Exploring Human Potential

Compounding Our Weaknesses – Gray Market Drug Collusion.

Posted on | September 6, 2017 | No Comments

Mike Magee

In the realm of pharmaceutical disaster deja vu, Tennessee deserves special recognition. In early September, 1937, the S.E. Massengill Company of Bristol, Tennessee, distributed tainted elixir of sulfanilamide nationwide. Before the disaster ended, 104 patients, most of them children, had died. Nearly 80 years latter to the date, Dr. April Petit put in a call to the Tennessee Department of Health, reporting his suspicion that an injection of steroids received from a middle man manufacturer  had caused a systemic fungal infection in a Tennessee patient.

Seven days after that call, the FDA was called in and traced the source to the New England Compounding Center (NECC) of Framingham, MA. The next day, 17,000 vials of supposedly purified injectable steroids were recalled. But it was already too late. The product had been distributed to 20 states. By final count, 753 were infected and 64 died.

The problems were obvious at NECC, a compounding pharmacy firm whose inspection had fallen through the regulatory cracks of a deeply flawed and financially weaponized entrepreneurial American Health Care system. When the FDA did investigate the facility on October 2, 2012, one representative lot of the supposedly pure steroid vials had floating “greenish black foreign matter” in 83 samples. 100% of 50 vials tested were positive for microbial growth. Manufacturing equipment was spotted with “greenish yellow discoloration.” Cleaning and disinfection records had been forged, and air-conditioning (essential to the maintenance of a sterile environment) had been routinely shut off each night to save money. As one FDA official stated, “The entire pharmacy was an incubator for bacteria and fungus. The pharmacy knew about the contamination and did nothing.”

Fourteen NECC employees, including president Barry Cadden and pharmacist Glenn Chinn, were arrested in 2014. Cadden and Chinn were charged with second degree murder. Their company had already gone bankrupt after being forced to established a $200 million dollar compensation fund. Cadden was acquitted of the murder charges but convicted of conspiracy and fraud and sentenced to 9 years, after trying to shift the blame on his pharmacist, Chinn, who is plea bargaining.

Historically, U.S. drug law has always tracked disasters. Horse tetanus tainted typhoid vaccine killed 13 children in St. Louis in 1901, and led to improvements in drug labeling and oversight in the Pure Food and Drug Act of 1906. The Massengill tragedy gave FDR the boost he needed to pass the Federal Food, Drug and Cosmetic Act of 1937. And the Thalidomide tragedy fueled support for the Kefauver-Harris Amendments that demanded proof of efficacy as well as safety prior to FDA new drug approval.

In each of the cases above, victims could be quite certain that some lasting benefit would come from their personal sacrifices. But for families and friends affected by the NECC felonies, the final record is less clear. Large batch compounding of pharmaceuticals continues to fall between the cracks. They are not your neighborhood pharmacist laboring over mortar and pestle and they are not giant pharmaceutical houses strictly regulated to comply with Current Good Manufacturing Practices (CGMP) by the FDA. They are something in between, and they are growing, sometimes with the active financial participation of physicians.

In the United States, up through the end of World War II, we relied primarily on local pharmacists to create and package pills and elixirs behind their counters following formulas laid out in the physician prescription. Drugs were tailor made, compounded and individualized on demand. Most of the drugs available today are produced by highly regulated large manufacturers. About 3% of drugs are produced by “compounders”, increasingly large enterprises selling across state lines. They are weakly and variably regulated within their own states.

The FDA was aware of quality concerns well before the 2012 disaster. Between 1990 and 2005, the agency catalogued 240 serious illnesses and deaths due to the products. Nothing was done about this because compounders were state vs. federally regulated if at all. Beyond safety, the FDA also found serious efficacy issues. A 2006 study by the agency revealed that roughly 1/3 of products tested lacked uniformity for potency and dosage compared to a failure rate of 2% with FDA regulated pharmaceuticals.

The FDA has been trying to get their arms around renegade compounders for two decades. In 1997 the Food and Drug Administration Modernization Act included the 503A section that exempted compounders from CGMP’s and the need to file new drug applications in return for prohibitions against advertising and promotion and soliciting prescriptions from doctors. But a group of compounders sued the government claiming their 1st Amendments right to speech had been denied, and the FDA was forced to abandon enforcement.

Even if they had the clear power or budget to enforce inspections, compounders have actively resisted. Between 2002 and 2012, the FDA was forced to obtain federal warrants to complete inspections eleven different times. After the 2012 event, legislation was passed – The Drug Quality and Security Act. One part of the law distinguished between local pharmacy compounding in response to specific patient prescriptions and large industrial compounders preparing inventory without prescription. According to their trade association, the International Academy of Compounding Pharmacists, we need these middle-men to fill the gray market gap. The association says compounders provide product when major manufacturers discontinue a medication (because it’s hard to make or unprofitable), for patients with special allergies or dosage requirements, for special combinations of drugs otherwise unavailable, and to create lotions and liquids when a patient can’t ingest pill forms.

But critics say these ever enlarging concerns are not compounding. They are manufacturing outside regulatory control. The 2013 law draws on the 1997 version, exempting large compounders from having to file a costly new drug application for each of their concoctions and allowing the unlimited manufacturing and sale of product without a prior prescription in return for voluntarily filing their company as a “outsourcing facility” which includes a willingness to submit to FDA inspections, comply with CGMP’s, and use only drugs on the official bulk ingredients list.

For those who choose not to register, they theoretically can be challenged on the basis of preparing “new drugs” without FDA approval, but this is unlikely in a federal agency already functioning with inadequate resources. Rather the FDA is actively encouraging hospitals and other providers to do their gray market purchasing only through compounders who have registered as a federally endorsed “outsourcing facility”. In addition, some states like Massachusetts have stiffened their laws with more inspections and better oversight. But this varies from state to state. The Office of Management and Budget is scheduled to do a three year analysis of the federal law to gauge the effectiveness of the voluntary compliance system in the near future. Currently 72 facilities have received the federal designation.

A continued gray area is “office-use medications”. In all states, physician’s prescriptive powers are broadly protected. And though not actively encouraged, the AMA and others allow physicians to sell pharmaceutical products out of their offices. This is common fare for oncologists, dermatologists, ophthalmologists, orthopedists, pain management specialists and others. Some entrepreneurs see this as a growth industry. For example, one firm, Physicians Compounding Alliance (PCA), advertises to doctors online saying, “Add thousands per month in additional income to your practice”, and claiming that “82% of physicians dispense on a daily or weekly basis, but only Physicians Compounding Alliance makes it possible to provide office-dispensed compounded prescriptions. Capture the extra business that you now send to others while providing your patients better care and greater convenience.” The AMA Code of Ethics provides ample wiggle room for such activities stating, “Physicians may dispense drugs within their office practices provided such dispensing primarily benefits the patient.”

Some worry that physicians, as small business people, are more price conscious than hospitals and health systems. For these customers, low price may win out over federal “outsourcing facility” designation. As a NEJM piece cautioned, “If providers constantly seek out the cheapest compounded drugs, then the unregulated compounders will have an unfair competitive advantage…”


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