Compounding a Crisis

By Scott Gottlieb 

Fifteen Americans have died from tainted steroid injections. Here’s how Obama’s FDA can make things better.

In the past two weeks, 15 Americans have died of fungal meningitis and more than 200 have become infected from tainted steroid injections they received to treat problems with their spines. The “compounding” pharmacy responsible for distributing the contaminated steroid shipped nearly 18,000 vials of the product to 75 facilities in 23 states, so that many more people could have been exposed to the fungal contaminant.
Federal health agencies are rightly focused on recalling the drugs, and members of Congress are already calling for new laws with tighter controls over compounding pharmacies. New laws merit consideration, but so do existing rules that are not being enforced and policies that are driving more widespread use of these compounded products.


Among the first policy issues that should be scrutinized is the Obama administration's recent tightening of oversight of the manufacturing of generic versions of sterile injectable drugs. This tightening was rooted in some legitimate concerns that the Food and Drug Administration (FDA) had about the reliability of the manufacturing facilities. But it has prompted shortages of these drugs. In some cases, the shortages have forced doctors to seek these medicines from compounding pharmacies, which are less regulated than the generic drug firms. At the same time, the administration has created a contradictory set of policies that has diluted the regulatory authority required to ensure the safety of these compounded medicines.
While it’s highly unlikely that the decisions made by the Obama administration led to the recent tragedy, new policies create regulatory challenges that could make similar incidents more likely down the road.
Compounding the Problem
The drug behind the current tragedy was an injected steroid that was produced by The New England Compounding Center, a pharmacy in Massachusetts. Compounding pharmacies cater to the unique needs of a patient, creating customized drugs that often are not available commercially. Compounded products can play an important role in clinical medicine, allowing doctors to tailor drugs to patients’ particular medical requirements.
The practice of pharmacy is typically regulated by individual states, not the FDA, except for under certain circumstances. Some of these circumstances include situations where:

• large scale compounding is done in anticipation of receiving prescriptions but not in response to actual patient scripts
• the compounders make drugs from bulk ingredients not approved by the FDA
• the compounding is done for third parties for resale
• the compounding drugs are essentially the same as commercially available products

Given the FDA’s limited resources and narrow authority over the compounding industry, coupled with the large number of compounders (more than 3,000 compounding pharmacies operate in the United States), the FDA has for the most part left the states to manage most enforcement regarding compounding firms.
But the FDA has often asserted its authority when compounding pharmacies were supplying their own versions of drugs that were also available commercially as FDA-approved branded and generic products. In these circumstances, the FDA held that these compounding firms were guilty of distributing unapproved drugs (the New England Compounding Center, the outfit behind the tainted steroid shots, was cited for this, among other violations, in a 2006 warning letter issued by the FDA).

About 30 percent of the manufacturing capacity for these sterile, injected drugs at the largest generic drug makers is now offline as a consequence of FDA enforcement actions.

However, a policy change made earlier this year by the Obama administration has curtailed some of this authority. Under the old policy, manufacturers had to remove certain compounded products from the market once an FDA-approved version of the same drug is available. If they continued to market the compounded versions, the pharmacies could be guilty of distributing an unapproved drug under FDA regulations. The FDA has effectively backed away from this longstanding policy in an effort to punish some drug makers over the cost of their products.
At particular issue are drugs that never went through formal FDA review. Compounders frequently distribute these unapproved, older medicines. Many of these drugs are cough medicines that have been on the market for decades, before the creation of the modern FDA review requirements. These drugs often have established efficacy and pose little risk. Some are sterile, injected drugs — similar to the steroid behind the meningitis outbreak.
The FDA typically seeks to get approved alternatives to unapproved, older drugs whenever possible. The agency’s stated policy was to clear the market of the unapproved products once an FDA-approved version of a drug was available. This was meant as an incentive for drug makers to invest in seeking FDA approval and to come into compliance with the agency’s stringent manufacturing requirements. The manufacturer of the newly approved drug would typically raise the price of the medicine once it had secured such a monopoly. The FDA considered the extra cost worth the oversight and additional assurance of safety that this afforded to consumers.
But the policy of removing the older, unapproved drugs remained controversial, and the Obama administration largely squashed that expectation as part of an effort to target a single drug maker, KV Pharma, over its pricing of a progesterone drug called Makena.
The FDA was told by political appointees at the Department of Health and Human Services not to take action to remove compounded versions of Makena, largely as a way to penalize KV Pharma for the high price it set for its drug. This political decision undermines the incentive for other companies to run registration trials to get FDA approval for drugs that are widely compounded. The company that got FDA approval for Makena, KV Pharma, is now in bankruptcy.
The administration’s intervention in the KV Pharma case could embolden the small number of compounding pharmacies willing to skirt the law and encourage them to go well beyond traditional pharmacy compounding and engage in large-scale drug manufacturing. It sends a message to would-be violators that the pricing of products could factor into how the FDA can enforce its own safety rules. The New England Compounding Center appears to have crossed the line between traditional pharmacy compounding and manufacturing already. It was also among the compounding firms distributing an unapproved version of the KV Pharma product.
Tougher Oversight Comes with Shortages
The FDA has also been directed by political officials in the Obama administration to take other policy steps that have disrupted the market for sterile injectable drugs. These new steps do not directly relate to the tragedy with the tainted steroid product, but the changes have affected how these products are regulated.

A more risk-based approach could balance the need to upgrade manufacturing plants with the public health problems created by the closing of facilities.

One of the most significant steps that the FDA has taken is to tighten how it regulates the generic drug companies that also manufacture many of the sterile, injected drugs. While these policy steps were rooted in genuine concerns that the agency had about the quality of some manufacturing facilities, the end result was that the FDA actions created shortages of these FDA-approved versions of the drugs. This compelled more doctors to seek these same drugs from more lightly regulated compounders, effectively driving greater use of the unapproved medicines.
The FDA’s political leadership decided to ramp up the number of sanctions that it issued, in part believing that the generic companies manufacturing the sterile injected drugs were not meeting the same standards as branded drug firms. In some cases, the FDA had evidence of significant shortcomings that could have created direct public health risks.
But the FDA’s actions were either directly or indirectly responsible for knocking a lot of these facilities offline while the manufacturing plants underwent remediation to conform to the FDA’s standards. About 30 percent of the manufacturing capacity for these sterile, injected drugs at the largest generic drug makers is now offline as a consequence of FDA enforcement actions.
While the FDA did not directly force most of these firms to shut plants, the agency’s very public actions against the facilities and the risk of product liability suits compelled the manufacturers to cease operations while the plants were upgraded. This, in turn, directly led to the shortages.
Orders to compounding pharmacies have grown sharply in recent years, at least in part as a result of the shortages of approved versions of some sterile, injected drugs. It was from one such pharmacy that doctors sourced the tainted steroid drug behind the meningitis outbreak. The two generic manufacturers that made FDA-approved versions of that steroid got out of the business after the FDA took actions at their manufacturing plants.

All of these underlying issues are a reminder that FDA regulation of the development and manufacture of drugs is a costly endeavor.

To be sure, some of the lapses that the FDA has found at the generic drug plants are not trivial, including glass shavings that made their way into finished vials of solutions. But not all of the problems were as significant. It is possible that a number of these plants could have continued operating while the FDA worked directly with the generic drug firms to bring plants into compliance with tighter rules. This requires time and resources on the part of the FDA to allow plants to continue to operate under the FDA’s close supervision while they undergo the necessary upgrades and remediation. But a more risk-based approach could balance the need to upgrade manufacturing plants with the public health problems created by the closing of facilities.
All of these underlying issues are also a reminder that FDA regulation of the development and manufacture of drugs is a costly endeavor. It adds to the price of drugs. Politicians cannot simultaneously support increased regulation of drugs and then undermine safety goals when the same rules drive out cost competition, leaving only the more expensive versions available. Less costly alternatives are sometimes cheaper for a reason.
On the heels of this tragedy, there are calls for new laws that would give expanded oversight of these compounding pharmacies. While certain laws merit consideration, we should first make sure we are appropriately enforcing the existing rules. We also need to take steps that make available an adequate and safe supply of these same drugs from traditional manufacturers who might want to produce them, especially the generic drug companies that have recently taken offline many of the plants that manufacture approved versions of these sterile, injected drugs.
All of these issues bear closer examination once the current tragedy is brought under control, and the present risks are eliminated. While it is highly unlikely that the decisions made by the Obama team led to the steroid tragedy, these policies create regulatory challenges that could make similar incidents more likely.
Scott Gottlieb is a practicing physician and a resident scholar at the American Enterprise Institute.