Medical Center Pharmacy v. Mukasey

• Citation: 536 F.3d 383
• Decision Date: 18 July 2008
• Docket Number: No. 06-51583.,06-51583.
• Parties: MEDICAL CENTER PHARMACY; Applied Pharmacy; College Pharmacy; Med Shop Total Care Pharmacy; Pet Health Pharmacy Incorporated; Plum Creek Pharmaceuticals Incorporated; Premier Pharmacy; University Compounding Pharmacy; Veterinary Pharmacies of America; Women's International Pharmacy Incorporated, Plaintiffs-Appellees, v. Michael B. MUKASEY, U.S. Attorney General, United States Department of Justice, in His Official Capacity; Michael O. Leavitt, Secretary, Department of Health and Human Services, in His Official Capacity; Andrew C. von Eschenbach, Commissioner of the United States Food and Drug Administration, in His Official Capacity, Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

536 F.3d 383

MEDICAL CENTER PHARMACY; Applied Pharmacy; College Pharmacy; Med Shop Total Care Pharmacy; Pet Health Pharmacy Incorporated; Plum Creek Pharmaceuticals Incorporated; Premier Pharmacy; University Compounding Pharmacy; Veterinary Pharmacies of America; Women's International Pharmacy Incorporated, Plaintiffs-Appellees, v. Michael B. MUKASEY, U.S. Attorney General, United States Department of Justice, in His Official Capacity; Michael O. Leavitt, Secretary, Department of Health and Human Services, in His Official Capacity; Andrew C. von Eschenbach, Commissioner of the United States Food and Drug Administration, in His Official Capacity, Defendants-Appellants.

No. 06-51583.

United States Court of Appeals, Fifth Circuit.

July 18, 2008.

Deborah Ann Pearce (argued), Powell & Pearce, New Orleans, LA, Terry Lane Scarborough, Matthew Thomas Slimp, Hance Scarborough LLP, Austin, TX, for Plaintiffs-Appellees.

Christine N. Kohl (argued), Douglas N. Letter, U.S. Dept. of Justice, Civil Div., Gerald Cooper Kell, Senior Trial Atty., U.S. Dept. of Justice, Office of Consumer Litigation, Washington, DC, for Defendants-Appellants.

Andrew Stephen Krulwich, Eve Jennifer Reed, Benjamin Boyce Reed, Wiley Rein LLP, Washington, DC, for Wyeth, Amicus Curiae.

Jeffrey Neil Gibbs, Hyman, Phelps & McNamara, Washington, DC, for Intern. Academy of Compunding Pharmacists, Amicus Curiae.

Andrew Layton Schlafly, Far Hills, NJ, for Ass'n of American Physicians & Surgeons, Inc., Amicus Curiae.

Steven Pierce Benson, O'Brien, Butler, McConihe & Schaefer PLLC, Washington, DC, for American Pharmacists Ass'n, Amicus Curiae.

Appeal from the United States District Court for the Western District of Texas.

Before HIGGINBOTHAM, DAVIS and SMITH, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

In this appeal we clarify the extent to which the Federal Food Drug and Cosmetic Act of 1938 (the "FDCA" or the "Act"), 21 U.S.C. §§ 301-397, permits the Food and Drug Administration ("FDA") to regulate a common practice of pharmacies known as "compounding." Ten pharmacies specializing in compounding prescription drugs for human and animal use (the "Pharmacies") sued various federal agencies (collectively, the "FDA") for declaratory and injunctive relief permitting them to continue compounding drugs without obtaining the FDA approval required for "new drugs" under the Act, 21 U.S.C. § 321(p) and (v). Concluding that the FDCA, as amended, permits compounded drugs to avoid the new drug approval process but that the exception applies only in certain statutorily-delimited circumstances, we vacate and remand.

I.

A.

Drug compounding is the process by which a pharmacist combines or alters drug ingredients according to a doctor's prescription to create a medication to meet the unique needs of an individual human or animal patient.¹ Compounding is "typically used to prepare medications that are not commercially available, such as medication for a patient who is allergic to an ingredient in a mass-produced product." W. States, 535 U.S. at 361, 122 S.Ct. 1497. According to the American Pharmacists Association, as amici, pharmacists compound patient-specific medication for a variety of medical purposes, including cancer treatment, where dosages must be calibrated to a "patient's body size, the type of cancer, the size and type of tumor, and the clinical condition of the patient;" pediatric treatment, where available drug dosages must be modified and diluted for use in children; elderly hospice care, where patients who no longer benefit from curative treatment use compounded dosages therapeutically to "establish optimal pain and symptom control;" and hospital stays, where "intravenous admixtures" must be highly individualized to allow administration of drugs "not suitable for other routes of administration."

Compounding has deep roots; it "is a traditional component of the practice of pharmacy and is taught as part of the standard curriculum at most pharmacy schools." Id. (citation omitted). Since 1820, pharmacists have relied on compounding instructions contained in the U.S. Pharmacopeia,² an independent compendium of drug standards whose authority is recognized by reference in federal law.³ "Many States specifically regulate compounding practices as part of their regulation of pharmacies. Some require all licensed pharmacies to offer compounding services." Id. (citations omitted).

In 1938, Congress enacted the FDCA to regulate drug manufacturing, marketing, and distribution. The Act empowers the FDA to require approval of any "new drug,"⁴ which the Act defines as "[a]ny drug (except a new animal drug ...) the composition of which is such that such drug is not generally recognized ... as safe and effective for use under the conditions prescribed, recommended, or suggested in the labeling thereof."⁵ The Act likewise requires approval of "new animal drugs"⁶ and defines "new animal drug" in similar terms.⁷

To be deemed "safe and effective" and thereby obtain FDA approval, a new drug must undergo an extensive application and approval process.⁸ Under the FDCA, an FDA finding of "safe and effective" must be based on "substantial evidence" of expert consensus.⁹ The "test is rigorous,"¹⁰ requiring expensive and time-consuming clinical trials estimated by some to cost more than $800 million per drug.¹¹

A question emerged from Congress's enactment of the FDCA: When a pharmacist creates a compounded medication to suit an individual patient, does the resulting creation constitute a "new drug" requiring FDA approval? If each individualized drug product produced through compounding required FDA approval, few would undergo the costly and arduous approval process. And the lack of approval would in turn make nearly all compounding unlawful under the FDCA. Although the question whether compounded drugs are "new drugs" was not before it, the Court has noted in dictum that

it would not make sense to require compounded drugs created to meet the unique needs of individual patients to undergo the testing required for the new drug approval process. Pharmacists do not make enough money from small-scale compounding to make safety and efficacy testing of their compounded drugs economically feasible, so requiring such testing would force pharmacists to stop providing compounded drugs.

Id. at 369-70.¹²

For roughly fifty years following the FDCA's enactment, the compounding question lay dormant, without dispute and without answer. The FDA did not seek to enforce "new drug" approval requirements against compounding pharmacists but instead left regulation of compounding to the states, and pharmacists continued to compound drugs without seeking FDA approval.¹³ In the early 1990's, however, the FDA became concerned that some pharmacies were purchasing bulk quantities of drug products, "compounding" them into specific drug products before receiving individual prescriptions, and marketing those drugs to doctors and patients. Although the agency had long refrained from regulating pharmacist compounding, it believed that pharmacies engaging in large-scale bulk compounding were effectively manufacturing drugs under the guise of compounding them — using the FDA's traditional lenience toward compounding as an end-run around the new drug approval, adulteration, and misbranding provisions of the FDCA.¹⁴

Ostensibly to prevent this end-run around its regulation of drug manufacturing, the FDA in 1992 promulgated Compliance Policy Guide No. 7132.16 (Mar.1992) ("CPG 7132.16"), deemed by this circuit in Professionals & Patients, 56 F.3d at 595-602, to be a valid agency rule under the Administrative Procedures Act. The Guide explained that "while retail pharmacies ... are exempted from certain requirements of the [FDCA], they are not the subject of any general exemption from the new drug, adulteration, or misbranding provisions." CPG 7132.16, at 1.

Although asserting its expansive authority under the FDCA to require formal approval of all compounded drugs, the FDA declared its intention "generally [to] continue to defer to state and local officials regulation of the day-to-day practice of retail pharmacy and related activities." Id. at 4. Nevertheless, the FDA warned that it "may, in the exercise of its enforcement discretion, initiate federal enforcement actions against entities and responsible persons when the scope and nature of a pharmacy's activity raises the kind of concerns normally associated with a manufacturer." Id. The FDA went on to list nine non-exhaustive factors it would consider in exercising its enforcement discretion against certain kinds of manufacturing-as-compounding considered to be hazardous to public health.¹⁵

A few years later, in a move the Pharmacies call a reaction to the FDA's 1992 policy and the FDA characterizes as a confirmation of it, Congress amended the FDCA by enacting the Food And Drug Modernization Act of 1997 ("FDAMA"), Pub.L. No. 105-115, 111 Stat. 2296 (codified as amended at 21 U.S.C. § 353a (2000)). Explicitly addressing "pharmacy compounding," FDAMA sought to permit pharmacy compounding by exempting compounded drugs from the FDCA's new drug approval, adulteration, and misbranding provisions, but FDAMA simultaneously conditioned the exemption on compliance with a number of restrictions on compounding practices and pharmacy advertising. Much like the FDA's 1992 policy, FDAMA created a safe harbor from the FDCA's new drug approval requirements so long as a compounding pharmacist observed a number of requirements designed to ensure the pharmacist was engaged in traditional compounding rather than disguised manufacturing.¹⁶

Although FDAMA did not cover animal drugs, Congress also amended the FDCA by enacting the Animal Medicinal Drug Use Clarification Act of 1994 ("AMDUCA"), Pub.L. No. 103-396, 108 Stat. 4153 (codified as amended at § 360b(a)(4), (5)). In a similar manner as FDAMA, the AMDUCA amended the FDCA by exempting some extra-label uses of...