Prescription Drugs: State and Federal Oversight of Drug 	 
Compounding by Pharmacies (23-OCT-03, GAO-04-195T).		 
                                                                 
Drug compounding--the process of mixing, combining, or altering  
ingredients--is an important part of the practice of pharmacy	 
because there is a need for medications tailored to individual	 
patient needs. Several recent compounding cases that resulted in 
serious illness and deaths have raised concern about oversight to
ensure the safety and quality of compounded drugs. These concerns
have raised questions about what states--which regulate the	 
practice of pharmacy--and the Food and Drug Administration (FDA) 
are doing to oversee drug compounding. GAO was asked to examine  
(1) the actions taken or proposed by states and national pharmacy
organizations that may affect state oversight of drug		 
compounding, and (2) federal authority and enforcement power	 
regarding compounded drugs. This testimony is based on		 
discussions with the National Association of Boards of Pharmacy  
(NABP) and a GAO review of four states: Missouri, North Carolina,
Vermont, and Wyoming. GAO also interviewed and reviewed documents
from pharmacist organizations, FDA, and others involved in the	 
practice of pharmacy or drug compounding.			 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-04-195T					        
    ACCNO:   A08757						        
  TITLE:     Prescription Drugs: State and Federal Oversight of Drug  
Compounding by Pharmacies					 
     DATE:   10/23/2003 
  SUBJECT:   Food and drug law					 
	     Quality assurance					 
	     Quality control					 
	     Safety regulation					 
	     Pharmaceutical industry				 
	     Drugs						 
	     Safety standards					 
	     Federal/state relations				 
	     Missouri						 
	     North Carolina					 
	     Vermont						 
	     Wyoming						 

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GAO-04-195T

United States General Accounting Office

GAO Testimony

Before the Committee on Health, Education, Labor, and Pensions, U.S.
Senate

For Release on Delivery Expected at 10:00 a.m.

Thursday, October 23, 2003 PRESCRIPTION DRUGS

         State and Federal Oversight of Drug Compounding by Pharmacies

Statement of Janet Heinrich
Director, Health Care-Public Health Issues

GAO-04-195T

Highlights of GAO-04-195T, a testimony to the Committee on Health,
Education, Labor, and Pensions, U.S. Senate

Drug compounding-the process of mixing, combining, or altering
ingredients-is an important part of the practice of pharmacy because there
is a need for medications tailored to individual patient needs. Several
recent compounding cases that resulted in serious illness and deaths have
raised concern about oversight to ensure the safety and quality of
compounded drugs. These concerns have raised questions about what
states-which regulate the practice of pharmacy-and the Food and Drug
Administration (FDA) are doing to oversee drug compounding. GAO was asked
to examine (1) the actions taken or proposed by states and national
pharmacy organizations that may affect state oversight of drug
compounding, and (2) federal authority and enforcement power regarding
compounded drugs.

This testimony is based on discussions with the National Association of
Boards of Pharmacy (NABP) and a GAO review of four states: Missouri, North
Carolina, Vermont, and Wyoming. GAO also interviewed and reviewed
documents from pharmacist organizations, FDA, and others involved in the
practice of pharmacy or drug compounding.

October 23, 2003

PRESCRIPTION DRUGS

State and Federal Oversight of Drug Compounding by Pharmacies

A number of efforts have been taken or are under way both at the state
level and among pharmacy organizations at the national level that may
strengthen state oversight of drug compounding. Actions among the four
states reviewed included adopting new regulations about compounding and
conducting more extensive testing of compounded drugs. For example, the
pharmacy board in Missouri is starting a program of random testing of
compounded drugs for safety, quality, and potency. At the national level,
industry organizations are working on standards for compounded drugs that
could be adopted by the states in their laws and regulations, thereby
potentially helping to ensure that pharmacies consistently produce safe,
high-quality compounded drugs. While these actions may help improve
oversight, the ability of states to oversee and ensure the quality and
safety of compounded drugs may be affected by state-specific factors such
as the resources available for inspections and enforcement.

FDA maintains that drug compounding activities are generally subject to
FDA oversight, including its authority to oversee the safety and quality
of new drugs. In practice, however, the agency generally relies on states
to regulate the limited compounding of drugs as part of the traditional
practice of pharmacy. In 1997, the Congress passed a law exempting drug
compounders that met certain criteria from key provisions of the Federal
Food Drug and Cosmetic Act (FDCA), including the requirements for the
approval of new drugs. These exemptions, however, were nullified in 2002
when the United States Supreme Court ruled part of the 1997 law to be an
unconstitutional restriction on commercial speech, which resulted in the
entire compounding section being declared invalid. Following the court
decision in 2002, FDA issued guidance to indicate when it would consider
taking enforcement actions regarding drug compounding. For example, it
said the agency would defer to states regarding "less significant"
violations of the Act, but would consider taking action in situations more
analogous to drug manufacturing.

www.gao.gov/cgi-bin/getrpt?GAO-04-195T.

To view the full product, including the scope and methodology, click on
the link above. For more information, contact Janet Heinrich at (202)
512-7119.

Mr. Chairman and Members of the Committee:

I am pleased to be here today as you consider state and federal oversight
to ensure the safety and quality of compounded prescription drugs. Drug
compounding-the process of mixing, combining, or altering ingredients to
create a customized medication for an individual patient-is an important
part of the practice of pharmacy. Common examples of compounded drugs
include tailor-made medications for patients who are allergic to an
ingredient in a manufactured drug. Drug compounding is part of pharmacy
education and, like other aspects of pharmacy practice, it is regulated by
state pharmacy practice acts, which in turn are enforced by state boards
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. At the federal level, the Food and Drug
Administration (FDA), which oversees the introduction of new drugs into
the marketplace under the Federal Food, Drug and Cosmetic Act (FDCA),1
maintains that compounded drugs are generally subject to the act.

While drug compounding is an important part of ensuring that medications
are available to meet individual patient needs, the quality and extent of
drug compounding have surfaced as important issues in recent years. For
example, several compounding cases in the past several years have resulted
in serious illnesses and deaths, raising concern about oversight to ensure
the safety and quality of compounded drugs. In addition, concerns have
been raised by FDA and others that some pharmacies are going beyond
traditional drug compounding for individual patients by, for example,
compounding and selling large quantities of drugs without meeting safety
and other requirements for new manufactured drugs. Because both states and
the federal government have oversight responsibilities, you asked us to
address (1) the actions taken or proposed by states and national pharmacy
organizations that may affect state oversight of drug compounding, and (2)
federal authority and enforcement power regarding compounded drugs.

My testimony today is based in part on discussions with the National
Association of Boards of Pharmacy (NABP), as well as a review we conducted
of four states: Missouri, North Carolina, Vermont, and Wyoming. We
selected these states based on their geographic location and

1See 21 U.S.C. S: 355.

variation in compounding regulations. Two of the states came to our
attention as having taken unique steps with regard to oversight of
compounded drugs, and the other two had each adopted new regulations on
drug compounding. For each of the four states, we reviewed state statutes
and regulations, interviewed officials from the state board of pharmacy,
and reviewed relevant documents such as pharmacy inspection forms. In
addition to examining state-level actions, we examined national industry
efforts by interviewing officials from the American Pharmacists
Association, the International Academy of Compounding Pharmacists, the
American Society of Health-System Pharmacists, the National Association of
Chain Drug Stores, and Professional Compounding Centers of America, which
provides training to pharmacists and also sells bulk ingredients for drug
compounding. We also contacted and obtained information from the United
States Pharmacopeia (USP), which is a nonprofit agency that develops
standards for pharmaceuticals. Finally, to examine federal authority and
enforcement power, we reviewed federal statutes, FDA compliance policy
guides, court decisions, and other relevant documents, and interviewed FDA
officials and industry experts. We conducted our work from August 2003 to
October 2003 in accordance with generally accepted government auditing
standards.

In summary, efforts at the state level and among pharmacy organizations at
the national level have been taken or are under way to potentially
strengthen state oversight of drug compounding. Actions among the four
states we reviewed included adopting new statutes and regulations about
compounding, such as requirements for facilities and equipment, and
conducting more extensive testing of compounded drugs. For example, the
pharmacy board in Missouri is starting a program of random testing of
compounded drugs for safety, quality, and potency. At the national level,
industry organizations are working on standards for compounded drugs that
could be adopted by the states in their laws and regulations, thereby
helping to ensure that pharmacies consistently produce safe, high-quality
compounded drugs. While these actions may help improve oversight, the
ability of states to oversee and ensure the quality and safety of
compounded drugs may be affected by state-specific factors such as the
resources available for inspections and enforcement. For example, in three
of the four states we reviewed, pharmacy board officials indicated that
resource limitations affected their ability to conduct routine
inspections.

FDA maintains that drug compounding activities are generally subject to
its oversight, including its authority to oversee the safety and quality
of new drugs. In practice, however, the agency generally relies on states
to regulate the compounding of drugs as part of the traditional practice
of pharmacy. In 1997, the Congress passed a law exempting drug compounders
that met certain criteria from key FDCA provisions, including safety and
efficacy requirements for the approval of new drugs. However, the entire
section of the law dealing with drug compounding was nullified in 2002
after the United States Supreme Court ruled that part of it was an
unconstitutional restriction on commercial speech. Following the court
decision in 2002, FDA issued guidance to indicate when the agency would
consider taking enforcement actions regarding drug compounding. For
example, it said the agency would generally defer to the states for "less
significant" violations of the FDCA but would consider taking action in
situations more analogous to drug manufacturing.

Background 	For most people and many pharmacies, filling a prescription is
a matter of dispensing a commercially available drug product that has been
manufactured in its final ready-to-use form. This has been particularly
true in the United States since the rise of pharmaceutical manufacturing
companies. In addition to meeting federal safety and efficacy requirements
before a new drug is marketed, the drugs manufactured by these companies
are routinely tested by FDA after marketing. According to FDA, the testing
failure rate for more than 3,000 manufactured drug products sampled and
analyzed by FDA since fiscal year 1996 was less than 2 percent. Drug
manufacturers are also required to report adverse events associated with
their drugs, such as illness and death, to FDA within specified time
frames.

Drug compounding, which has always been a part of the traditional practice
of pharmacy, involves the mixing, combining, or altering of ingredients to
create a customized medication for an individual patient. According to the
American Pharmacists Association, some of the most commonly compounded
products include lotions, ointments, creams, gels, suppositories, and
intravenously administered fluids and medication. Some of these compounded
drugs, such as intravenously administered chemotherapy drugs, are sterile
products that require special safeguards to prevent injury or death to
patients receiving them. For example, sterile compounding requires cleaner
facilities than nonsterile compounding, as well as specific training for
pharmacy personnel and testing of the compounded drug for sterility.

The extent of drug compounding is unknown, but it appears to be increasing
in the United States. While industry representatives, the media, and
others have cited estimates for the proportion of prescription drugs that
are compounded ranging from 1 percent to 10 percent of all prescriptions,
we found no data supporting most estimates.2 FDA does not routinely
collect data on the quantity of prescriptions filled by compounded drugs.
Similarly, we found no publicly available data, either from FDA or from
industry organizations, on the amount of bulk active ingredients and other
chemicals that are used in drug compounding in the United States. However,
many state officials, pharmacist association representatives, and other
experts we interviewed reported that the number of compounded
prescriptions, which had decreased when pharmaceutical manufacturing grew
in the 1950s and 1960s, has been increasing over the past decade.

Problems have come to light regarding compounded drugs, some of which
resulted in death or serious injury, because the drugs were contaminated
or had incorrect amounts of the active ingredient. Unlike drug
manufacturers, who are required to report adverse events associated with
the drugs they produce, FDA does not require pharmacies to report adverse
events associated with compounded drugs. Based on voluntary reporting,
media reports, and other sources, FDA has become aware of over 200 adverse
events involving 71 compounded products since about 1990. These incidents,
including 3 deaths and 13 hospitalizations following injection of a
compounded drug that was contaminated with bacteria in 2001, have
heightened concern about compounded drugs' safety and quality. In
addition, a limited survey conducted by FDA's Division of Prescription
Drug Compliance and Surveillance in 2001 found that nearly one-third of
the 29 sampled compounded drugs were subpotent-that is, they had less of
the active ingredients than indicated.

FDA and others have also expressed concern about the potential for harm to
the public health when drugs are manufactured and distributed in
commercial amounts without FDA's prior approval. While FDA has stated that
traditional drug compounding on a small scale in response to

2A 2001 draft report of a study contracted by FDA included an estimate
that about 6 percent of all prescriptions were compounded but cautioned
that there was considerable uncertainty around this estimate due to
limited data. The report acknowledged that definitive statistics on
compounding activities were not available. Eastern Research Group Inc.,
Profile of the Pharmaceutical Compounding Industry, draft final report
prepared for the Food and Drug Administration, August 27, 2001.

individual prescriptions is beneficial, FDA officials have voiced concern
that some establishments with retail pharmacy licenses might be
manufacturing new drugs under the guise of drug compounding in order to
avoid FDCA requirements.

  Actions Taken or Under Way by States and National Organizations to Strengthen
  State Oversight of Drug Compounding, but Affect Likely to Vary from State to
  State

We found efforts at the state level and among national pharmacy
organizations to potentially strengthen state oversight of drug
compounding. Actions among the four states we reviewed included adopting
new drug compounding regulations and random testing of compounded drugs.
At the national level, industry organizations are working on standards for
compounded drugs that could be adopted by states in their laws and
regulations. According to experts we interviewed, uniform standards for
compounded drugs could help ensure that pharmacists across states
consistently produce safe, quality products. While these actions may help
improve oversight, the ability of states to oversee and ensure the quality
and safety of compounded drugs may be affected by their available
resources and their ability to adopt new standards and enforce penalties.

Four States Reviewed Have Taken a Variety of Approaches to Strengthen
Oversight

The four states we reviewed have taken a variety of approaches to
strengthen state oversight.

o  	Missouri. The pharmacy board in Missouri has taken a different
approach from other states: it is in the process of implementing random
batch testing of compounded drugs. No other state has random testing,
according to an NABP official. Random testing will include both sterile
and nonsterile compounded drugs and the board plans on testing compounded
drugs for safety, quality, and potency. A Missouri pharmacy board official
said testing will include random samples of compounded drugs in stock in
pharmacies in anticipation of regular prescriptions, random selection of
prescriptions that were just prepared, and testing of compounded drugs
obtained by undercover investigators posing as patients. The official
added that random testing will help to ensure the safety and quality of
compounded drugs and is also intended to serve as a deterrent for anyone
who might consider purposely tampering with compounded prescriptions.

o  	North Carolina. North Carolina is the only state in the country that
requires mandatory adverse event reporting involving prescription drugs,

including compounded drugs, according to an NAPB official. Regulations in
North Carolina require pharmacy managers to report information to the
pharmacy board that suggests a probability that prescription drugs caused
or contributed to the death of a patient. This reporting system, which
does not extend to incidents of illness or injury, allows the board to
investigate all prescription-drug-related deaths and determine whether an
investigation is warranted.

o  	Vermont. The pharmacy board in Vermont overhauled the state's pharmacy
rules in August 2003 to address changes in pharmacy practice, including
the increase in Internet and mail-order pharmacies, according to the
pharmacy board chairman. For example, the chairman reported that prior to
the adoption of the new rules, Vermont had no definition of out-of-state
pharmacies and no requirements for these pharmacies to have a Vermont
license to do business in the state. The board chairman said that the new
rule requiring licensing for out-of-state pharmacies would provide a
mechanism to monitor pharmacies that ship prescription drugs, including
compounded drugs, into the state. In addition, he added that the board
revised the rules for compounding sterile drugs by including specifics on
facilities, equipment, and quality assurance measures.

o  	Wyoming. Prior to March 2003, Wyoming did not have state laws or rules
that established specific guidelines for drug compounding, aside from a
definition of drug compounding, according to a pharmacy board official.
The new rules include requirements for facilities, equipment, labeling,
and record keeping for compounded drugs, as well as a specific section on
compounding sterile drugs. In addition, under the new rules, the official
added that pharmacy technicians-in-training are no longer allowed to
prepare compounded drugs, including sterile products, which is a more
complex procedure requiring special equipment to ensure patient safety.

Efforts of National Organizations May Help States Strengthen Oversight of
Drug Compounding

At the national level, industry organizations are working on uniform
practices and guidelines for compounded drugs and a committee of national
association representatives recently began work on developing a program
that would include certification and accreditation for drug compounding
that could be used for state oversight. Groups such as the NABP concluded
that state oversight of drug compounding would be strengthened if the
states had uniform standards and other tools that could be adopted to
address the quality and safety of compounded drugs. Several experts that
we spoke with said national standards for compounding drugs that could be
incorporated into state laws and regulations could help to ensure the
quality and safety of compounded drugs. One expert noted that an advantage
to incorporating compliance

with national compounding standards into state laws is that it would be
easier for states to keep up with updated standards without going through
the process of legislative changes.

NABP developed and updated a Model State Pharmacy Act that provides
standards for states regarding pharmacy practice. Recently revised in
2003, the model act includes a definition of drug compounding and a
section on good drug compounding practices. According to the executive
director of NABP, many states have incorporated portions of the model act
into their state pharmacy statutes or regulations by including similar
definitions of drug compounding and components of NABP's good drug
compounding practices. For example, officials in Missouri and Wyoming
reported using the model act's good drug compounding practices as a
guideline for developing their drug compounding regulations. In addition,
USP has established standards and guidelines for compounding nonsterile
and sterile drug products, both of which are being updated by expert
committees. An official told us that these revisions would be completed
early in 2004.

In addition, recognizing that there is no coordinated national program to
oversee compounding practices and that states' oversight may vary, NABP
recently began working with other national organizations, including the
American Pharmacists Association and USP, to create a steering committee
to develop a national program to provide a national quality improvement
system for compounding pharmacies and the practice of compounding. The
committee, which held its second meeting in October 2003, is developing a
program that is anticipated to include (1) the accreditation of
compounding pharmacies, (2) certification of compounding pharmacists, and
(3) requirements for compounded products to meet industry standards for
quality medications. To strengthen state oversight of drug compounding,
these accreditations, certifications, and product standards, once
developed, could be adopted by the states and incorporated into their
requirements for compounding pharmacists and pharmacies.

Factors Such as Available Although there are several efforts by states and
national organizations that Resources May Affect may help strengthen state
oversight, some states may lack the resources to States' Ability to
Oversee provide the necessary oversight. State pharmacy board officials in
three of

the four states reported that resources were limited for inspections,
forCompounded Drugs example:

o  	The Missouri pharmacy board director reported that pharmacy
inspections typically occur every 12 to 18 months; however, an increase in
complaints has resulted in less frequent routine pharmacy inspections,
because investigating complaints takes priority over routine inspections.

o  	North Carolina has six inspectors for about 2,000 pharmacies, which
the state pharmacy board director said are inspected at least every 18
months. The director added that it is difficult to keep up with this
schedule of routine inspections with the available resources while also
investigating complaints, which take first priority.

o  	In Vermont, the pharmacy board chairman reported that, for a period of
about 8 years until January 2003, pharmacy inspectors were only able to
respond to complaints and not conduct routine inspections because of a
shortage of inspectors. Vermont now has four full-time inspectors that
cover the state's 120 pharmacies; however, in addition to routine pharmacy
inspections, the inspectors are also responsible for inspecting other
facilities such as nursing homes and funeral homes. The chairman added
that the board would like to have pharmacies inspected annually but it is
difficult to keep up with the current schedule of inspections once every 2
years.

Since drug compounding may occur in mail-order and Internet pharmacies,
the compounding pharmacy may be located in a state different from the
location of the patient or prescribing health professional. Three of the
four states we reviewed had a large number of out-of-state pharmacies that
were licensed to conduct business in those states, and inspection and
enforcement activities may differ for these pharmacies. For example,
Wyoming has 274 licensed out-of-state pharmacies, which is nearly twice as
many as the number of in-state licensed pharmacies. The four states we
reviewed said that they have authority to inspect out-of-state pharmacies
licensed in their states but because of limited resources, they generally
leave inspections to the state in which the pharmacy is located. Regarding
enforcement authority, all four states reported having authority to take
disciplinary action against out-of-state pharmacies licensed in their
states.

While the pharmacy boards in all four states we reviewed can suspend or
revoke pharmacy licenses or issue letters of censure, enforcement
mechanisms vary. For example, Missouri and North Carolina are not
authorized to charge fines for violations; however, Wyoming can fine a
pharmacist up to $2,000 and Vermont can fine a pharmacy or pharmacist
$1,000 for each violation. Further, not all state pharmacy boards have the

  FDA Asserts Oversight Authority Under FDCA but Generally Relies on States to
  Regulate Drug Compounding

authority to take enforcement action independently. For example, in
Missouri when attempting to deny, revoke, or suspend a license through an
expedited procedure, the pharmacy board must first file a complaint with
an administrative hearing commission. Only after the commission determines
that the grounds for discipline exist may the board take disciplinary
action.

Pharmacy board officials reported relatively few complaints and
disciplinary actions involving drug compounding. For example, of the 307
complaints received and reviewed by the board of pharmacy against
pharmacies and pharmacists in Missouri in fiscal year 2002, only 5 were
related to drug compounding.3

FDA maintains that drug compounding activities are generally subject to
FDA oversight, including the "new drug" requirements and other provisions
of the FDCA. In practice, however, the agency generally relies on the
states to regulate the traditional practice of pharmacy, including the
limited compounding of drugs for the particular needs of individual
patients. In recent years, the Congress has attempted to clarify the
extent of federal authority and enforcement power regarding drug
compounding. In 1997, the Congress passed a law that exempted drug
compounders from key portions of the FDCA if they met certain criteria.
Their efforts, however, were nullified when the Supreme Court struck down
a portion of the law's drug compounding section as an unconstitutional
restriction on commercial speech, which resulted in the entire compounding
section being declared invalid.4 In response, FDA issued a compliance
policy guide to provide the compounding industry with an explanation of
its enforcement policy, which included a list of factors the agency would
consider before taking enforcement actions against drug compounders.

3The state pharmacy board officials that we spoke with reported that most
complaints and disciplinary actions cover dispensing errors related to
manufactured drugs, such as incorrectly counting the number of pills for a
prescription.

4Thompson v. Western States Medical Center, 535 U.S. 357 (2002).

FDA Asserts Jurisdiction to Regulate Drug Compounding Under FDCA

FDA maintains that FDCA requirements, such as those regarding the safety
and efficacy requirements for the approval of new drugs, are generally
applicable to pharmacies, including those that compound drugs. The agency
recognized in its brief submitted in the 2002 Supreme Court case that
applying FDCA's new drug approval requirements to drugs compounded on a
small scale is unrealistic-that is, it would not be economically feasible
to require drug compounding pharmacies to undergo the testing required for
the new drug approval process for drugs compounded to meet the unique
needs of individual patients. The agency has stated that its primary
concern is where drug compounding is being conducted on a scale tantamount
to manufacturing in an effort to circumvent FDCA's new drug approval
requirements. FDA officials reported that the agency has generally left
regulation of traditional pharmacy practice to the states, while enforcing
the act primarily when pharmacies engage in drug compounding activities
that FDA determines to be more analogous to drug manufacturing.

FDA Modernization Act Exempted Drug Compounders from Some FDCA
Requirements but Was Declared Invalid

Federal regulatory authority over drug compounding attracted congressional
interest in the 1990s, as some in the Congress believed that
"clarification is necessary to address current concerns and uncertainty
about the Food and Drug Administration's regulatory authority over
pharmacy compounding."5 The Congress addressed this and other issues when
it passed the FDA Modernization Act of 1997 (FDAMA), which included a
section exempting drugs compounded on a customized basis for an individual
patient from key portions of FDCA that were otherwise applicable to
manufacturers.6 According to the congressional conferees, its purpose was
to ensure continued availability of compounded drug products while
limiting the scope of compounding so as "to prevent manufacturing under
the guise of compounding."7

In order to be entitled to the exemption, drug compounders had to meet
several requirements, including one that prohibited them from advertising
or promoting "the compounding of any particular drug, class of drug, or

5S. Rep. No. 105-43, at 67 (1997).

6These portions covered "adequate directions for use" labeling,
manufacturing, and new drug approval requirements. See former 21 U.S.C. S:
353a (a). Pub. L. No. 105-115, 111 Stat. 2296, former section 503A.

7H.R. Conf. Rep. No. 105-399, at 94 (1997).

type of drug."8 This prohibition was challenged in court by a number of
compounding pharmacies and eventually resulted in a 2002 Supreme Court
decision holding that it was unconstitutional. As a result, the entire
drug compounding section was declared invalid.9 However, the Court did not
address the extent of FDA's authority to regulate drug compounding.

Current FDA Enforcement Focuses on Drug Compounding Outside of the
Traditional Practice of Pharmacy

FDA issued a compliance policy guide in May 2002, following the Supreme
Court decision, to offer guidance about when it would consider exercising
its enforcement authority regarding pharmacy compounding.10 In the guide,
FDA stated that the traditional practice of drug compounding by pharmacies
is not the subject of the guidance. The guide further stated that FDA will
generally defer to state authorities in dealing with "less significant"
violations of FDCA, and expects to work cooperatively with the states in
coordinating investigations, referrals, and follow-up actions. However,
when the scope and nature of a pharmacy's activities raise the kinds of
concerns normally associated with a drug manufacturer and result in
significant violations of FDCA, the guide stated that FDA has determined
that it should seriously consider enforcement action and listed factors,
such as compounding drug products that are commercially available or using
"commercial scale manufacturing or testing equipment," that will be
considered in deciding whether to take action.11

8See former 21 U.S.C. S: 353a (c).

9Both the district and appellate courts held that the prohibition was
unconstitutional. However, the district court held that the prohibition
was "severable" and that the rest of the pharmacy compounding section
remained good law. While the appellate court agreed with the district
court on the constitutional question, it disagreed on the severability
issue and invalidated the entire section. The Supreme Court agreed with
both courts on the constitutional issue, but because the severability
decision was not challenged, the Court did not rule on it, and left it in
place. See Thompson v. Western States Medical Center; 69 F. Supp. 2d 1288
(D. Nev. 1999), aff'd in part and rev'd in part, 238 F. 3d 1090 (9th Cir.
2001), aff'd, 535 U.S. 357.

10This guide was similar to an earlier compliance policy guide published
by FDA in 1992. After the drug compounding section of FDAMA was declared
invalid, FDA determined that it needed to issue new guidance to the
compounding industry on what factors the agency would consider in
exercising its enforcement discretion regarding drug compounding.

11"Compliance Policy Guide: Compliance Policy Guidance for FDA Staff and
Industry", Chapter 4, Sub Chapter 460, May 2002.

Some representatives of pharmacist associations and others have expressed
concern that FDA's compliance policy guide has created confusion regarding
when FDA enforcement authority will be used. For example, some pharmacy
associations assert that FDA's guidance lacks a clear description of the
circumstances under which the agency will take action against pharmacies.
In particular, they pointed to terms in the guide, such as "very limited
quantities" and "commercial scale manufacturing or testing equipment" that
are not clearly defined, and noted that FDA reserved the right to consider
other factors in addition to those in the guide without giving further
clarification. FDA officials told us that the guide allows the agency to
have the flexibility to respond to a wide variety of situations where the
public health and safety are issues, and that they plan to revisit the
guide after reviewing the comments the agency received, but did not have a
time frame for issuing revised guidance.

In several reported court cases involving FDA's regulation of drug
compounders, the courts have generally sided with FDA. Two cases we
identified involved drug compounders engaged in practices that were
determined to be more analogous to drug manufacturing. In a district court
case decided this year, the court upheld FDA's authority to inspect a
pharmacy specializing in compounding, noting that it believed that FDA's
revised compliance policy guide was a reasonable interpretation of the
statutory scheme established by FDCA.12

While drug compounding is important and useful for patient care, problems
that have occurred raise legitimate concerns about the quality and safety
of compounded drugs and the oversight of pharmacies that compound them.
However, the extent of problems related to compounding is unknown. FDA
maintains that drug compounding activities are generally subject to FDA
oversight under its authority to oversee the safety and quality of new
drugs, but the agency generally relies on states to provide the necessary
oversight. At the state level, our review provides some indication that at
least some states are taking steps to strengthen state oversight, and
national pharmacy organizations are developing standards that might help
strengthen oversight if the states adopted and enforced them. However, the
effectiveness of these measures is unknown, and

12In the Matter of Establishment Inspection of Wedgewood Village Pharmacy,
Inc., 270 F. Supp. 525, 549 (D. N.J. 2003).

  Concluding Observations

factors such as the availability of resources may also affect the extent
of state oversight.

Mr. Chairman, this completes my prepared statement. I would be happy to
respond to any questions you or other Members of the Committee may have at
this time.

Contact and For further information, please contact Janet Heinrich at
(202) 512-7119. Individuals making key contributions to this testimony
included Matt Byer,Acknowledgments Lisa A. Lusk, and Kim Yamane.

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