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Navigating 503A and 503B Rules Not for the Faint of Heart
During the Visante Business of Pharmacy Virtual Forum 2020, a topic that stirred considerable discussion was how to stay clear of the financial and regulatory pitfalls of sterile compounding. Whether a health care system operates as a traditional 503A compounder, focusing solely on patient-specific prescriptions, or is considering a 503B build-out to serve multiple facilities within its network, major variables need to be considered.
One looming policy roadblock that came up is the question of when the FDA will implement its draft 1-mile radius provision, which allows 503A hospital pharmacies to distribute its compounded sterile products (CSPs) to owned and controlled health care facilities, as long as they are located within a 1-mile radius.
The “1-mile rule,” as it’s known, was first released in draft form as part of the FDA’s 2016 compounding guidance. The provision is based on the reasoning that a centralized hospital pharmacy sending compounded drugs beyond a 1-mile radius would be operating like a 503B pharmacy but not regulated as one.
In an April 2020 guidance establishing temporary policies on the compounding of certain drugs during the COVID-19 pandemic, the FDA made it clear that the 1-mile rule was still in draft form and would not be enforced yet.
Fred Massoomi, PharmD, a senior director at Visante and a facilitator at the forum, said he had expected a final version of the 1-mile rule to come out by the end of the 2020, but as of May 2021, the rule had not been finalized. Regardless of how that process plays out, he emphasized that health systems need to consider how the provision might affect their compounding operations. Indeed, “some states already have incorporated similar limitations into their statutes,” Dr. Massoomi said. “For health systems that handle CSPs in ways that may be perceived as blurring the line between the two compounding models, [the 1-mile rule] puts them at risk of heightened scrutiny by regulatory agencies.”
Still Scary: DIY 503B
Building your own 503B facility is another fraught sterile compounding topic that came up during the forum. Based on comments made by several forum participants, taking that DIY approach is not for the faint of heart. Ryan Stice, PharmD, the vice president of pharmacy at Sutter Health, headquartered in Sacramento, Calif., noted that, given the pressures of drug shortages, quality assurance and steadily rising costs, “it’s harder to sell not doing something versus taking action.” To that end, he and his colleagues did some research, and “it looked like we had a great 503B opportunity. But then we did a deeper dive and realized that it only made sense to insource about 10 CSPs, and so we decided it just wasn’t a smart move, based on volume and value.”
The question of value can be difficult to answer, noted one forum participant from a health system that submitted an application to be an FDA-registered 503B facility in May 2019. “If we had approached this simply from a cost-
justification basis—we invested about $10 million—there is no way this would have been a viable operation,” said the forum participant, a chief pharmacy officer, who requested anonymity due to corporate communication policy. “We had to build other services into our centralized service center [CSC] for this to really work.”
Adding those other services “was part of our overall strategy of building a viable CSC, rather than a partial solution to 503B compounding,” the participant stressed. “A CSC strategy that includes a 503B has an ROI [return on investment] that is much more attainable.”
John Fanikos, PharmD, the executive director of pharmacy at Brigham and Women’s Hospital, in Boston, agreed that an integrated services approach to 503B is the key to success. “Contracting and supply chain distribution initiatives, nuclear medicine consolidation, code tray fulfillment—whatever service line you need to add in order to leverage that centralized facility is the way to make the investment work,” Dr. Fanikos said.
Making the Decision
Hospitals should consider a few key factors when deciding whether to build a 503B facility, noted Matthew Brown, PharmD, the pharmacy manager - compounding pharmacy at Duke University Health System Raleigh-Durham, in North Carolina. Duke is one of the few health systems to produce
‘For health systems that handle CSPs in ways that may be perceived as blurring the line between [503A and 503B] compounding, … [the 1-mile rule] puts them at risk of heightened scrutiny by regulatory agencies.’ —Fred Massoomi, PharmD
