that the law contains many “unknowns” that are detrimental to the practice of pharmacy.

However, stakeholders will have an opportunity to weigh in on the promulgation of regulations to formally implement the legislation. For example, FDA announced it is starting to develop lists of drugs that cannot be compounded and of bulk ingredients that can be used in compounding, as required by the Drug Quality and Safety Act. To identify candidates for these lists, FDA is encouraging interested groups and individuals to nominate specific drug products or categories of drug products and is describing the information that should be provided to the agency in support of each nomination. In addition, the agency has promised to work with policymakers and industry to develop a workable framework for “office use” allowances of compounded medications done without a prescription or identified patient, as certain commonly compounded products are kept on hand by medical professionals.

Drug Supply Chain Security Act

For several years, policymakers have explored and attempted to improve the security of the drug supply chain, in part, to prevent the introduction of unsafe elements. For example, in 2012, legislation to reauthorize prescription drug and device user fee programs included language that would have created a national drug “track-and-trace system,” but it was not included in the final bill. The second part of the Drug Quality and Security Act formally establishes a national pharmaceutical track and trace system.

Pre-emption of State Law

The track-and-trace system required by the Drug Supply Chain Security Act will replace the currently fragmented system of product tracing with a uniform, electronic and interoperable unit-level product tracing system. Important to the pharmaceutical industry is the explicit preemption of California’s e-pedigree requirements, which would have come into effect in 2015. The legislation states that no state or political subdivision of a state may establish or continue in effect any requirements for tracing products through the distribution system that are inconsistent with, more stringent than or in addition to any of the requirements under the Drug Supply Chain Security Act.

Implementation Issues

The track-and-trace system would be implemented throughout the next decade and would track a product down to the package level. Similar to the recently finalized unique device identifier (UDI) rule for medical devices, the legislation would establish nationwide drug serial numbers. The aim of the nationwide drug serial numbers is to allow for efficient tracing to respond to recalls and notices of theft and counterfeiting.

Within one year after the passage of the Drug Quality and Security Act, FDA is required to issue a draft guidance document that establishes standards for the interoperable exchange of pharmaceutical tracking information in either paper or electronic format. In establishing the guidance, the secretary must allow for a public notice and comment period.

No later than two years after the date of enactment, FDA must issue further guidance discussing how a participant in the pharmaceutical supply chain may request a waiver or exception or be exempt from reporting requirements. This guidance must be reviewed biennially to determine whether the waivers, exceptions and exemptions are still applicable. During the same time period, FDA must also identify circumstances under which a product is grandfathered and exempt from the new law’s requirements.

During the initial implementation years, FDA will establish and coordinate pilot projects with manufacturers, repackagers, wholesale distributors, dispensers and other parties to explore and evaluate methods to enhance the safety and security of the pharmaceutical distribution supply chain.

Starting Jan. 1, 2015, manufacturers will be required to capture the transaction history and movement of a pharmaceutical product through the supply chain and store the information for at least six years. Initially, manufacturers will be able to store the information in either paper or electronic format, but eventually, manufacturers will be required to store the information in electronic format. At the same time, certain other participants in the pharmaceutical supply chain, including wholesale distributors, dispensers and repackagers, must develop verification methods to determine whether a product is a valid, suspect or illegitimate product. Upon determining it is in possession of such a product, a participant in the secure drug supply chain must notify its trading partners in order to prevent further circulation of potentially compromised medication. Authorized participants in the drug supply chain must also respond within 48 hours to requests from appropriate federal or state officials — in the event of a recall or for the purpose of investigating a suspect product or an illegitimate product — for the transaction history of the pharmaceutical product.

The overall goal is to establish, within 10 years from the date of enactment of the Drug Quality and Security Act, an interoperable, electronic tracing system of pharmaceutical products, down to the package level, that is able to promptly respond in the event of a recall or for the purposes of investigating a suspect product or an illegitimate product.

Overall, the structure and effectiveness of the track-and-trace system remain to be seen. In conjunction with the implementation of the UDI requirements, questions remain about how the system will technically perform.

If you have questions regarding either the Compounding Quality Act or the Drug Supply Chain Security Act, please contact one of the authors.