EI-01-16-00180 December 2018 oig.hhs.gov U.S. Department of Health and Human Services Office of Inspector General Most Hospitals Obtain Compounded Drugs From Outsourcing Facilities, Which Must Meet FDA Quality Standards OEI-01-17-00090 June 2019 OEI-01-17-00090 October 2018 Suzanne Murrin oig.hhs.gov Deputy Inspector General oig.hhs.gov for Evaluation and Inspections Report in Brief U.S. Department of Health and Human Services June 2019 OEI-01-17-00090 Office of Inspector General Why OIG Did This Review Most Hospitals Obtain Compounded Drugs To provide FDA with insights to improve From Outsourcing Facilities, Which Must its oversight of compounders and enhance patient safety, OIG determined Meet FDA Quality Standards the extent to which hospitals purchase non-patient-specific compounded drugs What OIG Found from outsourcing facilities. Only Most hospitals that obtained non-patient- Key Takeaway compounders registered with FDA as specific compounded drugs from outside Most hospitals obtain non- outsourcing facilities can legally compounders obtained them from what the patient-specific compound and distribute non-patient- Food and Drug Admnistration (FDA) calls compounded drugs from specific drugs. outsourcing facilities—compounders that are outsourcing facilities— registered with FDA. In fact, 89 percent of facilities that are registered In response to deaths from an outbreak hospitals that obtained non-patient-specific with FDA. Factors associated of fungal meningitis caused by compounded drugs did so exclusively from with quality, including contaminated compounded injections, outsourcing facilities, 9 percent of such registration with FDA as an Congress passed the Drug Quality and hospitals obtained at least some from outsourcing facility, are Security Act in November 2013. This outsourcing facilities, and just 2 percent among the most important legislation enhanced FDA’s authority obtained them exclusively from unregistered factors that hospitals over facilities that perform large-scale compounders. We provided FDA with a list consider when they decide compounding of non-patient-specific of compounders sorted by registration status, where to obtain their non- drugs. It distinguished the work of which it can use to prioritize followup. patient-specific compounded these facilities from traditional drugs. pharmaceutical compounding, which is Hospitals reported that quality done on a patient-specific basis. The considerations—including FDA registration; Drug Quality and Security Act allows State and Federal enforcement actions; product recalls; and quality assurance compounders that are registered as documentation—drive their decisions on where to obtain non-patient-specific outsourcing facilities with FDA to compounded drugs. Hospitals rated quality considerations as extremely compound and distribute drugs without important when choosing compounders. One expert told us, “… I would be a patient-specific prescription. FDA very hesitant to purchase from a nonregistered facility.” must inspect such facilities according to Of hospitals that compounded non-patient-specific drugs in their own a risk-based schedule. pharmacies, only 2 percent had considered registering those pharmacies with FDA as outsourcing facilities, and only one hospital had actually registered its How OIG Did This Review compounding facility. Cost, as well as equipment and facility design limitations, We selected a stratified random sample were extremely important factors for hospitals in deciding whether to register of 601 Medicare-participating hospitals their pharmacies as outsourcing facilities. and sent them a questionnaire, achieving an overall 94-percent What OIG Recommends and How the Agency Responded response rate. We asked the hospitals OIG recommends that FDA further communicate with hospitals about the detailed questions about where they importance of obtaining their non-patient-specific compounded drugs from obtain non-patient-specific outsourcing facilities. We also recommend that FDA take appropriate followup compounded drugs and the factors they actions with the unregistered compounding facilities on the list that we considered in choosing where to obtain provided; these facilities may not be in compliance with Federal law. FDA’s them. To determine the registration followup could include for-cause inspections and any advisory or enforcement status of the compounding facilities that actions that are warranted. FDA concurred with our recommendations. the hospitals identified, we compared those facilities' names to FDA’s list of registered outsourcing facilities as of January 2018. TABLE OF CONTENTS BACKGROUND 1 Methodology 5 FINDINGS Most hospitals that obtained non-patient-specific compounded drugs from outside 7 compounders got them from outsourcing facilities Hospitals reported that quality considerations, including whether a compounder was 9 registered as an outsourcing facility, drive decisions about where to obtain compounded drugs Hospitals rarely considered registering their pharmacies with FDA as outsourcing facilities 10 CONCLUSION AND RECOMMENDATIONS FDA should further communicate to hospitals the importance of obtaining 12 non-patient-specific compounded drugs from outsourcing facilities FDA should take appropriate followup action with the unregistered compounding facilities on 13 the list we provided AGENCY COMMENTS AND OIG RESPONSE 14 APPENDICES A: Types of drugs obtained by hospitals from outside compounders on a non-patient-specific 15 basis B: Types of drugs compounded in hospital pharmacies on a non-patient-specific basis 20 C: Types of drugs that hospitals reported being unable to obtain on a non-patient-specific 24 basis D: Point estimates and confidence intervals for findings 28 E: Factors that hospitals considered when choosing where to obtain compounded drugs 30 F: Agency Comments 32 ACKNOWLEDGMENTS 35 BACKGROUND Objectives To determine the extent to which Medicare-participating hospitals: 1. acquire compounded drugs from entities registered as outsourcing facilities with the Food and Drug Administration (FDA), and 2. consider registering their pharmacies with FDA as outsourcing facilities. In 2012, contaminated steroid injections compounded by the New England Compounding Center caused a nationwide meningitis outbreak resulting in 64 deaths and a total of 753 cases of fungal infection.1 The outbreak raised concerns about oversight of compounded drugs and prompted Congress to pass the Drug Quality and Security Act (DQSA) in November of 2013.2 The DQSA added a new section 503B to the Federal Food, Drug, and Cosmetic Act (FD&C Act) and established requirements for compounding facilities that elect to register with FDA. FDA calls such registered facilities outsourcing facilities.3 Only entities that register and comply with section 503B of the FD&C Act can compound and distribute drugs without a patient-specific prescription. Outsourcing facilities are subject to FDA inspections in accordance with a risk-based schedule.4 FDA inspections assess the facilities for compliance with the FD&C Act, including section 503B and the current good manufacturing practice (CGMP) requirements under section 501(a)(2)(B). These inspections frequently identify CGMP violations. One such violation would be poor aseptic technique that may result in a lack of sterility that facilities must address to protect the public’s health.5 FDA lists outsourcing facilities and their inspection results on its website, thereby promoting transparency and compliance with quality standards.6 In addition, outsourcing facilities must indicate to FDA each year whether they intend to compound drugs that are in shortage.7 Use of compounded drugs is widespread in hospitals. Prior Office of Inspector General work found that 92 percent of Medicare-participating hospitals used compounded sterile drugs in 2012, and that 79 percent of those hospitals contracted with at least one compounding facility to produce these products.8 In a 2014 letter to hospitals, FDA encouraged them to purchase their compounded drugs from outsourcing facilities because such facilities have greater assurances of quality (see Exhibit 1).9 Our current report determines the extent to which hospitals have purchased their compounded drugs from outsourcing facilities; provides FDA with Most Hospitals Obtain Compounded Drugs From Registered Outsourcing Facilities, Which Must Meet FDA Quality Standards 1 OEI-01-17-00090 further data on the landscape of compounded drugs; and adds to OIG’s body of work on this important topic. Exhibit 1. Excerpt from FDA’s 2014 Letter to Hospitals As a purchaser of compounded drugs, you can play an important role in improving the quality of compounded drugs by requiring compounding pharmacies that supply drugs to your facility to register as outsourcing facilities. Once they register, you and the patients you serve can be assured that FDA will inspect these facilities on a risk-based schedule, hold them to CGMP requirements, monitor adverse events reports they are required to submit to the agency, and require appropriate labeling. Pharmaceutical Compounding is generally the practice of combining, mixing, or altering a prescription drug to meet the needs of an individual patient. For example, Compounding a licensed pharmacist may compound a drug without a certain dye to which a patient may be allergic, or the pharmacist might create a liquid form of a drug for a patient who is unable to swallow a pill. Traditionally, licensed pharmacists and physicians compound a drug for an individual patient and dispense it upon the receipt of a prescription. In contrast, outsourcing facilities can engage in large-scale compounding of non-patient-specific (NPS) drugs—a process akin to conventional manufacturing.10 Unlike with most prescription drugs, FDA does not review and approve compounded drugs. Therefore, FDA does not verify their safety, effectiveness, or quality prior to their being marketed in the United States. Hospitals may contract with multiple outside compounders in addition to compounding drugs within their own pharmacies. The Drug The DQSA added a new section 503B to the FD&C Act, thereby enhancing FDA’s oversight authority over facilities that perform large-scale non- Quality and patient-specific compounding of drugs.11 State boards of pharmacy have Security Act primary responsibility for overseeing traditional compounding pharmacies, which perform patient-specific compounding (i.e., they prepare drugs for identified individual patients), distribute those products pursuant to patient- specific prescriptions, and otherwise comply with section 503A of the FD&C Act. Section 503B of the FD&C Act created a new category of compounding facilities—called outsourcing facilities—that often compound and distribute drugs without a patient-specific prescription. Unlike with traditional pharmacy compounding, outsourcing facilities may legally compound and distribute drugs without a patient-specific prescription if they register with FDA and comply with section 503B of the FD&C Act. Most Hospitals Obtain Compounded Drugs From Registered Outsourcing Facilities, Which Must Meet FDA Quality Standards 2 OEI-01-17-00090 Section 503B of the FD&C Act does not limit the quantities of compounded drugs that outsourcing facilities may sell without a patient-specific prescription anywhere in the United States. If an outsourcing facility complies with section 503B of the FD&C Act, it is eligble for exemption from certain FD&C Act requirements, including from the drug-approval process required for conventional manufacturers. See Exhibit 2. Exhibit 2. Outsourcing facilities and outside compounders, explained Outsourcing facility A compounder that is registered with FDA as a 503B outsourcing facility. Registration with FDA enables a facility to compound and distribute drugs without a patient-specific prescription (referred to as NPS drugs throughout this report), provided that the facility meets certain statutory conditions. Outsourcing facilities are subject to routine FDA oversight. Outside compounder Any entity other than a hospital’s pharmacy that produces compounded drugs. An outside compounder may be an outsourcing facility or an unregistered facility. Among other things, under section 503B of the FD&C Act, outsourcing facilities must meet the stringent quality standards found in FDA’s CGMP requirements under section 501(a)(2)(B) of the FD&C Act and parts 210 and 211 of Title 21 of the Code of Federal Regulations.12 FDA’s CGMP requirements establish baseline standards for the physical plant, equipment, and production controls in place at registered outsourcing facilities.13 FDA’s goal is generally to inspect an outsourcing facility within 2 months of the facility’s initial registration.14 As of September 21, 2018, 73 compounding facilities had registered as outsourcing facilities with FDA.15 As of January 2017, FDA had conducted 85 inspections of outsourcing facilities— it had inspected all facilities at least once, and had inspected some facilities more than once. Almost all of these inspections resulted in FDA’s issuing an FDA Form 483 to notify the facilities of objectionable conditions.16 FDA encourages facilities to respond to the form in writing with corrective action plans and to implement the plans expeditiously. If the objectionable conditions warrant further action, FDA may take an advisory or enforcement action, including sending the facility a warning letter or bringing an action for seizure or injunction.17, 18 Most Hospitals Obtain Compounded Drugs From Registered Outsourcing Facilities, Which Must Meet FDA Quality Standards 3 OEI-01-17-00090 Compounding Hospital pharmacies can fulfill an array of patient needs, compounding both non-patient-specific (NPS) and patient-specific drugs to varying degrees. Within a Hospital Sometimes, hospital pharmacies may not be able to compound a patient- Pharmacy specific drug in an emergency situation. In such cases, hospitals sometimes compound those drugs without a patient-specific prescription. Federal law does not permit a hospital pharmacy to compound and distribute non- patient-specific drugs within or outside of the hospital. In its 2016 draft guidance on hospital compounding, FDA recognizes that hospital pharmacies may need NPS supplies of certain compounded drugs,19 and FDA recommends that hospitals obtain NPS compounded drugs from outsourcing facilities. The draft guidance also proposes certain parameters within which FDA generally would not intend to object if hospitals compounded and distributed NPS drugs. In January 2018, FDA released its 2018 Compounding Policy Priorities Plan. FDA’s Proposed According to the plan, FDA’s priorities include transitioning from the current Risk-Based CGMP regulations to promulgating more specific CGMP regulations for Approach to outsourcing facilities. 20 In December 2018, FDA issued revised draft Manufacturing guidance outlining a risk-based approach to CGMP requirements. This approach seeks to recognize the differences between outsourcing facilities Standards and conventional drug manufacturers while protecting patients from substandard compounded drugs.21 Related OIG Work This study is part of a larger body of OIG work examining hospital use of compounded drugs. In 2013, OIG found that among Medicare hospitals that used compounded drugs, 95 percent prepared compounded sterile drugs onsite and 79 percent of these hospitals also purchased compounded sterile drugs from external compounding facilities.22 An OIG study published in 2014 found that Medicare claims data do not include identifying information for external compounding facilities that provide a hospital with compounded drugs. Including such identifying information on claims would help the Centers for Medicare & Medicaid Services (CMS) and hospitals identify the source(s) of future outbreaks.23 CMS did not concur with OIG’s recommendation to explore including that information, citing questions about CMS’s authority to do so and the significant resources that would be necessary to adjust the claims processing system. In 2015, OIG released a study that examined Medicare’s oversight of hospitals’ practices related to compounding. This study found that Medicare’s oversight addresses most of the expert-recommended practices related to compounding some of the time, but the study did not generally review hospitals’ contracts with external compounding facilities. These Most Hospitals Obtain Compounded Drugs From Registered Outsourcing Facilities, Which Must Meet FDA Quality Standards 4 OEI-01-17-00090 contracts help ensure that external compounding facilities provide safe, nontainted compounded drugs to hospitals.24 CMS implemented our recommendations for it to train surveyors on standards from nationally recognized organizations related to safe compounding practices and for it to amend its interpretive guidelines to address contracting with outside compounding pharmacies. Methodology Scope This report is national in scope. We selected our sample from all Medicare-participating acute-care hospitals as of September 2017. From that population, we focused our analysis on the estimated 80 percent of hospitals that obtained NPS compounded drugs from any source (hospital pharmacy, outside compounder, and/or outsourcing facility).25 Data Sources and Analysis To conduct this study, we relied on a survey of hospitals, FDA’s registry of outsourcing facilities, and stakeholder interviews. Stakeholders included officials from FDA and experts in pharmaceutical compounding and hospital compounding. We selected a sample of acute-care hospitals to determine where they obtained their patient-specific and NPS compounded drugs. To do so, we first identified 4,746 acute-care hospitals that participated in Medicare in 2017.26 We then stratified that population by size (bed count) and by whether a hospital was known to have registered its pharmacy as a 503B outsourcing facility. We selected 300 large hospitals(≥50 beds), 300 small hospitals (<50 beds), and the 1 hospital with a pharmacy that was on FDA’s registry of outsourcing facilities at the time we selected our sample, resulting in a total sample of 601 hospitals.27 See Exhibit 3 for additional details on the sample size and response rates. Most Hospitals Obtain Compounded Drugs From Registered Outsourcing Facilities, Which Must Meet FDA Quality Standards 5 OEI-01-17-00090 Exhibit 3. Sample and Population Data for Medicare-Participating Hospitals Surveyed for This Study Number of Number of Strata Descriptions Hospitals in Hospitals Response rate Population in Sample Large hospitals (≥50 beds) 2925 300 93% Small hospitals (<50 beds) 1820 300 94% Hospital registered as outsourcing facilities 1 1 100% Total 4746 601 94% We administered our electronic questionnaire between October 20, 2017, and January 4, 2018. We analyzed the responses as a whole and by hospital size. We requested information on (among other related questions) whether hospitals considered registering their pharmacies as outsourcing facilities, the hospitals’ sources for their compounded drugs, and factors that hospitals considered in sourcing their compounded drugs. For purposes of this report, we considered hospitals that reported compounding NPS drugs in their pharmacies or obtaining them from outside compounders to be using NPS compounded drugs. To determine the registration status of each source of compounded drugs, we compared by name the sources that responding hospitals identified and FDA’s registry as of January 2, 2018. Limitations Our review relied on self-reported information from hospitals. We did not independently verify hospitals’ responses. Standards We conducted this study in accordance with the Quality Standards for Inspection and Evaluation issued by the Council of the Inspectors General on Integrity and Efficiency. Most Hospitals Obtain Compounded Drugs From Registered Outsourcing Facilities, Which Must Meet FDA Quality Standards 6 OEI-01-17-00090 FINDINGS Most hospitals that Outsourcing facilities are major sources for hospitals’ compounded drugs. Among hospitals that obtained NPS compounded drugs from outside obtained NPS compounders, 89 percent of hospitals obtained them only from compounded drugs compounders that were registered with FDA as 503B outsourcing facilities. from outside This means that the facilities are subject to FDA inspection and reporting compounders got requirements, and that they must adhere to CGMP requirements. See Appendix D for point estimates and 95-percent confidence intervals for them from findings pertaining to the FDA registration status of outside compounders outsourcing from which hospitals obtain NPS compounded drugs. facilities Among hospitals that obtained NPS compounded drugs from outside compounders, about 11 percent obtained at least some of these drugs from unregistered facilities: 9 percent both from outsourcing facilities and unregistered facilities, and 2 percent exclusively from unregistered facilities (see Exhibit 4). Unregistered facilities that distribute NPS compounded drugs are not in compliance with the FD&C Act and are a potential significant threat to public health. We provided the list of all identified outside compounding facilities sorted by registration status to the FDA for appropriate followup.28 Exhibit 4. Most hospitals that obtained NPS compounded drugs from outside compounders got them from outsourcing facilities. Source: OIG analysis of survey data from Medicare-participating hospitals, 2017. Many hospitals obtain NPS compounded drugs from multiple outside compounders. Over half of hospitals that obtained such drugs from outside compounders obtained them from more than one outside compounder. Most Hospitals Obtain Compounded Drugs From Registered Outsourcing Facilities, Which Must Meet FDA Quality Standards 7 OEI-01-17-00090 Among all of these hospitals, almost 90 percent used between one and three outside compounders (see Exhibit 5). Exhibit 5. Most hospitals that obtained NPS compounded drugs obtained them from more than one outside compounder Source: OIG analysis of hospital-reported data. Analysis limited to hospitals that obtained non-patient-specific compounded drugs in the 12 months prior to October 2017. Three kinds of drugs—narcotics/controlled substances, patient-controlled analgesia, and epidurals—were among those commonly obtained from outside compounders and compounded in hospitals’ own pharmacies. See Appendix A for information on the kinds of drugs that hospitals obtain from outside compounders. See Appendix B for information on the kinds of drugs that hospitals compound in their own hospital pharmacies. Nearly half (45 percent) of hospitals faced some challenges in obtaining all the NPS compounded drugs they sought from outside compounders. Of these hospitals, 76 percent were unable to obtain a drug on FDA’s drug shortage list from outside compounders.29 Outsourcing facilities generally cannot make products that are essentially copies of approved drugs, but drugs that appear on FDA’s drug shortage list at the time of compounding, distribution, and dispensing are not considered to be essentially copies of approved drugs.30 However, some factors that contribute to drug shortages—such as lack of raw materials—affect outsourcing facilities and conventional manufacturers alike. The unpredictability of drug shortages also makes it risky for outsourcing facilities to invest in compounding a drug that remains for an indefinite period on the drug shortage list.31 Of the hospitals that reported facing challenges in obtaining all the NPS compounded drugs they sought from outside compounders, more than a quarter specifically reported challenges in obtaining patient-controlled Most Hospitals Obtain Compounded Drugs From Registered Outsourcing Facilities, Which Must Meet FDA Quality Standards 8 OEI-01-17-00090 analgesia, operating room syringes, narcotics/controlled substances, and pitocin/oxytocin from outside compounders. More information on the challenges that hospitals faced in obtaining NPS compounded drugs is included in Appendix C. Hospitals Nearly all hospitals rated quality considerations as extremely important in choosing sources for compounded drugs. (See Exhibit 6 for descriptions of reported that the factors we defined as quality considerations for the purposes of this quality report.) Overall, 94 percent of hospitals reported that a source’s history of considerations, Federal enforcement actions, such as product seizures or injunctions, was including extremely important. Likewise, 94 percent identified the history of State actions, such as suspension or revocation of a State license, as being whether a extremely important. Furthermore, 92 percent rated product recalls, quality compounder was assurance documentation, and 503B registration status as being extremely registered as an important. In fact, one stakeholder told us that FDA registration was a way to determine whether a compounder “passed muster.” outsourcing facility, drive decisions about “If I was a pharmacy director, I would be very hesitant where to obtain to purchase from a nonregistered facility.” compounded – Pharmacy expert drugs Finally, stakeholders with whom we spoke noted that the 2012 meningitis outbreak heightened hospitals’ awareness of the risks associated with compounding, and that it focused their attention on quality, risk management, and liability. Most Hospitals Obtain Compounded Drugs From Registered Outsourcing Facilities, Which Must Meet FDA Quality Standards 9 OEI-01-17-00090 Exhibit 6. Factors Defined as Quality Considerations for This Report  History of State actions against facility (e.g., suspension or revocation of State license)  History of Federal enforcement actions against facility (e.g., seizure or injunction)  History of product recalls and/or cessation of sterile operations  Quality assurance documentation  Registration with FDA as a 503B outsourcing facility  Facility’s accreditation status  Appropriate licensure of pharmacy staff  Warning letters issued based on FDA inspection findings  Facility’s reputation  Staff training and competency assessment documentation  Observations listed on FDA Form 483 Although the cost of compounded drugs matters to many hospitals, it does not appear to drive hospital decisions about where to obtain compounded drugs as strongly as do quality considerations. For example, 58 percent of hospitals considered the cost of the compounded drugs extremely important in choosing where to obtain them. A similar proportion— 53 percent—considered contracts with group purchasing organizations, which allow hospitals to leverage their buying power for discounts, to be extremely important. Less than half (49 percent) reported that their own purchasing histories with compounders were extremely important. See Appendix E for additional factors that hospitals consider when making decisions about where to obtain compounded drugs. Fewer than 2 percent of hospitals that compound NPS drugs in their Hospitals rarely pharmacies had considered or were currently considering registering their considered pharmacies as 503B outsourcing facilities. Registering as 503B outsourcing registering their facilities and complying with the FD&C Act represents a high bar for pharmacies with hospitals, which generally compound under less stringent conditions than those that must be met by outsourcing facilities. Stakeholders told us that FDA as outsourcing meeting this bar could represent a “huge leap in cost and talent” for facilities hospitals, calling for initial investments of $3 million to $10 million. Hospitals reported both that initial cost of making a pharmacy CGMP-compliant and the limitations of their equipment and facility design were extremely important in deciding whether to register. Nearly half of hospitals (47 percent) obtained NPS compounded drugs from both their own pharmacies and one or more other source(s)—usually, an outsourcing facility. Hospitals rarely relied solely on their own pharmacies to provide NPS compounded drugs; just 8 percent did so. Therefore, Most Hospitals Obtain Compounded Drugs From Registered Outsourcing Facilities, Which Must Meet FDA Quality Standards 10 OEI-01-17-00090 hospital pharmacies that compound NPS drugs may have little incentive to expend the significant amount of time and resources required to make their pharmacies CGMP-compliant. See Appendix D for compounding and purchasing practices for NPS drugs. Just one hospital pharmacy, associated with a large hospital system, is registered with the FDA. Most Hospitals Obtain Compounded Drugs From Registered Outsourcing Facilities, Which Must Meet FDA Quality Standards 11 OEI-01-17-00090 CONCLUSION AND RECOMMENDATIONS FDA stated that it is committed to implementing the Drug Quality and Security Act (DQSA) in a way that enhances patient safety by protecting patients from unsafe, ineffective, and poor-quality compounded drugs while preserving access to lawfully compounded drugs.32 The DQSA created outsourcing facilities, a new category of drug-compounding facility that is subject to FDA registration and oversight. Patient safety is advanced when hospitals choose to obtain compounded drugs from outsourcing facilities that are registered with FDA. Outsourcing facilities must adhere to current good manufacturing practices, report adverse events to FDA, and label products with certain information. According to our analysis, hospitals have largely chosen to obtain their NPS compounded drugs from such facilities. They based their decisions primarily on factors related to quality, and FDA registration was key among these factors. In 2014, FDA wrote to hospitals about the DQSA and urged them to obtain their compounded drugs from outsourcing facilities. Most heeded that call, but 11 percent still obtain at least some of their NPS compounded drugs from unregistered compounders. We provided a list that included those unregistered facilities to FDA for its information and appropriate followup. In light of our findings, we offer FDA the following recommendations as it continues to implement the DQSA: FDA should further communicate to hospitals the importance of obtaining NPS compounded drugs from outsourcing facilities Hospitals are the frontline of patient safety, and safely compounded drugs are necessary for effective patient care. To that end, FDA should further promote how hospitals can better ensure quality and patient safety by obtaining NPS compounded drugs from outsourcing facilities. FDA could communicate to hospitals by writing to them; posting information on its website; or publishing information or an article; among other options. In doing so, FDA could provide additional information on its oversight of outsourcing facilities—including information on its inspection and enforcement activities—to help hospitals make decisions about where to obtain compounded drugs. To help hospitals obtain drugs that are on FDA’s drug shortage list, FDA could make available information about outsourcing facilities that have informed it of their intent to compound such drugs. Finally, we encourage FDA to evaluate opportunities for enhancing its website as a tool for hospitals that wish to assess the compliance history of outsourcing facilities. Most Hospitals Obtain Compounded Drugs From Registered Outsourcing Facilities, Which Must Meet FDA Quality Standards 12 OEI-01-17-00090 FDA should take appropriate followup action with the unregistered compounding facilities on the list that we provided NPS compounders that are unregistered and are not operating in compliance with section 503B of the FD&C Act could pose a public health threat. We provided a list that included unregistered NPS compounders to the FDA. FDA should review that list and take appropriate actions with unregistered compounders, such as conducting for-cause inspections and any advisory or enforcement actions warranted. Most Hospitals Obtain Compounded Drugs From Registered Outsourcing Facilities, Which Must Meet FDA Quality Standards 13 OEI-01-17-00090 AGENCY COMMENTS AND OIG RESPONSE FDA concurred with both of our recommendations. In response to our first recommendation, FDA agreed that ongoing outreach to hospitals about obtaining compounded drugs from registered outsourcers is important. FDA stated that it regularly engages with hospitals and health-system stakeholders regarding drug compounding and applicable law and policy, and that its specific engagement efforts include holding annual listening sessions, developing policy on compounding in hospital and health-system settings, and continuing to post information about the products that outsourcing facilities have recently produced, which may include drugs in shortage. In response to our second recommendation, FDA stated that it has used the list we provided to conduct inspections and has confirmed that some sites distributed NPS compounded drugs. Those inspections also identified objectionable conditions, and some have led to a recall. FDA stated that it will continue to take appropriate followup actions. OIG appreciates FDA’s concurrences and its commitment to implementing the DQSA. FDA’s continued efforts in NPS compounding can help protect patients from unsafe, ineffective, and poor-quality compounded drugs while preserving access to lawfully compounded drugs. For the full text of FDA’s comments, see Appendix F. Most Hospitals Obtain Compounded Drugs From Registered Outsourcing Facilities, Which Must Meet FDA Quality Standards 14 OEI-01-17-00090 APPENDIX A: Types of drugs obtained by hospitals from outside compounders on a non- patient-specific basis Percentage of hospitals that obtained NPS compounded drugs with the following characteristics from outside compounding facilities Independent Point Estimate Group T- (95-Percent Test By Drug Sample Size Confidence Hospital Intervals) Size (P- Value) Small: 32.1% High-volume compounded 57.6% 421 Large: 67.9% sterile preparations (53.2%-62.0%) (<0.0001) Small: 54.6% Low-volume compounded 61.2% 421 Large: 64.0% sterile preparations (56.7%-65.6%) (0.0752) Small: 15.2% High-risk compounded sterile 24.5% 421 Large: 28.2% preparations (20.7%-28.7%) (0.0047) Small: 30.9% 58.1% Products in shortage 421 Large: 69.0% (53.7%-62.4%) ( <0.0001) Small: 17.0% 25.6% Emergency cart medications 421 Large: 29.0% (21.7%-29.8%) (0.0103) Small: 0% 0.3% Research/study drugs 421 Large: 0.4% (0.04%-1.8%) (0.4919 ) Most Hospitals Obtain Compounded Drugs From Registered Outsourcing Facilities, Which Must Meet FDA Quality Standards 15 OEI-01-17-00090 Percentage of hospitals that obtained NPS compounded drugs with the following mode of delivery or dosage form type from outside compounding facilities Independent Point Estimate Group T- (95-Percent Test By Drug Sample Size Confidence Hospital Intervals) Size (P- Value) Small: 43.0% 63.0% Operating room syringes 421 Large: 71.0% (58.6%-67.2%) (<0.0001) Small: 47.3% 70.6% Patient-controlled analgesia 421 Large: 80.0% (66.5%-74.4%) (<0.0001) Small: 29.7% 55.0% Epidurals 421 Large: 65.1% (50.5%-59.3%) (<0.0001) Small: 6.1% 32.0% Critical care infusions 421 Large: 42.4% (27.8%-36.4%) (<0.0001) Small: 1.8% 4.7% Intrathecals 421 Large: 5.9% (3.1%-7.2%) (0.0756) Small: 12.1% 8.2% Eye drops 421 Large: 6.7% (6.1%-11.0%) (0.0689) Small: 9.1% Creams/ointments/suppositories 9.6% 421 Large: 9.8% or other topical agents (7.2%-12.7%) (0.8237) Small: 1.2% 1.8% Tablets/capsules 421 Large: 2.0% (0.9%-3.5%) (0.5971) Most Hospitals Obtain Compounded Drugs From Registered Outsourcing Facilities, Which Must Meet FDA Quality Standards 16 OEI-01-17-00090 Small: 3.0% 4.5% Oral solutions 421 Large: 5.1% (2.9%-6.9%) (0.3564) Small: 0.6% 0.5% Otic solutions 421 Large: 0.4% (0.1%-1.7%) (0.7669) Most Hospitals Obtain Compounded Drugs From Registered Outsourcing Facilities, Which Must Meet FDA Quality Standards 17 OEI-01-17-00090 Percentage of hospitals that obtained any of the following categories of NPS compounded drugs from outside compounding facilities Independent Point Estimate Group T- (95-Percent Test By Drug Sample Size Confidence Hospital Intervals) Size (P- Value) Small: 32.1% 57.6% Pitocin/oxytocin 421 Large: 67.9% (53.2%-62.0%) (<0.0001) Small: 0.0% 4.8% Parenteral Nutrition 421 Large: 6.7% (3.1%-7.3%) (0.0036) Small: 53.3% 74.9% Narcotics/controlled substances 421 Large: 83.5% (71.0%-78.4%) (<0.0001) Small: 5.5% Antiarrhythmic agents (e.g., 11.1% 421 Large: 13.4% amiodarone) (8.5%-14.4%) (0.0193) Small: 7.3% Inotropic/vasopressors agents 23.4% 421 Large: 29.8% (e.g., dobutamine) (19.6%-27.6%) (<0.0001 ) Small: 0.0% 14.0% Cardioplegia 421 Large: 19.6 (11.0%-17.7%) (<0.0001 ) Small: 10.3% 22.6% Antibiotics/antimicrobials 421 Large: 27.5% (18.9%-26.7%) (0.0001) Small: 3.6% 5.2% Radiopharmaceuticals 421 Large: 5.9% (3.5%-7.8%) (0.3511) Most Hospitals Obtain Compounded Drugs From Registered Outsourcing Facilities, Which Must Meet FDA Quality Standards 18 OEI-01-17-00090 Small: 7.9% 14.6% Nerve blocks 421 Large: 17.3% (11.5%-18.2%) (0.0136) Small: 1.8% 12.3% Electrolyte solutions 421 Large: 16.5% (9.5%-15.8%) (<0.0001) Dialysis fluid and drugs (e.g., Small: 0.0% continuous renal replacement 2.5% 421 Large: 3.5% therapy, continuous veno- (1.4%-4.6%) (0.0366) venous hemofiltration) Small: 0.6% 0.7% Oncology drugs 421 Large: 0.8% (0.2%-2.2%) (0.8469) Small: 1.2% 5.1% Non-chemo hazardous drugs 421 Large: 6.7% (3.3%-7.7%) (0.0214) Small: 10.9% 16.3% Anesthetic agents 421 Large: 18.4% (13.1%-20.0%) (0.0590) Small: 27.3% Anesthesia syringes 44.7% 421 Large: 51.7% (neuromuscular blockers) (40.2%-49.3%) (<0.0001) Small: 0.0% 2.0% Diagnostic testing reagents 421 Large: 2.7% (1.0%-3.9%) (0.0662) Small: 10.9% Compounded topical 9.8% 421 Large: 9.4% medications (7.4%-12.9%) (0.6409) Most Hospitals Obtain Compounded Drugs From Registered Outsourcing Facilities, Which Must Meet FDA Quality Standards 19 OEI-01-17-00090 APPENDIX B: Types of drugs compounded in hospital pharmacies on a non-patient-specific basis Percentage of hospitals that compounded NPS drugs with the following characteristics in their pharmacies Point Estimate Independent Sample (95-Percent Group T-Test By Drug Size Confidence Hospital Size (P- Intervals) Value) Small: 6.8% High-volume compounded 24.0% 428 Large: 31.5% sterile preparations (20.3%-28.2%) (<0.0001) Small: 11.9% Low-volume compounded 22.8% 428 Large: 27.5% sterile preparations (19.1%-26.9%) (0.0004) Small: 0.6% High-risk compounded sterile 3.8% 428 Large: 5.2% preparations (2.3%-6.1%) (0.0214) Small: 8.5% 22.3% Products in shortage 428 Large: 28.3% (18.6%-26.4%) (<0.0001) Small: 1.7% 4.7% Emergency cart medications 428 Large: 6.0% (3.0%-7.2%) (0.0546) Small: 0.0% 0.6% Research/study drugs 428 Large: 0.8% (0.1%-2.0%) (0.3087) Most Hospitals Obtain Compounded Drugs From Registered Outsourcing Facilities, Which Must Meet FDA Quality Standards 20 OEI-01-17-00090 Percentage of hospitals that compounded NPS drugs with the following mode of delivery or dosage form type Point Estimate Independent Sample (95-Percent Group T-Test By Drug Size Confidence Hospital Size (P- Intervals) Value) Small: 5.1% 15.2% Operating room syringes 428 Large: 19.6% (12.1%-18.9%) (0.0001) Small: 5.1% 19.1% Patient-controlled analgesia 428 Large: 25.1% (15.6%-23.0%) (<0.0001) Small: 4.0% 14.8% Epidurals 428 Large: 19.6% (11.8%-18.5%) (<0.0001) Small: 0.6% 10.7% Critical care infusions 428 Large: 15.2% (8.1%-14.1%) (<0.0001) Small: 0.0% 0.6% Intrathecals 428 Large: 0.8% (0.1%-2.0%) (0.3087) Small: 1.7% 3.9% Eye drops 428 Large: 4.8% (2.4%-6.2%) (0.1289) Small: 10.2% Creams/ointments/suppositories 14.2% 428 Large: 15.9% or other topical agents (11.2%-17.8%) (0.1207) Small: 1.1% 0.9% Tablets/capsules 428 Large: 0.8% (0.3%-2.3%) (0.7285) Small: 11.9% 23.0% Oral solutions 428 Large: 27.9% (19.3%-27.2%) (0.0003) Small: 0.6% 0.7% Otic solutions 428 Large: 0.8% (0.2%-2.1%) (0.7988) Most Hospitals Obtain Compounded Drugs From Registered Outsourcing Facilities, Which Must Meet FDA Quality Standards 21 OEI-01-17-00090 Percentage of hospitals that compounded any of the following categories of NPS drugs Point Estimate Independent Sample (95-Percent Group T-Test By Drug Size Confidence Hospital Size (P- Intervals) Value) Small: 9.7% 23.2% Pitocin/oxytocin 428 Large: 29.1% (19.5%-27.4%) (<0.0001) Small: 0.0% 3.1% Parenteral Nutrition 428 Large: 4.4% (1.8%-5.3%) (0.0153) Small: 6.8% 20.7% Narcotics/controlled substances 428 Large: 26.7% (17.1%-24.7%) (<0.0001) Small: 0.0% Antiarrhythmic agents (e.g., 2.5% 428 Large: 3.6% amiodarone) (1.4%-4.6%) (0.0279) Small: 0.0% Inotropic/vasopressors agents 6.4% 428 Large: 9.2% (e.g., dobutamine) (4.4%-9.2%) (0.0003) Small: 0% 5.5% Cardioplegia 428 Large: 8.0% (3.7%-8.2%) (0.0009) Small: 7.4% 23.3% Antibiotics/antimicrobials 428 Large: 30.3% (19.6%-27.5%) (<0.0001) Small: 0% 0.0% Radiopharmaceuticals 428 Large: 0% (0.0%-1.8%) (N/A) Small: 1.1% 4.2% Nerve blocks 428 Large: 5.6% (2.7%-6.6%) (0.0359) Small: 0.0% 7.5% Electrolyte solutions 428 Large: 10.8% (5.3%-10.5%) (<0.0001) Most Hospitals Obtain Compounded Drugs From Registered Outsourcing Facilities, Which Must Meet FDA Quality Standards 22 OEI-01-17-00090 Dialysis fluid and drugs (e.g., Small: 0.0% continuous renal replacement 0.3% 428 Large: 0.4% therapy, continuous veno- (0.04%-1.8%) (0.4724) venous hemofiltration) Small: 0.0% 0.6% Oncology drugs 428 Large: 0.8% (0.1%-2.0%) (0.3087) Small: 0.0% 2.8% Non-chemo hazardous drugs 428 Large: 4.0% (1.5%-4.9%) (0.0210) Small: 0.6% 4.6% Anesthetic agents 428 Large: 6.4% (3.0%-7.1%) (0.0084) Small: 1.7% Anesthesia syringes 3.9% 428 Large: 4.8% (neuromuscular blockers) (2.4%-6.2%) (0.1289) Small: 0% 0.6% Diagnostic testing reagents 428 Large: 0.8% (0.1%-2.0%) (0.3087) Small: 9.1% Compounded topical 14.1% 428 Large: 16.3% medications (11.2%-17.7%) (0.0482) Most Hospitals Obtain Compounded Drugs From Registered Outsourcing Facilities, Which Must Meet FDA Quality Standards 23 OEI-01-17-00090 APPENDIX C: Types of drugs that hospitals reported being unable to obtain on a non-patient- specific basis Percentage of hospitals that were unable to obtain NPS compounded drugs with the following characteristics from outside compounders Point Estimate Independent Group Sample (95-Percent Drug T-Test By Hospital Size Confidence Size (P-Value) Intervals) Small: 41.7% High-volume compounded sterile 58.6% 223 Large: 61.5% preparations (52.3%-64.6%) (0.0164) Small: 41.7% Low-volume compounded sterile 51.2% 223 Large: 52.8% preparations (44.9%-57.5%) (0.1731) Small: 8.3% High-risk compounded sterile 16.9% 223 Large: 18.4% preparations (12.6%-22.3%) (0.1585) Small: 52.1% 76.3% Products in shortage 223 Large: 80.5% (70.7%-81.1%) (0.0006) Small: 14.6% 25.7% Emergency cart medications 223 Large: 27.6% (20.5%-31.6%) (0.1176) Small: 2.1% 0.3% Research/study drugs 223 Large: 0.0% (0.05%-1.8%) (0.0464) Most Hospitals Obtain Compounded Drugs From Registered Outsourcing Facilities, Which Must Meet FDA Quality Standards 24 OEI-01-17-00090 Percentage of hospitals that were unable to obtain NPS compounded drugs with the following mode of delivery or dosage form type from outside compounders Point Estimate Independent Group Sample (95-Percent Drug T-Test By Hospital Size Confidence Size (P-Value) Intervals) Small: 27.1% 44.2% Operating room syringes 223 Large: 47.2% (38.1%-50.6%) (0.0329) Small: 33.3% 49.5% Patient-controlled analgesia 223 Large: 52.3% (43.3%-55.8%) (0.0451) Small: 31.3% 34.5% Epidurals 223 Large: 35.1% (28.8%-40.8%) (0.6711) Small: 8.3% 24.3% Critical care infusions 223 Large: 27.1% (19.3%-30.2%) (0.0212) Small: 2.1% 1.3% Intrathecals 223 Large: 1.2% (0.4%-3.8%) (0.6772) Small: 2.1% 2.3% Eye drops 223 Large: 2.3% (1.0%-5.2%) (0.9398) Small: 4.2% Creams/ointments/suppositories 1.1% 223 Large: 0.6% or other topical agents (0.4%-3.2%) (0.0696) Small: 0.0% 0.5% Tablets/capsules 223 Large: 0.6% (0.1%-3.1%) (0.6659) Small: 4.2% 1.6% Oral solutions 223 Large: 1.2% (0.6%-4.0%) (0.2046) Small: 0.0% 0.0% Otic solutions 223 Large: 0.0% (0.0%-3.4%) (N/A) Most Hospitals Obtain Compounded Drugs From Registered Outsourcing Facilities, Which Must Meet FDA Quality Standards 25 OEI-01-17-00090 Percentage of hospitals unable to obtain NPS compounded drugs in the following categories from outside compounders Point Estimate Independent Group Sample (95-Percent Drug T-Test By Hospital Size Confidence Size (P-Value) Intervals) Small: 37.5% 48.1% Pitocin/oxytocin 223 Large: 50.0% (41.9%-54.5%) (0.1892) Small: 2.1% 1.8% Parenteral Nutrition 223 Large: 1.7% (0.7%-4.5%) (0.8763) Small: 41.7% 61.6% Narcotics/controlled substances 223 Large: 65.0% (55.3%-67.4%) (0.0050) Small: 4.2% Antiarrhythmic agents (e.g., 8.9% 223 Large: 9.8% amiodarone) (5.9%-13.3%) (0.3026) Small: 8.3% Inotropic/vasopressors agents 16.9% 223 Large: 18.4% (e.g., dobutamine) (12.6%-22.3%) (0.1585) Small: 0.0% 5.4% Cardioplegia 223 Large: 6.3% (3.1%-9.2%) (0.1410) Small: 8.3% 21.8% Antibiotics/antimicrobials 223 Large: 24.1% (17.0%-27.6%) (0.0437) Small: 0.0% 1.5% Radiopharmaceuticals 223 Large: 1.7% (0.5%-4.2%) (0.4521) Small: 8.3% 7.6% Nerve blocks 223 Large: 7.5% (4.9%-11.7%) (0.8478) Small: 8.3% 18.9% Electrolyte solutions 223 Large: 20.7% (14.4%-24.4%) (0.0966) Most Hospitals Obtain Compounded Drugs From Registered Outsourcing Facilities, Which Must Meet FDA Quality Standards 26 OEI-01-17-00090 Dialysis fluid and drugs (e.g., Small: 0.0% continuous renal replacement 1.0% 223 Large: 1.2% therapy, continuous veno-venous (0.3%-3.6%) (0.5404) hemofiltration) Small: 2.1% 0.3% Oncology drugs 223 Large: 0.0% (0.1%-1.8%) (0.0464) Small: 0.0% 2.0% Non-chemo hazardous drugs 223 Large: 2.3% (0.8%-4.9%) (0.3840) Small: 8.3% 11.5% Anesthetic agents 223 Large: 12.1% (8.0%-16.2%) (0.5396) Small: 14.6% Anesthesia syringes 31.1% 223 Large: 33.9% (neuromuscular blockers) (25.5%-37.2%) (0.0277) Small: 0.0% 1.0% Diagnostic testing reagents 223 Large: 1.2% (0.3%-3.6%) (0.5404) Small: 4.2% 1.1% Compounded topical medications 223 Large: 0.6% (0.4%-3.2%) (0.0696) Most Hospitals Obtain Compounded Drugs From Registered Outsourcing Facilities, Which Must Meet FDA Quality Standards 27 OEI-01-17-00090 APPENDIX D: Point estimates and confidence intervals for findings Point Estimate Sample Finding (95-Percent Confidence Size Intervals) Hospitals that obtained non-patient- specific drugs only from facilities registered with FDA as 503B 88.9% 389 outsourcing facilities (among hospitals (86.1%-91.3%) that obtained non-patient-specific drugs from outside compounders) Hospitals that obtained non-patient- specific drugs from unregistered facilities and facilities registered with 9.3% FDA as 503B outsourcing facilities 389 (7.1%-12.0%) (among hospitals that obtained non- patient-specific drugs from outside compounders) Hospitals that obtained non-patient- specific drugs only from unregistered 1.8% facilities (among hospitals that obtained 389 (1.0%-3.1%) non-patient-specific drugs from outside compounders) Hospitals that obtained non-patient- specific drugs from more than one 55.8% outside compounder (among hospitals 389 (51.7%-59.9%) that obtained non-patient-specific drugs from outside compounders) 88.7% Hospitals that obtained non-patient- 389 (85.7%-91.1%) specific drugs from between one and Most Hospitals Obtain Compounded Drugs From Registered Outsourcing Facilities, Which Must Meet FDA Quality Standards 28 OEI-01-17-00090 three outside compounders (among hospitals that obtained non-patient- specific drugs from outside compounders) Hospitals that faced challenges in obtaining all the non-patient-specific 44.8% 563 drugs they sought from outside (41.1%-48.5%) compounders (among all hospitals) Hospitals that considered or were currently considering registering their pharmacies as 503B outsourcing 1.7% 428 facilities (among hospitals that (0.7%-4.2%) compounded drugs in their own pharmacies) Hospitals that obtained non-patient- specific compounded drugs from at least one outside compounder and also compounded them in their own 47.2% 426 pharmacies (among hospitals that (42.8%-51.8%) compounded non-patient-specific drugs in-house and/or obtained them from outside compounders) Hospitals that relied solely on their pharmacies for non-patient-specific compounded drugs (among hospitals that compound non- 8.1% patient-specific drugs in-house and/or 426 (6.0%-10.1%) obtain them from outside compounders) Most Hospitals Obtain Compounded Drugs From Registered Outsourcing Facilities, Which Must Meet FDA Quality Standards 29 OEI-01-17-00090 APPENDIX E: Factors that hospitals considered when choosing where to obtain compounded drugs Sample Point Estimate Factor Size (95% Confidence Intervals) History of State actions against facility 94.1% (e.g., suspension or revocation of State 421 (91.7%-95.8%) license) History of Federal enforcement actions 94.0% against facility (e.g., seizure or 421 (91.6%-95.7%) injunction) History of product recalls and/or 92.1% 421 cessation of sterile operations (89.4%-94.1%) 91.6% Quality assurance documentation 421 (88.9%-93.8%) Registration status with FDA as a 503B 91.5% 421 outsourcing facility (88.8%-93.6%) 90.6% Facility’s accreditation status 421 (87.6%-92.9%) 89.7% Appropriate licensure of pharmacy staff 421 (86.7%-92.1%) Warning letters issued based on FDA 87.1% 421 inspection findings (83.7%-89.8%) 85.9% Facility’s reputation 421 (82.5%-88.8%) Most Hospitals Obtain Compounded Drugs From Registered Outsourcing Facilities, Which Must Meet FDA Quality Standards 30 OEI-01-17-00090 Facility’s ability to produce a specific 84.9% 421 product (81.3%-87.9%) Facility’s ability to produce products 78.7% with extended beyond use 421 (74.8%-82.1%) dates/expiration dates Staff training and competency 75.3% 421 assessment documentation (71.2%-79.0%) 69.8% Observations listed on FDA Form 483 421 (65.5%-73.8%) 58.3% Cost of products 421 (53.7%-62.7%) Hospital contract with group 53.2% 421 purchasing organization (48.6%-57.7%) Hospital’s history of purchasing from 48.9% 421 facility (44.3%-53.5%) Most Hospitals Obtain Compounded Drugs From Registered Outsourcing Facilities, Which Must Meet FDA Quality Standards 31 OEI-01-17-00090 APPENDIX F: Agency Comments Most Hospitals Obtain Compounded Drugs From Registered Outsourcing Facilities, Which Must Meet FDA Quality Standards 32 OEI-01-17-00090 Most Hospitals Obtain Compounded Drugs From Registered Outsourcing Facilities, Which Must Meet FDA Quality Standards 33 OEI-01-17-00090 Most Hospitals Obtain Compounded Drugs From Registered Outsourcing Facilities, Which Must Meet FDA Quality Standards 34 OEI-01-17-00090 ACKNOWLEDGMENTS Jesse Valente served as the team leader for this study, and Matt Blackburn served as the lead analyst. Office of Evaluation and Inspections staff who provided support include Althea Hosein, Christine Moritz, Michael Novello, and Melicia Seay. This report was prepared under the direction of Joyce Greenleaf, Regional Inspector General for Evaluation and Inspections in the Boston regional office, and Kenneth Price, Deputy Regional Inspector General. To obtain additional information concerning this report or to obtain copies, contact the Office of Public Affairs at Public.Affairs@oig.hhs.gov. Most Hospitals Obtain Compounded Drugs From Registered Outsourcing Facilities, Which Must Meet FDA Quality Standards 35 OEI-01-17-00090 ABOUT THE OFFICE OF INSPECTOR GENERAL The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as amended, is to protect the integrity of the Department of Health and Human Services (HHS) programs, as well as the health and welfare of beneficiaries served by those programs. This statutory mission is carried out through a nationwide network of audits, investigations, and inspections conducted by the following operating components: Office of Audit The Office of Audit Services (OAS) provides auditing services for HHS, either by conducting audits with its own audit resources or by overseeing audit Services work done by others. Audits examine the performance of HHS programs and/or its grantees and contractors in carrying out their respective responsibilities and are intended to provide independent assessments of HHS programs and operations. These assessments help reduce waste, abuse, and mismanagement and promote economy and efficiency throughout HHS. Office of Evaluation The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide HHS, Congress, and the public with timely, useful, and reliable and Inspections information on significant issues. These evaluations focus on preventing fraud, waste, or abuse and promoting economy, efficiency, and effectiveness of departmental programs. To promote impact, OEI reports also present practical recommendations for improving program operations. Office of The Office of Investigations (OI) conducts criminal, civil, and administrative investigations of fraud and misconduct related to HHS programs, Investigations operations, and beneficiaries. With investigators working in all 50 States and the District of Columbia, OI utilizes its resources by actively coordinating with the Department of Justice and other Federal, State, and local law enforcement authorities. The investigative efforts of OI often lead to criminal convictions, administrative sanctions, and/or civil monetary penalties. Office of Counsel to The Office of Counsel to the Inspector General (OCIG) provides general legal services to OIG, rendering advice and opinions on HHS programs and the Inspector operations and providing all legal support for OIG’s internal operations. General OCIG represents OIG in all civil and administrative fraud and abuse cases involving HHS programs, including False Claims Act, program exclusion, and civil monetary penalty cases. In connection with these cases, OCIG also negotiates and monitors corporate integrity agreements. OCIG renders advisory opinions, issues compliance program guidance, publishes fraud alerts, and provides other guidance to the health care industry concerning the anti-kickback statute and other OIG enforcement authorities. Endnotes 1 CDC, Multistate Outbreak of Fungal Meningitis and Other Infections. Accessed at http://www.cdc.gov/hai/outbreaks/meningitis.html on January 20, 2017. 2 Drug Quality and Security Act, P.L. No. 113-54 (enacted Nov. 27, 2013). 3 An “outsourcing facility” is 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; and (iii) complies with all the requirements of section 503B of the FD&C Act. Section 503B(d)(4) of the FD&C Act. 4 Section 503(b)(4) of the FD&C Act. 5 FDA, FDA’s Human Drug Compounding Progress Report: Three Years After Enactment of the Drug Quality and Security Act, January 2017. Accessed at http://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/PharmacyCompounding/UCM536549.pdf on January 23, 2017. 6 Section 503B(b)(1)(B)(ii) of the FD&C Act. FDA, Registered Outsourcing Facilities. Accessed at http://www.fda.gov/Drugs/GuidanceComplianceRegulatoryInformation/PharmacyCompounding/ucm378645.htm on January 23, 2017. 7 Section 503B(b)(1)(A) of the FD&C Act. 8 OIG, Memorandum Report: High-Risk Compounded Sterile Preparations and Outsourcing by Hospitals That Use Them, OEI-01-13-00150, April 2013. 9 FDA, letter to hospitals regarding registered outsourcing facilities. Accessed at https://web.archive.org/web/20140630095703/http:/www.fda.gov:80/downloads/Drugs/GuidanceComplianceRegulatoryInformatio n/PharmacyCompounding/UCM380599.pdf on June 26, 2018. 10 FDA, FDA’s Human Drug Compounding Progress Report: Three Years After Enactment of the Drug Quality and Security Act, January 2017. Accessed at http://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/PharmacyCompounding/UCM536549.pdf on May 18, 2017. 11 Section 102 of Drug Quality and Security Act, adding section 503B to the FD&C Act. 12 Section 503B(a) of the FD&C Act. 13 FDA’s regulations regarding CGMP requirements for the preparation of drug products are established in 21 CFR pts. 210 and 211. FDA intends to promulgate more specific CGMP regulations for outsourcing facilities. Until those regulations are finalized, outsourcing facilities are subject to 21 CFR pts. 210 and 211. FDA, Draft Guidance for Industry: Current Good Manufacturing Practice—Interim Guidance for Human Drug Compounding Outsourcing Facilities Under Section 503B of the FD&C Act (Revision 1), December 2018. Accessed at http://www.fda.gov/downloads/drugs/guidancecomplianceregulatoryinformation/guidances/ucm403496.pdf on January 30, 2017. 14 FDA, Information Concerning Outsourcing Facility Registration. Accessed at https://www.fda.gov/Drugs/GuidanceComplianceRegulatoryInformation/PharmacyCompounding/ucm389118.htm#10 on March 2, 2017. 15 FDA, Registered Outsourcing Facilities. Accessed at http://www.fda.gov/Drugs/GuidanceComplianceRegulatoryInformation/PharmacyCompounding/ucm378645.htm on January 23, 2017. 16 FDA, FDA’s Human Drug Compounding Progress Report: Three Years After Enactment of the Drug Quality and Security Act, January 2017. Accessed at http://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/PharmacyCompounding/UCM536549.pdf on January 23, 2017. 17 FDA, FDA Form 483 Frequently Asked Questions. Accessed at http://www.fda.gov/ICECI/Inspections/ucm256377.htm on January 23, 2017. 18 FDA, Regulatory Procedures Manual. Accessed at https://www.fda.gov/ICECI/compliancemanuals/regulatoryproceduresmanual/default.htm on May 18, 2017. 19 FDA, Draft Guidance for Industry: Hospital and Health System Compounding Under the Federal Food, Drug, and Cosmetic Act, April 2016. Accessed at https://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/UCM496287.pdf on January 16, 2019. 20 FDA, 2018 Compounding Policy Priorities. Accessed at https://www.fda.gov/Drugs/GuidanceComplianceRegulatoryInformation/PharmacyCompounding/ucm592795.htm on February 27, 2018. 21 FDA, Draft Guidance for Industry: Current Good Manufacturing Practice—Interim Guidance for Human Drug Compounding Outsourcing Facilities Under Section 503B of the FD&C Act (Revision 1), December 2018. Accessed at http://www.fda.gov/downloads/drugs/guidancecomplianceregulatoryinformation/guidances/ucm403496.pdf on March 21, 2019. 22 OIG, High-Risk Compounded Sterile Preparations and Outsourcing by Hospitals That Use Them, OEI-01-13-00150 (April 2013). 23 OIG, Compounded Drugs Under Medicare Part B: Payment and Oversight, OEI-03-13-00270 (April 2014). 24 OIG, Medicare’s Oversight of Compounded Drugs Used in Hospitals, OEI-01-13-00400 (January 2015). 25 The 95-percent confidence interval for this estimate is 77.3% to 82.4%. 26 Five hospitals participated in a pre-test of our electronic questionnaire. We dropped these hospitals from the sampling frame for this study. 27 We dropped one hospital from our sample at the request of OIG’s Office of Investigations. We dropped four hospitals in Puerto Rico from our sample because of Hurricane Maria. 28 OEI provided FDA with a list of outside compounding facilities identified by the hospitals that responded to our survey. Hospitals identified the outside compounding facilities from which they obtained compounded drugs in the year prior to the survey. We matched these hospital-identified outside compounding facilities with the compounding facilities that FDA’s website listed as registered outsourcing facilities as of January 2, 2018. Hospitals also identified whether the outside compounding facilities provided them with patient-specific and/or non-patient-specific compounded drugs. 29 According to FDA, it prioritizes drugs for its drug shortage list that are “medically necessary,” meaning that they are used to treat or prevent serious diseases or medical conditions for which no alternative drugs, available in adequate supply, are acceptable substitutes. FDA, Report on Drug Shortages for Calendar Year 2016, Required by Section 1002 of the Food and Drug Administration Safety and Innovation Act. Accessed at https://www.fda.gov/downloads/Drugs/DrugSafety/DrugShortages/UCM561290.pdf on May 30, 2018. 30 FDA, Guidance for Industry: Compounded Drug Products That Are Essentially Copies of a Commercially Available Drug Product Under Section 503B of the Federal Food, Drug, and Cosmetic Act, January 2018. Accessed at https://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/UCM510153.pdf on January 16, 2019. 31 ASHP (formerly the American Society of Hospital Pharmacists) and the Pew Charitable Trusts, 2015 Pharmaceutical Compounding Roundtable: How can outsourcing facilities meet provider needs? Accessed at https://www.ashp.org/-/media/assets/pharmacy- practice/resource-centers/sterile-compounding/compounding-roundtable.ashx on March 1, 2017. 32 FDA, 2018 Compounding Policy Priorities. Accessed at https://www.fda.gov/Drugs/GuidanceComplianceRegulatoryInformation/PharmacyCompounding/ucm592795.htm on January 29, 2019.