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Compounds – the stench of corruption

There’s a bill in the US House of Representatives that would greatly expand compounding, drastically reduce the FDA’s ability to oversee compounding, and eliminate many of the desperately-needed controls on this occasionally-deadly and often-abused practice.

Why anyone thinks this is good idea is beyond me, but someone convinced Rep. H Morgan Griffith (R VA) to write a bill and introduce it in Congress, and Rep Henry Cuellar (D TX) and others to co-sponsor Griffith’s bill.

That “someone” may have deep pockets.

Griffith has received over $100,000 in donations from “health professionals” and pharma entities; Cuellar got money too.

Griffith also got more money from the “International Academy of Compounding Pharmacists” than any other candidate for any Federal office.  The IACP has spent millions lobbying Congress to strip the FDA of authority and eliminate controls over compounding.

The IACP and other organizations are seeking to rewrite regulations issued after the New England Compounding disaster, a tragedy that saw hundreds of people sickened and scores killed by contaminated compounded medications. These medications were prepared and shipped by the NECC, a business in Massachusetts that happened to be located right next to a recycling center owned by the same family.

(This is relevant because ventilation systems were one of the problems identified by investigators looking into the causes of contamination in NECC’s products.)

The regulations were issued to implement a law passed by Congress in response to a Congressional inquiry into the disaster.

From wikipedia:

In a congressional hearing the FDA Commissioner was asked why regulators at the FDA and the Massachusetts Board of Pharmacy did not take action against the pharmacy years earlier. The legislators were told that the agency was obligated to defer to Massachusetts authorities, who had more direct oversight over pharmacies.

Yet Griffith’s bill would overturn many of the desperately-needed controls now in place:

The bill exempts from interstate distribution limits the dispensing of a compounded drug from the facility where it is compounded to a patient or health facility.

The scope of Food and Drug Administration (FDA) inspections of compounding pharmacies is limited to pertinent equipment, materials, containers, and labeling, which is the same scope as inspections of pharmacies. (Currently, the scope of inspections of compounding pharmacies is the same scope as inspections of drug manufacturers.)

The bill eliminates the requirement for compounding pharmacies to register with the FDA as drug manufacturers.

As a side note, we’re seeing a dramatic decrease in compounds in workers’ comp, driven by payers’ refusal to pay outrageous charges for “medications” with no proven efficacy. In our annual Survey of Prescription Drug Management in Work Comp, respondents are reporting they paid for far fewer compounds last year than the year before.

That decrease could reverse if Griffith’s bill is passed, and we could well see a return to the days of poorly-regulated profit mills masquerading as compounding pharmacies.

What does this mean for you?

Elections have consequences, and campaign finance laws are killing us.

8 thoughts on “Compounds – the stench of corruption”

  1. Hi Joe – the other side of the coin is that profiteering pharma companies took advantage of the 2013 compounding law by running a few studies and then getting patent protection on manufactured versions of some very old compounds. They then jacked the prices to extortion like levels. Case in point, a company called AMAG and progesterone. This company is literally bankrupting families that are trying to keep their unborn babies alive. It is unconscionable. The answer is probably somewhere in the middle – but all laws have consequences and I think the bigger takeaway is that the hyper divided political process prevents laws from being fixed once some of their shortfalls are known.

  2. “Capital is reckless of the health or length of life of the laborer, unless under compulsion from society.”

    Karl Marx

  3. Joe, the compounding industry has come along way since the adoption of the DQSA in 2013. The generalities your implying are not factual, do not reflect Congressional intent, and don\’t reflect that fact that most Compounding Pharmacies are doing a great job in providing personalized care and drug product to patients nationally. The DQSA created a new class of Compounding pharmacy, 503B – which applies to those who compound on a large scale. It was never the intent of Congress to regulate 503A pharmacies, as they remain clearly regulated by the States, just like WC pharmacies. Also, industry accreditation has tripled in the last 5 years for Compounding Pharmacies, as they seek voluntarily accreditation by the three accrediting organizations nationally. Lastly, the Griffith/Cuellar legislation is seeking to clarity Congressional intent, not strip the FDA of anything. Geesh Joe, you sound like a \”mouth piece\” for PhRMA.

    1. Jon – welcome to MCM. Allow me to address your points.

      1. You infer you know Congress’ “intent”, and that it was NOT to require the FDA’s tighter oversight of many compounding pharmacies. Source, please.

      2. You note accreditation is voluntary. Given the potential risks as demonstrated by NECC, the profiteering of WC compounders, and the fraudulent behavior exhibited by some compounders, it strikes me that mandatory accreditation should be the first step, and Federal oversight the next.

      3. As a lobbyist, you not only sound like, but are a mouthpiece for compounders.

      4. Do your homework. If you had, you’d know I’m not a friend of pharma.

  4. Joe, The profiteering WC coumpounders were created as a result of poorly drafted fee schedules. These poorly drafted fee schedules were created by your clients, the WC payers. PBM’s have taken the profit out of the pharmacy business, pharmacys now lose money on prescriptions so they some go the shady route of WC counpounding, this was created by your clients. There were no WC counpounding problems before MAC/FUL fee schedules in workers compensation. You cannot say you are not a friend of big pharma when you support PBMs. You always say that WC PBM do not provide data to big Pharma so you are ok, but this is not true. PMSI and other large PBMs that provide data to Big Pharma also do WC. You cant separate them to make yourself fell better.

    1. JGaines – welcome back to MCM.

      Well, there are so many inaccuracies in your comment it’s hard to know where to start. Let’s get going!

      1. WC Payers do NOT “create” WC fee schedules – legislators and regulators do, with input from lots of stakeholders. If payers did, all states would have fee schedules for all services, which, as you may not know, is NOT the case today. In fact, there’s wide variability in fee schedules among the states, with provider fees in Mass about 87% of Medicare, and above 200% in neighboring Connecticut. If your claim was correct, this would never have happened.

      2. This is also true for drug fee schedules; many states have them, some do not. And there’s a LOT of variability among the states, from AWP +40% to Medicaid (about AWP-50%). Again, if payers “created” these, there would be a lot more consistency.

      3. You justify shady practices by moaning about profits – as if shady behavior is thereby excused. Fact is, almost all of the compounders are NOT “regular” retail pharmacies but profiteers. The big national pharmacies, food and drug combos, and the vast majority of independent pharmacies are NOT compounding.

      3. There are only 2 states which use the MAC FUL and these were put in place years after compounders – so you got that wrong too.

      4. I have no idea where you got the idea that I said “WC PBM do not provide data to big Pharma so you are ok”. Citation please.

      5. I’m not trying to make myself “fell better (sic).” I have no need to invent reality. I’m proud of what I do and have no need to rationalize, as you do when claiming compounding is somehow justified by some nonsense about state fee schedule construction and your mythical link between MAC FUL fee schedules and compounding.

      If you are interested in a fact-based discussion, happy to engage.

      1. Joe,

        I am in court every week fighting these WC compound bills. I am talking about California the largest WC claims market in the world. I never justified WC compounding, it is wrong, you are falsely vilifying me. I said it was shady, which is wrong.

        You say WC payers do not create fee schedules, legislator do with help from stakeholder. WC payers are the stakeholder who create these fee schedules. The California WC Pharmacy Fee schedule was created by Bill Zackary who works for a WC payer. They were the biggest players in the reform of the California WC laws. This is a fact, I was there when he pushed for it.

        Mass and Conn are very small players.

        All of the money made by the profiteering WC compounders comes from WC payers. All of it! This is a fact. If these payer did a better job this would not have happened. This is a fact.

        Providing data to Big Pharma is supporting big pharma.

        Look at the numbers of compounds in California WC before and after the change in the pharmacy fee schedule. They went way up after the new fee schedule went into place. High priced WC compounds were not around in California in the 90s and 2000s.

        You must agree that PBMs have taken the profit out of filling prescriptions because you did not address this issue.

        I know you are proud of what you do, and I like your blog, it has good information. But it is simply not true that the WC payors and the fee schedules they pushed legislators to implement, had nothing to do with the WC compounding problem.

        1. JGaines – thanks, the clarifications are very helpful. You did not specify California in your earlier comment; as I work i all jurisdictions I’m quite familiar with other states. Rest assured the folks in MA and CT don’t think of themselves as very small players.

          Again, I disagree with your statement that Wc payers “create” fee schedules. I am quite well aware of the FS development process in CA; there were many stakeholders involved including payers, labor, providers, and PBMs. The DIR did what it did, despite disagreement from several payers, PBMs, and other stakeholders.

          To say that Bill Zachry “created” the fee schedule is just ludicrous. “Pushing” for a FS or components thereof does not equal “creating” a fee schedule.

          And again, compounds exploded BEFORE the CA Rx FS was changed. Look at the data from CWCI and you’ll see this is true. This isn’t about decades ago, this is about this decade.

          You can’t hold payers responsible for high compound costs; by law they have to comply with FS and regulations for reimbursement. As the payers did not “create” said FS, they can’t be the ones to blame for profiteering compounders.

          PBMs haven’t taken the profit out of WC Rx for pharmacies in CA – the fee schedule has. Rest assured PBMs are getting hammered by the FS, and many are operating at or very close to breakeven in the Golden State.

          JGaines, correlation is not causation. I suggest you check the timing of compound use growth and compare it to the introduction of the FUL FS.

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Joe Paduda is the principal of Health Strategy Associates



A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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