US Pharm. 2014;39(2):40-42.

The Drug Quality and Security Act (PL 113-54) became law on November 27, 2013.1 There are two parts to this new provision. Title I applies to the compounding of human drug products pursuant to a prescription. Title II, often referred to as the Drug Supply Chain Security Act, establishes a 10-year timeline to achieve an interoperable track-and-trace system for prescription drugs. This second part also strengthens licensure requirements for wholesale distributors and third-party logistics providers and establishes nationwide drug serial numbers. Title I has the most direct impact on practicing pharmacists. However, Title II also will have a direct impact on dispensers of prescription drugs.

Title I: Drug Compounding

Perhaps most significantly, the Drug Quality part of the law makes clear the distinction between traditional pharmacy compounding, which is exempt from the Act, and pharmacies that are making large volumes of compounded drugs without a prescription in hand. The Act also clarifies the FDA’s role in overseeing the later practices while reserving the rights of states to regulate traditional compounding.

In what will undoubtedly create headaches for pharmacy legal scholars down the road, Congress chose to reinstate §503A, an amendment to the Food, Drug, and Cosmetic Act (FDCA), as the vehicle for establishing the new policies and procedures required under the current law.2 An earlier version of §503A, also dealing with pharmacy compounding, had been struck down by the U.S. Supreme Court because it contained prohibitions against soliciting prescriptions requiring compounding and advertising for pharmacy compounding services.3

The original §503A was added to the FDCA by the Food and Drug Administration Modern-ization Act of 1997.4 It described conditions that must be satisfied in order for drug products compounded by a licensed pharmacist or physician to be exempt from three sections of the FDCA: 1) §501(a)(2)(B), concerning current good manufacturing practices (GMPs); 2) §502(f)(1), concerning the labeling of drugs with adequate directions for use; and 3) §505, concerning the approval of drugs under new drug applications (NDAs) or abbreviated new drug applications (ANDAs).

It is important to understand this background because in May 2002 the FDA issued a compliance policy guide (CPG) that described how the FDA intended “to address pharmacy compounding of human drugs in the immediate future” as a result of the Supreme Court decision.5 Now that §503A has been amended by the Drug Quality and Security Act, the May 2002 CPG is no longer relevant. Compounding pharmacists should disregard the 2002 guidance because it has been replaced by the Draft Guidance: Pharmacy Compounding of Human Drug Products Under Section 503A of the Federal Food, Drug, and Cosmetic Act.6 A finalized guidance should be available soon, and it is this version that pharmacists should be following.

The upshot of all of these changes is that traditional pharmacy compounding practices are exempt from the good manufacturing procedures, adequate directions for use, and new drug provisions of the FDCA, providing certain conditions are met. For example, the new regulations do not apply to sterile or nonsterile drugs that are compounded for an identified individual patient based on the receipt of a valid prescription or order and are compounded by a licensed pharmacist or physician. Furthermore, limited quantities may be compounded in anticipation of a prescription based on a history of receiving such prescriptions within an established relationship between pharmacist/physician and patient, or pharmacist and prescriber. However, USP monographs and chapters on compounding apply to compounding from bulk substances; if no monograph exists, compounded drugs must be made from a component of an approved drug or from substances on a list issued by the Department of Health and Human Services (HHS).

In addition, drugs cannot be compounded that were removed from the market as unsafe or not effective, or that appear on a list published by the HHS. Drugs that are essentially identical copies of a commercially available product may not be compounded, and restrictions on out-of-state shipments are either based on the presence of a memorandum of understanding between the state and HHS, or are limited to 5% of total prescription orders dispensed by the pharmacy.

Congress has dealt with sterile compounding by nonpharmacies by renumbering §501B as §501C and inserting a new §501B on outsourcing facilities. These facilities may voluntarily register with the FDA to compound sterile products. An outsourcing facility is defined as a facility operating from a single geographic location that is engaged in compounding sterile products, has voluntarily registered with the FDA, and complies with other provisions of §503B. Compounded drugs from these facilities will be exempt from the new drug and adequate directions for use provisions of the FDCA, but are not exempted from current GMP regulations.

While there have been attempts by the FDA to oversee pharmacy drug compounding for years, Congress acted now to give it such authority in light of the bacterial meningitis cases arising from the New England Compounding Center (NECC) fiasco in 2012.7 More than 750 people developed illnesses after receiving methylprednisolone acetate (MPA) steroid injections for back and joint pain. Over 17,000 vials of the injections were shipped from May through September 2012 before a nation-wide recall was issued. The NECC filed for bankruptcy after it was forced to close.

FDA investigators found unsanitary conditions at the facility, including bacteria and mold on multiple surfaces where drugs were prepared.8 The U.S. Senate proposed legislation in April 2013 that would subject drug compounders to FDA oversight.9 In September 2013, the House of Representatives approved the measure. The Senate passed the bill in November 2013.10 In December 2013, attorneys representing creditors in the bankruptcy proceedings for the NECC announced a proposed fund of $100 million to settle claims from the meningitis outbreak victims and creditors of the defunct operation.11 A judge will have to approve the plan before it goes into effect.

Title II: Drug Supply Chain Security

Title II of the Act establishes a federal track-and-trace system for prescription drugs.1 While the majority of the Act applies to manufacturers and distributors, there are several provisions that apply to “dispensers” such as pharmacies and pharmacists. The legislation is intended to replace a patchwork of state product-tracing laws with a uniform federal standard.

Upon full implementation, the system will facilitate the exchange of information at the individual package level about where a drug has been in the supply chain. The new system will enable verification of the legitimacy of the drug product identifier down to the package level; enhance detection and notification of illegitimate products in the drug supply chain; and facilitate more efficient recalls of drug products. The law also tightens registration and licensure mandates for wholesale distributors and third-party logistics (3PL) providers. 3PL providers will be recognized as a part of the drug supply chain. The FDA will be required to develop a public database of licensed wholesalers.

Among key provisions to be implemented over the next 10 years are requirements for the following12:

Product identification: Manufacturers and repackagers are to put a unique product identifier on certain prescription drug packages; e.g., a bar code that can be easily read electronically

Product tracing: Manufacturers, wholesaler drug distributors, repackagers, and many dispensers (primarily pharmacies) in the drug supply chain are to provide information about a drug and who handled it each time it is sold in the U.S. market

Product verification: Manufacturers, wholesaler drug distributors, repackagers, and many dispensers (primarily pharmacies) are to establish systems and processes to be able to verify the product identifier on certain prescription drug packages

Detection and response: Manufacturers, wholesaler drug distributors, repackagers, and many dispensers (primarily pharmacies) are to quarantine and promptly investigate a drug that has been identified as suspect, meaning that it may be counterfeit, unapproved, or potentially dangerous

Notification: Manufacturers, wholesaler drug distributors, repackagers, and many dispensers (primarily pharmacies) are to establish systems and processes to notify the FDA and other stakeholders if an illegitimate drug is found

Wholesaler licensing: Wholesaler drug distributors are to report their licensing status and contact information to the FDA. This information will then be made available in a public database

3PL licensing: 3PLs, those who provide storage and logistical operations related to drug distribution, are to obtain a state or federal license.

The Act will be implemented in a number of steps over a 10-year period. Within 7 years, supply chain sectors “will all be passing and holding onto key information about each drug’s distribution history.”10 Within 10 years, a full system of electronic, interoperable product tracing will be in place. Manufacturers will be required to serialize drugs under this system within 4 years after passage, which will result in the creation of nationwide drug serial numbers. The Secretary of the HHS is required, within 1 year of enactment, to issue a draft guidance document establishing standards for the interoperable exchange of transaction information, transaction history, and transaction statements, in paper or electronic form. Within 2 years, the Secretary must publish guidances on waivers, exceptions, and exemptions, and on grandfathering of products already in the supply chain on the effective date of labeling requirements.

By January 1, 2015, manufacturers must provide the subsequent owners of their products with transaction histories, transaction information, and a transaction statement, and they must begin capturing transaction information, including lot-level information, for not less than 6 years after the date of the transaction. Also by January 2015, manufacturers must have systems in place to quarantine, investigate, and clear suspect or illegitimate products.

Of most importance to pharmacies and pharmacists, after January 1, 2015, dispensers must not accept ownership of a product unless the prior owner provides a transaction history, information, and statement. Drug products dispensed to patients do not need to be accompanied by any of this ownership information. However, dispensers transferring products to another owner (except for returns) must provide the subsequent owner with a transaction history, information, and statement for the product. Exempt from this later requirement are “accommodation sales” wherein a dispenser provides another dispenser with a product needed to fulfill a specific patient need. All dispensers must maintain transaction histories, information, and statements for 6 years “as necessary to investigate a suspect product.”1

Most returns from pharmacies to wholesalers are also exempt from providing the ownership transaction documentation. For example, dispensers may return a saleable product to the trading partner from whom it was obtained without providing a transaction history, information, or statement, and may provide nonsaleable products to manufacturers, wholesalers, or returns processors without supplying transaction histories, information, or statements.

From January 15, 2015, and thereafter, dispensers must have systems in place to quarantine, investigate, and notify the Secretary of cleared suspect products. In addition, dispensers must have means for assisting in the disposal and analysis of illegitimate products, and for notification within 24 hours to the Secretary and trading partners of discovery of illegitimate products. Specific enhanced requirements for dispenser investigations will go into effect 7 years from the date of enactment.


1. The Drug Quality and Security Act. HR 3204 (PL 113-54). November 27, 2013. Accessed January 10, 2014.
§503A, an amendment to the Food, Drug, and Cosmetic Act (FDCA).
3. Thompson v. Western States Med Ctr, 535 U.S. 357 (2002).
4. Food and Drug Administration Modernization Act of 1997 (PL 105-115). November 21, 1997.
5. Guidance for FDA Staff and Industry. Compliance Policy Guides Manual. Sec. 460.200. Pharmacy compounding. May 2002. Accessed January 10, 2014.
6. FDA. Draft Guidance: Pharmacy Compounding of Human Drug Products Under Section 503A of the Federal Food, Drug, and Cosmetic Act. December 4, 2013. Accessed January 10, 2014.
7. Castillo M. Meningitis outbreak may affect more than 23 states. CBS News. October 5, 2012. Accessed January 10, 2014.
8. Jaslow R. FDA finds contaminated vials, bacteria and mold at New England Compounding Center. CBS News. July 29, 2013. Accessed January 10, 2014.
9. Senate bill aimed at tighter regulation of com-pound-ing pharmacies. CBS News. April 26, 2013. Accessed January 10, 2014.
10. Senate health policy leaders hail passage of bipartisan legislation to improve safety of compounded drugs, track all prescription drugs; bill now heads to the President’s desk. U.S. Senate Newsroom. November 18, 2013. Accessed January 10, 2014.
11. Pharmacy’s bankruptcy attorneys announce deadline to file meningitis claims. Bankruptcy News. January 10, 2014. Accessed January 10, 2014.
12. Drug Supply Chain Security Act. FDA. Updated December 2, 2013. Accessed January 10, 2014.

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