Generally, in order to qualify for this exemption, a compounded drug must meet the following requirements:

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1 In its May 4, 2015 FDB Custmer Cnnectin, First Databank (FDB) annunced a decisin t remve CutisPharma s cmpunding kits frm FDB s MedKnwledge Database as f June 8, We believe FDB s actins are ill-cnsidered, based n mistaken assumptins abut the facts and incrrect cnclusins abut the law, and will be t the detriment f patients. What fllws is a brief summary f the law and facts, and a line-by-line respnse t FDB s annuncement. Brief Summary f Applicable Law 1 Sectin 503A f the Fd, Drug, and Csmetic Act (FDCA) is the primary federal law that gverns pharmacy cmpunding. It exempts certain cmpunded drugs frm the fllwing requirements f the FDCA, which are generally applicable t drug prducts: FDCA 501(a)(2)(B): A drug is adulterated (and therefre cannt be distributed in interstate cmmerce) if it has nt been manufactured in accrdance with current Gd Manufacturing Practice (cgmp); FDCA 501(f)(1): A drug is misbranded (and therefre cannt be distributed in interstate cmmerce) if it lacks adequate directins fr use (as a practical matter, this means if FDA has nt apprved the labeling); and FDCA 505: A new drug that is, a drug that is neither generally recgnized as safe and effective (GRAS/E) nr exempt as a grandfathered drug may nt be distributed in interstate cmmerce unless it has been apprved by FDA. Generally, in rder t qualify fr this exemptin, a cmpunded drug must meet the fllwing requirements: It must be cmpunded by a licensed pharmacist r physician, fr an identified patient in respnse t a prescriptin r in limited quantities befre a prescriptin, based n a histry f rders frm an established relatinship between the cmpunder and the prescriber r patient. The cmpunding must be frm a bulk drug substance 2 that: Cmplies with an applicable USP r NF mngraph and the USP chapter n pharmacy cmpunding; r, if there is n mngraph, is a drug substance that is a cmpnent f an FDA-apprved drug; r if neither f the preceding, is n an FDA-issued list f drugs permitted t be cmpunded; Was manufactured by an establishment that is registered with FDA; and Is accmpanied by a valid certificate f analysis. 1 This discussin presents an abbreviated and general descriptin f the requirements, and is intended t prvide backgrund. It is nt a cmplete r exhaustive discussin f the applicable law, is nt intended t prvide legal advice, and shuld nt be relied n fr that purpse. 2 The statute specifically refers t the regulatry definitin f bulk drug substance, which is any substance that is represented fr use in a drug and that, when used in the manufacturing, prcessing, r packaging f a drug, becmes an active ingredient r a finished dsage frm f the drug.

2 The ther ingredients must meet the standards f an applicable USP r NF mngraph, if ne exists, and the USP chapter n pharmacy cmpunding. The cmpunded drug prduct can t be n an FDA-issued list f prducts withdrawn frm the market because they are unsafe r ineffective. The cmpunding pharmacist r physician can t regularly r in inrdinate amunts cmpund prducts that are essentially cpies f a cmmercially available drug prduct. The cmpunded prduct can t be n an FDA-issued list f prducts that shuldn t be cmpunded. The cmpunding must take place in a state that has entered int a memrandum f understanding (MOU) with FDA addressing interstate sale f inrdinate amunts f cmpunded drugs, r if nt, n mre than 5% f the cmpunding pharmacist/pharmacy/physician s cmpunded prducts are distributed t a different state than where they were cmpunded. Applicatin t CutisPharma Kits The CutisPharma kits meet each f the requirements that are applicable t us and ur suppliers and cntract manufacturers. Mre specifically: Each CutisPharma kit cnsists f a bulk drug substance that: Cmplies with an applicable USP r NF mngraph and the USP chapter n pharmacy cmpunding and/r is a cmpnent f an FDA-apprved drug; Was manufactured by an establishment that is registered with FDA; and Is accmpanied by a valid certificate f analysis. The inactive ingredients in each CutisPharma kit meet the standards f an applicable USP r NF mngraph, if ne exists, and the USP chapter n pharmacy cmpunding. Nne f the prducts intended t be cmpunded frm CutisPharma kits are prducts that: Were withdrawn frm the market because they are unsafe r ineffective; Are essentially cpies f a cmmercially available drug prduct; r Are n an FDA-issued list f prducts that shuldn t be cmpunded. This all is relatively straightfrward. The cmplicatin and what we believe has been a pint f cnfusin fr FDB is that the CutisPharma prducts are presented as kits that cntain premeasured amunts f active and inactive ingredients, rather than being large quantities f ingredients frm which a pharmacist wuld measure and remve a smaller quantity necessary t cmpund a given prescriptin. This is intentinal, f curse; it reflects a cnvenience t the pharmacist and prevents measuring errrs, amng ther things. It is CutisPharma s strngly held -2-

3 view, hwever, that this fact des nt take the CutisPharma prducts utside the regulatry definitin f bulk drug substance t which the cmpunding statute specifically refers. It may well be that the vast majrity f bulk drug substances mve in interstate cmmerce in large (what ne might call bulk ) quantities, but that s nt smething required by the regulatry definitin f the term. Mrever, the CutisPharma prducts are nt labeled as finished drug prducts wuld be; this reflects that their intended use is nt as a finished drug prduct. Review f FDB Statement Applying the law t the facts, ne can address the cmpnents f the FDB statement, as fllws: Significant unanswered questins regarding the legal marketability f cmpunding kit drugs cntinue t be presented t FDB. We dn t knw wh s presenting the questins t FDB, but we knw that CutisPharma has discussed the situatin with FDB n mre than ne ccasin. We ve explained t FDB that ur prducts are bulk drug prducts intended fr use in pharmacy cmpunding, and they meet all the requirements f materials t be used in cmpunding under FDCA 503A, i.e., cmpunding by licensed pharmacists and physicians. These kits are neither 503B utsurcing facility prducts, 503A cmpunded drugs nr NDA/ANDA-apprved drugs. That is a factually crrect statement, but irrelevant. Fr the CutisPharma kits t be legally marketed, they d nt need t fall within ne f the three categries FDB identifies; as explained abve, the kits are legally marketed as bulk drugs intended fr use in cmpunding under FDCA 503A. The kits are nt themselves prducts cmpunded under 503A, but when used as intended, they will be cmpnents in prducts that are cmpunded under 503A and therefre legally marketed. Mrever, because the finished prducts fr which CutisPharma furnishes ingredients are cmpunded under 503A, they d nt require an apprved NDA r ANDA; that is precisely ne f the benefits the statute prvides t prperly cmpunded drugs they are exempt frm the FDCA 505 requirement f an apprved NDA r ANDA. Despite their intended use as finished prducts, we are aware f n regulatry review prcess that demnstrates their safety and efficacy. This prceeds frm a faulty premise: the CutisPharma kits are nt intended t be finished prducts. Their intended use is as bulk prduct fr cmpunding under FDCA 503A, and they therefre d nt require an apprval as safe and effective, nr des the finished prduct that is cmpunded with the CutisPharma ingredients. As nted abve, a finished prduct cmpunded in accrdance with the requirements f 503A is exempt frm the apprval requirement (which is based n a review f the prduct s safety and efficacy) impsed by FDCA 505. Mrever, the safety and effectiveness f the prducts are addressed by a number f things, including: -3-

4 As required by the statute, the ingredients meet USP r NF mngraph standards, as well as the USP chapter n pharmacy cmpunding, and are accmpanied by certificates f analysis. The active ingredients are cmpnents f FDA-apprved prducts. The ingredients are manufactured in FDA-registered facilities that are subject t agency inspectin. CutisPharma gathers, analyzes, and as apprpriate reprts adverse event data fr each f its prducts. Additinally their self-characterizatin as bulk ingredients t be used by cmpunding pharmacies is questinable, since bulk pharmaceutical ingredients are nt intended fr use by an individual patient. By regulatry definitin, bulk drug substances are intended t be used in the manufacturing f a finished drug prduct and that finished drug prduct is intended fr use by an individual patient. That is precisely the intended use f the CutisPharma kits. What FDA is really saying here is that bulk ingredients are suppsed t be in bulk but that s nt what the regulatin says. It s admittedly smewhat cunter-intuitive, but that desn t make it illegal. Nthing in the definitin f bulk drug substance requires the drug substance t be in any minimum quantity. Finally, these prduct lack FDA-apprved labeling and adequate supprting infrmatin as t indicatins, warnings, and precautins and side effects. This, t, is a sentence that is factually accurate, but nt at all relevant t the legal status f the CutisPharma prducts. Bulk drug substances which is what we prvide dn t require FDA-apprved labeling that includes intended uses (i.e., indicatins), warnings, precautins, and side effects. Mrever, t the extent FDB is referring t FDCA 502(f)(1) which says a drug is misbranded if it lacks adequate directins fr use, and which, as a practical matter, means a prduct must have FDA-apprved labeling that is a requirement generally applicable t finished drug prducts, and ne frm which a prduct cmpunded under FDCA 503A is exempt. Accrdingly, it desn t apply t either the CutisPharma prducts r the finished prducts that are cmpunded frm the CutisPharma ingredients. The ptential cnsequences when cmpunding manufacturer prducts are marketed in the absence f FDA apprval were prfundly demnstrated in the case f the New England Cmpunding Center. This is true, as far as it ges, but there s much mre t it. The issue wasn t really the lack f FDA apprval as is demnstrated by the fact that the statute enacted in the wake f NECC desn t necessarily require FDA apprval. (In fact, the statute establishes circumstances under which prducts may be manufactured and dispensed t patients withut FDA apprval.) Rather, the enactment f FDCA 503A and 503B established cntrlled cnditins under which such prducts may be made and distributed, and it s thse cnditins that are intended t prevent a repeat f NECC. Mrever, NECC invlved a lack f FDA inspectins r ther versight f the manufacture f sterile injectable prducts, which led t failures in cgmp cmpliance and sterility assurance nne f which is applicable t -4-

5 CutisPharma r its prducts. Our prducts are nt sterile injectables, and the cmpany has been subject t regular FDA inspectins, the mst recent f which ccurred in As a result, federal legislatin impsed standards fr facility inspectin prduct requirements and labeling n utsurcing facilities t prevent a recurrence f the NECC tragedy. As nted abve, the legislatin didn t require apprval f cmpunded drug prducts; it tightened the cnditins under which prducts may be cmpunded and legally distributed withut apprvals. Mrever, this specific sentence is abut requirements impsed n utsurcing cmpunding facilities, which are subject t FDCA 503B, and are nt relevant t cnsideratin f ur prducts. The cmpunding kits, hwever, remain utside any FDA-sanctined pathway. If this is meant as a narrw statement that the kits are nt the subject f an FDA-sanctined apprval pathway, it is true. As nted abve, hwever, neither FDCA 503A nr 503B establish an apprval pathway fr cmpunded drugs; rather, they impse cnditins under which cmpunding may take place cnditins that are intended t reduce the risks assciated with cmpunded prducts. What s trubling is the implicatin f the statement that, because the kits are nt subject t FDA apprval, they are nt subject t any versight, and therefre are unsafe. That simply is nt true in general r, mre specifically, with regard t the CutisPharma kits. As discussed abve, CutisPharma, its kits, suppliers, and cntract manufacturers are all subject t FDA versight, which the agency has exercised. S, t, are the finished prducts that are cmpunded with the bulk ingredients prvided by CutisPharma; that is what 503A prvides. Fr all these reasns, the cmpunding kits d nt present sufficient evidence that they can be used safely, and we have accrdingly determined t remve all unapprved cmpunding kit prducts frm the MedKnwledge database effective the week f June 8, As discussed herein, FDB starts frm faulty premises as t the legal requirements and the facts and ends up with a flawed result. We strngly believe that FDB shuld list each f ur cmpunding kits n the MedKnwledge database. FDB s actins t the cntrary are unnecessary and, as a practical matter, deny patients, dctrs, and pharmacists f a beneficial alternative. * * * -5-