• Regulating compounding pharmacies through insurance

    Compounding pharmacies have been under scrutiny since the fungal contamination crisis at New England Compounding Center (NECC) in Massachusetts. Governments reacted predictably, with calls for greater regulation.

    In the Drug Quality and Security Act, Congress restored to the FDA authority to regulate compounding pharmacies that had been placed in doubt by a 2002 Supreme Court opinion (background here). Congress also considered a new license category for large-scale sterile compounders. From my 2014 NEJM Perspective:

    Over the past year, most of the debate in Congress has centered on how to draw the line between traditional compounding and activities that require the new license. The legislative compromise leaves that choice up to the compounder.

    Congress left the real regulatory work to the states and to the market. The Perspective described what states and providers need to do. I’d like to add a new thought on the market.

    NECC is bankrupt, so the vast majority of the settlement funds to victims has come from insurance. The Boston Globe reports the settlement in the range of $100 million, funded primarily from insurance. For the victims, it was very fortunate that NECC had that level of liability insurance, but as far as I know this is not required by law.

    So my suggestion is for every state to set a high insurance requirement for all sterile compounding pharmacies doing business in their jurisdiction (perhaps $100 million aggregate), with much smaller limits for non-sterile compounders. Once these limits are set, the insurance companies would privately reward (or punish) compliance and risk through insurance premiums.

    Very simple and straightforward.

    @koutterson

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