Compounding Pharmacies to Compete with Pharma Manufacturers?

As the media pressures the pharmaceutical industry to offer the same high-quality drugs at lower prices, industry experts actively seek ways to meet this growing demand. And the answer isn’t always from where you might expect.

With companies such as Mylan making headlines for its price hike of the EpiPen—from $100 in 2007 to more than $600 in 2016—many companies are turning to their internal operations and assessing where money can be saved and the ultimate cost of the drug cut (while not impacting overall revenue). However, the answer may not be within pharmaceutical companies alone.

Big pharmacies, such as Walgreens, have increased their pharmaceutical compounding operations, preparing personalized medications for patients at a lower price and without the need for a drug supply from pharmaceutical companies (on select medications).

“Compounding is a practice in which a licensed pharmacist, a licensed physician, or, in the case of an outsourcing facility, a person under the supervision of a licensed pharmacist, combines, mixes, or alters ingredients of a drug to create a medication tailored to the needs of an individual patient in its conveyable form (needle and syringe),” said Walt Murray, CEO of ARC Experts and a strategic partner for MasterControl Quality and Compliance Consulting. “Compounding pharmacies make drugs prescribed by doctors for specific patients whose needs that can’t be met by commercially-available drugs.”

According to the Professional Compounding Centers of America (PCCA), with the arrival of drug manufacturing on a larger scale in the 1950s and 1960s, pharmaceutical compounding saw a rapid decline. The role of a pharmaceutical compounder shifted to that of a dispenser and is only now starting to revert back to its original role.

Compounding vs. Manufacturing

Compounding pharmacies, like drug manufacturers, have to follow the same regulations, such as those pertaining to a manufacturing process in a controlled environment. A manufacturing environment, for any drug product, must demonstrate control of the manufacturing process—suppliers, cleanliness, personnel, etc.—regardless of whether it takes place in a pharmaceutical manufacturing facility or a compounding facility.

However, there are key distinctions between the two.

“A 503 product is distributed by prescription,” Murray explained. “503(a) is a pharmacy that provides a prescription to a patient. 503(b) is a pharmacy that provides prescriptions that are prescribed in mass quantity (i.e., doctor prescribes one syringe of testosterone for 50 patients, which can be prescribed across multiple pharmacies).

“The key is the nature of [the] prescription demand. Drugs are produced by independent, profit-driven commercial companies (e.g., Merck, AstraZeneca, and GSK). Such drugs are produced in mass quantities regardless of prescription demand.”

In addition, any production environment requires GMP controls for drugs.

“Additional GxP requirements, such as good laboratory practices (GLP) and good clinical practices (GCP), may apply to commercial drugs,” Murray explained.

For compounding pharmacies, the law defines an “outsourcing facility” as a facility at one geographic location or address that:

  1. Is engaged in the compounding of sterile drugs
  2. Has elected to register as an outsourcing facility
  3. Complies with all of the requirements of section 503(b)

Regulation of Pharmaceutical Compounding

Unlike drugs produced by pharmaceutical manufacturers, compounded drugs are not FDA-approved.

“The practice of compounding is regulated by state boards of pharmacy,” said Murray. “Generally, state boards of pharmacy will continue to have primary responsibility for the day-to-day oversight of state-licensed pharmacies that compound drugs in accordance with the conditions of section 503(a) and 503(b) of the FD&C Act. Although, the FDA retains some authority over their operations (but only when manufacturing processes are involved).

“However, outsourcing facilities that register under section 503(b) are regulated by FDA and must comply with GMP requirements and will be inspected by the FDA according to a risk-based schedule.”

Other governing bodies that have sway over compounded drugs include:

  • The Drug Enforcement Agency (DEA), which has oversight for any controlled substances used in the preparation of compounded preparations, e.g., hydrocodone and amphetamines.
  • The United States Pharmacopeia (USP) Convention, which issues standards that apply to compounding.

Furthermore, there is a major distinction in the packaging of drug products (between compounding and manufacturing facilities).

“Compounds have HIPPA data on the label (i.e., the prescription number and patient name),” said Murray. “Commercial drugs typically have the description (brand name), lot number, and expiry date. A prescription would be added as a label by a pharmacy.”

When is Compounding Preferable?

Pharmaceutical compounding is preferable “when a patient’s need cannot be met by FDA-approved medications,” Murray said.

The FDA gives specific examples of when pharmaceutical compounding might be preferable to traditional drug manufacturing:

  • If a patient has an allergy and needs medication to be made without a certain dye
  • If an elderly patient or a child is unable to swallow a pill and needs medicine in a liquid form that is not otherwise available
  • To adjust strength or dosage

“Compounding pharmacists also customize medications to make them more palatable to facilitate compliance, e.g., flavor a medication for a child,” said Murray. “So if your child can’t swallow a pill or won’t take his/her medication because it tastes ‘yucky,’ compounding would be the way to go. However, compounding doesn’t replicate available drugs.”

Will Compounders Compete with Manufacturers?

Pharmaceutical compounders have the potential to compete with pharmaceutical manufacturers, particularly with the rising concern of drug availability and cost.

“The FDA is considering control of the demographics for 503(b) pharmacies, meaning it will no longer allow a 503(b) pharmacy unlimited geographical acceptance,” said Murray. “Currently, if I operate a pharmacy in Montana, I can go to Florida to have my product mass produced. This constitutes interstate commerce, which the FDA regulates.”

At present, the drugs that compounding pharmacies are most often manufacturing are prescriptive, formulated products, such as testosterone.

However, according to Murray, pharmaceutical companies still have the upper hand.

“Commercial drug manufacturers make products based on approved design formulation from the FDA. Because they have gone through the submission process, they are able to brand and market their drugs to consumers. Also, these branded drugs are patented and proprietary,” said Murray. “Formulations by prescription don’t require FDA approval. So, the quandary (for compounding pharmacies) is that they can’t brand a prescription formulation without due process (FDA submission). If they can brand it, they can’t influence consumer demand.”

This feature story can also be found in the January/February 2017 issue of Pharmaceutical Processing. 

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