Federal District Court in Florida Delivers a Decisive Blow to FDA’s Authority to Regulate Pharmaceutical Compounding from Bulk Substances

September 18, 2011

By Karla L. Palmer & Jeffrey N. Gibbs

Marking a significant victory for the pharmaceutical compounding industry, a Florida federal district court ruled that FDA did not have authority to enjoin the “long-standing, widespread, state-regulated practice of pharmacists filling a veterinarian’s prescription for a non-food producing animal by compounding from bulk substances.”  United States v. Franck’s Lab, Inc., No. 5:10-cv-147-Oc-32TBS (M.D. Fla. filed Sept. 9, 2011) at 80.  While the case involved pharmacy compounding, its implications extend much more broadly to other areas of FDA law.  Significantly, the court chastised the FDA for trying to “eradicate the line” between what would be considered unlawful manufacturing and the traditional compounding of animal medications.  After engaging in a detailed historical, regulatory and legal analysis of pharmaceutical compounding, the court held that FDA’s attempted assertion of authority over “traditional pharmacy compounding in the context of a pharmacist-veterinarian-patient relationship is contrary to [the] congressional intent” of the Federal Food, Drug and Cosmetic Act (“FDCA”).  Id. at 70.  The court further held that the undisputed evidence in the case demonstrated that allowing FDA to enjoin a pharmacist’s “traditional state-authorized practice of bulk compounding of animal drugs could destabilize the pharmacy profession and leave many animal patients without necessary medication.”  Id. at 74-75.

We previously blogged about the court’s earlier denial of FDA’s motion for a preliminary injunction against Franck’s Lab back in 2010.  Recall that FDA filed its lawsuit against Franck’s after 21 Venezuelan polo ponies died as a result of a mathematical compounding error, which the Florida Board of Pharmacy had investigated and resolved.  Despite the state’s thorough resolution of the pony matter, FDA inspected Franck’s facility on several subsequent occasions, issued a Form 483 citing various observations, which primarily concerned “perceived quality assurance and training issues.”  Id. at 5.  Franck’s responded to the Form 483, asserting that the violations were the province of the Florida Department of Health and not FDA, among other defenses.  Instead of  further discussion with Franck’s, the FDA sought an injunction in April 2010 to halt Franck’s distribution of animal drugs compounded from bulk substances, claiming that Franck’s was engaging in illegal animal drug manufacturing in violation of the FDCA.  Id. at 5-6.  (The court spent several pages of its opinion reviewing Franck’s history of compliance with state pharmacy laws, its cooperation with the FDA - citing letters to the agency dating back to at least 2004 - and Franck’s understanding that its compounding activities were lawful.)    

The court stated at the outset of its opinion on summary judgment that FDA “acknowledges that this is the first time it has sought to enjoin a state-licensed pharmacist from bulk compounding of animal medications.”  Id. at 6.  Indeed, FDA made it clear to the court that it was staking “the bright line position that any compounding of animal medications from bulk substances violates … the FDCA, even when conducted by a state-licensed pharmacist for an individual animal patient pursuant to a valid veterinary prescription.”  Id. at 7.  FDA asserted that it “essentially can enjoin a pharmacist’s state-authorized practice of animal drug compounding even where a single medication is compounded pursuant to a valid prescription.”  Id. at 38.  FDA further contended that a “traditional compounding practice implicates the same concerns under the FDCA as the mass-production, mass-marketing, and mass distribution of unapproved animal drugs by an unlicensed manufacturer.”   

In response to FDA’s claims, Franck’s submitted industry, fact, expert and other declarations supporting its position that it was not engaging in unlawful manufacturing of unapproved animal drugs.  The FDA failed to present evidence refuting Franck’s position, despite having an “ample opportunity” to do so, “resting instead on its position that compounding animal drugs from bulk … constitutes a per se violation of the FDCA.”  Id. at 8, 45.  The court noted that FDA also claimed that this was a “simple case” because “the literal, plain language of the 1938 FDCA gave the agency enforcement authority to prevent pharmacists from bulk compounding medications for non-food producing animals.”  Id. at 38, 39.  

The court disagreed with FDA’s “maximalist” portrayal of its own statutory authority.  Also, as underscored by its 80-page opinion, the court disagreed that the case was a “simple” one.  After undertaking a historical review of pharmaceutical compounding and compounding in bulk, the court reviewed FDA’s fifty-plus years of its “regulation” of compounding practices.  It found untenable the agency’s position that, for over fifty years since enactment of the FDCA, it did not assert its authority to regulate pharmacy compounding; nevertheless, “once it has shown a violation of the statute (i.e., that a ‘new animal drug’ has been distributed without an approval or exemption in place), it enjoys unfettered enforcement discretion” to take action.  Id. at 41.  The court also addressed the illogicality of FDA’s inconsistent regulatory positions in the 2002 and 2003 pharmacy compounding Compliance Policy Guides (“CPG”) (that address human and animal compounding, respectively) by presenting the following hypothetical: “A pharmacist who compounds medication from bulk for ingestion by a horse is akin to a manufacturer and subject to an FDA enforcement action, while the same pharmacist compounding medication from bulk for ingestion by the human rider of that horse is not.”  Id. at 30. 

After engaging in a Chevron analysis about the statutory construction of the FDCA’s new animal drug approval process, the type of bulk pharmaceutical compounding at issue, and FDA’s failure to engage in notice and comment rulemaking, the court ultimately held that it is simply unreasonable for FDA to assert that, even when “charitably viewed,” the FDCA is ambiguous concerning whether Congress intended the agency to regulate compounding.  Id. at 77.  In addition, the FDA should have been on notice that its “statutory authority to regulate traditional, state-licensed veterinary pharmacy compounding was questionable.”    

The court was troubled that FDA never “attempted to test its views” about bulk compounding for non-food producing animals by “notice and comment review.”  Id. at 74.  Several in the industry (including Franck’s) had long argued to FDA that its decidedly more hostile 2003 CPG guidance, which included FDA’s position that compounding animal drugs from bulk substances was a practice akin to manufacturing, represented a significant departure from previous guidance, and would cause many animals and the industry to suffer needlessly.  (Unlike earlier guidance, the 2003 CPG, “without explanation,” did not acknowledge, among other things: (1) the utility of compounding from bulk; (2) the circumstances under which doing so would absolve the pharmacist from regulatory action; and (3) the permissibility of the practice for non-food producing animals.)  The court noted that, notwithstanding numerous communications from industry and Congress over the years, the FDA failed on its promise to promulgate the revised guidance.  Id. at 30-33.  Many of the criticisms leveled by the court against FDA’s veterinary CPG would apply equally to enforcement actions against drugs compounded for humans that rest of the theory that all compounding is illegal.

Given FDA’s predilection for issuing guidance documents instead of proceeding through rulemaking, this part of the court’s decision may have broad applicability.  A recurring criticism of FDA’s use of guidance documents instead of rulemaking is that the agency does not “attempt[] to test its views” through the more rigorous rulemaking process.  See id. at 74.  Unless reversed on appeal, this language will be cited in many other challenges to FDA’s employment of guidance documents, such as regulation of laboratory developed tests and research use only products, to name a few examples.