Last month, a federal judge in Boston overturned the convictions of two former employees of New England Compounding Center (“NECC”) who had been accused of conspiring to help NECC interfere with and obstruct “the lawful government functions” of the US Food and Drug Administration (“FDA”) in conjunction with the 2012 fungal meningitis outbreak associated with one of its injectable steroid products. In overturning their convictions, the court ruled that Gregory Conigliaro, NECC co-owner, and former employee Sharon Carter, did not have “fair warning” that the “FDA was poised to insert itself as a hands-on overseer of compounding pharmacies,” and that the industry was “left to guess as to the FDA’s future enforcement policies.”
NECC, located in Framingham, Massachusetts, was a compound pharmacy which produced medications, each of which was tailored to the needs of a specific patient, and in response to a valid prescription. However, NECC also produced bulk quantities of drugs without prescriptions, and shipped those nationwide, often used as “office stock” for healthcare providers. Compounded drugs that are produced in response to patient-specific prescriptions are not FDA approved, and are not subject to Federal Food Drug and Cosmetic (“FD&C”) Act drug manufacturing requirements. However, at the time of the meningitis outbreak, it was not clear if these bulk drugs were regulated as compounded drugs, or as manufactured drugs – if the former, they would have been regulated largely by state pharmacy boards; if the latter, they would have been regulated by the FDA and subject to the strict FD&C Act drug manufacturing requirements.
At trial, the government’s theory was that Conigliaro and Carter were engaged in a conspiracy to convince the FDA that the NECC was a standard compound pharmacy that should be regulated by the Massachusetts Board of Pharmacy, when in reality NECC was a drug manufacturer of bulk quantities of drugs. “If so, according to the government’s theory, NECC would have been ‘subject to heightened regulatory oversight by the FDA’ … likely averting a tragedy like the 2012 fungal meningitis outbreak.”
Conigliaro and Carter appealed their convictions on a “legal impossibility” theory, arguing essentially that the FDA had previously “disavowed a legal right to regulate compounding pharmacies.” In support of this argument, the defendants noted that Congress had never provided any clarity on the “dividing line” between drug compounding and manufacturing, that there was confusion between state and federal regulators as to who was responsible for what oversight, and that the FDA had previously issued a Compliance Policy Guide indicating its abstention from policing compound pharmacies.
The court agreed with the defendants, noting that “entities like NECC did not fit neatly into the compound-manufacturing dichotomy that had historically influenced the FDA’s enforcement strategy.” The court also noted that “[i]n pre-outbreak inspections of NECC, the FDA labeled the company as either a ‘pharmacy’ or ‘compounding pharmacy,’ but never as a drug manufacturer.” The court concluded “[t]hus, the bottom line: during the critical times, these defendants (and NECC) could not have defrauded the FDA by interfering with the relevant regulatory functions because there were none to speak of.”
Since the 2012 meningitis outbreak, Congress passed new legislation, entitled the Drug Quality and Security Act (“DQSA”), which amended the FD&C Act to clarify and increase the FDA’s role in regulating compound pharmacies. One provision of the DQSA establishes a new category of compound pharmacies, referred to as “outsourcing facilities,” which are permitted to compound drugs in bulk and without a patient-specific prescription. Thus, while the NECC defendants won on their legal impossibility argument, going forward, there will be no confusion as to FDA’s authority to regulate such facilities.