By way of background, drugs compounded by outsourcing facilities according to section 503B are afforded certain exemptions concerning new drug approval, labeling, and drug supply chain security requirements. One of the conditions outsourcing facilities must abide by, though, is the section’s prohibition against wholesaling. The exact statutory language is as follows:
Prohibition on wholesaling. The drug will not be sold or transferred by an entity other than the outsourcing facility that compounded such drug. This paragraph does not prohibit administration of a drug in a health care setting or dispensing a drug pursuant to a prescription executed in accordance with section 503(b)(1) [21 USCS § 353(b)(1)].
21 USC § 353b(a)(8) (hereinafter referred to as the Wholesaling Prohibition). The Wholesaling Prohibition provides that a drug must not be sold or transferred by an entity other than the outsourcing facility that compounded such drug, but it does not prohibit administration of a drug in a health care setting or dispensing a drug pursuant to a prescription intended for administration. This has long been ripe for interpretation by FDA.
What does the Draft Guidance cover?
First, the Draft Guidance describes FDA’s interpretation of certain key terms and phrases within the Wholesaling Prohibition, such as how FDA intends to define “sold or transferred,” “entities other than the outsourcing facility,” and “administration or dispensing.” For example, FDA interprets “sold or transferred” to capture movements of the compounded drug in situations where money does, and does not, change hands, but FDA does not intend to apply this thinking to instances where certain common carriers or third-party logistics providers provide transportation services or warehousing and logistics services. Further, FDA considers “entities other than the outsourcing facility” to include marketing firms, wholesale distributors, and clinics, among others. In certain contexts, the FDA even considers other outsourcing facilities and mail-order pharmacies to fit within that definition as well.
Second, the Draft Guidance provides examples of activities that FDA will generally consider to be prohibited by the Wholesaling Prohibition. These examples include some of the following situations:
- An outsourcing facility distributes a drug it compounded to a wholesale distributor or manufacturer (e.g., a repacker or relabeler) that sells or otherwise transfers the drug;
- An outsourcing facility compounds a drug and transfers it to a second, non-commonly owned outsourcing facility for distribution, without obtaining a valid prescription for administration; or
- A third party (e.g., a marketing firm or operator of a website that is not a pharmacy) sells a drug compounded by the outsourcing facility by providing services to the prescribing physicians and bundling the cost of the services with the cost of obtaining the drug.
Third, the Draft Guidance provides examples of activities that FDA generally will not consider prohibited by the Wholesaling Prohibition. These examples include some of the following situations:
- An outsourcing facility moves a drug it compounded to another location that is part of the same address or location as the outsourcing facility;
- An outsourcing facility distributes a drug it compounded to a pharmacy for subsequent dispensing pursuant to a prescription for administration; or
- An outsourcing facility distributes a drug it compounded to a health care professional for administration in a health care setting without first obtaining a patient-specific prescription.
The above examples are not a fulsome representation of all examples provided within the Draft Guidance, and surely the Draft Guidance does not contain all activities that FDA has contemplated when it comes to enforcing the Wholesaling Prohibition.
What’s next?
FDA is currently accepting comments and suggestions regarding the Draft Guidance, which must be submitted by August 28, 2023. As it stands, this Draft Guidance is not legally enforceable and was issued only to provide FDA’s current thinking on the Wholesaling Prohibition. Nevertheless, the Draft Guidance does provide significant insight into FDA’s thinking when it comes to the Wholesaling Prohibition and how the Agency intends to approach regulatory or enforcement action against outsourcing facilities that run afoul of this statutory provision. Outsourcing facilities should closely monitor their compliance with the Draft Guidance, as well as any future revisions made to the guidance as FDA enters the upcoming comment period.
Should you have any questions regarding the Draft Guidance, or should you wish to submit a comment to FDA regarding this guidance, please do not hesitate to reach out to any of the authors on this alert for further discussion.
Client Alert 2023-148
