Track-and-Trace, Compounding Reform Bill Signed Into Law

The Drug Quality and Security Act (H.R. 3204) that provides uniform, nationwide standards for both pharmacy compounding and drug tracking was enacted into law in November. The bill came as a response to a report from the Government Accountability Office that confirmed legislation was needed to clarify the Food and Drug Administration’s (FDA’s) oversight of large-scale drug compounders. It also replaces the current patchwork of state drug tracing laws and establishes a nationwide track-and-trace pharmaceutical system.

The new law applies a uniform national standard to the oversight and inspection of compounding pharmacies that produce large volumes of custom pharmaceuticals so that they are regulated more like drug manufacturers. Specifically, pharmacies must register as “outsourcing facilities” and be subject to FDA regulation. They can compound drugs only from bulk ingredients that appear on a list compiled by the Health and Human Services Department. Drugs are required to be compounded under the direct oversight of a pharmacist, but facilities are not required to have a prescription to provide compounded drugs. The drugs sold in the previous six months must be reported every six months, and any serious adverse drug experiences must be reported within 15 days, plus facilities are required to conduct follow-up investigations and reporting. Facilities will be inspected by FDA according to a risk-based schedule, with companies paying a $15,000 annual fee to FDA to support these inspections (compounding manufacturers with under $1 million in gross revenue will pay a reduced fee). FDA may also publish the name, state location and specific information about drugs compounded by the facilities. Last, outsourcing facilities are exempt from certain requirements, including the national track-and-trace provisions established under the bill.

Under the track-and-trace provision, all members of the pharmaceutical distribution supply chain — manufacturers, wholesale distributors, pharmacies and repackagers — are required to keep detailed records of transactions made between them when drugs change hands. Specifically, they must transmit specific information about each drug upon each transfer, and they must maintain transaction statements and histories for a minimum of three years. For all transfers, a transaction history showing all prior transactions, beginning with the manufacturer, must be provided. The provision also requires all entities in the drug supply chain to promptly investigate whether a drug is contaminated, counterfeit or stolen, if requested by FDA. In addition, the law strengthens licensure requirements for wholesale distributors and specifically includes third-party logistics providers for the first time as part of the drug supply chain. Within four years of the bill’s enactment, manufacturers will be required to include a “prescription drug product identifier,” or nationwide drug serial number. By seven years after the bill’s enactment, repackagers, wholesale distributors, pharmacies and other dispensers cannot receive drugs without such labels. Last, one of the goals of the bill is to develop a feasible pathway to unit-level tracing in 10 years.

FDA is developing a guidance process, a set of milestones and a public interface over the next two years in order to implement the law for 2015.