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Exceptions to the Rule Part 1: Module 4 of 5

Module 4: Exceptions to the Rules Part 1

In the old days, unscrupulous individuals- sometimes referred to by terms such as “snake oil salesmen”- created and peddled products that were promoted as treatments or even cures for a variety of maladies. Most of these products were, at best, useless and many were often more damaging than the ailment they claimed to remedy. In modern times, the development and marketing of medicines has become regulated by complex sets of laws and controls that apply to a wide range of products. In previous segments of this course, we have briefly studied some of these regulations and their impacts on today’s pharmaceutical industry. However, the very nature of medicinal products and the uniquely challenging ethical aspects of the pharmaceutical business make exceptions to the rules increasingly common. In the remainder of this course, we will learn about some categories of pharmaceuticals that require special consideration. In this module will look at Compound pharmaceuticals and the use of accelerated New Drug Applications for approval of Generic drugs.

Compound Pharmaceuticals

A popular new concept in today’s medical community is that of “personalized medicine”, that is, “customize(d) health care, with decisions and treatments tailored to each individual patient”[i]. We will return to this idea in the final module of this course in connection with our discussion of the field of Pharmacogenomics, which is the study of how one’s genes affect a person’s response to drugs[ii] and how medicines could be specifically tailored to treat a particular patient. However, before modern scientific and technological advances enabled the pursuit of focused treatment, there were other methods by which physicians and pharmacists worked together to create medicines that could facilitate the treatment of individuals with unique needs.

The oldest method of personalized medicine is the compounding of drugs[iii]. Prior to the advent of mass-produced drugs, all medicines were prepared individually by experts who would use various methods to make drug formulations that were appropriate and tolerable to the patients in need. They might mix a specific amount of the active ingredient with a liquid to make it easier to swallow or with flavoring agents to mask unpleasant tastes. They could also add materials that would enable the drug to be administered by being applied to the skin rather than in a pill or by injection. This practice is known as “compounding”. As mass production of drugs became the norm, pharmacists were largely restricted to dispensing ready-made medications provided by drug makers in standard doses and containing defined types and amounts of additives. In recent years, however, the growing recognition of the necessity to customize medications to meet specific patient needs has led to a resurgence in the practice of compounding. As practiced today, compounding drugs is defined as “the process of combining, mixing or altering ingredients to create a medication tailored to the needs of an individual patient”[iv]. Compounding pharmacists aim to address the special needs of an individual patient who is not able to use commercially available formulations by applying methods such as creating a mixture of the drug without a common additive to which the patient is allergic or a suspension containing a lower-than-standard dose of active ingredient for a very young patient.

Individual states’ pharmacy boards may set rules controlling compounding, and compounding pharmacies typically follow the standards set by the United States Pharmacopeia[v] (USP 795 for non-sterile products, USP 797 for sterile products, and USP 800 for hazardous drug mixtures, such as chemotherapy or radiopharmaceuticals). For example,[vi] compounding pharmacies must formulate their products for specific patients and by prescription from a qualified health provider. They are not permitted to mass produce medications, except in the case of compounding sterile drugs for use in health care settings[vii]. However, compounding is not directly regulated by the FDA and is, therefore, exempt from most of the requirements to which other medical products are subject such as demonstrating safety and efficacy prior to marketing approval or for quality controls in manufacturing. This absence of FDA oversight, and the ability of a local compounding pharmacy to rapidly distribute products to patients in far-flung locations using modern methods of packaging and transportation, greatly increased the potential for the wide-spread accessibility of unsafe, low-quality products. It was only a matter of time before serious patient injury would result. Since compounders are not required to report adverse events to FDA and, typically, do not do so[viii], only the most egregious examples are brought to the attention of federal officials. Thus, it was not until 2012 that an incident came to light that was so serious that it could not be overlooked.

In 2012, over 750 cases of fungal meningitis infection and over 60 deaths in 20 states were linked to the use of contaminated drugs compounded by a Massachusetts pharmacy.[ix]  In 2013, in response to this tragedy, Congress added muscle to existing laws that were designed to ensure safer compounding practices including updates to Section 503 of the Federal Food, Drug and Cosmetic Act (FDCA) and passage of the Drug Quality and Security Act (DQSA)[x]. Enforcement of these laws is facilitated by rules against healthcare fraud and abuse and via agencies that include the FBI, the Department of Health and Human Services, Office of the Inspector General (OIG), the Drug Enforcement Administration, state Medicaid Fraud Control Units, the US Department of Justice (DOJ), and, in particular, the Medicare Fraud Strike Force[xi]. The latter group is an inter-agency task force comprised of participants from the OIG and DOJ “who target emerging or migrating fraud schemes, including fraud by criminals masquerading as health care providers or suppliers”.

Common Violations

The majority of violations committed by makers of compounded drugs fall into the following categories:

·         Health care fraud;

·         Price gouging; and

·         Illegal promotion

Let’s take a brief look at each of these types of abuse.

Healthcare fraud

The opportunity to commit health care fraud presents a great temptation to those who seek to illegally capitalize on the higher reimbursement that is enjoyed by suppliers of compounded pharmaceuticals under publicly funded healthcare programs. In June 2016, the US government revealed the existence of an “unprecedented nationwide sweep led by the Medicare Fraud Strike Force in 36 federal districts, resulting in criminal and civil charges against 301 individuals, including 61 doctors, nurses, other licensed medical professionals, and also health care company owners and others for their alleged participation in health care fraud schemes involving approximately $900 million in false billings”[xii]. Those apprehended were prosecuted under provisions of federal regulations including the Anti-Kickback Statute, which is “a criminal statute that prohibits the exchange of anything of value in an effort to induce the referral of federal health care program business,”[xiii]  and the False Claims Act, which prohibits false claims to any federal agency.”[xiv]

Price gouging

The practice of compounding has been implicated in the recent dramatic increases in drug prices, with compounded drug costs increasing by 218% from 2012-2014 compared to an overall rise in US prescription drug prices of 13% in 2014[xv]. The steep increases have been attributed to inflated wholesale prices for some of the bulk components of the compounded drugs as well as to what some consider unscrupulous physician prescribing habits and compounding pharmacies’ “creative profitmaking schemes.”[xiii]

On the other hand, compounding has been proposed as a possible solution to the ethical problem of skyrocketing sole-source generic drug prices. In 2015, responding to Turing Pharmaceuticals’ raising the price of its drug, Daraprim, from $13.50 to $750 per pill, Imprimis Pharmaceuticals announced that it would offer patient-specific, custom formulations of pyrimethamine (the active ingredient in Daraprim) together with leucovorin (a drug often administered together with Daraprim) for $1 per pill[xvi]. Combining the two drugs for custom use by prescription would allow them to avoid violation of patent laws, as Turing owned the patent for Daraprim, not the generic form, pyrimethamine, that was used by Imprimis. It would also allow them to comply with compounding regulations, such as rules prohibiting them from mass production of a single drug.

Illegal promotion

Placing controls on the promotion of compounded drugs is not a simple task. For example, compounded drugs are not required to be approved by FDA and, therefore, cannot- by definition- be guilty of promoting an unapproved use. In fact, the makers of compounded drugs won a major Supreme Court victory in this area in the 2002 case of Thompson v. Western States Medical Center,[xvii] which held that federal law that heavily restricted the advertising and promotion of compounded drugs[xviii] violated the First Amendment's free speech guarantee. When Congress revised the law in 2013, it removed all restrictions against promotion of compounded drugs.[xix] As a result, makers of compounded drugs may make virtually any claims about their products as long as they are not clearly false or misleading.

An example is the case of Imprimis Pharmaceuticals, a company that we met earlier, which was in the news again in 2018 when it received an FDA warning letter accusing the drug maker of representations made about some of their drugs on their website and Twitter account. The letter accused the statements of asserting “that these products are made with FDA approved components or are FDA-approved, when that was not the case.”  In addition, the firm’s website was accused of making “false or misleading claims about ‘Dropless,’ ‘LessDrops,’ and ‘Simple Drops’ products by omitting important risk information, including side effects, contraindications, or consequences that may result from their use, and by presenting efficacy claims about the ‘Simple Drops’ products while omitting material information”[xx].

Compounded Drugs: Next Steps

Regulatory exemptions were granted to drug compounders to make it less cumbersome for patients in-need to access special drug formulations. However, the safety concerns that came to the fore in the 2012 meningitis outbreak continue to trouble regulators. In 2018, the FDA announced a plan that would focus on five major issues related to compounded drugs:

·         Manufacturing standards for outsourcing facilities;

·         Regulating compounding from bulk drug substances;

·         Restricting compounding of drugs that are essentially copies of FDA-approved drugs;

·         Boosting FDA's partnership with state-level regulators that oversee pharmacists and compounders;

·         Developing new guidances on other aspects of drug compounding[xxi]

The guidances and regulations that are expected to come out of this effort are intended to ensure that the needs and expectations of consumers of compounded drugs will continue to be satisfied while protecting patients’ safety.

Generics and Accelerated New Drug Applications

Earlier in this module, and in a previous module of this course, we have given some thought to the problems associated with fair pricing for generic versions of drugs. We will now take a closer look at how a generic drug gains marketing approval and how that process differs from the path followed by producers of drugs that are sold under brand names.

According to the FDA, a generic drug is “a medication created to be the same as an existing approved brand-name drug in terms of dosage form, safety, strength, route of administration, quality, and performance characteristics.”[xxii]  To get approval to market a generic drug, the manufacturer must demonstrate that:[xxiii]

·         It is “pharmaceutically equivalent” to the branded drug;

·         The manufacturer can make the drug correctly and consistently;

·         The “active ingredient” is the same as that in the brand-name version;

·         The right amount of the active ingredient is delivered to the part of the body where it has the desired physiological effect;

·         The “inactive ingredients” (fillers, flavorings, etc.) are safe;

·         The drug has acceptable long-term stability;

·         The drug will be shipped and sold in an appropriate container;

·         The label contains the same information as that in the branded drug’s label;

·         Relevant patents or legal exclusivities have expired.

In 1962, the landmark Kefauver-Harris Amendment to the FDCA was passed, requiring that drug manufacturers demonstrate that their product is both safe and effective before FDA could approve it for marketing[xxiv]. This is accomplished by submission of a New Drug Application (NDA), containing all relevant data on pre-clinical, clinical, and analytical testing as well as manufacturing methods and controls, packaging information, and plans for collecting safety and efficacy information post-approval.

In 1984, the Hatch-Waxman Act created a modified process for approving generic copies of all drugs that were originally approved after 1962 by stating that pre-clinical and clinical testing does not have to be repeated for generics[xxv]. Instead, the generic manufacturer must only conduct those pre-clinical or clinical tests that would be needed to demonstrate equivalence of their product to the approved drug. The generic manufacturer will then submit an Abbreviated New Drug Application (aNDA) that includes any new data generated by the generics maker and references the existing pre-clinical and clinical testing that was in the NDA of the approved version of the drug. This greatly decreases the time that it takes the manufacturer to test the drug and to prepare this less complex document. It also shortens the length of time it takes FDA to review the regulatory submissions.

The overseer of generic drug approvals and the agency’s point of contact for stakeholders- such as physicians, pharmacists, patients, and patient advocacy groups- is the FDA’s Office of Generic Drugs (OGD)[xxvi]. Dozens of guidances [xxvii] have been developed to help drug makers understand how FDA will enforce regulations related to the generic drug industry. Unfortunately, the development and implementation of these regulations has been accompanied by controversies[xxviii].

Once approved, a generic form of a drug is typically sold at a much lower price than its branded equivalent. Since the drug maker will not need to invest in the discovery and development of the product and only needs to finance manufacturing, its costs are much lower. At the same time, this simplified process often results in a lot of competition among generics makers which drives down prices and, with them- despite the lower costs- profit margins. A significant incentive exists, therefore, to get an aNDA approved as quickly as possible and to get the product to the market before it becomes too crowded. In 1987, Mylan, a generic drug manufacturer, complained that review of several of its aNDAs had been intentionally delayed. The investigation revealed that, to accelerate bringing their generic products to the market, some manufacturers had given kickbacks to regulators who promised to expedite the review of their submissions. In addition, it was revealed that some drug makers had submitted false information in their aNDAs. In response to these violations, the Generic Drug Enforcement Act of 1992 was passed, imposing penalties for illegal acts related to aNDAs and requiring more bio-equivalence and quality data in the submissions [xxviii]


We have examined two categories of pharmaceuticals- compounded drugs and generics- that, due to their exceptional characteristics, have made it necessary for regulatory agencies to devise and enforce novel types of controls. In the final module of this course, we will examine some additional rules that are intended to make it easier and faster for patients with very serious illnesses to gain access to new potentially life-saving treatments: Orphan Drug designation, Fast Track approval, and Expanded Access (also known as Compassionate Use). We will close with a brief discussion of a recent scientific development that has raised the specters of new ethical challenges to drug developers and suppliers: Pharmacogenomics.