Office of Inspector General of Department of Heath and Human Service: Drug Compounding and Imported Drugs Challenge

Challenge 10: Ensuring the Safety of Food, Drugs, and Medical Devices

Why This Is a Challenge

The Department, through the Food and Drug Administration (FDA), is responsible for protecting public health by ensuring the safety, efficacy, and security of drugs, medical devices, biologics, dietary supplements, tobacco, and much of our Nation's food supply. The Department must ensure that once a drug, biologic, or device has been approved for use, it conducts effective post-market monitoring. During a food emergency, the Department is responsible for finding the contamination source and overseeing the removal of these products from the market. However, OIG work has revealed weaknesses in FDA's ability to adequately oversee the safety of drugs, biologics, medical devices, and food. It has also revealed failures by industry participants to follow processes designed to ensure the safety and efficacy of food, drugs, biologics, and medical devices. These high risk areas include:

Drug Compounding. A fall 2012 nationwide fungal meningitis outbreak associated with contaminated compounded sterile drug injections raised major concerns about the quality of drugs supplied by compounders and FDA's ability to effectively oversee these entities. OIG reviewed hospitals' use of compounded drugs and found that in 2012, 92 percent of hospitals used compounded sterile preparations (CSPs). Additionally, we found that 56 percent of hospitals made changes or planned to make changes to CSP sourcing practices in response to the 2012 outbreak. After the meningitis outbreak, in November 2013, President Obama signed the Drug Quality and Security Act (DQSA), Public Law 113-54. Among other things, the DQSA added a new section to the Federal Food, Drug, and Cosmetic Act, section 503B, that provides a new pathway for entities called "outsourcing facilities" to legally compound human drugs. FDA also continues to identify serious deviations from acceptable practices for the production of compounded sterile drugs, as evidenced by the lists of inspectional observations issued to compounders at the conclusion of FDA inspections; the numerous recalls of compounded drugs because of contamination or lack of sterility assurance; and the warning letters issued to compounders addressing, in part, unsanitary conditions at their facilities. Implementation of the DQSA poses new challenges for the Department.

Imported Drugs. Medications imported from foreign or unlicensed suppliers may be unapproved by FDA and may be ineligible for reimbursement by Medicare, Medicaid, and other federal health care programs. Such drugs may also be counterfeit, contaminated, ineffective, and/or unsafe. FDA's Office of Criminal Investigations (OCI), OIG, and our law enforcement partners have investigated many instances in which physician practices, drug distributors, and suppliers have imported such drugs. Among other consequences, importation of such drugs can lead to patient safety issues, the submission of improper claims to federal health care programs, and the circumvention of FDA drug approval and facility inspection processes.

Food Safety. Protecting the American public from food-borne illness, such as those caused by salmonella and E. coli, is an ongoing challenge. In the past, OIG has found that food facilities' failures to comply with FDA's requirements impede the Department's ability to ensure the safety of the Nation's food supply. Since September 2009, FDA has required food facilities to report to a new registry all instances when there is a reasonable probability that a food might cause serious adverse health consequences and to investigate the causes of any adulteration reported if the adulteration may have originated with the food facility. The Food Safety Modernization Act (FSMA), signed into law in January 2011, provides FDA important authorities to better protect the Nation's food supply. However, implementing these authorities could prove difficult given the broad preventive controls framework envisioned in FSAM, including establishing the new import oversight program and the training needed to ready both FDA and the states to conduct preventive control inspections.

Marketing Requirements. Manufacturers of drugs, biologics, and medical devices gain approval for sale of their products for specific uses once FDA determines that the products are safe and effective for those uses. Once approved for sale, qualified medical providers may prescribe them for any use on the basis of their medical judgment. However, manufacturers are prohibited from promoting products for uses for which FDA has not specifically approved them (known as off-label uses). OIG, in conjunction with its law enforcement partners, including FDA's OCI, has investigated many instances in which manufacturers illegally promoted products for off-label uses. Off-label promotion can undermine the system intended to ensure that drugs are safe and effective and can put patients at risk. Additionally, this illegal off-label promotion may lead to fraudulent claims for payment submitted to federal health care programs, including Medicare and Medicaid. (See Management Challenge 2 for more information on drug diversion and appropriate use of prescription drugs in Medicare and Medicaid.)

FDA faces ongoing concerns regarding dietary supplements and the structure/function claims made by manufacturers. Structure/function claims describe the role of a dietary supplement in the structure and function of human bodies, but the claims may not explicitly or implicitly claim to prevent, treat, mitigate, cure, or diagnose a disease. Manufacturers must have competent and reliable scientific evidence to show that dietary supplement claims are truthful and not misleading, but they do not have to submit the substantiation to FDA, and FDA has only voluntary standards for it. OIG found that substantiation documents for the supplements reviewed were inconsistent with FDA guidance on competent and reliable scientific evidence. OIG also found that FDA could not readily determine whether manufacturers had submitted the required notification for their claims. These results raise questions about the extent to which structure/function claims are truthful and not misleading.

Progress in Addressing the Challenge

To address risks associated with imported drugs, FDA has engaged in both outreach and enforcement actions. FDA has undertaken significant efforts to warn consumers, medical practitioners, and others about the risks associated with buying drugs from foreign sources. In addition, FDA has continued to work with OIG and other law enforcement partners to investigate and prosecute individuals and businesses (e.g., physicians and drug suppliers) that import unapproved drugs. In July 2013, three physicians previously associated with McLeod Cancer and Blood Center entered into civil settlement agreements and agreed to pay more than $4.25 million to resolve allegations that they purchased misbranded, unapproved chemotherapy drugs from foreign sources; used the drugs to treat their Medicare, Medicaid, and other patients; and billed federal health care programs for the drugs. Dr. William Kincaid, the managing partner, pled guilty to receiving misbranded drugs with intent to defraud and mislead. Dr. Kincaid was sentenced to 2 years in prison and was excluded from participating in federal health care programs for 10 years.

With regard to drug compounding, FDA increased inspection and enforcement efforts, while developing the regulatory framework to implement the DQSA. In FY 2014, FDA conducted over 85 inspections of compounding pharmacies and outsourcing facilities and issued 29 warning letters. FDA's inspection and enforcement efforts are continuing. In addition, since the DQSA was enacted in November, 2013, FDA issued numerous policy documents to implement both section 503A (concerning pharmacy compounding) as well as the new section 503B (concerning outsourcing facilities) and continues to work on additional rules and guidance. FDA has made progress in addressing OIG recommendations. For example, as a result of OIG's identifying vulnerabilities in FDA's oversight of regulatory decisions, FDA implemented new operating procedures for resolving scientific disagreements. In response to OIG recommendations regarding oversight of dietary supplements, FDA stated that it is considering whether to seek explicit statutory authority to review substantiation for structure/function claims beyond its pre-existing authorities.

What Needs To Be Done

The Department and FDA will need to continue issuing rules and guidance documents to fully implement the various provisions in the July 2012 Food and Drug Administration Safety and Innovation Act (FDASIA) and in DQSA. FDA will need to continue to conduct inspections of compounding pharmacies and pursue regulatory action, as needed to protect public health, when deficiencies are identified. In addition, FDA will need to continue its efforts to fully implement FSMA to better protect the Nation's food supply. FSMA addresses many of OIG's recommendations; however, we continue to recommend that FDA remedy identified weaknesses in its inspections and recall procedures. FDA should also ensure that states properly conduct contracted food facility inspections. The Department also needs to continue its efforts to eliminate off-label promotion and reduce the importation of unapproved drugs from foreign sources to protect patients and HHS health care programs. Moreover, the Department and FDA will need to continue implementing the provisions under the 2009 Family Smoking Prevention and Tobacco Control Act to protect public health.

Key OIG Resources

• OIG Report, High-Risk Compounded Sterile Preparations and Outsourcing by Hospitals That Use Them, April 2013
• OIG Report, Dietary Supplements: Structure/Function Claims Fail To Meet Federal Requirements, October 2012
• OIG Report, Vulnerabilities in FDA's Oversight of State Food Facility Inspections, December 2011
• DOJ press release, sentencing of William Kincaid, M.D., June 11, 2013