Alerts and Updates

Congress Drafts Compounding Legislation -- Defines Compounded Drugs as "New Drugs" Under the FFDCA and Creates Bright Line Between "Traditional Compounders" and "Compounding Manufacturers"

April 29, 2013

While the Proposal's creation of two new regulatory categories for traditional compounders and compounding manufacturers represents a significant change, the most sweeping change under the Proposal is the inclusion of compounded drugs as a "new drug" under the Federal Food, Drug, and Cosmetic Act.

In the wake of the New England Compounding Center meningitis outbreak, the federal government has actively pushed for greater legislative oversight over compounding pharmacies. On April 26, 2013, the U.S. Senate Committee on Health, Education, Labor & Pensions ("HELP") released proposed legislation ("Proposal") aimed at regulating compounding pharmacies. The Proposal makes compounds "new drugs" under the Federal Food, Drug, and Cosmetic Act ("FFDCA"), subjecting all compounds to federal regulation. The Proposal also draws a bright line, defining some compounders as "traditional compounders," and creates a new category called "compounding manufacturers." While the legislation has a long road until it becomes law, compounding pharmacies should consider closely analyzing the provisions now, as the Proposal fundamentally changes the regulation of compounding pharmacies.

What Is a "Compounding Manufacturer" Under the Proposal?

Compounding pharmacies are presently licensed under state pharmacy laws. The Proposal, however, divides compounding pharmacies into two categories for purposes of federal regulation: (1) traditional compounders and (2) compounding manufacturers.

Under the Proposal, a traditional compounder would be limited to entities where a drug is compounded by a licensed pharmacist, physician or veterinarian that compounds the drug either (1) upon receipt of a prescription order for an identified individual patient or (2) in limited quantities before receipt of a prescription order for an identified individual patient in certain limited circumstances.1 Although a traditional compounder would continue to be state licensed pharmacies, under the Proposal, it would be subject to additional federal requirements.

However, a compounding manufacturer would be defined as an entity that compounds a sterile drug prior to receiving a prescription and introduces the drug into interstate commerce.2 The new definition of compounding manufacturer also includes entities that pool sterile products or that repackage sterile, single-use, preservative-free vials. Under the Proposal, compounding manufacturers cannot be licensed as pharmacies under state laws.

What Are the New Requirements Under the Proposal?

While the Proposal's creation of two new regulatory categories for traditional compounders and compounding manufacturers represents a significant change, the most sweeping change under the Proposal is the inclusion of compounded drugs as a "new drug" under the FFDCA. This creates a presumption that compounded drugs are subject to the FFDCA's registration, new drug, manufacturing practices and other requirements, unless an exemption applies.

If any entity meets the new definition of a traditional compounder, it would be exempt from the FFDCA requirements for Current Good Manufacturing Practices ("CGMPs"), adequate directions for use regulations and the new drug provisions.

If an entity meets the definition of a compounding manufacturer, it would be exempt from the new drug and adequate directions for use regulations. Significantly, however, compounding manufacturers would be required to comply with the CGMPs and would not be exempt from the FFDCA's registration and inspection exemptions.

The Proposal would also require compounding manufacturers to:

  • Compound products under the direct oversight of a pharmacist licensed in the state in which the compounder is located.
  • Make semiannual reports of compounded drugs sold.
  • Report serious adverse events within 15 days; investigate, follow up and report adverse event experiences; and maintain records of adverse events for 10 years.
  • Develop enhanced labeling that includes a statement identifying the drug as a compounded drug. Compounded drugs without these labels will be deemed misbranded.
  • Pay a $15,000 annual fee designed to defray the costs for inspection and regulation.3

Finally, the Proposal identifies three categories of drugs that may not be compounded: (1) complex dosage forms and biologics, (2) marketed drugs or "copies" and (3) drugs removed from the market based on safety and efficacy concerns.

Limitations on the Sale of Compounded Drugs

The Proposal also imposes certain limitations on the sale of compounded drugs. Compounded drugs, whether from a traditional compounder or compounding manufacturer, may not be sold by an entity other than the compounding manufacturer or traditional compounder that compounded the drug. Similarly, the compounded drug may not be sold to an entity other than a healthcare entity that provides medical services through licensed prescribers directly to patients, except in cases where a traditional compounder dispenses the drug directly to an individual or in inter-corporate transfers to a licensed pharmacy for the sole purpose of dispensing compounded drugs to the end user for self-administration. Drugs sold to healthcare entities must also be marked "not for resale."

Criminal Penalties

It is important to note that the Proposal makes it unlawful to resell a compounded drug that is labeled "not for resale." These sales are now prohibited under the FFDCA and carry penalties of up to one year in prison and/or up to a $1,000 fine. Additional penalties may be imposed if the resale is committed with the intent to defraud or mislead; such sales are punished by up to three years in prison and/or up to a $10,000 fine.


The Proposal represents a significant change to the present state-based regulation of compounding pharmacies, and it has the potential of imposing significant new regulatory and compliance requirements on entities deemed as compounding manufacturers. The Senate HELP Committee is seeking comments on "the policy merits, potential unintended consequences, and potential opportunities to improve the legislative language," and comments may be submitted directly to by 6:00 p.m. on May 3, 2013.

For Further Information

If you have any questions about this Alert or would like more information, please contact Rachael G. Pontikes, Elinor L. Hart, any of the attorneys in our Pharmaceutical, Medical Device, Pharmacy & Food group or the attorney in the firm with whom you are regularly in contact.


  1. The Proposal states that such compounding may occur when it is based on a history of, and generated solely within an established relationship between, the licensed pharmacist, physician or veterinarian.
  2. It is important to note that a compounding manufacturer would exclude interstate shipments within a hospital system.
  3. The $15,000 annual fee will be adjusted annually for inflation, and entities with 25 or fewer employees would need to pay only one-third of the established annual fee.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.