TITLE I--DRUG COMPOUNDING
SEC. 101. SHORT TITLE.
This Act may be cited as the ``Compounding Quality Act''.
SEC. 102. VOLUNTARY OUTSOURCING FACILITIES.
(a) In General.--Subchapter A of chapter V (21 U.S.C. 351 et seq.)
(1) by redesignating section 503B as section 503C; and
(2) by inserting after section 503A the following new section:
``SEC. 503B. OUTSOURCING FACILITIES.
``(a) In General.--Sections 502(f)(1), 505, and 582 shall not apply
to a drug compounded by or under the direct supervision of a licensed
pharmacist in a facility that elects to register as an outsourcing
facility if each of the following conditions is met:
``(1) Registration and reporting.--The drug is compounded in an
outsourcing facility that is in compliance with the requirements of
``(2) Bulk drug substances.--The drug is compounded in an
outsourcing facility that does not compound using bulk drug
substances (as defined in section 207.3(a)(4) of title 21, Code of
Federal Regulations (or any successor regulation)), unless--
``(A)(i) the bulk drug substance appears on a list
established by the Secretary identifying bulk drug substances
for which there is a clinical need, by--
``(I) publishing a notice in the Federal Register
proposing bulk drug substances to be included on the list,
including the rationale for such proposal;
``(II) providing a period of not less than 60 calendar
days for comment on the notice; and
``(III) publishing a notice in the Federal Register
designating bulk drug substances for inclusion on the list;
``(ii) the drug compounded from such bulk drug substance
appears on the drug shortage list in effect under section 506E
at the time of compounding, distribution, and dispensing;
``(B) if an applicable monograph exists under the United
States Pharmacopeia, the National Formulary, or another
compendium or pharmacopeia recognized by the Secretary for
purposes of this paragraph, the bulk drug substances each
comply with the monograph;
``(C) the bulk drug substances are each manufactured by an
establishment that is registered under section 510 (including a
foreign establishment that is registered under section 510(i));
``(D) the bulk drug substances are each accompanied by a
valid certificate of analysis.
``(3) Ingredients (other than bulk drug substances).--If any
ingredients (other than bulk drug substances) are used in
compounding the drug, such ingredients comply with the standards of
the applicable United States Pharmacopeia or National Formulary
monograph, if such monograph exists, or of another compendium or
pharmacopeia recognized by the Secretary for purposes of this
paragraph if any.
``(4) Drugs withdrawn or removed because unsafe or not
effective.--The drug does not appear on a list published by the
Secretary of drugs that have been withdrawn or removed from the
market because such drugs or components of such drugs have been
found to be unsafe or not effective.
``(5) Essentially a copy of an approved drug.--The drug is not
essentially a copy of one or more approved drugs.
``(6) Drugs presenting demonstrable difficulties for
``(A) is not identified (directly or as part of a category
of drugs) on a list published by the Secretary, through the
process described in subsection (c), of drugs or categories of
drugs that present demonstrable difficulties for compounding
that are reasonably likely to lead to an adverse effect on the
safety or effectiveness of the drug or category of drugs,
taking into account the risks and benefits to patients; or
``(B) is compounded in accordance with all applicable
conditions identified on the list described in subparagraph (A)
as conditions that are necessary to prevent the drug or
category of drugs from presenting the demonstrable difficulties
described in subparagraph (A).
``(7) Elements to assure safe use.--In the case of a drug that
is compounded from a drug that is the subject of a risk evaluation
and mitigation strategy approved with elements to assure safe use
pursuant to section 505-1, or from a bulk drug substance that is a
component of such drug, the outsourcing facility demonstrates to
the Secretary prior to beginning compounding that such facility
will utilize controls comparable to the controls applicable under
the relevant risk evaluation and mitigation strategy.
``(8) Prohibition on wholesaling.--The drug will not be sold or
transferred by an entity other than the outsourcing facility that
compounded such drug. This paragraph does not prohibit
administration of a drug in a health care setting or dispensing a
drug pursuant to a prescription executed in accordance with section
``(9) Fees.--The drug is compounded in an outsourcing facility
that has paid all fees owed by such facility pursuant to section
``(10) Labeling of drugs.--
``(A) Label.--The label of the drug includes--
``(i) the statement `This is a compounded drug.' or a
reasonable comparable alternative statement (as specified
by the Secretary) that prominently identifies the drug as a
``(ii) the name, address, and phone number of the
applicable outsourcing facility; and
``(iii) with respect to the drug--
``(I) the lot or batch number;
``(II) the established name of the drug;
``(III) the dosage form and strength;
``(IV) the statement of quantity or volume, as
``(V) the date that the drug was compounded;
``(VI) the expiration date;
``(VII) storage and handling instructions;
``(VIII) the National Drug Code number, if
``(IX) the statement `Not for resale', and, if the
drug is dispensed or distributed other than pursuant to
a prescription for an individual identified patient,
the statement `Office Use Only'; and
``(X) subject to subparagraph (B)(i), a list of
active and inactive ingredients, identified by
established name and the quantity or proportion of each
``(B) Container.--The container from which the individual
units of the drug are removed for dispensing or for
administration (such as a plastic bag containing individual
product syringes) shall include--
``(i) the information described under subparagraph
(A)(iii)(X), if there is not space on the label for such
``(ii) the following information to facilitate adverse
event reporting: www.fda.gov/medwatch and 1-800-FDA-1088
(or any successor Internet Web site or phone number); and
``(iii) directions for use, including, as appropriate,
dosage and administration.
``(C) Additional information.--The label and labeling of
the drug shall include any other information as determined
necessary and specified in regulations promulgated by the
``(11) Outsourcing facility requirement.--The drug is
compounded in an outsourcing facility in which the compounding of
drugs occurs only in accordance with this section.
``(b) Registration of Outsourcing Facilities and Reporting of
``(1) Registration of outsourcing facilities.--
``(A) Annual registration.--Upon electing and in order to
become an outsourcing facility, and during the period beginning
on October 1 and ending on December 31 of each year thereafter,
``(i) shall register with the Secretary its name, place
of business, and unique facility identifier (which shall
conform to the requirements for the unique facility
identifier established under section 510), and a point of
contact email address; and
``(ii) shall indicate whether the outsourcing facility
intends to compound a drug that appears on the list in
effect under section 506E during the subsequent calendar
``(B) Availability of registration for inspection; list.--
``(i) Registrations.--The Secretary shall make
available for inspection, to any person so requesting, any
registration filed pursuant to this paragraph.
``(ii) List.--The Secretary shall make available on the
public Internet Web site of the Food and Drug
Administration a list of the name of each facility
registered under this subsection as an outsourcing
facility, the State in which each such facility is located,
whether the facility compounds from bulk drug substances,
and whether any such compounding from bulk drug substances
is for sterile or nonsterile drugs.
``(2) Drug reporting by outsourcing facilities.--
``(A) In general.--Upon initially registering as an
outsourcing facility, once during the month of June of each
year, and once during the month of December of each year, each
outsourcing facility that registers with the Secretary under
paragraph (1) shall submit to the Secretary a report--
``(i) identifying the drugs compounded by such
outsourcing facility during the previous 6-month period;
``(ii) with respect to each drug identified under
clause (i), providing the active ingredient, the source of
such active ingredient, the National Drug Code number of
the source drug or bulk active ingredient, if available,
the strength of the active ingredient per unit, the dosage
form and route of administration, the package description,
the number of individual units produced, and the National
Drug Code number of the final product, if assigned.
``(B) Form.--Each report under subparagraph (A) shall be
prepared in such form and manner as the Secretary may prescribe
by regulation or guidance.
``(C) Confidentiality.--Reports submitted under this
paragraph shall be exempt from inspection under paragraph
(1)(B)(i), unless the Secretary finds that such an exemption
would be inconsistent with the protection of the public health.
``(3) Electronic registration and reporting.--Registrations and
drug reporting under this subsection (including the submission of
updated information) shall be submitted to the Secretary by
electronic means unless the Secretary grants a request for waiver
of such requirement because use of electronic means is not
reasonable for the person requesting waiver.
``(4) Risk-based inspection frequency.--
``(A) In general.--Outsourcing facilities--
``(i) shall be subject to inspection pursuant to
section 704; and
``(ii) shall not be eligible for the exemption under
``(B) Risk-based schedule.--The Secretary, acting through
one or more officers or employees duly designated by the
Secretary, shall inspect outsourcing facilities in accordance
with a risk-based schedule established by the Secretary.
``(C) Risk factors.--In establishing the risk-based
schedule, the Secretary shall inspect outsourcing facilities
according to the known safety risks of such outsourcing
facilities, which shall be based on the following factors:
``(i) The compliance history of the outsourcing
``(ii) The record, history, and nature of recalls
linked to the outsourcing facility.
``(iii) The inherent risk of the drugs compounded at
the outsourcing facility.
``(iv) The inspection frequency and history of the
outsourcing facility, including whether the outsourcing
facility has been inspected pursuant to section 704 within
the last 4 years.
``(v) Whether the outsourcing facility has registered
under this paragraph as an entity that intends to compound
a drug that appears on the list in effect under section
``(vi) Any other criteria deemed necessary and
appropriate by the Secretary for purposes of allocating
``(5) Adverse event reporting.--Outsourcing facilities shall
submit adverse event reports to the Secretary in accordance with
the content and format requirements established through guidance or
regulation under section 310.305 of title 21, Code of Federal
Regulations (or any successor regulations).
``(1) In general.--The Secretary shall implement the list
described in subsection (a)(6) through regulations.
``(2) Advisory committee on compounding.--Before issuing
regulations to implement subsection (a)(6), the Secretary shall
convene and consult an advisory committee on compounding. The
advisory committee shall include representatives from the National
Association of Boards of Pharmacy, the United States Pharmacopeia,
pharmacists with current experience and expertise in compounding,
physicians with background and knowledge in compounding, and
patient and public health advocacy organizations.
``(3) Interim list.--
``(A) In general.--Before the effective date of the
regulations finalized to implement subsection (a)(6), the
Secretary may designate drugs, categories of drugs, or
conditions as described such subsection by--
``(i) publishing a notice of such substances, drugs,
categories of drugs, or conditions proposed for
designation, including the rationale for such designation,
in the Federal Register;
``(ii) providing a period of not less than 60 calendar
days for comment on the notice; and
``(iii) publishing a notice in the Federal Register
designating such drugs, categories of drugs, or conditions.
``(B) Sunset of notice.--Any notice provided under
subparagraph (A) shall not be effective after the earlier of--
``(i) the date that is 5 years after the date of
enactment of the Compounding Quality Act; or
``(ii) the effective date of the final regulations
issued to implement subsection (a)(6).
``(4) Updates.--The Secretary shall review, and update as
necessary, the regulations containing the lists of drugs,
categories of drugs, or conditions described in subsection (a)(6)
regularly, but not less than once every 4 years. Nothing in the
previous sentence prohibits submissions to the Secretary, before or
during any 4-year period described in such sentence, requesting
updates to such lists.
``(d) Definitions.--In this section:
``(1) The term `compounding' includes the combining, admixing,
mixing, diluting, pooling, reconstituting, or otherwise altering of
a drug or bulk drug substance to create a drug.
``(2) The term `essentially a copy of an approved drug' means--
``(A) a drug that is identical or nearly identical to an
approved drug, or a marketed drug not subject to section 503(b)
and not subject to approval in an application submitted under
section 505, unless, in the case of an approved drug, the drug
appears on the drug shortage list in effect under section 506E
at the time of compounding, distribution, and dispensing; or
``(B) a drug, a component of which is a bulk drug substance
that is a component of an approved drug or a marketed drug that
is not subject to section 503(b) and not subject to approval in
an application submitted under section 505, unless there is a
change that produces for an individual patient a clinical
difference, as determined by the prescribing practitioner,
between the compounded drug and the comparable approved drug.
``(3) The term `approved drug' means a drug that is approved
under section 505 and does not appear on the list described in
subsection (a)(4) of drugs that have been withdrawn or removed from
the market because such drugs or components of such drugs have been
found to be unsafe or not effective.
``(4)(A) The term `outsourcing facility' means a facility at
one geographic location or address that--
``(i) is engaged in the compounding of sterile drugs;
``(ii) has elected to register as an outsourcing facility;
``(iii) complies with all of the requirements of this
``(B) An outsourcing facility is not required to be a licensed
``(C) An outsourcing facility may or may not obtain
prescriptions for identified individual patients.
``(5) The term `sterile drug' means a drug that is intended for
parenteral administration, an ophthalmic or oral inhalation drug in
aqueous format, or a drug that is required to be sterile under
Federal or State law.''.
``(d) Obligation to Pay Fees.--Payment of the fee under section
744K, as described in subsection (a)(9), shall not relieve an
outsourcing facility that is licensed as a pharmacy in any State that
requires pharmacy licensing fees of its obligation to pay such State
(b) Fees.--Subchapter C of chapter VII (21 U.S.C. 379f et seq.) is
amended by adding at the end the following:
``PART 9--FEES RELATING TO OUTSOURCING FACILITIES
``SEC. 744J. DEFINITIONS.
``In this part:
``(1) The term `affiliate' has the meaning given such term in
``(2) The term `gross annual sales' means the total worldwide
gross annual sales, in United States dollars, for an outsourcing
facility, including the sales of all the affiliates of the
``(3) The term `outsourcing facility' has the meaning given to
such term in section 503B(d)(4).
``(4) The term `reinspection' means, with respect to an
outsourcing facility, 1 or more inspections conducted under section
704 subsequent to an inspection conducted under such provision
which identified noncompliance materially related to an applicable
requirement of this Act, specifically to determine whether
compliance has been achieved to the Secretary's satisfaction.
``SEC. 744K. AUTHORITY TO ASSESS AND USE OUTSOURCING FACILITY FEES.
``(a) Establishment and Reinspection Fees.--
``(1) In general.--For fiscal year 2015 and each subsequent
fiscal year, the Secretary shall, in accordance with this
subsection, assess and collect--
``(A) an annual establishment fee from each outsourcing
``(B) a reinspection fee from each outsourcing facility
subject to a reinspection in such fiscal year.
``(2) Multiple reinspections.--An outsourcing facility subject
to multiple reinspections in a fiscal year shall be subject to a
reinspection fee for each reinspection.
``(b) Establishment and Reinspection Fee Setting.--The Secretary
``(1) establish the amount of the establishment fee and
reinspection fee to be collected under this section for each fiscal
year based on the methodology described in subsection (c); and
``(2) publish such fee amounts in a Federal Register notice not
later than 60 calendar days before the start of each such year.
``(c) Amount of Establishment Fee and Reinspection Fee.--
``(1) In general.--For each outsourcing facility in a fiscal
``(A) except as provided in paragraph (4), the amount of
the annual establishment fee under subsection (b) shall be
equal to the sum of--
``(i) $15,000, multiplied by the inflation adjustment
factor described in paragraph (2); plus
``(ii) the small business adjustment factor described
in paragraph (3); and
``(B) the amount of any reinspection fee (if applicable)
under subsection (b) shall be equal to $15,000, multiplied by
the inflation adjustment factor described in paragraph (2).
``(2) Inflation adjustment factor.--
``(A) In general.--For fiscal year 2015 and subsequent
fiscal years, the fee amounts established in paragraph (1)
shall be adjusted by the Secretary by notice, published in the
Federal Register, for a fiscal year by the amount equal to the
``(ii) the average annual percent change in the cost,
per full-time equivalent position of the Food and Drug
Administration, of all personnel compensation and benefits
paid with respect to such positions for the first 3 years
of the preceding 4 fiscal years, multiplied by the
proportion of personnel compensation and benefits costs to
total costs of an average full-time equivalent position of
the Food and Drug Administration for the first 3 years of
the preceding 4 fiscal years; plus
``(iii) the average annual percent change that occurred
in the Consumer Price Index for urban consumers (U.S. City
Average; Not Seasonally Adjusted; All items; Annual Index)
for the first 3 years of the preceding 4 years of available
data multiplied by the proportion of all costs other than
personnel compensation and benefits costs to total costs of
an average full-time equivalent position of the Food and
Drug Administration for the first 3 years of the preceding
4 fiscal years.
``(B) Compounded basis.--The adjustment made each fiscal
year under subparagraph (A) shall be added on a compounded
basis to the sum of all adjustments made each fiscal year after
fiscal year 2014 under subparagraph (A).
``(3) Small business adjustment factor.--The small business
adjustment factor described in this paragraph shall be an amount
established by the Secretary for each fiscal year based on the
Secretary's estimate of--
``(A) the number of small businesses that will pay a
reduced establishment fee for such fiscal year; and
``(B) the adjustment to the establishment fee necessary to
achieve total fees equaling the total fees that the Secretary
would have collected if no entity qualified for the small
business exception in paragraph (4).
``(4) Exception for small businesses.--
``(A) In general.--In the case of an outsourcing facility
with gross annual sales of $1,000,000 or less in the 12 months
ending April 1 of the fiscal year immediately preceding the
fiscal year in which the fees under this section are assessed,
the amount of the establishment fee under subsection (b) for a
fiscal year shall be equal to \1/3\ of the amount calculated
under paragraph (1)(A)(i) for such fiscal year.
``(B) Application.--To qualify for the exception under this
paragraph, a small business shall submit to the Secretary a
written request for such exception, in a format specified by
the Secretary in guidance, certifying its gross annual sales
for the 12 months ending April 1 of the fiscal year immediately
preceding the fiscal year in which fees under this subsection
are assessed. Any such application shall be submitted to the
Secretary not later than April 30 of such immediately preceding
``(5) Crediting of fees.--In establishing the small business
adjustment factor under paragraph (3) for a fiscal year, the
``(A) provide for the crediting of fees from the previous
year to the next year if the Secretary overestimated the amount
of the small business adjustment factor for such previous
fiscal year; and
``(B) consider the need to account for any adjustment of
fees and such other factors as the Secretary determines
``(d) Use of Fees.--The Secretary shall make all of the fees
collected pursuant to subparagraphs (A) and (B) of subsection (a)(1)
available solely to pay for the costs of oversight of outsourcing
``(e) Supplement Not Supplant.--Funds received by the Secretary
pursuant to this section shall be used to supplement and not supplant
any other Federal funds available to carry out the activities described
in this section.
``(f) Crediting and Availability of Fees.--Fees authorized under
this section shall be collected and available for obligation only to
the extent and in the amount provided in advance in appropriations
Acts. Such fees are authorized to remain available until expended. Such
sums as may be necessary may be transferred from the Food and Drug
Administration salaries and expenses appropriation account without
fiscal year limitation to such appropriation account for salaries and
expenses with such fiscal year limitation. The sums transferred shall
be available solely for the purpose of paying the costs of oversight of
``(g) Collection of Fees.--
``(1) Establishment fee.--An outsourcing facility shall remit
the establishment fee due under this section in a fiscal year when
submitting a registration pursuant to section 503B(b) for such
``(2) Reinspection fee.--The Secretary shall specify in the
Federal Register notice described in subsection (b)(2) the manner
in which reinspection fees assessed under this section shall be
collected and the timeline for payment of such fees. Such a fee
shall be collected after the Secretary has conducted a reinspection
of the outsourcing facility involved.
``(3) Effect of failure to pay fees.--
``(A) Registration.--An outsourcing facility shall not be
considered registered under section 503B(b) in a fiscal year
until the date that the outsourcing facility remits the
establishment fee under this subsection for such fiscal year.
``(B) Misbranding.--All drugs manufactured, prepared,
propagated, compounded, or processed by an outsourcing facility
for which any establishment fee or reinspection fee has not
been paid, as required by this section, shall be deemed
misbranded under section 502 until the fees owed for such
outsourcing facility under this section have been paid.
``(4) Collection of unpaid fees.--In any case where the
Secretary does not receive payment of a fee assessed under this
section within 30 calendar days after it is due, such fee shall be
treated as a claim of the United States Government subject to
provisions of subchapter II of chapter 37 of title 31, United
``(h) Annual Report to Congress.--Not later than 120 calendar days
after each fiscal year in which fees are assessed and collected under
this section, the Secretary shall submit a report to the Committee on
Health, Education, Labor, and Pensions of the Senate and the Committee
on Energy and Commerce of the House of Representatives, to include a
description of fees assessed and collected for such year, a summary
description of entities paying the fees, a description of the hiring
and placement of new staff, a description of the use of fee resources
to support inspecting outsourcing facilities, and the number of
inspections and reinspections of such facilities performed each year.
``(i) Authorization of Appropriations.--For fiscal year 2014 and
each subsequent fiscal year, there is authorized to be appropriated for
fees under this section an amount equivalent to the total amount of
fees assessed for such fiscal year under this section.''.
SEC. 103. PENALTIES.
(a) Prohibited Acts.--Section 301 (21 U.S.C. 331) is amended by
adding at the end the following:
``(ccc)(1) The resale of a compounded drug that is labeled `not for
resale' in accordance with section 503B.
``(2) With respect to a drug to be compounded pursuant to section
503A or 503B, the intentional falsification of a prescription, as
``(3) The failure to report drugs or adverse events by an entity
that is registered in accordance with subsection (b) of section
(b) Misbranded Drugs.--Section 502 (21 U.S.C. 352) is amended by
adding at the end the following:
``(bb) If the advertising or promotion of a compounded drug is
false or misleading in any particular.''.
SEC. 104. REGULATIONS.
In promulgating any regulations to implement this title (and the
amendments made by this title), the Secretary of Health and Human
(1) issue a notice of proposed rulemaking that includes the
(2) provide a period of not less than 60 calendar days for
comments on the proposed regulation; and
(3) publish the final regulation not more than 18 months
following publication of the proposed rule and not less than 30
calendar days before the effective date of such final regulation.
SEC. 105. ENHANCED COMMUNICATION.
(a) Submissions From State Boards of Pharmacy.--In a manner
specified by the Secretary of Health and Human Services (referred to in
this section as the ``Secretary''), the Secretary shall receive
submissions from State boards of pharmacy--
(1) describing actions taken against compounding pharmacies, as
described in subsection (b); or
(2) expressing concerns that a compounding pharmacy may be
acting contrary to section 503A of the Federal Food, Drug, and
Cosmetic Act (21 U.S.C. 353a).
(b) Content of Submissions From State Boards of Pharmacy.--An
action referred to in subsection (a)(1) is, with respect to a pharmacy
that compounds drugs, any of the following:
(1) The issuance of a warning letter, or the imposition of
sanctions or penalties, by a State for violations of a State's
pharmacy regulations pertaining to compounding.
(2) The suspension or revocation of a State-issued pharmacy
license or registration for violations of a State's pharmacy
regulations pertaining to compounding.
(3) The recall of a compounded drug due to concerns relating to
the quality or purity of such drug.
(c) Consultation.--The Secretary shall implement subsection (a) in
consultation with the National Association of Boards of Pharmacy.
(d) Notifying State Boards of Pharmacy.--The Secretary shall
immediately notify State boards of pharmacy when--
(1) the Secretary receives a submission under subsection
(2) the Secretary makes a determination that a pharmacy is
acting contrary to section 503A of the Federal Food, Drug, and
SEC. 106. SEVERABILITY.
(1) in subsection (a), in the matter preceding paragraph (1),
by striking ``unsolicited'';
(2) by striking subsection (c);
(3) by redesignating subsections (d) through (f) as subsections
(c) through (e), respectively; and
(4) in subsection (b)(1)(A)(i)(III), by striking ``subsection
(d)'' and inserting ``subsection (c)''.
(b) Severability.--If any provision of this Act (including the
amendments made by this Act) is declared unconstitutional, or the
applicability of this Act (including the amendments made by this Act)
to any person or circumstance is held invalid, the constitutionality of
the remainder of this Act (including the amendments made by this Act)
and the applicability thereof to other persons and circumstances shall
not be affected.
SEC. 107. GAO STUDY.
(a) Study.--Not later than 36 months after the date of the
enactment of this Act, the Comptroller General of the United States
shall submit to Congress a report on pharmacy compounding and the
adequacy of State and Federal efforts to assure the safety of
(b) Contents.--The report required under this section shall
(1) a review of pharmacy compounding in each State, and the
settings in which such compounding occurs;
(2) a review of the State laws and policies governing pharmacy
compounding, including enforcement of State laws and policies;
(3) an assessment of the available tools to permit purchasers
of compounded drugs to determine the safety and quality of such
(4) an evaluation of the effectiveness of the communication
among States and between States and the Food and Drug
Administration regarding compounding; and
(5) an evaluation of the Food and Drug Administration's
implementation of sections 503A and 503B of the Federal Food, Drug,
and Cosmetic Act.