Featured Health Business Daily Story, March 19, 2014

Drug Compounding Takes Center Stage As FDA, OIG Turn Their Attention to Hospitals

REPORT ON MEDICARE COMPLIANCE is the nation's leading source of news and strategic information on Medicare compliance, Stark and other big-dollar issues of concern to health care compliance officers.

By Nina Youngstrom, Managing Editor
March 10, 2014Volume 23Issue 9

Pharmacy compounding is shaping up to be a hot spot this year, as Medicare and FDA watchdogs turn up the heat on compounding by hospitals, compounding by manufacturers and the way in which they intersect.

The two worlds — state-regulated compounding in hospitals and federal oversight of manufacturers — are colliding, as the FDA in January urged hospitals to buy drugs only from compounders that voluntarily register with the agency and abide by “good manufacturing practices.”

Compounding — which is the mixing of two or more ingredients to tailor a drug to a specific patient’s needs — also is a new target on the 2014 Work Plan for HHS’s Office of Inspector General, with the OIG eyeing practices inside hospitals and oversight by Medicare accreditors.

This is raising the compliance and quality improvement stakes for a service that may fall through the regulatory cracks. “It’s an area that has not had sufficient concern in hospitals and has not risen to the level of other organizational risks,” says Margaret Hambleton, vice president and chief compliance officer at Dignity Health in California. “If you haven’t done a gap analysis using experts, I recommend it.”

Compounding Is Under Scrutiny

Compounded sterile products often were overlooked by state and federal regulators until the New England Compounding Center debacle in 2012, when the manufacturer sold contaminated steroid injections in 20 states that caused a fungal meningitis outbreak that affected 750 people and was linked to 64 deaths. Although this wasn’t the first time problems were identified with compounded sterile products, the case exposed the flaws in government surveillance and led to a November 2013 law giving the FDA more authority over them. And the ball has just begun rolling, between new moves by the FDA commissioner and the OIG Work Plan.

When performed at hospitals, pharmacies and other health care facilities, compounding is governed by Chapter 797 of US Pharmacopeia (USP), which is enforced by state pharmacy boards, says Phillip Williams, Pharm.D., administrative director of pharmacy services for Edward-Elmhurst Healthcare in Naperville, Ill. Compounding sterile products by a manufacturer in large batches — which sounds like an oxymoron because compounding was designed to tailor drugs to individual needs (e.g., a patient with allergies) — is regulated by the states and, depending on the circumstances, the FDA.

“I follow USP 797 because I make compounded drugs for one patient at a time. I don’t follow GMP [good manufacturing practices] because I am not a manufacturer,” he says.

As the risks come into sharper focus, hospitals are caught between a rock and a hard place. Either they try to shift the risks of compounding drugs by outsourcing more of them (but may not adequately oversee manufacturers), or they bring compounding back in-house without providing adequate quality assurance, Hambleton says. “It again highlights the need for compliance to be aware of the hospital’s quality assurance and performance improvement plan, which is a requirement of its Medicare conditions of participation,” she says. If the hospital has been focused on traditional pharmacy risks — e.g., drug diversion, wastage — it may be time to turn its attention to compounding.

Compounding Is a Multi-Step Process

Compounding at the hospital requires a number of steps, Williams says. For example, after receiving a physician’s order, the pharmacy verifies the drug is appropriate for the patient based on height, weight, age, renal or liver function and disease state. “We also look for any potential drug-drug, drug-food and drug-disease interactions,” he says. Then the pharmacist or pharmacy technician prepares the order in a USP 797-compliant sterile compounding room. They use laminar air-flow hoods and an aseptic technique to maintain the sterility of the drug and “diluent” (the substance it is diluted with). USP 797 also has rules governing the competency of people who compound drugs. This includes training, observation and validation testing. For example, hospitals can take a sample of a compounded drug they prepare, put it into an incubator and check for contaminants. “If there’s no growth, their technique is verified,” Williams says. If there is growth, they repeat the process until they pass. Hospitals may also randomly do fingertip tests on pharmacists and pharmacy technicians, using an agar plate to check for bacterial and fungal growth. They do this to ensure staff is using proper hand-washing methods, according to Williams.

USP 797 also requires pharmacies to monitor 24/7 for appropriate air flow in their compounding environments. “The air is continuously filtered using HEPA filtration to ensure that the environment is as clean as possible,” Williams says.

There are three classes of compounding, he says. Level one and two are lower risk, and include the preparation of sterile IVs and unique eye drops. Most hospitals are equipped to compound these medications, but level three drugs are another story. “That’s where you start with a non-sterile ingredient and attempt to make it sterile” (e.g., morphine powder), he says. “It’s trickier and the consequences of doing it wrong can be deadly.” That’s why hospitals often buy level-three drugs from manufacturers that specialize in compounded drugs.

Because of the risks, Williams says hospitals should closely monitor manufacturers of compounded drugs. He makes annual surprise inspections of the compounder his hospital buys drugs from even though it is in another state, using inspection tools available through USP and other professional organizations. “I look at quality, training and competency logs,” he says. The compounder also is required to send him quarterly reports on end-product testing to ensure the compounded drugs are sterile and the correct ingredients are used in proper doses. Group purchasing organizations may perform inspections on behalf of hospitals that don’t have the budgets to perform them.

New FDA Law Is Tied Into Hospitals

At the federal level, compounded drugs are not reviewed by the FDA for safety or effectiveness. But after the New England Compounding Center disaster, Congress passed the Drug Quality and Security Act to improve federal oversight. It created Section 503B of the federal Food, Drug, and Cosmetic Act, which allows compounding manufacturers to register as “outsourcing facilities.” They are exempt from FDA approval and product-label requirements, but must abide by “current good manufacturing practice” (CGMP) requirements, accept FDA inspections on a risk basis, submit information to FDA on their products and report adverse events.

Although registration is voluntary, FDA Commissioner Margaret Hamburg, M.D., apparently is trying to leverage hospitals’ buying power to give the law more teeth. In a Jan. 8 letter, Hamburg asked hospitals to buy only from 503B outsourcing facilities. “As a purchaser of compounded drugs, you can play an important role in improving the quality of compounded drugs by requiring compounding pharmacies that supply drugs to your facility to register as outsourcing facilities,” she wrote. “Once they register, you and the patients you serve can be assured that FDA will inspect these facilities on a risk-based schedule, hold them to CGMP requirements, monitor the adverse event reports they are required to submit to the agency, and require appropriate labeling. I urge you to consider this in your future purchasing decisions and look forward to working with you to improve the quality of compounded drugs.”

Williams likes this idea. “We put in place a policy that we will only do business with 503B companies,” he says. “Our duty is to take care of patients and do no harm. We have to ensure what we are doing internally is appropriate and safe, or if we use a third party, whoever we are purchasing from is producing the highest-quality, safest product.” It’s not easy, he says. In addition to paying for inspections of its outsourcing facility, the hospital is “relying on the states and boards of pharmacies to uphold these rules and regulations so that if I buy something, the process they used to make the product is safe.” Hambleton suggests compliance officers gather relevant decision makers in the hospital to discuss whether it buys drugs from nonregistered compounding pharmacies and if so, why, and whether the hospital should use its purchasing power to press the pharmacy to register under 503B.

‘Do No Harm’ Is Rule No. 1

Compounders may ignore 503B and opt for 503A of the FD&C Act, which leaves oversight to the states with some powers reserved for the FDA. Even before the law was passed, Hamburg noted in her letter, FDA had inspected 70 compounders, usually with its state partners. “During these inspections, FDA observed serious quality problems, including contaminated products and poor sterile practices that create a risk of contamination. Numerous recalls of sterile products have been conducted, and numerous pharmacies chose to stop sterile compounding after FDA identified problems with their sterile compounding processes,” she wrote. “New problems continue to be identified at compounding pharmacies across the country, which number over 15,000.”

The scrutiny of compounding doesn’t stop there. OIG will put Medicare oversight of pharmaceutical compounding in hospitals under the microscope, according to the 2014 Work Plan, which notes that “most hospitals compound at least some pharmaceuticals onsite.” OIG will look at the quality and safety of compounding and examine how CMS oversees it through accreditation and certification.

Compounding is an area where compliance departments can partner with quality improvement, Hambleton says. Quality improvement departments, under the oversight of the quality committee of the hospital board, develop the annual quality assurance and performance improvement plans required by CMS as part of the conditions of participation, but they often focus on the same risk areas even when scores are consistently good. “Hospitals should monitor things that really make an impact on quality and not just things they do well on. It makes me crazy when the plans show 100% compliance year after year,” she says. “Compliance should play a significant role in evaluating whether, from a monitoring and audit perspective, those are the monitors that will most improve the quality in the organization.”

Compliance Can Play an Important Role

Hambleton says compliance officers may know how to ask the right questions. For example, has this measure been in place for many years? Are we continuing to show 100% compliance? If so, why are we continuing to measure it? Have we gotten to the best quality we can? Are we “actively and effectively monitoring” corrective action plans and quality improvement plans? Are quality initiatives under consideration that will move the needle from a quality perspective? “I don’t expect compliance officers will necessarily be able to identify the right quality measures from a clinical perspective, but they can look at the overall effectiveness of the quality plan and offer useful tools to the quality improvement department related to risk assessment,” Hambleton says.

For example, hospitals need to ensure they are monitoring USP 797 in its entirety. “You can’t pick and choose,” Hambleton says. “The plans pharmacies have in place are generally pretty good but don’t necessarily consider all aspects of 797.”

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