Sterile Compounding: 503A vs 503B and the Non-Existent 1 Mile Radius

Many healthcare systems are creating Consolidated Service Centers (CSC) to help standardize the pharmaceutical experience throughout their system.  There are many cost savings and quality improvement benefits to consolidating pharmaceutical practices.  Unfortunately, when it comes to centralizing sterile compounding there is a great deal of misunderstanding when it comes to registering with the FDA; specifically, whether to be a state regulated 503A or an FDA regulated 503B.  The most common notion is that registering as a 503B is the right approach.  Even though that approach might appear to be the safest option, registering with the FDA as a 503B outsourcing manufacturer is not the same thing as operating an inpatient pharmacy following the standard USP 797 regulations.  It is better to think of 503B as becoming an actual manufacturer with its own set of rules.  To be effective, selecting the 503B path would require a different business model to cost justify such an operation.  Fortunately, working within the confines of the 503A classification can still produce a quality product for patients and help keep the high costs associated with Current Good Manufacturing Practice (CGMP) from disrupting certain aspects of a consolidated services approach.

The draft guidance for Hospital and Health System Compounding Under the Federal Food, Drug, and Cosmetic Act: Guidance for Industry dated April 2016 states, “…FDA does not intend to take action if a hospital pharmacy distributes compounded drug products without first receiving a patient-specific prescription or order provided that:  (1) The drug products are distributed only to healthcare facilities that are owned and controlled by the same entity that owns and controls the hospital pharmacy and that are located with a 1 mile radius of the compounding pharmacy;” Forcing CSCs to register as 503B because they move compounded product more than 1 mile from the facility that compounded the product is frequently misinterpreted and does not align with the regulations which clearly allow for anticipatory compounding and interstate distribution of products when certain conditions are met.

It is important to focus on the applicable statutes and regulations as found in Section 503A of the Federal Food, Drug, and Cosmetic Act.  The guidance documents have limited ability to be enforced when they make statements and claims outside of the applicable statutes and regulations.  To reinforce this, many of the Guidance for Industry documents contain in their introductions: “You can use an alternative approach if it satisfies the requirements of the applicable statutes and regulations.”  The headers on many of the pages within the documents also state: “Contains Nonbinding Recommendations.”

The key requirements for maintaining 503A compliance for most CSCs are as simple as:

1. Ensure the facility administering the medication obtains a valid order prior to dispensing
2. Provide the CSC with access to these orders so that auditable records are maintained
3. Prohibit the CSC from compounding inordinate amounts of products
4. Refrain from compounding products that are essentially copies of commercially available drug products
5. Obtain out-of-state licenses prior to initiating interstate distribution and comply with the quantity restrictions associated with 503A regulations

CSCs are in a unique position to receive valid prescription orders for identified individual patients.  With the advancements in electronic health records, CSCs can operate as a member of their health system with full access to required documentation and the ability to generate auditable reports to support their practice. 

Section 503A and the FDA guidance documents have left opportunities for healthcare systems to take a defensible position on identifying their CSC(s) as 503A.  Consolidating sterile compounding can increase safety and decrease costs for patients without taking on the unnecessary burdens of registering with the FDA as a 503B outsourcing manufacturer.