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OIG Report Finds a Small Percentage of Hospitals Do Not Obtain Compounded Drugs from FDA-Registered Outsourcing Facilities

On June 6, 2019, the U.S. Department of Health and Human Services’ Office of Inspector General (OIG) issued a report that found that, among a sample U.S. hospitals that obtained non-patient-specific (NPS) compounded drugs from outside compounders, 89% of hospitals obtained them only from compounders that were registered with the U.S. Food and Drug Administration (FDA) as outsourcing facilities. The OIG study was conducted to provide the FDA with insights to improve its oversight of compounders and enhance patient safety. According to the study, “factors associated with quality, including registration with FDA as an outsourcing facility, are among the most important factors considered when hospitals decide where to obtain their non-patient-specific compounded drugs.” Although the use of compounded drugs is widespread in hospitals, the OIG also found that it is rare for hospitals to consider registering their own pharmacies as outsourcing facilities.

As we’ve previously discussed on the blog, Congress passed the Drug Quality and Security Act (DQSA) in November 2013 in response to deaths associated with a fungal meningitis outbreak caused by contaminated compounded injections (see one of our prior posts here). The DQSA gave the FDA greater authority to oversee the compounding of non-patient-specific drugs by a new category of facilities designated in the law as “outsourcing facilities.” Such facilities must register with FDA, follow current good manufacturing practices for human drugs, are subject to FDA inspections, and otherwise must be in strict compliance with the Federal Food, Drug, and Cosmetic Act. In exchange, they may compound and distribute drugs without the need for a patient-specific prescription, as is required of more traditional compounders under the Act.

Since passage of the DQSA, the OIG has conducted several studies pertaining to hospital use of compounded drugs, as summarized in the June 2019 report. In order to implement its most recent study, OIG stratified a random sample of 601 Medicare-participating hospitals and sent them a questionnaire, achieving an overall 94% response rate. Among other things, the questionnaire asked about the hospitals’ sources for their compounded drugs, details about what types of drugs and what modes of delivery were sourced from outside compounders, and what factors the hospitals considered when determining from where to obtain their NPS compounded drug. OIG then determined the registration status of the compounders the hospitals had identified in the questionnaire by comparing the facilities’ names to FDA’s list of registered outsourcing facilities in effect at the time.

The findings were fairly eye-opening. Although most hospitals that obtained NPS compounded drugs from outside compounders did obtain them from outsourcing facilities that were registered with the FDA – 89% of the sample, as noted above – this means that 11% of the hospitals obtained at least some of their NPS drugs from unregistered compounders. More specifically, OIG reports that 9% of the hospitals obtained some, but not all, of their NPS compounded drugs from outsourcing facilities, while the remaining 2% sourced these drugs exclusively from unregistered compounders. The inspector general notes this situation could lead to another potential outbreak or other harm to patients’ safety in relation to unsafe, ineffective, and poor-quality compounded drugs. As the report stresses, “patient safety is advanced when hospitals choose to obtain compounded drugs from outsourcing facilities that are registered with FDA.” While only a small percentage of the sampled hospitals were engaged in this risky practice, the consequences of non-compliance could be drastic and that is precisely why the DQSA was enacted.

OIG recommends that “FDA further communicate with hospitals about the importance of obtaining their NPS compounded drugs from outsourcing facilities.” OIG also suggests that FDA take appropriate follow-up actions with the list of unregistered compounding facilities that the OIG identified from the study. For its part, the FDA concurred with the recommendations and reaffirmed its commitment to implementing the DQSA.

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Joanne counsels global clients on the regulatory and distribution-related implications when bringing a new FDA-regulated product to market and how to ensure continued compliance after a product is commercialized.