Compounding changes

U.S. Army Maj. Adam Ziegler spent three years deployed in Iraq and Afghanistan. Back home, in Woodlawn, Tenn., in September 2012, he went to a local clinic to receive a steroid injection in his hip for an injury he sustained during parachute jump training.

Two weeks later, the 33-year-old found himself in the emergency room at nearby Blanchfield Army Community Hospital, describing pain that eventually led to the diagnosis of fungal infections in the joint, bone and muscle and 19 days of hospitalization.

The injection came from a lot of methylprednisolone acetate vials that had been mixed and distributed by the New England Compounding Center, a Framingham, Mass.-based compounding pharmacy. NECC had shipped thousands of contaminated vials of MPA across state lines, triggering a meningitis outbreak that led to 64 deaths and sickened hundreds more people. State health officials identified the outbreak in late September 2012. NECC eventually recalled all of its products and filed for bankruptcy protection by the end of last year.

Not only has the incident put the little-known practice of pharmacy compounding in the spotlight, raising concerns about the sector's regulatory oversight, it is raising new questions and potential legal liabilities for hospitals and healthcare providers that bought drugs from outsourced compounding pharmacies during the past decade.

Ziegler is only one of hundreds of patients who have filed suit against NECC, its owners and its associated companies. His lawsuit and others filed in U.S. District Court in the Middle District of Tennessee this month also named the clinic that dispensed the injections, the Saint Thomas Outpatient Neurosurgical Center, and the hospital and health system that share ownership of the outpatient surgery center, Saint Thomas Network health system and the Howell Allen Clinic physicians group.

At least 90 lawsuits against NECC and its associated companies have been filed in September in the same Tennessee court. The state has a one-year statute of limitations.

Like others sickened by the injections, Ziegler continues to take anti-fungal medications and suffers from nerve damage.

“The corporate-owned clinics chose to buy cheap steroids from a drug compounder that was evading patient safety rules and had a history of problems,” Mark Chalos, a lawyer with Lieff Cabraser Heimann & Bernstein who is representing Ziegler and eight others in Tennessee, said in an e-mail.

A year ago, few people outside of the pharmacy sector knew much about drug compounding. During the past decade, some compounding pharmacies have evolved into national companies that distribute thousands of drugs across state lines as part of anticipatory compounding. It's the process of making large batches of drugs in anticipation of a prescription, or office-stock compounding, the practice of compounding without a prescription.

While state and federal regulators and some providers have expressed concerns about the safety of compounded drugs, the meningitis outbreak last fall highlighted the cracks that exist in the regulatory system for what has been a largely unregulated drug market.

“There's no greater example of that than NECC, where those states and the (Food and Drug Administration) knew about the situation, knew it was a ticking time bomb, and neither the states nor the FDA took action to prevent the massive outbreak that happened,” says Sarah Sellers, a former FDA official and a leader of the Working Group on Pharmaceutical Safety.

The group, formed in June, is composed of patient groups and drug companies, some of which have had longstanding legal and business disputes with compounders.

The outbreak also raised safety questions for hospitals, which have increasingly turned to compounders to buy compounded versions of drugs in short supply that are otherwise commercially unavailable or to secure better drug pricing for medications at a time when economic pressure is weighing down on supply costs.

“Given the tragedy we've seen with NECC and the other concerns, our hospitals are very concerned about the safety of the medications that have been compounded by outsourcing pharmacies,” says Roslyne Schulman, director of policy development at the American Hospital Association.

Most experts agree that legislation is needed to reframe the regulatory oversight of the large-scale compounders that are more likely to take on high-risk sterile compounding. There is little data available about the size of the U.S. compounding market or the number of companies that are involved with high-risk sterile compounding. The International Academy of Compounding Pharmacists has estimated that the compounding industry accounts for up to 3% of the $300 billion prescription drug market.

The FDA has oversight of drug manufacturing, while states are responsible for regulating pharmacies. The oversight of large-scale compounders that ship across state lines tends to fall somewhere in between.

In the past year, lawmakers have spent countless hours in hearings, scheduling meetings and drafting legislation that they say will fill in the regulatory gaps that exist. Just last week, lawmakers announced a bipartisan, bicameral bill that they say will strengthen oversight of large-scale compounders. However, unlike the House and Senate versions that were previously introduced, the legislation makes registering as a compounder under FDA oversight voluntary.

The FDA, which has called for Congress to give it more authority to regulate large-scale compounders, rapidly stepped up enforcement within months of the outbreak, launching unannounced inspections of at least 50 compounding pharmacies producing “high-risk” sterile compounded drugs.

“For years, the FDA has conducted for-cause inspections of compounding pharmacies based on reports of adverse events,” an FDA spokesman said in an e-mail. “The agency took a more proactive approach by inspecting sterility practices at compounding pharmacies that may pose higher risks, including many with which the FDA has had issues in the past.”

During tense hearings last spring on Capitol Hill, some lawmakers argued that the FDA already had the regulatory oversight it needed over large-scale compounding pharmacies. The Government Accountability Office in July recommended that Congress clarify the FDA's authority over drug compounding.

Stepped-up inspections led to results. Fourteen compounders that operate in multiple states have issued voluntary recalls this year through the FDA, with the majority focusing on sterile injectable drugs. The U.S. District Court for New Jersey later entered into a consent decree with one of the compounders, Med Prep Consulting, enjoining the company from shipping contaminated sterile injectable drugs across state lines. At least three other compounders have also recalled products.

The Pew Charitable Trusts said it supports the legislation but has some concerns. “Because it's voluntary, it's not going to create a sweeping change immediately in how these facilities operate,” says Allan Coukell, Pew's senior director of drugs and medical devices.

The legislative process has generated interest from a wide variety of organizations. The new Working Group on Pharmaceutical Safety has spent $70,000 since June. The International Academy of Compounding Pharmacists has spent $390,000 on lobbying so far this year, more than three times than what it spent in 2011.

The bill would likely create a market where hospitals and clinics choose to buy drugs from registered compounders because they would be expected to have higher standards, Coukell says.

And many hospitals and healthcare providers continue to rely on outsourced compounding pharmacies. HHS' inspector general's office said 92% of the hospitals it surveyed use compounded sterile drugs and 77% have purchased some of the compounded medications from at least one outsourced pharmacy.

The introduction of stricter standards for sterile compounding in 2004 led some hospitals to look to external sources of the drugs rather than make the investments necessary to ensure their internal facilities met the new standards. This may be changing, with some larger health systems moving forward with plans to insource compounded drugs as a result of the NECC crisis.

Mercy health system in Chesterfield, Mo., UC San Diego Health System and Vanderbilt University Medical Center in Nashville are three examples of health systems that plan to assume all compounding activity or take on more low- and medium-risk compounding to decrease their reliance on external compounders.

The lawsuit filed on behalf of Ziegler alleges that the “sole motivation for Saint Thomas Neurosurgical to purchase steroids in bulk from NECC was price.”

The Saint Thomas Outpatient Neurosurgical Center, an ambulatory surgery center, reportedly started to buy drugs from NECC when another manufacturer in 2011 raised the price of methylprednisolone acetate from $6.49 for an 80 milligram vial to $8.95.

The suit also alleges that the clinic also did not use patient-specific individual prescriptions as required by state law in Massachusetts and Tennessee and later submitted a patient list to NECC that cited a patient name as “Mickey Mouse.”

“Last year's multistate outbreak of very rare form of fungal meningitis is tragic and we understand the anguish experienced by families who lost loved ones and the concern of those who were infected,” a spokeswoman for Saint Thomas Health said in an e-mail. “Any fault lies with the New England Compounding Pharmacy, which failed to follow applicable laws and regulations to ensure the sterility of the medicine they compounded, manufactured and distributed to more than 500 doctors and clinics across the country.”

Follow Jaimy Lee on Twitter: @MHjlee