Fifth Circuit Medical Center Pharmacy v. Mukasey Decision Creates Circuit Split Over FDCA § 503A Pharmacy Compounding “Safe Harbor”

July 23, 2008

When Congress enacted the Federal Food, Drug, and Cosmetic Act (“FDCA”) in 1938, it required New Drug Applications (“NDAs”) for “any” new drug.  At the time, approximately half of the drugs in this country were compounded, not manufactured.  Today, while the percentage of compounded prescriptions has dropped significantly, millions of compounded drugs are dispensed each year.  One unresolved legal question was whether the NDA requirements applied to compounded drugs.  On July 18th, the United States Court of Appeals for the Fifth Circuit announced its answer to the question in Medical Center Pharmacy v. Mukasey.

In the early 1990s, FDA began asserting that the compounding of drugs without an NDA was unlawful.  FDA’s move spurred considerable controversy.  To resolve the dispute, Congress added section 503A to the FDCA when it enacted the FDA Modernization Act of 1997.  This provision stated that compounded drugs were exempt from the NDA, good manufacturing practice, and adequate directions for use requirements if they met certain criteria. 

One criterion was that pharmacies could not advertise the compounding of specific drugs.  A group of pharmacists successfully challenged this provision in Western States Med. Ctr. v. Shalala, 69 F. Supp. 2d 1288 (D. Nev. 1999).  The Ninth Circuit affirmed the Nevada district court’s ruling that the advertising restriction violated the First Amendment.  It also found that the provision was not severable from the rest of section 503A.  The Supreme Court affirmed the lower court rulings that the advertising restriction was unconstitutional, but declined to consider the severability issue.  Thompson v. Western States Med. Ctr., 535 U.S. 357 (2002).

Subsequently, another group of pharmacists filed suit in Midland, Texas challenging FDA’s regulation of compounded drugs.  The district court granted sweeping relief, holding that compounded drugs were “implicitly exempt” from the 21 U.S.C. § 321(p) “new drug” definition.  Med. Ctr. Pharm. v. Gonzales, 451 F. Supp. 2d 854 (W.D. Tex. 2006).  FDA appealed.

In the Medical Center Pharmacy opinion issued last week, the Fifth Circuit acknowledged that there are reasons to believe Congress did not intend to deem all compounded drugs unapproved “new drugs,” but nevertheless held that compounded drugs are not exempt from the “new drug” definition.  Rejecting the pharmacies’ argument that including compounded drugs within the “new drug” definition would absurdly but effectively outlaw the lawful practice of compounding, the court concluded that “Congress hid no such elephant in §321(p)’s mousehole.”  The court also found, however, that the advertising restrictions of section 503A are severable from the rest of the law.  Thus, the court disagreed with the Ninth Circuit and held that section 503A remains in effect.

The court also found that compounded veterinary drugs fall within the statutory definition of “new animal drug.” It acknowledged, however, that compounded veterinary drugs are exempt from the FDA approval requirement if they meet the criteria established by the 1994 Animal Medicinal Drug Use Clarification Act (“AMDUCA”).  Codified at 21 U.S.C. §360b(a)(4), (5), AMDUCA permits the compounding of veterinary drugs using FDA-approved human and animal drugs upon the order of a licensed veterinarian and subject to FDA discretion as to whether the drug poses a risk to public health.

The Fifth Circuit’s decision could increase the confusion over the legal status of compounding.  Pharmacists in the Ninth Circuit cannot claim protection by section 503A, while pharmacists in the 5th Circuit can.  The status of the law elsewhere in the country remains an open question.  The Fifth Circuit’s analysis, however, is more detailed than the Ninth Circuit’s, paving the way for pharmacists elsewhere in the country to claim that they, too, are protected by § 503A.

After the district court decision in Medical Center Pharmacy, FDA said it would honor the court’s ruling in only that one district, which is geographically large but sparsely populated.  It will be much more difficult for FDA to take the same tack with the Fifth Circuit decision.  It remains to be seen whether FDA and/or the pharmacies will seek Supreme Court review based on the circuit split.  Alternatively, FDA could ask Congress for a legislative fix.  In the meantime it appears that the controversy over the legal status of compounding will continue unabated.

By Jeff N. Gibbs & Jennifer B. Davis

Categories: Drug Development