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The Clinical Trial Model Is Up for Review

P&T Journal - October 2014 - for a PDF copy of the published version go HERE.

Time, Expense, and Quality of Results Are at Issue, As Is the Relationship to Drug Pricing

The storm seeded by the pricing of Sovaldi has led payers, patients, and the federal government to seek cover from what some view as problematic pharmaceutical industry practices, including a few partly outside of the industry’s control.

Sovaldi’s $84,000 list price for a course of treatment has raised questions about how a company such as Gilead Sciences, Inc., decides on a price tag. The answer may hinge—in small or large part, depending on who’s talking—on the length and complexity of the clinical trials a company must conduct in order to win approval from the Food and Drug Administration (FDA) for the new drug. Sundeep Khosla, MD, Dean for Clinical and Translational Science at the Mayo Clinic, says clinical trials are subject to the “Valley of Death.” He explains, “This refers to the fact that the average length of time from target discovery to approval of a new drug currently averages approximately 14 years, the failure rate exceeds 95%, and the cost per successful drug exceeds $2 billion, after adjusting for all of the failures.”

According to Robert J. Meyer, Director of the Virginia Center for Translational and Regulatory Sciences at the University of Virginia School of Medicine, “It is well documented that one of the major categories of expenditure in developing a new therapeutic is the expense of conducting randomized, phase 3 clinical trials, which are intended to address the regulatory expectations in the U.S. and beyond.” However, Meyer doesn’t think the clinical trial costs for Sovaldi are substantially higher than those for similar drugs, much less those with a list price of $84,000 for a 12-week regimen. “I think pricing is driven by what the market will bear, including the value of the drug’s ability to forestall later disease,” he states. “But I can’t say clinical trial costs have no relationship to the price of drugs. The company must amortize those costs, especially the costs of the 50% of drugs that fail in phase 3 trials.”

Gilead has declined to provide data on the cost of clinical trials for Sovaldi. On March 20, 2014, U.S. Rep. Henry Waxman (D-Calif.) and colleagues sent a letter to John Martin, PhD, Chief Executive Officer of Gilead, asking for information about the methodology Gilead used to establish Sovaldi’s pricing.1 One of the things Waxman wanted to know was “the value to the company of the expedited review provided under the priority review and breakthrough therapy designation and how any savings provided by the expedited review factored into pricing decisions for the drug.” The priority review and breakthrough therapy designations are new tools that Congress has given the FDA in the past few years that enable the agency to approve a drug faster based on abbreviated clinical trials.

Cara Miller, a Gilead spokeswoman, says the company met with Waxman’s staff to “share our perspective on the scientific and medical evidence for treating a disease that causes significant morbidity and mortality in the U.S. and the benefits of Sovaldi.” But that perspective is not public, nor has Waxman himself published anything that Sovaldi may have shown his staff. Miller declines to discuss the costs of Sovaldi clinical trials or the relationship of those costs to Sovaldi pricing.

A Waxman spokeswoman says Gilead was “not able to answer all our questions, and [was] not able to provide us with information that adequately justified the cost of the drug.”

It is not just the cost of conventional clinical trials that is at issue, but also their inclusiveness. In an interview with the Wall Street Journal on August 4, 2014, Arvind Goyal, MD, Medical Director of the Illinois Department of Health Care and Family Services, raised questions about the population enrolled in the Sovaldi clinical trials.2 He complained that Gilead did not include people with alcohol and drug problems, which are prevalent among his state’s Medicaid population. “If someone is using a street drug such as heroin,” he said, “I can’t be sure they are compliant taking Sovaldi. It is a total waste.”

Miller, the Gilead spokeswoman, says: “Patients with ongoing illicit drug use such as cocaine and heroin were excluded from the clinical trials. Patients who were actively abusing alcohol were excluded from the clinical trials. However, a history of alcohol abuse or ongoing alcohol use was not exclusionary; approximately 5–10% of patients in the phase 3 studies self-reported this medical history.”

Congress Looks at Possible Reforms


Because of the many structural imperfections that prevent faster, cheaper, more accurate clinical trials, Democrats and Republicans in Congress are considering what they can do to inject doses of modernity into a dusty system. The House Energy and Commerce Committee, as part of its year-long “21st Century Cures” hearings, has been exploring varieties of unconventional clinical trials—often grouped under the rubric of “adaptive” clinical trials—and looking at ways useful flexibility can be injected into FDA requirements. At hearings in July, Jay Siegel, MD, Chief Biotechnology Officer and Head of Scientific Strategy and Policy at Johnson & Johnson, said, “I believe that we now face an extraordinary opportunity to reinvent our approach to clinical trials and, as a result, to greatly increase the quality of medical care and the quality of life itself.”
The President’s Council of Advisors on Science and Technology succinctly stated the problem in its 2012 report on drug innovation:3
Unfortunately, there is broad agreement that our current clinical trials system is inefficient. Currently, each clinical trial to test a new drug candidate is typically organized de novo, requiring substantial effort, cost, and time. … Navigating all of these requirements is challenging even for large pharmaceutical companies, and can be daunting for small biotechnology firms.
U.S. Rep. Joe Pitts (R-Pa.), Chairman of the House Health Subcommittee, detailed the shortcomings of the clinical trial system when he welcomed Janet Woodcock, MD, Director of the FDA Center for Drug Evaluation and Research, to a hearing on July 11, 2014. “Widespread duplication of effort and cost also occurs because research is fragmented across hundreds of clinical research organizations, sites, and trials, and information regarding both the successes and failures of clinical trials is rarely shared among researchers,” Pitts said. “It is often difficult to identify potential participants due to a shortage of centralized registries, low awareness of the opportunity to participate in clinical trials, low patient retention, and lack of engagement among community doctors and volunteers.”

Dr. Woodcock said the FDA has been doing what it can to reduce clinical trial requirements, consistent with maintaining patient safety, but “some of these challenges need to be addressed by those outside of FDA.” The FDA issued guidance in December 2012 on clinical trial enrichment strategies. She pointed to Novartis’ Zykadia (ceritinib), a new drug for patients with a certain type of late-stage, non–small-cell lung cancer, which the FDA approved in April 2014 via a breakthrough therapy designation. “It took less than four years—versus the roughly 10 years it used to take—from the initial study of the drug to FDA approval,” she stated.

The FDA granted Zykadia a conditional approval based on a phase 1, single-arm study of 163 people that investigated the maximum tolerated dose, safety, pharmacokinetics, and preliminary antitumor activity of Zykadia. Dana Cooper, a Novartis spokeswoman, declined to provide details on what the company has spent so far on clinical trials for the drug. “As we manage our research investment across a portfolio of medicine in development, we do not provide estimates of research costs for individual molecules,” she says. The company is continuing phase 2 and 3 trials as a condition of FDA conditional approval. The average wholesale price for a 30-day supply of Zykadia at the recommended daily dose is $16,197, according to Red Book.

Recent FDA Efforts to Cut Approval Times


The cost of clinical trials and their required length to completion have been the subject of criticism within the pharmaceutical industry for some time. Over the past decade or so, Congress has provided the FDA with authority to approve new drugs more quickly in certain circumstances, sometimes on the basis of shortened clinical trials.4 With Sovaldi, for example, Gilead asked for and received a priority review, which reduces the FDA review goal date from 10 to six months. The FDA also awarded Sovaldi a breakthrough therapy designation, which allows a company to submit a new drug for approval based on preliminary clinical evidence “that the drug may have substantial improvement on at least one clinically significant endpoint over available therapy.” In addition, the FDA offers drug developers accelerated approval, which can be granted on the basis of studies establishing that the drug or biologic “has an effect on a surrogate endpoint that is reasonably likely to predict a clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments.”

Some drugs the FDA has approved with its new authorities, based on truncated trials, have turned out to be problematic in the post-marketing period. Avandia and Avastin are two examples. “The recent history of drug misadventures provides numerous examples of rare but catastrophic side effects overlooked at current levels of testing in broader patient populations,” says Thomas J. Moore, Senior Scientist at the Institute for Safe Medication Practices and Lecturer in the Department of Epidemiology and Biostatistics at The George Washington University School of Public Health and Health Services.

Moore is skeptical about the FDA’s efforts to establish a new “alternative approval pathway for certain drugs intended to address unmet medical needs.” Congress directed the FDA to do so in the Food and Drug Administration Safety and Innovation Act (FDASIA) of 2012,5 the law that established the breakthrough therapy designation. The 2012 law also included language expanding the types of evidence the FDA can use to assess whether a surrogate endpoint is likely to predict clinical benefit and encouraged usage of a broader variety of endpoints for accelerated approval. Moore says the alternative approval pathway “could compromise patient safety, is unnecessary given seven existing expedited approval programs, has no clear public health justification for exposing patients to increased risks, and is insufficiently researched and documented to permit a clear evaluation.”

The FDA held a hearing in February 2013 to seek input from industry and the public on the viability of a new alternative pathway. Paul Huckle, Chief Regulatory Officer for GlaxoSmithKline PLC, stated, “We believe that the proposed pathway should be considered in parallel, and in addition to, already existing regulatory pathways such as accelerated approval, fast track, priority review, and breakthrough therapy designation, and if implemented should be applied at the sponsor’s request.” The FDA has not published any draft, much less final, guidelines offering a new alternative pathway.

Need for More Flexibility and Infrastructure


Speeding up the FDA review process, though, is essentially nibbling around the edges of an antiquated system, where one drug is tested in a large population of people suffering from one disease, be that lung cancer, hepatitis C, or any of the conditions that afflict much smaller populations. There is broad agreement that this “one drug, one condition” methodology must change. Winds of change—actually, they are more like light breezes—are blowing through the hallways of contract research organizations and academic medical centers, which do the majority of clinical testing. The reforms include use of biomarkers to select participants, use of “adaptive” clinical trials sponsored jointly by drug companies, and establishment of nationwide academic networks with access to electronic medical records. Study participants are chosen because they have a specific genotype that is thought to be responsive to a specific agent. Large groups of patients across numerous academic centers are recruited because those genes are found in a very small percentage of those volunteers. Often new patients are recruited on a rolling basis, under a master protocol that test sites adhere to across the country. A number of agents are tested at the same time, each one in a separate small group consisting of patients who all have the same target gene.

Lung-MAP, which is testing five lung cancer agents, is a clinical trial now getting under way that uses many of the new clinical trial techniques. It is expected to screen as many as 1,250 patients each year for more than 200 cancer-related genomic alterations. Participants will eventually be divided into five “baskets,” each including patients with an identical genotype thought to be responsive to a single agent. Five agents are being tested by five companies, all of them cooperating. None of the five companies, on their own, could recruit that many patients. That kind of large population is important because each of the five biomarkers will be found in a very small percentage of people, so it is necessary to recruit large numbers in order to have enough participants in each of the five baskets.

Moving Straight From Phase 2 to Phase 3


“Another distinctive feature of Lung-MAP is the ability for a drug that is found to be effective in phase 2 to move directly into the phase 3 registration components, incorporating the patients from phase 2,” explains Roy S. Herbst, MD, PhD, Ensign Professor of Medicine, Chief of Medical Oncology, and Associate Director for Translational Research at Yale Cancer Center. “This unique statistical approach can save both time and the number of patients that would be needed to program compared to conducting separate phase 2 and phase 3 studies.”

As its endpoint, the trial is using “median progression-free survival,” which Dr. Herbst concedes is a surrogate endpoint. He explains that any of the five agents could show a positive effect as early as the first year. But clearly nothing is certain: the efficacy of the agents, the viability of the trial’s structure, or the cost savings to the five companies compared with what they would have spent had they embarked on singular, conventional trials.

Not everyone thinks the potentially fast transition from phase 2 to phase 3 is a blessing. “While this sounds attractive, this kind of adaptive trial raises many significant issues—not the least of which is the loss of the ability to conduct a true ‘learn and confirm’ development paradigm, which is the very heart of cogent drug development,” explains the University of Virginia’s Meyer. “If there is any message in the rising failure rate of phase 3 trials, I think it is that the increasingly parallel drug trials paradigm, rather than the serial learn-and-confirm model, does not allow for enough careful thought of past results to properly inform future designs.”

That kind of skepticism may explain why the FDA has not opened the door very wide to adaptive studies. The agency published draft guidance in March 2010,6 but final guidance has never appeared. Industry generally applauded the FDA’s draft, but felt it was too restrictive. The draft talked about “familiar” and “less familiar” approaches, and seemed to bestow approval on the former and skepticism on the later. “The less familiar design methods incorporate methodological features with which there is little experience in drug development at this time,” the draft stated.

Industry and Academia Slow to Help


To some extent, the fact that clinical trials take as long and cost as much as they do is partly the fault of the companies that conduct them, according to Meyer. He calls some of the steps in phase 3 trials “self-inflicted.” A recent Tufts University study7 showed the number of endpoints and procedures in clinical trials went up more than 60% from 2002 to 2012. At the same time, this study showed that a minority of the procedures, endpoints, and related trial costs in phase 3 trials were driven by regulatory requirements. This study estimated that non-core elements of these trials cost $4 billion to $6 billion in aggregate spending across the industry.

A significant portion of those “self-inflicted” costs come from companies reinventing the wheel every time they conduct a clinical trial. Those costs include setting up a network and developing and implementing a protocol. Some of those costs disappear when companies and academic centers avail themselves of clinical trial networks. But these networks are few and far between.

The National Institutes of Health inaugurated a Clinical and Translational Science Awards (CTSA) program in 2006.8 It is active at 62 sites, mostly academic medical centers, and is funded at a level of nearly $500 million. The hope was for those centers to work together on specific clinical trial projects. A 2013 report from the Institute of Medicine (IOM)9 said the program is “contributing significantly” to clinical research. But based on the number of recommendations made to improve the program, that praise seemed pro forma. The report described the program as being in an infant stage, with little cross-center or center-public collaboration, and hamstrung by a bureaucratic structure. It said: “The IOM committee envisions a transformation of the CTSA program from its current, loosely organized structure into a more tightly integrated network that works collectively to enhance the transit of therapeutics, diagnostics, and preventive interventions along the developmental pipeline; disseminate innovative translational research methods and best practices; and provide leadership in informatics standards and policy development to promote shared resources.”

Even for a clinical trial network such as the one being developed by Lung-MAP, one can see what a huge task it is to assemble 5,000 patients, obtain and massage their personal health data, and de-identify that data. Paula Brown Stafford, MPH, President of Clinical Development at Quintiles, a major contract research organization, thinks Congress should create a central repository of accessible, securely de-identified patient-level data and make it available for research use through appropriate licensing. “And just think about the amount of time that would be cut out of the trial,” she says, “from four years [for] finding patients down to 14 days because we have the data that gives us access to identify the patients.” Dr. Herbst says, for example, that Lung-MAP registered 10 patients in the first two months the trial was in progress.

No one would argue the merits of a more national clinical trial infrastructure, backed by national disease registries and fueled by electronic medical records. The use of biomarkers to select trial participants is a bit more dicey, given its reliance on diagnostic tests that may or may not have received FDA approval.

Congress is likely to include clinical trial reforms in the next reauthorization of the Prescription Drug User Fee Act (PDUFA). In past reauthorizations, the emphasis has been on speeding FDA approval, not clinical trials. Helping companies get to the FDA with a new drug application more quickly and more cheaply, in a way consistent with protecting safety and efficacy, should be the focus this time. Given the importance of this objective, it shouldn’t be necessary to wait until 2017, when PDUFA is scheduled to be reauthorized for the sixth time.

Author bio: 
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

FERC's Moeller Presses Online Gas Trading Platform; Industry Unenthusiastic

Pipeline & Gas Journal - October 2014 - for the online version go HERE.

FERC "pipeline" Commissioner Phillip Moeller held a workshop Sept. 18 to explore the possibility of the commission, on its own or through a third party, establishing an online trading platform for the nomination and confirmation of pipeline deliveries of natural gas. The proposal was made at a technical conference in April by Don Sipe, a Maine attorney, on behalf of the American Forest and Paper Association.

That workshop examined operational and resource issues in the gas and electric industries arising from last winter’s polar vortex. Sipe served two terms as chair of the New England Power Pool and for over a decade was vice chair of NEPOOL for the end use sector.

The potential of an online scheduling tool is just one idea FERC is studying to address several somewhat related issues dealing with getting adequate natural gas to electric utilities during cold snaps. Some proposals deal with scheduling, others with delivery, some only on the natural gas side of the issue, others with better coordination between gas pipelines and electric wholesalers.

Moeller says about the online trading workshop and scheduling issues more broadly, "We have to at least try and move the concept forward before next winter. Pipelines have the incentive to keep their electric generator customer base happy, so they should be in favor of these efforts because generators are not happy now with the lack of transparency and liquidity after hours."

Sipe says the response to his proposal from the industry at large could best be characterized as "thunderous silence." The current system of commodity trading is "old school," where generators faced with short-notice supply needs essentially use, according to Sipe, their rolodexes to call various marketers in search of gas and available capacity.

Joan Dreskin, INGAA general counsel, responds that pipelines are aware of Sipe's proposal, but haven't piped up because Sipe has advanced a concept, not a detailed proposal. "We are eager to learn more, but do have some serious reservations, as to who will pay for the online trading platform, and whether it will add value for our customers." She notes, for example, that some customers could lose out if pipelines have to make their capacity fungible.

"Pipelines have worked to customize tariffs for customers and not all firm transportation recourse tariffs look the same," she explains. "It is unclear how a uniform trading platform would work if you are not comparing apples to apples."

An online trading platform would theoretically allow electric generators to find out much more quickly whether pipelines will be able to supply gas needed on short notice such as when an Independent System Operator (ISO) must quickly find a replacement generator due to an outage or an unexpected change in load. Typically, an ISO, such as the one operating in New England, needs to know, in real time within 15 minutes whether a given generator will be able to supply the necessary power to local electric utilities on any given day. This is particularly an issue during a cold weather snap or a heat wave or when unexpected generator outages require the ISO to dispatch previously offline units.

However, in the current system, it takes much longer for generators to nominate gas on a given pipeline's system, and even longer for the pipeline to confirm it can supply the gas at a given price. That can sometimes take three to four hours. This is particularly tough on merchant generators which frequently don't have firm capacity. At times, this uncertainty will lead the system operator to dispatch more generation than needed because it is unsure which, if any of the units will be able to get gas.

Generators, in turn, may nominate more gas than needed to fulfill ISO requests. Subsequently, the ISO may find itself with more generation that it needs and “dispatch down” a certain number of generators that had gone out and secured supply. Left with excess supply, generators may either have to resell at a loss or face imbalance penalties. If generators cannot recover these costs in some fashion they are harmed, and conversely, if they can recover these costs electricity consumers end up paying these added charges.

The pipeline industry generally believes the solution to the problem is to build more pipeline capacity. "I agree we need to build more pipelines, but that appears to be the sole focus of the industry," explains Sipe. He believes the apparent lack of enthusiasm for considering expanding an online trading platform such as the Intercontinental Exchange, to coordinate more closely with and perhaps automate the nomination and confirmation process in real time trading, has to do with some uncertainty as to whether FERC could mandate such a trading platform, who would pay for it and perhaps some hesitancy on the part of marketers to be more transparent in their pricing. But he believes pipelines and others industry participants could make more money from "being more efficient."

His proposal wouldn't be a panacea," concludes Dreskin, "but we are willing to talk about it."

Author bio: 
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

Congress Likely to Include Pension "Smoothing" in Highway Bill

Strategic Finance - September 2014

What is a corporate pension funding provision doing in a federal highway funding bill? Well, both the House and Senate are scraping for new revenue with which to replenish the Highway Trust Fund, which is on the precipice of bankruptcy. The House has passed its bill, and the Senate is close to doing so. The two bills have three pools of new federal revenue totaling $11 billion, one of which consists of "pension smoothing" revenue. This will effect only single-employer plans, which currently insure about 30 million Americans, still working and retired. Those plans have argued that the formula used by the Pension Benefit Guarantee Corporation (PBGC) to assess future corporate pension liabilities results in excessively and unrealistically underfunded results. That is because of the low interest rate environment. The two bills substitute, at least temporarily, a new formula that will lead to funding calculations which will be more realistic. That will mean companies will have to dedicate less money to funding future, potential liabilities, leading to smaller tax deductions, leading to greater federal revenue.  However, neither bill does anything to reform the PBGC premium structure, which assesses companies a flat rate per participant and a variable rate which applies only to companies with severely underfunded pensions. Plan sponsors have argued that instead of companies having to pay the same flat rate, the rate should be adjusted on a per-company basis based on the degree of solvency for the company. Companies with fully-funded pension plans resent having to essentially overpay premiums in order to cover the mistakes made by bankrupt companies, whose legacy pension costs they are forced, to some extent, to cover.

Author bio: 
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

Hospitals Struggle With ACA Challenges

P&T Journal - September 2014 - for a PDF copy of the published version go HERE.

More Regulatory Changes Are in the Offing in 2015

The results released on July 10, 2014, by CareFirst of Maryland, a Blue Cross Blue Shield plan, probably had some Maryland hospitals shaking in their boots. It wouldn’t be surprising if hospitals around the country felt the vibrations.

CareFirst was reporting for the first time on the results of its patient-centered medical home (PCMH) program, which the insurer initiated three years ago. The Patient Protection and Affordable Care Act (ACA) established a formal PCMH pilot program within Medicare, and insurers in the commercial market who aren’t part of the pilot, such as CareFirst, have been experimenting with the concept too. A PCMH program pays physicians incentives to monitor the health of their patients more closely, with the objective of minimizing referrals to specialists and hospital admissions. Members seen by medical home physicians participating in the CareFirst program experienced 6% fewer hospital admissions, 11% fewer days in the hospital, and 11% fewer outpatient visits than other CareFirst clients last year.1

The PCMH is just one of the ACA initiatives aimed at reducing hospital admissions and, by extension, hospital revenue. The ACA’s emphasis on primary care as a bulwark against hospitalization, and its endorsement of accountable care organizations (ACOs) and bundled payments, is having, and will continue to have, a major impact on hospital revenue—in some cases not in a good way, speeding hospital consolidations and closures. Stephen Schimpff, MD, retired Chief Executive Officer of the University of Maryland Medical Center, puts it this way:
It is a changing world for hospitals; it is harder to thrive in the way in which it was done in the past. We used to be in the business of disease and pestilence, the more disease and pestilence the better. Now we are in a totally different business, improving the health of your community.
But the ACA has been something of a double-edged sword. While its payment initiatives are staunching the flow of patients to hospitals, its insurance expansion has opened the spigot. The ACA’s Medicaid expansion has sent waves of people through hospital doors in some states. Many of them were previously “self pay”—with some percentage being “no pay”—and hospitals are suddenly being compensated for their care. The health insurance marketplaces have brought eight million customers, not all of them newcomers, to hospital doors. However, hospitals have had to contend with the pricing demands of qualified health plans (QHPs), which sell individual health plans and must comply with federal rules, some of which filter down to hospitals.

The Revolution Gathers Steam


Just as the application of steam power to manufacturing in Great Britain in the mid-1700s ignited the industrial revolution, the 2010 passage of the ACA has prompted an emerging upheaval in health care. Traditional hospital operations across a broad range of activities have been upended and are being refashioned.

Hospitals are merging at a pace previously unseen, buying insurance companies (and being bought by insurance companies), and piling into “clinically integrated networks” faster than high school seniors jumping into beach-bound cars on the last day of school. Health systems are also buying physician practices to establish PCMHs or ACOs, or simply to have a better footing to contend with insurance companies outside of Medicare that are requiring some form of risk-based “value,” “bundled,” or “capitated” purchasing contract—terms that are being tossed around with varying meanings.

“At the strategic level, the Affordable Care Act has certainly colored the internal dialog at Catholic Health Initiatives [CHI] around the positioning of our health system and our markets,” says Juan Serrano, Senior Vice President of Payer Strategy and Operations at CHI, which owns about 90 hospitals around the country. CHI has about 15 hospitals participating in the Shared Savings Program at the Centers for Medicare and Medicaid Services (CMS).

The Shared Savings Program is an ACO option, a companion to the smaller, more radical Pioneer ACO program. Both programs promote what has come to be called “value purchasing,” in which Medicare and Medicaid, and an increasing number of commercial insurers, pay hospitals for integrated clinical care. There were 32 Pioneer ACOs and about 350 hospitals in the Shared Savings Program. Only two organizations have terminated Medicare ACOs, while seven have shifted from the Pioneer program (in which they must assume “downside” risk for losses) to the more financially forgiving Shared Savings Program, which permits one-sided (bonus-only) financial arrangements.

About 100 hospitals participate in the Medicare bundled payments pilot program, which is another product of the ACA. Medicare has also begun testing PCMHs, although the CMS had been experimenting with the concept prior to ACA passage. The demonstration program kicked off in 2011. It pays a monthly care management fee for beneficiaries receiving primary care from a designated medical group. The care management fee is intended to cover care coordination, improved access, patient education, and other services to support chronically ill patients. The program is operating in select states, and like other ACA programs it has sent ripples into the commercial marketplace, where companies such as CareFirst have inaugurated their own programs. The idea is to keep patients from being referred to specialists at hospitals, where care is more expensive.

While “clinical integration” and “value purchasing” have become watchwords in the hospital industry thanks to the ACA, the law has also prompted some hospitals to look outward, beyond their normal operational borders, particularly in terms of capitalizing on the eight million entrants into the federal and state health insurance marketplaces. As a result, hospitals are slowly moving into the health insurance business. CHI recently purchased QualChoice, a health insurance company based in Arkansas. Serrano says the purchase may become a platform for CHI to offer plans in the state and federal marketplaces. “The purchase of QualChoice allows us to accelerate our value delivery to the market; it gives us a distribution channel for our products and new models of care: for example, new disease management programs and narrow networks,” he states.

Some hospitals participate in the ACO and bundled payment programs simultaneously. “We are working with both health systems that have bundles with CMS, and with health systems that have bundles with CMS while at the same time participating in the Medicare Shared Savings Program,” explains Morgan Bridges-Guthrie, a spokeswoman for Premier, Inc., which provides buying, data, and other services to hospitals. “So, ACOs instituting bundled payment programs is a natural fit.”
Hospital executives will need to be even more nimble next year as ACA programs continue to morph. The QHPs that sell individual policies in federal and state insurance marketplaces face new requirements in 2015, some of which affect hospitals. In addition, the CMS will rework its ACO program, both the narrow Pioneer and broader Shared Savings models.

Debate Over ACA Shifts to New Issues


The debate about the ACA seems to have morphed since spring 2014. Then, there were questions about whether the eight million people the Obama administration had forecast would enroll in federal and state marketplaces would actually show up. When they did, the question became whether all of the new entrants would pay their premiums and actually get coverage. Most did. Competing studies by national organizations have offered differing results about what percentage of that eight million (or whatever the final 2014 number turns out to be) were previously uninsured. That was the whole point of the ACA, to insure the uninsured. But even the fire over that question has died down.

Interestingly, no one seems too concerned that 90% of marketplace participants are receiving federal subsidies for their premiums and that those premiums average 75%. Maybe those federal costs are less than what taxpayers were paying for the portion of the eight million who were previously costing hospitals money in the form of uncompensated care. However, a report from the Department of Health and Human Services (HHS) inspector general in July said that at the end of 2013, the federal marketplace (13 states have their own marketplaces) had 2.9 million inconsistencies relating to an applicant’s income status and Social Security number.2

It is probably because of the federal subsidies that QHPs, having offered reasonable premiums for the four plan levels (bronze, silver, gold, and platinum) in 2014 while they got a feel for the costs of covering essential health benefits, now feel free to jack up 2015 premiums. Companies began filing 2015 premiums with HHS this summer; they take effect on January 1, 2015. The Wall Street Journal in June looked at potential 2015 premium increases in 10 states and found that the largest carriers were proposing increases of 8% to 22.8%.3 These proposed increases may not stick: Both the states and HHS have the power to negotiate lower rates. But it seems clear that a certain percentage of marketplace participants will switch to lower-priced plans using more constricted networks. This will put even more pressure on hospitals.

A New World for Hospitals


That uncertainty aside, some trends now seem immutable. In the name of clinical integration, some of the biggest hospital companies, such as CHI and Ascension Health, have been adding hospitals and considering buying insurance companies. The not-for-profit Denver-based CHI system, which provides health care services in 18 states, assumed control of several hospitals and a health system and purchased a majority interest in a physician-owned health plan last year.

In the reverse scenario, health insurers are buying hospitals. Highmark Inc., one of the biggest Blue Cross/Blue Shield plans in the country, in 2013 bought the West Penn Allegheny health system, which boasts eight hospitals in western Pennsylvania. Highmark offers marketplace and nonmarketplace policies in Pennsylvania, Delaware, and West Virginia, and is the only marketplace carrier in the third state. Spokesman Aaron Billger says Highmark’s acquisition of the West Penn hospitals was not done with marketplace leverage in mind. Rather, the hospitals provide Highmark with a platform to create an integrated delivery network—called the Allegheny Health Network—that serves as an ACO/PCMH-type destination for the 218,000 policyholders (marketplace and nonmarketplace) in western Pennsylvania.

Highmark’s ACO program is not a part of either Medicare model, so it illustrates how the commercial insurance marketplace is picking up the ACA ball and running with it. There were 147,000 Highmark-insured individuals whose physician practices were members of the Highmark Accountable Care Alliance between October 2012 and October 2013. In clinical quality performance measures, those practices showed a 26% improvement in quality scores and a reduction in medical costs, with total six-months savings of about $11.5 million.

ACA Impact on Hospital Financial Health Unclear


This scurrying by hospitals to capitalize on the new ACA programs has had an uneven financial impact on them. A June Modern Healthcare analysis of earnings reports for about 200 hospitals and health systems, both not-for-profit and investor-owned, found that hospital margins narrowed significantly last year despite an improving economy.4 The magazine wrote: “Despite a buoyant stock market streak by some publicly traded chains, health care providers as a group continue to operate with slim and shrinking margins. Overall, a smaller percentage of health care providers saw positive operating margins last year compared with the previous two years.”

The Modern Healthcare analysis found that the average operating margin in 2013 was 3.1%, down from 3.6% in 2012 based on data available for 179 health systems, which included acute-care, post-acute-care, rehabilitation, and specialty hospital groups and some stand-alone hospitals. A total of 61.3% of organizations in the Modern Healthcare analysis saw their operating margins deteriorate over the previous year.

Probably the best news for many hospital systems is the influx of Medicaid patients, via the ACA Medicaid expansion. For example, LifePoint Hospitals reported a 14% increase in net income in the first quarter of 2014. That is based on just seven of LifePoint’s 20 states expanding Medicaid, although 35% of its self-pay volume was generated in those states in 2013. About 22% of its self-pay patients during the first quarter had enrolled in Medicaid, and 3% had enrolled in an exchange plan—on the high end of previous expectations. Diane Huggins, Vice President of Communications at LifePoint, says not all of the gain in net income came from treating new Medicaid recipients. “Clearly, there were a confluence of factors that impacted our Q1 2014 results compared to the same quarter of the prior year in addition to Medicaid expansion,” she states.

There has been little analysis of how ACOs have specifically affected hospitals, which are just one member of an ACO team that depends heavily on physician practices as, for want of a better term, quarterbacks. However, hospitals are the key team member because they drive shared savings via better quality care that results in fewer hospital readmissions. The only financial results issued so far by the CMS were in July 2013 for the 32 Pioneer ACOs.5 Thirteen of the 32 produced shared savings with CMS, generating a gross savings of $87.6 million in 2012 and saving nearly $33 million for the Medicare Trust Funds. Overall, Pioneer ACOs performed better than published rates in fee-for-service Medicare for all 15 clinical quality measures for which comparable data are available. Medicare has not published any comparable results for the Pioneer programs in 2013 or for the much larger Shared Savings ACO program.

The Pioneer results are partly encouraging and partly not. Some hospitals earned substantial profits. Others turned themselves inside out to no avail. “We’ve spent a lot of money and haven’t shown much progress on the revenue side,” said Richard Barasch, Chairman and CEO of Universal American Corp., at an investor conference in June. “There’s a limit to our public service feelings about this. We are going to scale it back to some degree.” Universal has 34 ACOs and is one of the biggest players in the ACO world. Most of its ACOs participate in the Shared Savings Program.
The CMS has not published financial results or health outcomes from its Bundled Payments for Care Improvement (BPCI) initiative. Its four bundled payment models allow providers to bid as a team to provide a continuum of services for a predetermined target amount to include physician payment, nursing-home care, surgery, and other care, most commonly for treatments such as heart, colon, and spinal surgery, as well as hip and knee replacements.

The Premier, Inc., Bundled Payment Collaborative includes 17 health care provider systems with more than 45 hospitals across the nation. Members of the collaborative are committed to sharing best practices and data with each other. They focus on improving care and reducing costs across multiple episodes of care, including hip and knee joint replacements, lumbar spinal fusions, coronary artery bypass grafts, heart valve replacements, congestive heart failure, percutaneous coronary interventions, and colon resections.

“We haven’t charted the financial impact yet,” Premier’s Bridges-Guthrie explains when asked how the Premier bundled payments participants have fared so far. “Our Bundled Payment Collaborative members went live beginning of January, so it is a bit too early to tell real results versus estimates. At this time, we only have partial results. Unfortunately, it’s just too early to know performance.”

Changes in ACA Programs on the Way


Even as hospitals try to gain traction in current ACA programs, some of those programs will be changing. The CMS was supposed to publish a proposed rule in May 2014 detailing changes it wants to make in the Shared Savings Program. That proposal had not been issued as of mid-July. But just the prospect of the proposed rule forced the American Hospital Association (AHA) to launch a pre-emptive strike in the form of a long letter to Patrick Conway, MD, Acting Director of the CMS Innovation Center. In that letter, Linda E. Fishman, Senior Vice President of Public Policy Analysis and Development, said the AHA continues to have “significant concerns about the design of the current Pioneer ACO Model and the Medicare Shared Savings Program (MSSP).”6

The two programs are similar in many regards, although the Pioneer program offers greater potential rewards to participants for greater savings. Both the Pioneer and Shared Savings ACOs enroll Medicare recipients and accept “risk.” Payment is based on traditional fee-for-service (FFS) in the first two years, but Pioneer ACOs can transition to population-based payment after that if “results” warrant the transition. Population-based payment is per-beneficiary-per-month compensation intended to replace some or all of the ACO’s FFS payments. The CMS also requires that 50% of Pioneer revenue come from participating in “risk” contracts with other payers by the end of the second performance period.

The AHA wants a laundry list of changes, as does the American Medical Group Association (AMGA), whose members—larger physician group practices—typically drive the ACOs, which almost always include hospitals. Fishman’s letter to Dr. Conway complained that the Pioneer ACO and MSSP programs place too much risk and burden on providers with too little opportunity for reward in the form of shared savings. She made a number of suggestions for changes to improve the programs, all of them technical and all of them practically requiring a doctorate in statistics to understand for anyone not steeped in ACO terminology and methodology. Suffice it to say that the AMGA has some of the same concerns about requirements, for example, attached to the minimum savings rate (MSR) for ACOs. The MSR accounts for the potential random variation in savings that may not be linked to improvements in quality and efficiency.

The QHPs already have new rules to follow in 2015, those established by the so-called “2015 Letter to Issuers in the Federally-facilitated Marketplaces.” 7 One change drills down to hospitals and opens up new liability: the first-time imposition of civil money penalties (CMPs) for any breach of federal rules by any party, including consumer assistance entities such as hospitals. When the draft letter was published, the AHA argued that applying CMPs to individual and institutional assisters, especially voluntary certified application counselors (CACs), would have a chilling effect on some hospitals continuing to serve in that role. It wanted the CMS to reconsider the application of CMPs to voluntary assisters, and to limit CMPs in general to egregious violations of selected requirements in which there are no other enforcement mechanisms already in place. Otherwise, hospitals could be penalized for simple human errors of judgment or facts that are unintentional, nonmalicious, and consistent with the purpose of the ACA—to provide coverage to the uninsured.

The CMS seems to have ignored the AHA’s pleas, so hospitals may have to tiptoe around efforts to sign up federal marketplace customers. Some hospitals may trip over sign-ups or other impediments suddenly strewn in their path thanks to the ACA. But some hospitals will prosper, too, as they figure out how to make this revolution work for them.

Author bio: 
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

References

  1. CareFirst BlueCross BlueShield. 2013;PCMH program performance report. July 102014;Available at: https://member.carefirst.com/carefirst-resources/pdf/pcmh-program-performance-report-2013.pdf. Accessed July 14, 2014
  2. Department of Health and Human Services, Office of Inspector General Marketplaces faced early challenges resolving inconsistencies with applicant data. June 2014;Available at: http://oig.hhs.gov/oei/reports/oei-01-14-00180.pdf. Accessed July 14, 2014
  3. Radnofsky L. Premiums rise at big insurers, fall at small rivals under health law. Wall Street Journal June 182014;Available at: http://online.wsj.com/articles/premiums-rise-at-big-insurers-fall-at-small-rivals-under-health-law-1403135040. Accessed July 14, 2014
  4. Kutscher B. Fewer hospitals have positive margins as they face financial squeeze. Modern Healthcare June 232014;Available at: http://www.modernhealthcare.com/article/20140621/MAGAZINE/306219968/1135. Accessed July 14, 2014
  5. Centers for Medicare and Medicaid Services. Pioneer accountable care organizations succeed in improving care, lowering costs. [Press release]. July 162013;Available at: http://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-Releases/2013-Press-Releases-Items/2013-07-16.html. Accessed July 14, 2014
  6. American Hospital Association Letter from Linda E Fishman, Senior Vice President, Public Policy Analysis and Development, to Patrick Conway, MD, Acting Director, Innovation Center, Centers for Medicare and Medicaid Services. April 172014;Available at: http://www.aha.org/advocacy-issues/letter/2014/140417-cl-aco.pdf. Accessed July 14, 2014
  7. Centers for Medicare and Medicaid Services. 2015 letter to issuers in the federally-facilitated marketplaces. March 142014;Available at: http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2015-final-issuer-letter-3-14-2014.pdf. Accessed July 14, 2014

New U.S. Drug Tracing Regime Stirs Concern

P&T Journal

July 2014 - for a PDF copy of the published version go HERE.

A mob descended on the big conference room at the Food and Drug Administration (FDA) White Oak campus in Maryland on May 8 and 9. It wasn’t a revolt, but change was in the air and the crowd was on edge. The FDA, at Congress’s direction, was considering how to implement a new law that requires manufacturers, wholesalers, and pharmacies to trace drug products as they move through the distribution chain.
The law kicks in on January 1, 2015. Between now and then, and even afterward, some degree of turmoil will enfold pharmaceutical industry players as they figure out how to comply with the new regulatory regime.
During the May 8 morning session, while discussing the provisions of the Drug Supply Chain Security Act (DSCSA) that Congress passed last November, Connie Jung, RPh, PhD, the FDA official running the workshop, looked up at the audience, stopped, and said, “I hear some snickering.” The unhappy murmuring was directed at some of the drug product tracing provisions in the Pharmacy Distribution and Security Act (PDSA), one of the two titles in the DSCSA.
The FDA held the two-day workshop to get industry input on the draft guidance it is scheduled to release in November. It will guide drug manufacturers, wholesalers, and pharmacies on how to comply with the first wave of DSCSA requirements. Starting January 1, 2015, manufacturers will have to give wholesalers compliance information, either on paper or electronically, in the form of transaction information, transaction statement, and transaction history (TI/TS/TH). That will be a single document called the “DSCSA compliance document.”
The wholesaler, who is next to receive ownership, makes some changes and sends a clean DSCSA document to the pharmacy. If a secondary distributor is part of the chain, he passes along information, too. The pharmacy must verify the document, determining that the drugs it has received are the drugs that originated with the manufacturer. The pharmacy has to record the information, save it for six years, and be able to retrieve it in the event that the manufacturer or the FDA asks the pharmacy to search for “suspect” or “illegitimate” products, which the law defines. Moreover, the pharmacy cannot even accept a product unless it comes with a transaction history.
From January 1, 2015, to November 27, 2017, products will be traced by their lot numbers. After that, manufacturers must imprint unique serial numbers on each unit-level product and package, introducing a much more accurate tracing and tracking system.

Law’s Idiosyncrasies Complicate Compliance

The law contains some idiosyncrasies that will complicate implementation in some instances. For example, the pharmacy’s life will be a little easier when it receives ownership from a primary wholesaler: McKesson, AmerisourceBergen, or Cardinal. In that instance, the primary wholesaler will send a paper DSCSA document to the pharmacy. The TI/TS/TH will be on the document, but the lot number won’t be included. It will be printed on the container of 500 pills or on whatever unit container arrives.
The primary wholesalers were exempted from providing lot numbers because they argued to Congress that it isn’t feasible. That is because they put many different products with different lot numbers into a single container destined for a single pharmacy. The lot numbers are printed on each package. They cannot be individually scanned and uploaded to a database because of the limitations of technology. So considerable manual effort is needed to record those lot numbers and tie them to the DSCSA document. The wholesalers did not want to do that, and they implied there would be a cost impact if they were forced to do so.
Congress, in its wisdom, or in acceding to political pressure, exempted them, thinking that counterfeits are not an issue when the primary wholesaler buys directly from the manufacturer. So why worry about lot numbers? There are not going to be any counterfeits in that shipment. Of course, the absence of lot numbers on documentation makes it harder for the pharmacy to trace a particular container in the event of a recall.
Pharmacies also buy from secondary distributors, who can sometimes provide a product when the primary wholesaler cannot get it. The law says secondary distributors—the broken link in the chain where counterfeits typically come in—do have to send the pharmacy the lot number, but it does not have to be included in the paper documentation. That is a problem for pharmacies, says Susan Pilcher, Vice President of Policy and Regulatory Affairs for the National Community Pharmacists Association:
This is of great concern to the pharmacy community, particularly in light of the fact that during the PDSA discussions about this topic, there were some secondary wholesalers that indicated that the only manner in which they planned to “pass” the lot number information was on the actual bottle of medication that was being sold to the pharmacy. In order to be able to comply with the record retention requirement of the law and in order to respond to requests for information from the FDA, it is essential that pharmacies receive this information in a single document—whether in paper or electronic format.

Initial Tracing Based on Lot Number

The DSCSA defines the elements that need to be included in each of the three items of the TI/TS/TH. For example, a TI must contain 10 pieces of data, including the lot number and the National Drug Code for each item in a particular shipment. Until November 2017, when manufacturers are required to print a unique serialized identifier on each unit package of each drug, the key piece of the TI is the lot number. If a manufacturer sells one million saleable items in a year, and it has 10 packaging events during that year where 100,000 units are packaged, then 10 different lot numbers would be assigned, and that number would be printed on each saleable unit (sometimes on a syringe, for example) packaged during that “event,” on the container the unit is packaged in, on the carton it is shipped in, and often on the pallet the carton is placed on.
The system based on lot numbers, however, is leaky. An unscrupulous distributor could purchase 10 cases of legitimate product from a wholesaler. He now has a record of what he received, including the lot numbers. Nothing prevents him from going out and purchasing 40 cases of counterfeit product. When he sells the counterfeit product to the pharmacy, the bad guy simply shows the legitimate document with legitimate lot numbers he received from the primary wholesaler. The pharmacy is none the wiser.
Compliance with DSCSA requirements starts January 1, 2015, for manufacturers and wholesalers, and six months later for dispensers, primarily pharmacies. Those initial requirements will be spelled out in greater detail based on the FDA’s publication of “Standards for the Interoperable Exchange of Information for Tracing of Human, Finished, Prescription Drugs, in Paper or Electronic Format.”
The FDA is supposed to issue that guidance by November. It will specify in more detail than the congressional bill exactly how documentation must be passed, i.e., in what form, and what that document should include. That will give trading partners precious little time to implement the form of their DSCSA compliance document, including getting software systems up and running (unless, of course, they are using paper). Even before the November deadline, the FDA has to issue separate guidance documents on what constitutes a suspect or illegitimate product. Complicating the issue further, the rules will be “draft” standards, meaning their longevity is in question. The final guidance, whenever that appears, may contain changes. Moreover, “guidance” has minimal legal standing. The FDA cannot fine a company for ignoring guidance.
“There is a lot the FDA has to do to stand this up,” says Anne Marie Polak, a director at FaegreBD Consulting, which represents the Pharmaceutical Distribution Security Alliance.
The short window between publication of draft guidance and the need to comply with that guidance explained why uncertainty was the order of the day at the FDA workshop. No one expects the FDA to issue that draft guidance before November, although there were multiple pleas from the audience to do so. The FDA could move more quickly if it had more staff assigned to this very technical task, and/or it had more technical people with knowledge of pharmaceutical industry distribution channels on its roster. But neither is the case. It was clear that the FDA officials writing the guidance have very little understanding of how each player in the distribution chain creates and receives shipping documents, and the differences within various categories of documents.
But perhaps the FDA cannot be faulted for lacking technical understanding. Even members of the audience were flummoxed over terminology and definitions, both regarding aspects of how the DSCSA document would be passed down the line and what form each of the 10 TI items must take. Differences of opinion from sector to sector were clear. For example, is a shipping document created by computer in PDF form and then sent to a trading partner an “electronic,” interoperable document? How many digits should a National Drug Code (NDC) have?
“What does interoperability even mean?” asked one attendee among the many who grabbed the microphone during the free-for-all discussion on the morning of May 9.

Interoperable Tracing: “How” Will Be Difficult

Although a DSCSA document is supposed to be interoperable starting January 1, 2015, only those passed down in electronic format will be … maybe. The format favored by manufacturers and wholesalers is called the Electronic Data Exchange (EDI) Advanced Ship Notice (ASN), sometimes called an 856 document. EDI documents, including the ASN, are based on standards established by the American National Standards Institute. A second alternative is the Electronic Product Code Information Service (EPCIS) method, which is a GS1 global standard. Both are based on standards, so they offer the promise of uniformity within the drug distribution chain. The third option would be an electronic invoice.
The ASN is the tool of choice because it has been around for decades, there are numerous vendors around who can install the system, and it is being used by the major manufacturers and major wholesalers. But it is not used by the minor wholesalers and definitely not by the pharmacies, which could not receive an ASN. Still, the ASN appears to be the best choice, even though it is not structured to include the transaction statement or transaction history, which for now may be recorded in a text field without a standard format. The ASN is an electronic text document passed from manufacturer to wholesaler.
“While electronic is a favored approach, we are going to have to bend the ASN standard, which was never meant for trade history, in order to include previous transaction, and that may get somewhat unruly. EPCIS on the other hand is designed to provide current and past transactions but must be updated to support tracking by lot number and is much less widely used.” explains Bill Fletcher, Managing Partner at Pharma Logic Solutions, LLC.
The GS1 standard calls for the TI to be encoded in a Datamatrix two-dimensional barcode on the carton and the unit dose package. It was developed so that manufacturers can print a unique serial number on each package. The DSCSA requires this by November 27, 2017. Until them, tracing of products is done via the lot number, which, again, is one of the elements of the TI. The current version of GS1 does not allow for inclusion of lot numbers. Version 2.0 will be out this spring or summer. But that will not give manufacturers enough time to test it and incorporate it into their packaging, to the extent that manufacturers are using GS1 tags now (and few are).
Electronic invoices are problematic for a number of reasons. They could be sent in the form of a PDF. But invoices generally go to accounting offices, not shipping docks. And they arrive after, sometimes long after, a shipment has reached a wholesaler or a distributor. Nor is there a standard for electronic invoices. Lastly, the manufacturers include drug pricing information on an invoice, which they consider proprietary. That information is not in an ASN. The manufacturers are very wary of having their pricing out there for obvious competitive reasons.
But even the ASN and GS1 formats, electronic though they are, are not interoperable between one another. They do not conform to the same standards. For example, a trading partner can only use EDI to communicate directly with other trading partners that also use EDI. Even two trading partners both using ASN may have interoperability trouble. Sarah Spurgeon, Assistant General Counsel for Pharmaceutical Research and Manufacturers of America (PhRMA), says, “For example, even if all of a trading partner’s customers use EDI, each customer may receive unique data sets due to the customization that is allowed by the Healthcare Distribution Management Association’s (HDMA) implementation guideline for the ASN 856. Manufacturers customize their EDI mappings based on trading partner requirements.” But Spurgeon admits customization does not necessarily complicate DSCSA implementation, since mapping, testing, and adjusting of documents with each customer is something that occurs in the regular course of business.

Paper Documents Aren’t a Good Option

Of course, a DSCSA document in paper form isn’t interoperable, either, although that is the least of its limitations. Pharmacies may have to log in hundreds of paper invoices a week, since they are not set up to receive ASNs and are not likely to make the investments to be able to do so. Some manufacturers send paper invoices in the form of packing slips with the shipment, in addition to an ASN, or by mail or fax to transfer relevant information to downstream trading partners. These methods are not based on a standard. But, probably for the benefit of their pharmacy customers, manufacturers are likely to send both ASNs and paper invoices with TI/TS/TH.
Paper packing slips have considerable shortcomings for pharmacies. They currently do not include the name of the manufacturer who initially owns the product; instead, they include the name of the entity shipping the product. Including both the transaction statement and transaction history will be cumbersome, especially for those trading partners that must transmit this information in a single document. There may be timing issues in cases of split shipments (i.e., portions of a single order shipped separately, possibly on different days), since the packing slip would only be attached to one portion of the shipment.
The paperwork burden is significant, too. Fletcher says that pharmacies could scan paper invoices with transaction information, turn them into electronic PDF documents, and search for particular lot numbers. “They might have some false returns but they could likely find documents with a specific lot number,” he states.
Pharmacies will have two alternatives to keeping paper invoices on the premises. They will be able to avoid having to log them in if they opt to subscribe to a cloud-based data supplier such as TraceLink. It counts eight of the 12 major U.S. drug manufacturers among its clients, all of whom connect to the TraceLink Life Sciences Cloud, using it to exchange their DSCSA documents with trading partners. For customers, there are subscription costs involved, of course. But TraceLink offers the advantage of a single connection to a company’s entire supply network while allowing manufacturers, wholesalers, pharmacies, and others to “talk” to one another in different electronic voices, such as ASN versus EPCIS, with TraceLink enabling each company to use its preferred format. One challenge facing the industry is that there is no common standard, as there is for EDI and EPCIS, for portal-based communications that were discussed as a key to exchanging DSCSA compliance documents with independent pharmacies.
The second alternative is for the pharmacy to pay its wholesalers to store the DSCSA documentation and give the pharmacy access to it if need be. Wholesalers aren’t going to do this for free.

Transaction Elements: “What” Is Complicated, Too

Defining the “how” is probably a bigger challenge for the FDA than defining the “what.” One wouldn’t expect a lot of confusion there given that Congress listed the 10 items to be included in the transaction information.
But Anita T. Ducca, Vice President of Regulatory Affairs for the HDMA, says her members are confused about these elements: “number of containers,” “container size,” and “NDC number.” She adds:
It is illogical and unnecessary for the wholesale distributor to inform the dispenser as to the number of containers of the pharmaceutical it received from the previous owner. Including that detail may even be confusing and counterproductive by distracting the dispenser/purchaser from rapidly identifying other, and far more important, TI information for the customer’s purposes.
PhRMA’s Spurgeon says the “date of transaction” requirement could pose a particular challenge to manufacturers. “Industry relies on countless arrangements with complex and varying contractual terms related to sale, shipment, ownership, and billing and invoicing,” she explains. “A single approach to the term ‘date of the transaction’ that is applicable to every arrangement across the manufacturing industry is not feasible.” PhRMA wants the FDA to provide manufacturers with flexibility to determine what date to use for the “date of the transaction” as long as the date used is reasonable for a company’s given business arrangements and ensures the ability to establish the relevant chain of control for a product as part of an investigation consistent with the intent of the DSCSA.
Trading partners are also unenthusiastic, to say the least, about passing along a transaction statement. The DSCSA defines that statement as the sender affirming it:
  1. is authorized as required under the DSCSA;
  2. received the product from a person who is authorized as required under the DSCSA;
  3. received transaction information and a transaction statement from the prior owner of the product;
  4. did not knowingly ship a suspect or illegitimate product;
  5. had systems and processes in place to comply with verification requirements;
  6. did not knowingly provide false transaction information; and
  7. did not knowingly alter the transaction history.
Primary wholesalers recommend that the FDA permit the phrase “DSCSA compliant” to satisfy the transaction statement requirements. Other, longer statements would create enormous data storage burdens that could significantly undermine the adoption and usefulness of electronic transactions.
Whatever new regimen the FDA imposes will be imperfect in many ways. Aside from the holes that Congress either inadvertently created or did not anticipate, the system’s biggest flaw, perhaps, is that it starts with the manufacturer and ends with the pharmacy. There are no security requirements around the chemicals the manufacturers receive as ingredients for their drugs. Nor does a lot number allow a pharmacy to identify which patient received “suspect” or “illegitimate” drugs.
“Ideally, we would want to find the patient who received a particular drug and tell him or her to stop taking the drug, but the law doesn’t drive to that point,” says Fletcher. “We don’t get a true picture of the lineage of the product, just the middle life. There are many examples of ingredients resulting in harm, and if we must recall all of a drug because we cannot pinpoint the recipient, we impact the health of those who are not at risk by denying them their needed medication.”

Author bio: 
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

REFERENCE

1. Food and Drug Administration. Title II of the Drug Quality and Security Act: Drug Supply Chain Security. Available at:  http://www.fda.gov/Drugs/DrugSafety/DrugIntegrityandSupplyChainSecurity/Drug-SupplyChainSecurityAct/ucm376829.htm. Accessed May 29, 2014.

Chicago Metalworking Area One of 12 Newly-Designated Manufacturing "Communities"

The Fabricator
July 2014

There is one metalworking "community" among the 12 the Department of Commerce just announced as the first in what it is calling its Manufacturing Communities Partnership (IMCP) initiative. The program's objective is to accelerate the resurgence of manufacturing in communities nationwide by supporting the development of long-term economic development strategies that help communities attract and expand private investment in the manufacturing sector and increase international trade and exports. Commerce's Economic Development Administration (EDA) is running the new program. Its announcement was made simultaneously with the appointment of a new administrator of the EDA, Jay Williams. He worked in at the Obama White House and prior to that as the Mayor of Youngstown, Ohio from 2006 to August 1, 2011.
    
But exactly what the 12 communities will receive in the way of federal help is, well...way up in the air. They will get their identities disclosed on a website, and each will get a designated federal liaison at each of the 11 federal agencies which have economic assistance grants to hand out. But there is no guarantee that any of the 12 communities will get any of those funds, which the Commerce Department estimates at $1.3 billion.

Secretary of Commerce Penny Pritzker announced the first 12 communities on May 28. Seventy communities applied to the program. They had to submit manufacturing resurgence plans, and compete with other cities before being named as one of the 12 first participants. Besides the metalworking community centered in Chicago, there are mostly aircraft and automotive communities. They are mostly promising to upgrade worker training efforts, in one way or another. Many of those efforts are already underway. So there is some question about what they will be doing additionally as a result of being included in this program, especially since there is no promise of new federal funding.
   
In order to be included in the program, communities had to demonstrate the significance of manufacturing already present in their region and develop strategies to make investments in six areas: 1) workforce and training, 2) advanced research, 3) infrastructure and site development, 4) supply chain support, 5) trade and international investment, 6) operational improvement and capital access. Later this year, the Obama administration plans to launch a second IMCP competition to designate additional communities, as well as convene the 70 communities that applied for designation to share best practices in economic development planning.
    
Chicago's Metro Metal Consortium Manufacturing Community will be headed up by the Alliance for Illinois Manufacturing (“AIM”) and Illinois Manufacturing Excellence Center (IMEC). They will work with metal manufacturers to assess business operational capability and identify key areas for improvement. Sustainability efforts will be coordinated by the Cook County Department of Environmental Control with participation from Illinois Sustainable Technology Center and Elevate Energy. The region’s more than 3,700 firms in the metals industry and supply chains employ more than 100,000 people and generate more than $30 billion in revenues.
  
David Boulay, President, Illinois Manufacturing Excellence Center, notes that Cook County is taking the lead in pulling all the Chicago metal participants together. "They have assembled a great team," he states. "But how this plays out, well, that is always a matter of execution." He hopes the designation as a manufacturing community helps the Chicago metals sector get more federal resources. "But if all the designation does is help us focus existing resources, that is an excellent path in the right direction."

Author bio: 
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

Federal Court Ruling On Mercury Revives Gas-Electric Worries

Pipeline & Gas Journal
June 2014 - for the online version go HERE.

A federal court decision allowing the Environmental Protection Agency (EPA) to move forward with a rule limiting mercury emissions from power plants has heightened concerns in some quarters about interstate pipeline infrastructure inadequacy.

In mid-April, the U.S. Court of Appeals for the District of Columbia said 1,400 coal- and oil-fired electric generating units (EGUs) at 600 power plants must meet air emissions standards finalized in 2011. The plants have up to four years to comply with necessary reductions in emissions of mercury and other air toxics, but the 2011 final rule had been held in abeyance because of a legal challenge.

In September 2013 the EPA issued a proposed rule, which, if finalized, will force newly built power plants to meet stricter standards on emissions of carbon dioxide, a leading greenhouse gas. Taken together, these two EPA actions have persuaded some electric utilities to close coal-and oil-fired power plants, leading some officials at agencies such as the Federal Energy Regulatory Commission (FERC) to worry that natural gas pipelines will have a hard time supplying replacement power plants using natural gas, especially in tough weather such as last winter.

American Electric Power has said it will retire almost a quarter of its coal-fueled generating units in the next 14 months. That is 25% of its capacity. In PJM, 13,000 MW of additional capacity will be retired by mid-2015. "Unless the market structure changes, the capacity replacements for these assets may not provide the same level of reliability we have experienced historically," says Nicholas Akins, chairman, president, and CEO, AEP. PJM is the Regional Transmission Organization (RTO) serving all or parts of the states of Illinois, Indiana, Michigan, Ohio, Kentucky, Tennessee, West Virginia, North Carolina, Virginia, Maryland, Delaware, Pennsylvania, New Jersey and the District of Columbia. AEP, Dominion and Exelon, among others, serve electricity customers within PJM, to name a few.

To the extent that EPA regulations drive some coal-fired generation plants out of business, pressure will be ramped up on pipelines to serve the gas-fired plants that take their place, if in fact gas-fired plants DO take their place. "Natural gas has proven to be the fuel of choice for new generation developing in our region," states Michael Kormos, executive vice president of Operations for PJM Interconnection. "Over 64% of new resources in our queue are proposed gas-fired generation."

A week before the federal court handed down its EPA/mercury ruling, the FERC’s unofficial "pipeline commissioner" told a Senate committee he preferred the EPA present better data before forcing electric utilities to close because of new environmental rules. Philip Moeller told the Senate Energy and Natural Resources Committee, which was meeting to consider issues related to grid reliability, "The sufficiency of our generating resources has been clouded by uncertainties arising from changing environmental regulation. I am not opposed to closing older and less environmentally-friendly power plants, but I am concerned that the compressed timeframe for compliance with the new environmental rules was not realistic given the amount of time it takes to construct new plants and energize transmission upgrades to mitigate plant closures.”

Author bio: 
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

FDA Draft Guidances Compound the Compounding Uncertainty

P&T Journal
June 2014 - for a PDF copy of the published version go HERE.

A New List of 503B Outsourcing Facilities Offers No Guarantee of Anything

On January 8, 2014, Margaret A. Hamburg, MD, Commissioner of Food and Drugs, sent a form letter to hospital pharmacists. That doesn’t happen very often. But Dr. Hamburg had something of critical importance to say: She encouraged the pharmacists to ask the compounding vendors they deal with to register with the Food and Drug Administration (FDA) under a new program called “503B” authorized by the Drug Quality and Security Act (DQSA).
Congress passed the DQSA in November 2013. Its compounding provisions grew out of the catastrophic events of late 2012, when contaminated compounded steroid injections made by the New England Compounding Center (NECC) caused a fungal meningitis outbreak leading to infections in more than 750 individuals and the deaths of 64 people across 20 states. The FDA had inspected NECC facilities and found suspect conditions, but had failed to force the company to make the kind of improvements that would have prevented the fungal meningitis disaster. Part of the FDA’s failure was related to enforcement limitations it faced under provisions in the Food, Drug, and Cosmetic Act.
The new, voluntary 503B program allows compounders who ship nonpatient-specific prescriptions of sterile and (maybe) nonsterile compounded pharmaceuticals to register with the FDA and be held to much higher standards than NECC and others in that category ever had to meet. The FDA will regulate and inspect 503B pharmacies, and the 503B list is supposed to be a de facto FDA “Good Housekeeping” seal of approval. As of early May, 42 compounders were listed on the FDA website as having registered.
But on its website, the FDA provides all sorts of cautionary clarifications as to the reliability of 503B outsourcing facilities. It says purchasers will have “assurance that conditions at that facility met applicable current good manufacturing practice [cGMP] standards at the time of the inspection” if the facility has had “a recent satisfactory FDA inspection.” But only nine of the 42 pharmacies on the list have had an inspection since registering this year. In each case, the FDA issued a Form 483 as a result of the inspection. The FDA website says: “An FDA Form 483 is issued when investigators observe any significant objectionable conditions. It does not constitute a final agency determination of whether any condition is in violation of the FD&C Act or any of our relevant regulations.”  Many of the other 42 have received Form 483s in the past few years, and some of them then got warning letters from the FDA.
So hospital pharmacists looking to the 503B list, per Dr. Hamburg’s urging, can be excused for being a bit perplexed at what looks not so much like a “Good Housekeeping” seal of approval but rather a list of pigs in a poke. Some of the facilities on the list may have floors that one could eat off of. Others may have floors that one wouldn’t want to walk on.

Skepticism Toward 503B Registrants

The International Academy of Compounding Pharmacists (IACP) “is very disappointed with FDA’s current actions on recommending that stakeholders only do business with 503B registered outsourcing facilities even while acknowledging that such registration alone does not guarantee any safer compounded medications or promote public health,” states David G. Miller, RPh, the IACP’s Executive Vice President and CEO. “FDA is blatantly recommending that stakeholders do business with facilities that have fulfilled no other safety requirements except simply filling out paperwork to register with the FDA.”
Some hospitals realize the limitations of the 503B list. Where resources are available, they are double-checking the outsourcing facility’s bona fides.
“We also have an annual on-site evaluation of our compounding vendors,” explains George Hill, RPh, MBA, Catholic Health Initiative’s Director of Pharmacy Services. “We discuss FDA communication specific to their facility at that time. We have developed a checklist of items we evaluate at our on-site inspection. Our annual inspection includes an independent auditor and a pharmacist with expertise in USP 797 standards,” the U.S. Pharmacopeia guidelines that cover compounding of sterile preparations. “Every two years we include an additional inspector who has a microbiology background and consulting experience advising pharma with sterile manufacturing process. We expect corrective action plans based on the on-site inspections and we incorporate resolution of corrective action planning into our vendor agreements.”
Not only did the DQSA change the outsourcing regulatory landscape, it also made some adjustments in the in-hospital or in-retail compounding environment. It did that by making changes to Section 503A of the Food, Drug, and Cosmetic Act, which has been around since 1997. It regulates in-pharmacy compounding, and puts state boards of pharmacy in control of policing that compounding. That will remain the case: State boards will continue to inspect hospital and community pharmacies that compound.
The constitutionality of the provisions originally included in 503A have been challenged in federal court over the years, and some of them were set aside. Given that shaky legal ground, the FDA never clearly defined the 503A provisions over the years they were in effect. That led to confusion, at times, as to whether state boards of pharmacy or the FDA should inspect and/or regulate pharmacies doing various kinds of compounding. The DQSA ostensibly cleared up that confusion. The FDA issued draft guidance on implementation of both 503A and 503B in January 2014. Both draft documents gave pharmacy providers cause for concern and raised as many questions as they answered.
“It is unfortunate the FDA is not moving faster to clarify some of these issues, but I am sure they have a process to follow,” says T.J. Johnsrud, RPh, president of Nucara, a pharmacy company with four 503A pharmacies in three states. Johnsrud explains that he is considering starting a 503B pharmacy but has received conflicting answers on such things as whether they can manufacture nonsterile compounds and which drugs they can make. “It is not clear whether the FDA is going to require compliance with the pharma industry cGMP or something else. It would be helpful if they made it easier to do small-batch, sterile compounding. That is why we haven’t pulled the trigger.”
The DQSA’s key provision established the new 503B federal regulatory program for bulk compounders such as NECC that can voluntarily register as “outsourcing facilities.” Any companies selling bulk compounded drugs without first receiving a prescription for a particular patient theoretically should register voluntarily. If they do not, they are supposedly subject to the same requirements that conventional drug manufacturers such as Pfizer, Merck, and the rest have to meet, and failure to satisfy those requirements, in areas such as GMPs, opens the compounder to heavy penalties, also approved by the DQSA. Again, pharmacies that prepare only patient-specific compounded drugs—although there is some undefined leeway in that regard—will be regulated by each state’s board of pharmacy.

503B List Open to Interpretation

As of early May 2014, 42 pharmacies had registered under 503B. Those 42 are a tiny fraction of the bulk pharmacies that hypothetically, because they provide nonpatient-specific medications, should voluntarily register. On one hand, the 42 deserve considerable credit. They have raised their hands and said they want to be held to a higher standard. However, the DQSA told the FDA to develop a set of cGMPs specifically for 503B pharmacies. Those practices have not been proposed, so the FDA is starting to inspect the 42 against standards that are not yet in place. “I have spoken to some of the pharmacies on the list [of 42] and know some are spending hundreds of thousands of dollars to upgrade their facilities,” says Joe Cabaleiro, RPh, Associate Director of Pharmacy at the Accreditation Commission for Health Care, which accredits pharmacies.
Still, the list of 42 503B outsourcing facilities would give anyone reason for pause. For example, the first compounder on the list of 42 is Advanced Pharma, Inc., of Houston, Texas. It registered on January 22, 2014. The FDA completed an inspection on March 17, 2014, and issued a Form 483. It discusses a number of shortcomings at the Houston facility, including some in the category of procedures to prevent microbiological contamination of sterile products.
Bourjois Abboud, RPh, MBA, President of Advanced Pharma, says those kinds of observations—and they are common on Form 483s issued to many of the 42—should give potential hospital pharmacist customers pause for concern. But he explains that Advanced Pharma, like many of the others, is in the process of transitioning from an environment where it complies with USP 797 to one where it complies with FDA GMPs written especially for 503B pharmacies. Those have not even been published yet, which means 503B registrants such as Advanced Pharma are not sure what FDA inspectors will be looking for. “So the important thing to ask is, what is a 503B pharmacy’s response to a 483, and what corrective action is it taking,” Abboud states. Soon he expects to complete a significant expansion to the present facility that began in 2013 with the speculation of FDA governance and GMP standards. This expansion represents a seven-figure investment that he feels puts his company ahead of the yet-to-be-issued standards, Abboud says.
Johnsrud points out that under USP 797 the sterility of the finished product is emphasized as opposed to the facility and the process, which is what a cGMP additionally attempts to ensure.
Abboud emphasizes that he and other leaders in the bulk sterile compounding business have long wanted the FDA to regulate and inspect their facilities. That is because Advanced Pharma and other companies have been unable to sell products to hospital pharmacies in states that require in-office use, meaning that the hospital must be able to produce a specific prescription for each dose it purchases from an outside vendor. Now Advanced Pharma plans to market to hospital pharmacies in 48 states.

Inspections Have Turned Up Issues

There is no way to sugarcoat the Form 483s issued before and after January 2014 to almost all of the pharmacies on the 503B list. Almost all are designated “open.” The FDA explains that designation this way: “Open does not mean that FDA has determined that further action will be taken. It means only that a determination has not yet been made. If an action has been taken, it will be listed. Possible FDA actions may include: warning letter; seizure; or injunction.”  The Form 483s paint a picture of endemic sloppiness.
The FDA inspected Allergy Laboratories, Inc., in Oklahoma City, Oklahoma, the third compounder on the list of 42, in April 2013. A Form 483 was issued as a result of that inspection. Then the FDA issued a warning letter on September 4, 2013. One paragraph from that letter states:
The deficiencies described in the Form FDA 483 issued at the close of each inspection referenced above and this letter are an indication of your quality control units not fulfilling their responsibility to assure the identity, strength, quality, and purity of your licensed biological drug products and intermediates. These serious deficiencies from the applicable regulations and standards described above, when viewed collectively, represent the extensive failure of your firm to maintain control over the manufacturing process, including 1) release of product, 2) monitoring of the process, 3) appropriate response to a failure in the process, and 4) process controls. These critical aspects of the operation are objectionable and accordingly, the agency lacks confidence in your firm’s ability to manufacture pure, potent, safe and effective products.
Rebecca Johnson, president of Allergy Laboratories, did not return phone calls.
Cantrell Drug Company in Little Rock, Arkansas, has an open warning letter, while its president, Dell McCarley, PharmD, is president of the newly launched Specialty Sterile Pharmaceutical Society (www.sterilepharma.net). A Form 483 was issued to Cantrell Drug on November 2, 2013, and remains “open.” It includes numerous complaints, including entries in a section titled: “Procedures designed to prevent microbiological contamination of drug products purporting to be sterile are not established.” Dr. McCarley did not respond to phone and e-mail requests to be interviewed.
The FDA has never inspected some of the registrants. A state regulatory agency may have done so, but no information in that regard is posted on the FDA website. The second registrant listed alphabetically that has never been inspected by the FDA is Banner Health in Chandler, Arizona. Repeated requests to the Arizona State Board of Pharmacy asking whether it has inspected Banner went unanswered.
Even if a hospital pharmacist does find a spotless 503B pharmacy, it is not clear what compounds he or she may purchase from that outsourcing facility. Johnsrud says he has heard conflicting reports about what a 503B pharmacy can manufacture. The 503B draft guidance document  says the list of acceptable products will come into play if a potential compounded drug does not comply with the standards of an applicable USP or National Formulary monograph. If such a monograph does not exist, then the substance must be a component of an approved drug product. If the substance used is neither of the above, then the bulk substance must be included on a “positive list.”
The FDA first published a proposed positive list of such substances in 1999. That list contained 20 substances that the FDA initially recommended, and another 10 then still under FDA consideration. The FDA did not issue a final rule adopting the 30 substances or otherwise finalize the list. On December 4, 2013, the FDA withdrew that proposed rule and bulk substances list, stating it would reconsider the substances on the original list and requesting nominations for specific bulk substances to be included on a new list.
Can pharmacists still compound those 30 drugs in the absence of an FDA list? Jim Smith, President of the Professional Compounding Centers of America, says:
To now preclude their use, after this prolonged period of permissible use, until finalization of a new list, would mean disruption for the physicians who prescribe these therapies and the untold number of patients who have come to rely upon them. Bulk substances that illustrate the importance of continued access include: betahistine, cantharidin, diphenylcyclopropenone, piracetam, and quinacrine HCl.

What Are “Limited” and “Inordinate” Under 503A?

While it is mostly hospital pharmacists who will be concerned about bulk purchases from 503B outsourcing facilities, both they and community pharmacists will have to pay attention to the new complexities evolving out of the tightened-up 503A program. Those new provisions have particular relevance for hospital pharmacies because one of them will detail the extent to which hospital pharmacies can distribute compounded drugs beyond a certain number (that metric is among the many things undetermined) to other hospitals or clinics in the health system that happen to be located across state lines from the pharmacy where the compounding takes place.
There will be two distinctions here. First, if the compounding pharmacy is located in a state that has not executed a memorandum of understanding (MOU) with the FDA, it can sell interstate no more than 5% of the total prescription orders dispensed or distributed by the individual or firm. The FDA is supposed to come up with a model MOU in conjunction with the National Association of Boards of Pharmacy. The FDA published a draft MOU back in 1999, but it was never finalized. If the state does sign an MOU, the hospital pharmacy does not face that 5% restriction.
The American Pharmacists Association (APhA) wants the FDA to reconsider the inclusion of the 5% limitation on compounded drug products as the default “non-MOU” metric. Its comments to the FDA say the agency needs to clarify how it will calculate “total prescription orders.” Is this calculated on a monthly, quarterly, or annual average basis? How is the baseline established, and if there is a temporary spike (e.g., for a drug in shortage), how would that affect a pharmacy’s compliance? Further, because the FDA has failed to provide any basis for this number, the 5% limit appears arbitrary at best.
Other elements in the draft guidance affect all state-regulated 503A pharmacies, not just those shipping interstate. One allows a licensed pharmacist or licensed physician to compound “in limited quantities before the receipt of a valid prescription.” There is no definition of “limited quantities.” The FDA has never defined that term, and the draft guidance doesn’t take a shot at doing so, either. The draft guidance also states that a pharmacist or physician should “not compound regularly or in inordinate amounts any drug products that are essentially copies of commercially available drug products.” “Inordinate amounts” is not defined either.
“This language has affected how much high-risk compounding we do internally. There may be some subjectivity surrounding how ‘compound regularly or in inordinate amounts’ can be interpreted,” states CHI’s Hill. “The draft guidance and all the events involving adverse drug events (ADEs) have caused us to examine our compounding practices more closely. We have advised our membership to use high-risk compounding only when other means of acceptable procurement have been exhausted.”

How Far Does FDA Authority Go Under 503A?

An equally fundamental question is what standards a pharmacy will be held to when compounding drugs on its own premises. Congress made it clear when writing the new 503B section that the FDA must make sure that outsourcing facilities are complying with USP chapters 795 and 797. It did not amend 503A to require the same for in-house, 503A pharmacies. “It would appear, absent Congressional action, FDA does not have the legal authority to enforce compliance with 795 and 797 for pharmacies exempt under 503A,”’ states the PCCA’s Smith. “PCCA fully supports compounding in compliance with USP 795 and 797, encourages states to adopt these standards (as many have), and provides significant training and education on the same; regulation and enforcement of these provisions should remain a matter of state, not federal law.”
The USP 797 issue is academic in many states, where compliance is required by the state board of pharmacy. That is the case in Iowa, Illinois, and Texas, according to Johnsrud, whose four sterile pharmacies operate in those states.
But the answers to many of the open questions about the new compounding landscape are clearly not academic. The longer confusion reigns, the more likely it is that another NECC type of problem will develop.

Author bio: 
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

REFERENCES

1. FDA. Form letter from Margaret A. Hamburg, MD, Commissioner of Food and Drugs, to hospital pharmacists. Available at:  http://www.fda.gov/downloads/Drugs/GuidanceCompliance-RegulatoryInformation/PharmacyCompounding/UCM380599.pdf. Accessed April 30, 2014.
2. Government Printing Office. Drug Quality and Security Act. 2013 Available at: http://www.gpo.gov/fdsys/pkg/BILLS-113hr3204enr/pdf/BILLS-113hr3204enr.pdf. Accessed April 25, 2014.
3. FDA. Registered outsourcing facilities. Available at: http://www.fda.gov/Drugs/GuidanceComplianceRegulatoryInformation/PharmacyCompounding/ucm378645.htm. Accessed May 12, 2014.
4. FDA. Information concerning outsourcing facility registration. Available at: http://www.fda.gov/Drugs/GuidanceCompliance-RegulatoryInformation/PharmacyCompounding/ucm389118.htm. Accessed April 30, 2014.
5. FDA. Form 483 issued to Advanced Pharma, Inc., Houston, Texas. Available at: http://www.fda.gov/downloads/AboutFDA/CentersOffices/OfficeofGlobalRegulatoryOperationsandPolicy/ORA/ORAElectronicReadingRoom/UCM392180.pdf. Accessed April 30, 2014.
6. FDA. Warning letter to Allergy Laboratories, Inc.; Oklahoma City, Oklahoma: Available at: http://www.fda.gov/ICECI/Enforce-mentActions/WarningLetters/2013/ucm376390.htm. Accessed April 30, 2014.
7. FDA. Form 483 issued to Cantrell Drug Company, Little Rock, Arkansas. Available at: http://www.fda.gov/downloads/AboutFDA/CentersOffices/OfficeofGlobalRegulatoryOperationsandPolicy/ORA/ORAElectronicReadingRoom/UCM375548.pdf. Accessed April 30, 2014.
8. FDA. Guidance for Industry: Interim Product Reporting for Human Drug Compounding Outsourcing Facilities Under Section 503B of the Federal Food, Drug, and Cosmetic Act. Available at: http://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatory-Information/Guidances/UCM377050.pdf. Accessed April 30, 2014.
9. Professional Compounding Centers of America. Re: Draft Guidance “Pharmacy Compounding of Human Drug Products Under Section 503A of the Federal Food, Drug, and Cosmetic Act.” Available at: http://www.protectmycompounds.com/wp-content/uploads/2013/06/PCCA-503A-Guidance-Comments-to-FDA-020314.pdf. Accessed April 30, 2014.
10. FDA. Guidance: Pharmacy Compounding of Human Drug Products Under Section 503A of the Federal Food, Drug, and Cosmetic Act. Available at: http://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/UCM377052.pdf. Accessed April 30, 2014.