FDA Announces Availability of the Standard Memorandum of Understanding for Signature by States – the 365 Day Countdown to 5% Begins

October 28, 2020
Firm Publication

The U.S. Food and Drug Administration (FDA) announced October 26 the availability for the signing of the final standard Memorandum of Understanding Addressing Certain Distribution of Compounded Human Drug Products (MOU) between state boards of pharmacy or other state agencies and the FDA. The MOU was part of the rulemaking delegated to FDA under section 503A of the federal Food, Drug and Cosmetic Act (FDCA). Section 503A of the FDCA prohibits compounding pharmacies from distributing “inordinate amounts” of compounded drugs across state lines.

According to the statute, compounding pharmacies may distribute only 5% of their compounded drugs interstate unless the state in which the pharmacy is located has entered into an MOU with the FDA. Under the MOU, compounders in those states that have signed the MOU may distribute up to 50% of compounded drug products interstate. The percentage of compounded drug products distributed interstate is calculated from the total compounded products in a calendar year, not the total number of dispenses by the pharmacy.

The 503A MOU addressing the interstate distribution of compounded drug products has been long-awaited. FDA released the first draft in 1999. Revised drafts were issued in 2015 and 2018. Now, more than 20 years later, the 503A MOU has been finalized. States have 365 days to sign the MOU before the 5% limitation goes into effect.

Section 503A and the Role of the MOU

Section 503A of the FDCA carves out “traditional” pharmaceutical compounding from FDA oversight, leaving its regulation primarily to the states. Drugs compounded under section 503A are exempt from each of the following:

  • The requirement for pre-market FDA approval of new drugs.
  • The requirement for compliance with current good manufacturing practices.
  • The requirement for labeling drugs with adequate directions for use.

To qualify for the exemptions under section 503A, all drug compounding must meet certain requirements. Compounding must be performed by a licensed pharmacist or physician and subject to limited exceptions and must be based on a prescription order for an individual patient. 503A compounding cannot be used to compound drugs for general, office use.

503A compounding must also be performed using compounding ingredients meeting certain criteria and cannot be used to compound any drug product that is either on an FDA list of drugs that have been withdrawn or removed from the market because they have been found unsafe or not effective or on an FDA list of drugs that present demonstrable difficulties for compounding.

Requirements under the Final MOU

By signing the MOU, states are not required to enforce the 50% interstate distribution limitations, but instead agree to notify the FDA. The FDA has stated that it does not intend to take action against a pharmacy located in a state that has entered into the MOU solely because it has exceeded the threshold for inordinate amounts. Rather, the information on pharmacies that distribute inordinate amounts of compounded drugs interstate may be used to help inform inspectional priorities.

States that enter into the MOU with the FDA must also agree to investigate any complaints about a drug compounded at a pharmacy within their state and distributed out of state and to notify the FDA as soon as possible, but no later than five business day after they receive reports of a serious adverse drug experience or product quality issue.

While the FDA had previously announced that it would provide states 180 days to sign the MOU, the FDA has extended the time-frame and is now providing states 365 days to decide whether to sign the MOU to allow states sufficient time to modify their laws and regulations. After the 365-day timeframe ends, the FDA intends to begin enforcing the 5% limit in states that do not sign.

If you have any questions about how the MOU may impact your business, please contact the authors.