The Effect of the DOJ Memo, "Limiting Use of Agency Guidance Documents in Affirmative Civil Enforcement Cases," On FDA Inspections of Compounding Pharmacies and Outsourcing Facilities

For years, the Food and Drug Administration (FDA) has relied upon draft and final guidance policies as the basis of Form 483 inspectional observations. A recent memorandum issued on January 25, 2018 by the Attorney General clearly prohibits the use of guidance documents in civil enforcement cases to effectively bind the public without undergoing notice and comment rulemaking. This alert explores FDA’s current practice of relying on draft and final guidance policies during inspections against the backdrop of this recent memorandum.

Background on Form 483

FDA inspects section 503A pharmacies under 21 U.S. Code § 374(a) and inspects outsourcing facilities under section 503B of the Federal Food, Drug, and Cosmetic Act (FDCA). The FDCA provides that FDA may “at reasonable times and within reasonable limits…[inspect] all pertinent equipment, finished and unfinished materials, containers, and labeling therein…. The inspection shall extend to all things therein (including records, files, papers, processes, controls, and facilities…” (21 U.S.C. § 374(a)). Upon completion of these inspections, FDA provides the representative of the pharmacy or outsourcing facility with a Form 483 that contains FDA’s inspectional observations.

FDA also publishes Form 483 inspectional observations on its website for public review. In certain circumstances, FDA will even communicate its findings directly to the state boards of pharmacy. State boards, in turn, have been known to use FDA’s Form 483 inspectional observations as a basis to conduct their own investigations of pharmacies and outsourcing facilities. State boards will frequently cite to FDA’s Form 483 inspectional observations as the source for their own allegations of wrongdoing under allegedly related provisions of state law. Pharmacies and outsourcing facilities, therefore, face an outsized risk of incurring penalties under state law each time FDA conducts an inspection and issues a Form 483.

Form 483 Is Intended to Teach, Not to Punish

Form 483 does not represent a finding of wrongdoing by FDA and is not intended to be a final agency action. This is apparent from the form itself, which states (emphasis added) that:

This document lists observations made by the FDA representative(s) during the inspection of your facility. They are inspectional observations, and do not represent a final Agency determination regarding your compliance. If you have an objection regarding an observation, or have implemented, or plan to implement, corrective action in response to an observation, you may discuss the objection or action with the FDA representative(s) during the inspection or submit this information to FDA at the address above.

FDA further clarifies the weight of Form 483 on its website, providing that: “The FDA Form 483 does not constitute a final Agency determination of whether any condition is in violation of the FD&C Act or any of its relevant regulations.”1

Rather, Form 483 is merely a mechanism for FDA to communicate compliance concerns to a pharmacy or outsourcing facility. Form 483 does not contain any express findings of violations of federal law, and it does not provide punishment for such violations. Notably, FDA states in its Inspectional Operations Manual that “[t]he FDA 483, Inspectional Observations (see Exhibit 5-5) is intended for use in notifying the inspected establishment’s top management in writing of significant objectionable conditions, relating to products and/or processes, or other violations of the FD&C Act and related Acts (see IOM 5.2.3.2) which were observed during the inspection.”2 In other words, Form 483 inspectional observations are meant to prompt a pharmacy or outsourcing facility to take corrective action to avoid additional agency action that might include determinations of wrongdoing and punishment. A Form 483 is not meant to signify a finding of fault.

Form 483 Observations Based Solely on Standards Set Forth in Draft and Final Guidance Documents Called Into Question

This policy has been further clarified by the Attorney General who issued a memorandum (Guidance Policy) prohibiting the use of guidance documents3 in enforcement actions as effectively binding the public without undergoing notice and comment rulemaking. The Guidance Policy was first issued on November 16, 2017, but an additional memorandum explaining the purpose of the Guidance Policy was recently issued on January 25, 2018. This new memorandum makes it clear that the Guidance Policy “prohibits the Department from using its guidance documents to coerce regulated parties into taking any action or refraining from taking any action beyond what is required by the terms of the applicable statute or lawful regulation.”4 Thus, guidance documents cannot create a legal obligation or binding requirement that does not already exist by statute or regulation. Further, “the Department cannot use noncompliance with guidance documents as a basis for proving violations of applicable law in [affirmative civil enforcement] cases.”5

This Guidance Policy calls into question how FDA is currently conducting its inspections of pharmacies and outsourcing facilities. For example, FDA is currently inspecting pharmacies and outsourcing facilities against FDA’s draft “Insanitary Conditions” guidance and issuing Form 483 observations when the facility is allegedly not compliant with FDA’s draft guidance. This draft guidance includes standards like “moving quickly,” “failing to disinfect gloves or change gloves frequently enough,” and “putting on gowning apparel improperly,” which lack a specific definition and a specific statutory or regulatory basis. Therefore, it is now an open question whether FDA can rely on these types of standards to issue any Form 483 since the observations of alleged noncompliance are based on standards without a specific statutory or regulatory basis, which is contrary to the Guidance Policy.

Conclusion

In sum, Form 483 inspectional observations based on applicable statutes, rules, and regulations should not be treated as FDA findings of wrongdoing or final agency action, and should not serve as a basis to find legal wrongdoing under state law. Moreover, in light of the memorandum issued by the Attorney General, it is now an open question as to whether FDA will, or should, be inspecting against its draft and/or final guidance.

1. FDA Form 483 Frequently Asked Questions (available at: fda.gov). FDA recently reiterated this position in its notice changing FDA’s procedure for inspection of Section 503A pharmacies. Notice to Advise of a Change in the U.S. Food and Drug Administration (FDA’s) Procedure for Inspections of Entities That Are Seeking to Compound Human Drugs in Accordance with Section 503A of the Federal Food, Drug, and Cosmetic Act (FD&C Act) (available here).
2. FDA Inspectional Observation Manual, Section 5.2.3 – REPORTS OF OBSERVATIONS (available at: fda.gov).
3. Guidance document means any agency statement of general applicability and future effect, whether styled as “guidance” or otherwise, that is designed to advise parties outside the federal Executive Branch about legal rights and obligations.
4. Limiting Use of Agency Guidance Documents in Affirmative Civil Enforcement Cases, Memorandum for Heads of Civil Litigating Components United States Attorneys, January 25, 2018 (available at: justice.gov).
5. Id.