Supreme Court Decision Re: Compounding

On April 29, 2002, the United States Supreme Court issued its opinion in Thompson v. Western States Medical Center, No. 01-344 (Apr. 29, 2002). The Supreme Court affirmed the decision of the United States Court of Appeals for the Ninth Circuit Striking down section 503A of the Federal Food Drug, and Cosmetic Act ("FDCA"), which was added in 1997 by the Food and Drug Administration Modernization Act ("FDAMA"). The Court held that section 503A violated the First Amendment by prohibiting compounding pharmacies from advertising their ability to compound specific products. As a result of the Court's decision, section 503A is now void.

Section 503A had been added as part of FDAMA to address growing concerns about FDA's regulation of compounding. Specifically, FDA-after over 50 years of ignoring most pharmacy compounding activities-issued a compliance policy guide regarding compounding and began taking an active enforcement stance to restrict compounding. Section 503A purported to strike a balance between compounding and large scale compounding, which FDA believed was more akin to manufacturing. Among other restrictions, section 503A prohibited compounding pharmacies from advertising what types or classes of drugs the pharmacy could compound. The plaintiffs-several large-scale compounding pharmacies that promoted specific drugs - sued FDA to prevent the agency from enforcing the advertising restrictions.

Memorandum
April 30, 2002
Page 2

The District Court issued an injunction, finding that the advertising restrictions violated the First Amendment. The District Court held, however, that the advertising restrictions could be severed from the rest of section 503A, thus leaving section 503A in place, except for the advertising provisions. The Ninth Circuit agreed that the advertising restrictions were unconstitutional, but struck down all of section 503A.

The Supreme Court agreed to hear the government's petition regarding the constitutional issue.¹ The government argued before the Court that prior to FDAMA, all compounding was illegal and violated the "new drug" provisions of the FDCA. According to the government, section 503A was a valid compromise between allowing patients access to compounded drugs and protecting the integrity of the new drug approval process.

The Supreme Court disagreed. In an opinion written by Justice Sandra Day O'Connor for five members of the Court², the Court held that "§503A's provisions regarding advertisement and promotion amount to unconstitutional restrictions on commercial speech…." Slip Opinion at 2. Although the Court recognized that "[p]reserving the effectiveness and integrity of the FDCA's new drug approval process is clearly an important government interest," Slip Opinion at 11, the Court did not specifically adopt the government's argument that in the absence of section 503A, all compounding was illegal. Indeed, the Court recognized the long-standing history of compounding and its value in serving special medical needs. The Court also rejected the view that advertising could be banned because physicians might prescribe unnecessary medications.

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¹ Neither party presented the severability issue to the Court.
² Justice Breyer, joined by the Chief Justice, Justice Stevens, and Justice Ginsberg, dissented. The dissent focused on advertisements aimed at patients, not physicians.

Memorandum
April 30, 2002
Page 3

The Court found that using advertising as a proxy for determining whether compounding had crossed the line into manufacturing was inappropriate. However, the Court agreed that distinguishing compounding from large-scale manufacturing was appropriate. The Court suggested that many of the factors that were part of FDA's 1992 Compliance Policy Guide could be used. Slip Opinion at 14.

The decision will not end FDA's efforts to play a regulatory role in the field of compounding. All members of the Court agreed that it would be appropriate for FDA to require large-scale drug compounding to go through the new drug approval process. At the same time, the Court clearly articulated that the "Government also has an important interest. . .in permitting the continuation of the practice of compounding so that patients with particular needs may obtain medications suited to those needs." Slip Opinion at 11.

Although section 503A is now gone, this regulatory void will not last indefinitely. One possibility is that FDA will seek to reinstate the substance of its compliance policy guide, either as a formal rule, or an informal guidance. It is also possible that new legislation will be sought delineating the boundaries of acceptable compounding. Based on the Court's ruling, it would not be surprising if the Compliance Policy Guide is the starting point for any such regulatory efforts. Whatever else happens, it is now clear that advertising the ability to compound specific drugs is constitutionally protected.

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If you have any questions about this issue, or wish to have copy of the decision, please contact Jeffrey Gibbs at (202) 737-4288 or Jeffrey Wasserstein at (202) 737-9627.

JNW/dag