Court of Appeals Overturns Ruling Allowing FDA to Conduct Records Inspections of Compounding Pharmacies

Mar 08, 2011   
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On February 25, 2011, the United States Court of Appeals for the Fifth Circuit vacated a ruling of the United States District Court for the  Western District of Texas which held that the FDA could conduct limited inspections of pharmacy records to determine if pharmacy-compounded drugs comply with the conditions set forth in the Food, Drug  & Cosmetic Act (“FDCA”). The Fifth Circuits opinion may be read here.

This case arose from a 2005 lawsuit filed by a group of pharmacies against the FDA challenging the authority of the FDA to regulate compounded drugs under the FDCA. The District Court ruled in  favor of the pharmacies, declaring that compounded drugs were exempt from new drug definitions and from the new drug approval processes.  Also, it ruled that under the FDCA, if a pharmacy is compliant with local laws, dispenses drugs pursuant to a prescription, and compounds in the regular course of its own business, the pharmacy is exempt from FDA records inspections.

The FDA appealed the District Courts ruling that compounds were exempt from the definition of new drugs under the FDCA, but not the ruling that compliant pharmacies were exempt from FDA records inspections. The Court of Appeals reversed the District Courts ruling on the new drug issue, holding instead that compounded drugs were “new” drugs under the FDCA, but were exempt from the FDCAs substantive provisions if they comply with the conditions of Sections 353a and 360b(a). On remand, the District Court entered a new judgment that declared that the FDA had the statutory authority to conduct limited inspections of pharmacy records to determine whether drugs compounded by pharmacies are exempt from the provisions of the FDCA.

The pharmacies then appealed this new District Court ruling, arguing that by failing to appeal the District Courts first inspection declaration, FDA forfeited the inspection issue. On appeal, the Court of Appeals ruled in favor of the pharmacies, finding that since the FDA did not appeal the District Courts original ruling that compounding pharmacies were exempt from FDA records inspection, the FDA forfeited the issue, and therefore, the District Court violated the “waiver doctrine” by reconsidering the inspection issue. The District Courts ruling that FDA could conduct limited records inspections of compounding pharmacies was thus vacated.

The applicability of many provisions of the FDCA to compounding pharmacies is complicated. With a primary focus of the FDCA being federal regulation of drug manufacturers, the application of these regulations to compounding pharmacies may be inappropriate.

Under the FDCA and its enforcing regulations, drug manufacturers must comply with an extensive regulatory scheme, including the new drug approval process, misbranding provisions, and registration with the FDA.  Additionally, the FDA has the express authority to conduct field inspections of drug manufacturing facilities under the Act.  While it is unclear whether this provision applies to compounding pharmacies, Section 704 of the FDCA allows the FDA “to enter, at reasonable times, any factory, warehouse, or establishment in which food, drugs, devices, or cosmetics are manufactured, processed, packed, or held, for introduction into interstate commerce. . . .”  Based on this language, these provisions may only apply to compounding pharmacies if they are properly considered manufacturers of drugs that may be introduced into interstate commerce.  However, because of the FDAs failure to properly preserve the inspection issue, the Court of Appeals did not determine whether this provision applied and the District Courts original ruling that compounding pharmacies are exempt survives.

The issue of applying the FDCA and its enforcing regulations to compounding pharmacies and doctors is hotly-contested.  Typically applicable to manufacturers, Congress enacted the FDCA in an effort to oversee establishments that manufacture products affecting interstate commerce. However, the FDA has made repeated attempts to apply these restrictions to pharmacists and doctors, which have traditionally been seen as beyond FDAs jurisdiction.  Because Congress did not intend for the Act to regulate practitioners, who are generally regulated by the states, the FDAs regulation of the practice of pharmacy and the practice of medicine may be viewed as exceeding the scope of its authority.