Compounding issues

FDA’s flawed memorandum of understanding on interstate shipments

A poor definition and lack of research has put states and their pharmacists in a bind.

The latest

26 October 2020: APC issues press release responding to the final MOU.

26 October 2020: FDA issues press release on MOU that misrepresents reality — there was little to no “collaboration with states.”

The issue

In 1997, as part of the Food, Drug & Cosmetic Act, FDA was instructed to draft a memorandum of understanding with states regarding the interstate shipment of compounded drugs. It was expected to be a consensus document, created with input and endorsement of the states — an MOU they would be willing to sign.

Instead, inexplicably, the FDA drafted the MOU with little input from state boards of pharmacy, and released a document that, rather than having broad backing, puts states between a rock and a hard place:

  1. They can sign the MOU and commit to investigating, documenting, and reporting to FDA any time a pharmacy ships more than 50 percent of its compounded drugs to out-of-state patients.
  2. Don’t sign, and limit every pharmacy in the state to shipping no more than five percent of their prescription orders to other states.

The details: FDA has underestimated the administrative burden on states

When Congress added section 503A to the Food, Drug & Cosmetic Act in 1997, it directed the FDA to come to an agreement with the states — a memorandum of understanding — to help FDA “address … the distribution of inordinate amounts of compounded drug products interstate."

The legislation offered the states a choice: They could sign the MOU and report to FDA on inordinate amounts of compounded medications shipped by in-state compounding pharmacies to patients in other states. Or don’t sign it, and pharmacies in that state would be limited to shipping out-of-state no more than five percent of all prescription orders it dispensed.


Congress’s expectation, communicated in committee testimony and in Appropriations Committee notes to FDA since the bill passed, was that FDA would structure the MOU in such a way that states would be motivated to sign it.

That motivation was to be an administrative regime that was workable for state boards of pharmacy, the agencies that in most states are charged with regulating pharmacy compounding and whose funding comes not from the federal government but from the state legislature. In return, states would collect and report data on in-state pharmacies that shipped more than 50 percent of their compounded drugs out of state.

If the MOU was to be the carrot, the cap on out-of-state shipments was the stick. Impeding patients’ access to compounded meds was not Congress’ goal. The goal was to incentivize states to help FDA gather data on large shippers of compounded drugs — so that it could properly inspect and document patient safety in those pharmacies.

For patients served by compounding pharmacies based in states that don’t sign the MOU (many of whose lives are sustained by the compounded medications that are shipped to them) the loss of access to those drugs — because of that five percent cap on shipments — would be significant. There will also be an economic cost to states, as compounding pharmacies limited by the five percent cap close or relocate to a state that did sign the MOU.

FDA has had 23 years to create that MOU and get buy-in from the states. Unfortunately, the “final” MOU, released by FDA in May, fails to address earlier concerns raised by states and pharmacy groups. Now several states are hinting that they won’t sign it. Rather than an enticing carrot, they see this final MOU itself as a stick, just another expensive unfunded mandate.

We believe FDA failed to account for the real costs of the regulation, and thus has violated the federal Paperwork Reduction Act. FDA conducted no survey of state boards of pharmacy but relied instead on old input provided to NABP on an earlier iteration of the MOU, a version that was later withdrawn. As a result — made clear by the number of states now threatening not to sign — FDA has underestimated the administrative cost to states that signing the MOU would incur and has over-estimated the number of states that will likely sign it.

As the final step in the process, the MOU has been submitted by FDA to the Office of Management and Budget for clearance under the Paperwork Reduction Act, which requires federal agencies to estimate the burden of federal regulations on state agencies.

CONTACT: APC’s David Pore —; or Scott Brunner —

APC’s May 2020 statement on the FDA’s MOU

FDA finally releases “final” MOU, and it’s flawed

This week the FDA made available the long-awaited final memorandum of understanding with states on the interstate distribution of inordinate quantities of compounded drugs. This version of the MOU is the fourth iteration — but the first “final” version — in the 20-plus years since its creation was mandated in amendments to the Food, Drug & Cosmetics Act.

In states that sign the MOU, pharmacies that ship more than 50 percent of their compounded drugs out of state will trigger state investigation and reporting requirements and the state board of pharmacy will be required to report adverse events to the FDA. Pharmacies in states that don’t sign the MOU will be prohibited from distributing more than five percent of their compounded drugs out of state.

Obviously, a five percent cap on out-of-state shipment of compounded preparations would have a profound chilling effect on patient access to certain compounded drugs. That’s why, over the past two decades, APC has urged FDA to make essential changes to the previous drafts of the MOU. Our aim has been twofold: to assure, first, that the lawful and proper provision of compounded meds to patients, pursuant to a prescription and regardless of their state of residence, is preserved; and second, that the final MOU is one that states can live with and will actually sign.

This latest version of the MOU incorporates some of the suggestions APC and other stakeholders made in relation to the requirements on states, and those changes may serve has helpful inducements for states to sign the MOU.

However, the final MOU still redefines the key term “distribution” to include the patient-specific dispensing of compounded drugs — in other words, applying the term distribution to include traditional dispensing of medications pursuant to a patient-specific prescription, an area appropriately regulated by state boards of pharmacy under state law. This redefining of a key term is inconsistent not only with the plain statutory language of the Food, Drug & Cosmetic Act, but with the definition of the term “distribution” in every other appertaining federal law. Concern about that inconsistency has been raised in multiple letters from members of Congress to the FDA, statements in the congressional record, appropriations report language directives, and the overwhelming consensus of stakeholder input to the agency on this issue.

In states that choose for whatever reason not to sign the MOU, pharmacies will be limited to shipping no more than five percent of ALL compounded drugs (including those dispensed with a prescription) out of state. Enforcement of a five percent cap on that kind of traditional, patient-specific dispensing — as opposed to applying the cap only to distributions of drugs in larger quantities without a prescription — could deprive patients of needed medications. Moreover, it’s simply not supported by the statute and will undoubtedly trigger lengthy and expensive litigation, tying up the issue in the courts for a long time.

It’s particularly disappointing given the lengths APC and other stakeholders went to in providing FDA suggestions for a very narrow, limited definition of “distribution” for the purposes of the MOU that would meet the statute’s intent, satisfy FDA’s information needs, and avoid legal action.

The timing of the release of this final MOU is curious given temporary guidance FDA issued on April 20 that allows 503A pharmacies to actually distribute (without a patient-specific prescription) certain compounded COVID-19 treatment drugs to hospitals when those drugs are unavailable commercially or from 503B outsourcing facilities.

APC is studying the MOU and will continue working with our allies in Congress and other pharmacy stakeholders and organizations representing providers and patients who rely on compounded drugs to effect policy outcomes that are both safe and protect patient access to the medicines they need.