The Bottom Line Pharmacy Podcast Pharmacy Frenemies: Legal Updates Impacting 503A and 503B Pharmacies

The 503A and 503B legal landscape is ever changing and staying on top of these changes can be tedious.

But don’t worry! Sykes is here with the trustee colleagues at Brown & Fortunato.

On this episode of the Bottom Line Pharmacy Podcast, Scotty Sykes, CPA, CFP® and Bonnie Bond CPA, sit down with Brad Howard, Esq. And Michael Alexander, Esq. From Brown & Fortunato share recent changes to the 503A and 503B regulatory landscape including:

• The Evolving relationship between 503B and 503A pharmacies 
• Impact of FDA regulations and state-level inconsistencies 
• Possible changes coming in 2025 

Join the discussion with us!

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More resources about this topic:  

Schedule an Rx Assessment

Podcast – Developing a Weight Loss Program with GLP1s in Your Pharmacy

Podcast – Driving Independent Pharmacy Profitability in 2024

Video – 503B Compounding: A Step By Step Journey

If you prefer to read this content, the video transcript is below:

Scotty Sykes, CPA, CFP®: Well, shoot, let’s hop right in it. I’m Scotty Sykes. We got 007 Bond, Bonnie Bond here, the star of show. Everybody knows who follows the podcast, knows Bonnie is the star of the show.  

Bonnie Bond, CPA: Whatever, morning. 

Scotty Sykes, CPA, CFP®: She signs autographs. And then we have Brad Howard here. 

Bonnie Bond, CPA: I’ve signed one. I did sign one. 

Brad Howard: I’d like one when we’re done here. 

Scotty Sykes, CPA, CFP®: Brad Howard with Brown & Fortunato and we got Michael Alexander as well with Brown & Fortunato. We like to say Brown & Fortunato is kind of the A-Team with us. We work really close together with you guys on a lot of transitions, buy/sell and other legal matters as well. And I know Jeff Baird is always kind of in the background stirring the pot. Is he? 

Brad Howard: He’s three doors down. 

Bonnie Bond, CPA: Well, I was just about to ask. I had a big question. I heard he had sold his house in Texas and that he is living a lot over in Utah now, so I’m wondering if someone’s taking his office. He’s keeping the office. 

Brad Howard: No, he’s got, he’s, that’s a great, it’s a great question. He lives at the embassy suites here down the street. He’s got a house in Utah where his family is, but he’s here in Texas a lot. 

Bonnie Bond, CPA: Okay, so he still has his office space. Nobody’s taking us. 

Brad Howard: Yeah, it’s a nice office with a little baseball memorabilia and  paper. Yeah, yes. He’s got Mickey Mantle, I’m thinking that there’s some pretty valuable stuff there to keep it in office. Yeah, yeah. 

Bonnie Bond, CPA: Yeah, Scotty’s been in there. Yeah, they had taken some pictures in there. 

Scotty Sykes, CPA, CFP®: He’s got like Mickey Mantle cards in there or something, doesn’t he? 

Bonnie Bond, CPA: Maybe we shouldn’t say that for everybody to hear. He’s a great guy. Yes, the address. You can look it up and figure it out. 

Michael Alexander: Our address is at the bottom of the screen. 

Scotty Sykes, CPA, CFP®: Yeah. All right. Well, thank you guys for getting on today. Today’s topic, 503B. There’s a lot of, boy, there’s a lot going on here.  

Brad Howard: Yeah, there is. 

Scotty Sykes, CPA, CFP®: So, I guess I’ll kick it off here, Brad and Michael, if you’ll kind of fill us in on the current regulatory landscape. I know the FDA took, I think, Semaglutide or  one of those off the shortage list back on, know, where are we? Where’s the current environment right now in this space? 

Brad Howard: Yeah, so well first of all, thank you for having us. It’s a pleasure to partner with you on these bottom line podcasts. These are cool. These are these are fun. I and I’ve looked I watched the ones besides what I’ve done and Jeff’s done and Alfonso’s done. I watch all of them. They’re just full of content there. That’s really cool.  

Scotty Sykes, CPA, CFP®: We have a good time. 

Brad Howard:  So it’s a pleasure to be here. But it’s also content that kind of makes you laugh occasionally, which is nice. It’s not that we don’t laugh a whole lot. Well, they don’t laugh a lot in pharmacy right now, but 

Scotty Sykes, CPA, CFP®: Well, Bonnie’s real easy to joke on, so that’s why. 

Brad Howard: But you guys make everybody laugh. It’s nice. 

Bonnie Bond, CPA: They’re saving a lot of blooper edits that they’ve had all year to do maybe like a compilation at the end of the year. 

Brad Howard: Oh man, I know I’ve got a few of those. It’ll be on there. I’m sure. Well, it’s great to be here. So, thank you. I’m here with, I’m Brad Howard. I’m here with Michael Alexander, my colleague. We’re part of a large health care group here at Brown & Fortunato. We represent pharmacies, all kinds of health care companies just all over the country and everything that they do. It’s great to be here because Michael and I work with pharmacies all over the country day in, day out. And they are dealing with the things you’re talking about, Scotty. They’re dealing with FDA. They’re dealing with state boards of pharmacy. They’re dealing with shortage lists. And kind of the way that I might kick this off. And if you don’t mind, Michael and I sort of are kind of interchangeable. He’s about six doors down. He’s two doors down from Jeff Baird. And we tag team these questions all day long. So, we may blur the lines here and just jump in and out, kind of try to provide as much content as we can. We want to give as much content as we can for pharmacies. I know they’re dealing with a lot right now. So current landscape, I’m gonna start with kind of a theme that resonates with me and with Michael based on our discussions all day long with 503As, with pharmacies. And that is that 503Bs are our frenemies, which I think maybe I made that word up or maybe it’s real. But, you know, in some regards, they’re friends to the extent that, you know, we’re dealing with drugs that are on the shortage list as we are, and we have a lot of patients out there, millions of patients who need to get access to their prescription medications, and the manufacturers don’t have enough, then 503Bs come in to kind of fill the void, fill the gap, help a lot of 503As supply patients with what they need. But then 503As, they’re compounding pharmacies as you were talking about here, compounding pharmacies provide prescriptions that are patient specific. And so, a lot of what they want to provide to patients might look a little bit different than what 503Bs have traditionally provided to patients, which is kind of mass quantities of prescription drugs to healthcare facilities. So, the lines are kind of blurred right now. Sometimes the 503A pharmacies our clients, you know, their best buddy is the 503B, you know, down the road, so to speak. But then what Michael and I see a lot of and others in our group see a lot of is that 503Bs are honing in on 503A territory to serve patients individually with their prescriptions. So, there’s a little bit of tension there. So, I’d say the current state of the relationship between pharmacies and 503Bs is they’re frenemies. I bet Michael could add a lot more there because he talks to pharmacies all day long about these issues. 

Michael Alexander: Yeah, so I mean, jumping in on that just briefly, when you’re talking about kind of the scope of what each  type of facility can do, there’s in circling back just kind of the regulatory landscape, there’s still a great deal of uncertainty in the regulatory landscape in terms of what a 503B is and what it can and can’t do. Now we’ve received a lot of guidance from the FDA, which you know, is the overarching entity that regulates and registered as 503Bs. But then you get down to the state level and that’s where so much confusion exists. And so, when we’re talking about this concept of 503A’s and 503B’s and how they fit together and to what extent is there synergy, to what extent is there a little bit of potential for competition and competitiveness understanding what 503Bs can do not only on a federal level but at your state specific level is something that’s important for not only 503Bs to know but for 503As to know. And that’s where having a good knowledge and teaming up with experts in the industry or counsel to get that understanding for your operations specifically is still important. Now I’ll use a quick example. You’ll see this is in terms of licensing, so 503Bs are of course federally registered entities. They are subject to, like a manufacturer, they have to register with the FDA. They’re subject to risk-based inspections. They have certain reporting requirements. They’re subject to standards that 503A compounding pharmacies are not. You drop down to the state level, and the states also want to impose their own regulatory scheme onto these entities because, hey, you’re doing business into our state. You are either operating in our state to some extent as a resident facility or you’re shipping drugs into our state and we care about that. But there’s not been a great deal of consistency with respect to how are we going to regulate you? So you’ll have some states that say, hey, this is just like a 503A pharmacy. You just get to do bulk compounding. And so they’ll say, you’re a pharmacy. You’re just a 503B pharmacy. And then you have other states. So, an example of a state that would say that you’re a 503B pharmacy, I believe Alabama is gonna regulate you like that. Other states like Texas, the Board of Pharmacy doesn’t regulate them at all. They’re regulated under a completely different department and they’re classified as a wholesale distributor. And so when you come in, the FDA is gonna say, hey, 503Bs, you can do one thing. You can wholesale to these types of peoples. You can do this type of bulk compounding. And then you drop down to the state level and Alabama might have a different answer for you in terms of what you can do and who you can sell to as a 503B than Texas might because Texas is looking at you as a wholesaler. That’s how you’re going to be classified and so you’re subject to those restrictions and requirements. Whereas another state is going to say, no, you’re a pharmacy. You need to act like a pharmacy. Why are you doing these things that look a whole lot like manufacturing and wholesaling? And so it’s just as a 503B, of course, you have to be aware of those restrictions. As a 503A, if you’re working with a 503B to, you know, obtain products, you need to know what your states are telling you. And that is… 

Brad Howard: Can I, I’m going to jump in there for a second? If you don’t mind, Scotty, Bonnie with a little bit of… Jeff Baird always uses the phrase inside baseball, like, you know, something that maybe nobody else really kind of knows. So, this isn’t exactly that, but something that Michael and I and a lot of our colleagues who represent pharmacies all over the place. So, what we’re finding is like the first question is that the pharmacies ask us is, hey, man, what’s the law? Like, okay, with respect to not only generally, what can I provide to patients and what can 503Bs provide to patients? Then third, know, where can we kind of do it together? Where is there some, you know, synchronicity that our efforts together will take care of patients? What’s the law? What can I do? And what we’re finding is this, the FDA, you know, has issued a draft guidance back in summer of 2023, which in a minute I want Michael to kind of touch on that because that’s huge. I mean, it’s a year ago, but it’s still new news because it really matters for what pharmacists are doing and state boards have all read it. So that’s kind of the second part of what the law is. You’ve got the FDA saying, here’s what we think the law is in the form of a draft guidance that’s been out for 15 months. You know, if I have a draft response to a client, can’t sit for 1.5 days. But, you know, the FDA can sit on a draft guidance for 15 months. But then all the states, all these pharmacies operate in states and state boards of pharmacy, as we all know, are the ones that regulate pharmacies, the 503As. And the states all have their own laws that are like on the books, the laws that anybody can look up. But then what Michael, you know, spends about a third of his day doing is he’s on the phone talking to board attorneys around the country and to boards of pharmacy because like, okay, there’s the FDA guidance, then there’s the law and the books, then there’s like this other set of unwritten laws and customs, case by case, you know, temporarily and early and late ’24 kind of laws that also really matter for what pharmacies can do. And it’s important for pharmacies that want to operate, especially where there are, you know, shortages. And Scotty mentioned this at the at the beginning where there are product shortages. So, there’s a shortage list that FDA has put out there and the question is who can provide the product? Well, that third set of laws is the kind of unwritten laws and customs of the tribe. You know, going back to the Native Americans, you know, they’re not written, they’re just passing down from those in the know to the next generation. It’s kind of like that in pharmacy law right now, where there’s that third set of law. Well, what are the states really going to do? What do they really think about what a pharmacy can do and what a pharmacy can do with a 503B. And if you don’t mind, I’d like to kind of give you a super timely example of where things are really, as a lawyer are very interesting.  

Bonnie Bond, CPA: Yeah, please. yeah, this is good, yeah. 

Scotty Sykes, CPA, CFP®: By all means. 

Brad Howard: Okay, well, hope you like Michael and I talked before the call and I’m like, okay, we’re not going to name any client names, we never do that. But like, we deal with this stuff all day long. And it’s super interesting to us and a bunch of our colleagues down the hall and around the country deal with this stuff. And to us, it’s fascinating, but it’s uncomfortable. It’s uncomfortable for, I mean, as lawyers, we like to know the law. Obviously, we know the law, we study the law all day long. But then, you know, you might get an email six in the morning on your list serve. And hey, what do know, the third thing, the unread laws and customs, maybe it changed overnight. Or maybe a lawsuit got filed. And Michael will text me at seven in the morning, hey, man, before you get in the office, you need to read this thing. I’m like, oh well, maybe we should tell the whole group about it because the law may have just changed at least for you know today. So, here’s what’s kind of interesting is that I’m seeing a lot of now that I’ve been doing this for 32 years. Michael’s been doing it for whatever 14, 15, a long time. We’ve been doing this and we have colleague from Jeff who’s been doing it for 40 years to others who’ve been you know three or four years and kind of everything in between. And the one thing that’s like interesting to me is one of the older guys in the group is back in the old days people would file lawsuits and it would kind of changed the whole dynamic, the regulatory dynamic. And then that kind of went away. I didn’t see much of that anymore. Like lawsuits were filed, lawsuits got dismissed. Maybe it was newsworthy for a day or two or a week. Not anymore. What we’re seeing in the compounding space is that some of these industries, associations, and some of the larger players, we have a lot of pharmacy clients that are nationwide and they’re 50 states. And maybe, you know, maybe some territories and they’re trying to provide products to patients all over the country and they’re trying to figure out like what can I do and what I can’t I do and pharmacy associations, trade associations are putting out newsletters every day or every week telling their members, hey, here’s what you can do. You know, timeout change that actually no, here’s what you can do. But I’m seeing lawsuits come up that aren’t getting thrown out and that are kind of game changers. Michael’s a reformed trial lawyer. He joined our firm from a firm that, you know, they prepared and tried cases. And, Michael’s all about that, but he really sort of likes to get in the weeds on what the law is and what the law isn’t and help businesses kind of navigate all that. But a lawsuit got filed in Fort Worth a couple weeks ago. And that’s, Scotty, you mentioned earlier, you know, Tirzepatide sometimes known as, you know Mounjaro, but it’s a weight loss drug. A lot of pharmacies are compounding versions of it to meet, you know, supply shortages, but also because a lot of people can’t take injections and maybe they need it, you know, sublingual or they need it administered in different doses. That’s what compounders do, right? So, the FDA says that Trizepatide is on the shortage list and that was the law. That was the law. And so, our clients, the 503As are supplying, you know, supplying and the 503 Bs are coming to kind of fill the void with supply disruptions. And then one day, Michael and I talk, we always talk a lot early in the morning because he’s got a bunch of kids. So he likes to get up early in the morning before his kids are up. And we talk about what happened last night in the law because it’s changing all the time. So suddenly, Trizepatide is not on the FDA shortage list. So, there’s this industry panic, mean, what the hell are gonna do now? Like we’re compounded a bunch of Trizepatide, you know, and a bunch of 503Bs are like, hey, can we still, what can we do here? But you know, most of our practice is 503A, we mostly represent pharmacies around the country. You know, what can they do about this? And then a lawsuit gets filed in Fort Worth, we have an office in Dallas, so just right down the road from our office, gets filed in Fort Worth in front of a very conservative, very smart judge, but a very conservative judge who’s also taken the FDA and other agencies to task in some of his rulings because he doesn’t feel like the government should overstep its bounds. And then this lawsuit gets filed saying, hey, maybe the FDA violated the law because they took Trizepatide off the shortage list. But even in their notice, their notice said, hey, this may cause some, you know, some disruption. And so we were laughing about in our group like, well, Is it on the shortage list or is it not? You just took it off the shortage list, but in your own proclamation, you’re saying there’s a shortage. So we regroup, hey, what is the law here? What are we going to tell these pharmacies? These pharmacies don’t want to be in trouble with the FDA, but all of our pharmacy clients are trying to take care of millions of patients around the country. So what do we do about it? Well, then a lawsuit gets filed by a 503B industry organization. They’ve got three letters, OC, OFA, I can’t think. Anyway, they’re, you know, Outsource Industry Association. They filed a lawsuit in Fort Worth and say, we want to injunction against the FDA. The FDA can’t say Trizepatide is on the shortage list on Monday and then say on Tuesday, there’s no shortage. So, it’s it also it’s painfully unfair. 

Bonnie Bond, CPA: Sounds like, it sounds like job security for you guys. This is good. 

Scotty Sykes, CPA, CFP®: Well, it sounds like, first of all, like a good movie. Like this is like a good book. Get your popcorn. And it’s bringing back some like PTSD because when tax law changes next year, we’re going to be Bonnie in the same shoes. 

Brad Howard: It is, I agree. Yeah. 

Bonnie Bond, CPA: Well, I was just thinking, I mean, you guys are in a similar profession as us that you can’t just learn something and then be really good at it forever. It’s constant change, you know, constant. And then when you bring the states, we deal with the same thing. We can figure out something on a federal level, but then you have, you know, all these states that can be completely different and have different views on it. It’s just, it’s a nightmare. Yeah. 

Brad Howard: That’s exactly what’s going on. It’s the exact same thing. It’s the exact same thing because the, you know, we always provide the advice and here’s what the law is now. But then, you know, if you want to be a good servant to your clients, you’re going to forecast where you think the law might  be going and how they might want to, you know, like chess, let’s think three or four moves ahead. So it’s not, you know, it’s not over in five minutes. And so we were looking at what the law is, hey Trizepatide is on the shortage list, but also we’re advising clients, hey, you know, the law is going to, it may change. At some point it may change. And we may have a kind of a runway FDA, may give pharmacies a runway 503B might have a runway. All things that we’re talking to clients about. But now like on Monday, it’s on the shortage list and on Tuesday, it’s not. And so our phones were blowing up for, you know, the entire week. Hey,  what’s the law now on Trizepatide? Can I compound it? Can I not what’s going on? Well, this lawsuit got filed by this industry association for 503B suppliers in Fort Worth, in front of a very conservative federal judge, a genius guy, but also a guy like doesn’t think the government just has unfettered, from what I can tell, doesn’t think the government has unfettered discretion to do whatever the government wants. He’s going to hold them accountable. So, this injunction says, that they filed for says, hey, you can’t be on the shortage list one day and not the next day. FDA has got to do better rule making than that. You got to give notice to pharmacies. What are patients supposed to do if you’re acknowledging that patients might, there’s not a shortage any longer, but patients might not be getting their product. Well, it sounds like a shortage. So, they filed this lawsuit and I think they caught, you know, Michael and I and the whole group were talking about this like, hey, what’s going to happen in this lawsuit? Because I don’t think it was just thrown together overnight. We think they sort of had in their back pocket knowing that maybe, you know, something was going to happen. And this lawsuit gets filed. I think the FDA got caught kind of flat footed. And like they’re trying to get their lawyers admitted into federal court in Texas right down the road from us to deal with this case. And it was a pretty solid looking lawsuit going, hey, the FDA can’t just say here’s the law today and here’s the law tomorrow. And the FDA put a hold on it, kind of put a time out and said, ok, on Trizepatide let’s wait. Yeah. 

Scotty Sykes, CPA, CFP®: I don’t want to get political here, but I mean government dysfunction. It just I mean just sounds like government dysfunction to me. 

Brad Howard: Well, it’s so yeah. And so, this isn’t political at all because the federal government regulates all of our clients and some yours and mine. You know, all of our pharmacy clients that you do tax work for and and provide all kinds of other financial services and we handle, you know, legal matters for them. All of us care about what the federal government does. I mean, it’s it’s huge. The FDA, DOJ, FTC, you know, the OIG, HHS for federal payers. I mean, they regulate all of our pharmacy clients. And of course, IRS and others regulate all your pharmacy clients in the tax world. I think that, and Michael and I talked a lot about this, how are we gonna kind of forecast what things look like for clients? And then the lawsuit comes in and sort of puts it on ice for a little while. So now the FDA is not going to enforce the Tirzepatide as if there’s not a shortage there. They’re going to kind of take a time out and think about it. They’re regrouping and a lot of our clients are regrouping and that’s what Michael spends all day advising clients on what is the law. Now what’s the law going be at the end of November? What’s the law going be in December? What’s the law going be in January? But a lot of what we’re advising clients on with respect to 503A’s and B’s is a lot of this law is timeless. I mean you have to understand what a 503A can do, what a 503B can do. And then understand that with the shortages and the weight loss drugs, some of that’s kind of fleeting. We’ll still be dealing with 503As and 503Bs and the legal tension long after all this gets resolved. So it’s a, 

Michael Alexander: Yeah, but you look at the, sorry, I didn’t mean to cut you off, but when you look at, you use the semaglutide from Novo as another example of where you have to really have your ear to the ground in the market. You know, Novo, of course, has been trying to ramp up its production for ever since it went on the shortage list. But you see them, you know, increase the manufacturing space for the production of these semaglutide products. And the FDA just, I believe it was a week ago, might have been a week ago Friday, you know, the Wygovi and the Ozempic are still on the shortage list, but they’re now listed as available. And so what does that mean? I mean, you’re talking about something that’s still on the shortage list, listed as available. Okay, well, 503A, 503B, what can we do? Well, it’s still on the shortage list. So good news there. But you know, start to read the market. Here’s what Novo is trying to do. And I mean, Novo is also, they’ve all, It’s not new news, it’s kind of just a continuation of the old news. They’ve been very aggressive in their attempts to tamp down and stamp down the compounding of these products, whether that’s through suits related to product infringement or trademark infringement, whether that’s related to trying to get these products listed on the difficult to compound list, which again is going to probably have to go through the whole rule nose making process at the FDA to get it added to that list, but that’s that would really impact what compounders are able to do. 

Brad Howard: Which is news to lot of our clients who are compounding. It’s not difficult to compound at all. They know what they’re doing and they’re compounding it very, very safely. And so interesting, Michael and I just talked about this because, yeah, Novo filed a application with the FDA, you know, with regard to Semaglutide to try to get the train going towards it’s difficult to compound and maybe that’s a different status that you know, the evidence they kind of cited was, you know, a handful of cases where people got hurt from compounded, you know, product. But then if you look at their own history as a manufacturer and, you know, injury claims and the like from patients who’ve used their product, then those numbers might tell, you know, kind of a contradictory story, at least the pharmacies would say. And, you know, it’s nice that we have our ear to the ground and we kind of hear these things come and before the train shows up at the station we can tell it’s coming down the tracks. But yeah, there’s a lot of stuff for pharmacies to keep their eyes and ears on in the industry right now. 

Scotty Sykes, CPA, CFP®: Well, yeah, I was going to say you got the federal, you got the state, and then you have, you know, the manufacturers themselves that are also adding pressure and uncertainty, you know, in the space. I know they, I see them on CNBC every other week talking about this issue and saying they’re not as safe or whatever. I mean, they’re, so they’re, they got their agenda, they’re pushing on their end as well. So that throws a whole kink in everything too. 

Brad Howard: Yeah, they’ve got their own. I mean, manufacturers have their interest in, ultimately, and this is not… 

Scotty Sykes, CPA, CFP®: And a lot of, I don’t mean to cut you off there Brad, but a lot of pharmacies I talk to that are not getting into this area, they don’t want to deal with I think the potential litigation from any like manufacturers or whatever. That’s kind of what they are telling me. Like I don’t want to be in a potential lawsuit down the road or something. 

Brad Howard: I get that but then Michael and I get these demand letters for clients on behalf of manufacturers, you know, and a lot of those we read and just kind of, you  chuckle a little bit because we have pharmacies all over the country. So maybe like 10 pharmacies all got the same letter. They try to make it sound like it’s specific to, you know, an individual pharmacy or whatever. It’s kind of a form letter from a lawyer. And then you check out the lawyer and the lawyer is not a pharmacy lawyer in a lot of cases. 

Scotty Sykes, CPA, CFP® : Yeah. 

Michael Alexander: And frankly, so much of it from just the pharmacy perspective, there’s a great deal of comfort in the shortage list because that comes in and really cuts the manufacturer’s claims, at least some of their claims off right at the knees. If it’s on the shortage list, then that comes in and really just provides the allowance and the permission for compounding pharmacies to come in or 503B outsourcing facilities to come in and engage in that conduct. You know, say, hey, you’re infringing on my patent. It’s like, well, your patent currently in shortage, so the FDA says I can compound it, so I’m going to compound it. And so, you know, it’s not to diminish the significance of those letters because they can be scary when you get a big manufacturer coming in against a little, little retail compounding pharmacy who’s local, just trying to serve their patients. But you know, there’s the real claims that have meat and bones to them are the ones related primarily to product infringement. So not product infringement, but the trademark infringement where you’re being deceptive and how you’re marketing this stuff and so those are the ones where we’ve seen more aggressive or I’ve seen more aggressive conduct by the manufacturers and they’ve had more success at the state levels because it’s like hey you’re basically just doping my marketing and using it to sell your compounded product  that’s exactly why trademark infringement is out there is to permit that sort of conduct but with respect to you if you’re just compounding you know these types of products, not trying to steal their marketing, not trying to steal their branding, just, hey, I’ve got a prescription from a physician who can’t get Ozempic, and he needs me to compound for his patient, you know, an essential copy of Ozempic because it’s currently on the shortage list, manufacturers don’t really have a whole lot they can say about that because it’s on the shortage list and I’m doing it pursuant to patient prescription and I’m not marketing it as Ozempic, I’m just, hey, I can compound the same type of product. It’s not Ozempic because it’s not manufactured by Novo. So, you know, there’s been that type of actions by the manufacturers against compounders. Some of the other directions they’ve taken, which has been to go to the state boards. And again, this is somewhat old news, but it again demonstrates what they’re doing, which is saying, hey, you get the letter from the state board and it’s the same letter that this other state board sent me that’s the exact, it’s just, you know, this is this, Novo wrote this. So it again comes down to  what are  states doing? And some states have taken that route. They’ve gone the route of Novo and have followed that. Said “Hey, you can’t be doing this because of XYZ reason.” And, you know, when that comes up to my clients, they email me and say, Hey, North Carolina said, said this, what do I do? It’s like, well, that’s the effective position of North Carolina. And if you know, you’re at a regulatory risk if you continue to compound this product in North Carolina. Is Texas going to take that route? Well, Texas hasn’t said that Texas generally follows the FDA’s position on these issues. I was at a conference recently and it was interesting because there was a board of pharmacy panel and they were talking about, okay, like what do we do? How does the board interplay with the FDA? And just to kind of see the divide sometimes pop up where sometimes the board of pharmacy representative saying, wel like you really have to look at our regulations and what we’re saying and other states saying, we just rely on the FDA to make those determinations for 503Bs. And if the FDA is fine with that determination for 503B, we’ll follow their guidance. And so it again comes back to the FDA has its overarching guidance. But you really got to drop down to the state level as well and say, okay, you know, I’m in Rhode Island, what is Rhode Island doing? Are they following just kind of what the FDA is telling them to say, or are they going to come in and be more aggressive? Like Mississippi, you know, in their newsletter came out and just directly contradicted the FDA’s position on, you know, the wholesale prohibition and what 503B compounders are, or 503B compounding facilities can do. You know, the FDA says, hey, you know, here’s our interpretation of, you know, the FDNC act in terms of who you can, you know, sell your products to you know what’s known as the wholesale prohibition, which just says a 503B compounding facility cannot sell or transfer its product to any other entity apart from that outsourcing facility with two big exceptions. One being you can sell it to an entity that is going to administer it, pursuant to a patient prescription, or you can sell it to an entity that will dispense it pursuant to patient prescription. The FDA comes out and says, hey, that dispense language, that means pharmacies. You know, you’ll read that draft guidance from last year and say, that means pharmacy. You jump down to Mississippi, and Mississippi says, yeah, we disagree. Not, we disagree based off of state law, which some pharmacies, what some states will do. Some states will say, yeah, that’s the FDA guidance, but you can’t do it pursuant to our state law. Mississippi just jumped up and said, we just disagree that that’s the proper interpretation of the statute. And so. 

Bonnie Bond, CPA: Yeah, we got a client in Mississippi, and it’s just been so frustrating. 

Brad Howard: Yeah, well, have a different point of view about what the FDA says can happen and can’t happen. And that’s why it’s interesting is a lot of our clients are regional or nationwide or they cover a big swath of states or maybe the whole country. So the advice we’ve got to give is not only here’s what federal looks like, but it’s nuanced for where they’re doing business. And then also it’s nuanced for maybe some states don’t officially proclaim what the law is, but it’s, they have a viewpoint about what the law is and you want to figure out what that is and you want to navigate it. 

Scotty Sykes, CPA, CFP®: So due diligence is key here, obviously. We’ve been saying that a long time. And now I got one more question here. Like with the election now behind us and from what I’m reading, there’s going to be some big ol’ changes going on with a lot of this, these agencies supposedly. And that’s what they’re trying to do anyway. What do you, what’s the crystal ball telling you here, Brad, Michael? 

Brad Howard: So it’s, that’s a very good question. And I want to get it right because if somebody watches this podcast in March, I don’t want them to say, “oh that was all wrong.” 

Bonnie Bond, CPA: We had to be careful when we were doing all those PPP podcasts and different stuff we were putting out. We had to be like pay attention to the date because it changes every week. 

Scotty Sykes, CPA, CFP®: God. The interim final rule, I know the interim final rule, has anybody ever heard of an interim final rule? 

Brad Howard: So did we, yeah we… Yeah. No, no, we specialized in COVID law during the first years. We did all the same thing like, hey, this webcast is good for this week. We’ll see what happens. No, it’s a great question. So, you know, what we think, at least Michael, I won’t speak for the whole group, but Michael and I have talked about this. What we think is that the new administration is certainly going to tighten up things on FDA. And, you know, they, you know, some of what you read is that there’s not a federal agency that they don’t want to severely restrict. But FDA is kind of different. Like you go back to New England Compounding Center back in 2013 and a bunch of people died. And that’s just one example. But there are reasons that FDA exists to regulate a lot of these products. And while some of our clients and as a firm, we may have some issues with some of the rulemaking and the proclamations and shortage today, no shortage tomorrow, you know, the FDA has an important role. We don’t think they’re going to be eliminated  or so severely restricted that they can’t, you know, try to provide oversight for safe products. What we do think is that maybe they’re going to take a little bit lesser of a role and states will continue to elevate kind of the importance in their role for regulating these products and ensuring patient safety. Which isn’t a lot different than what Michael and I have seen for years is the states are really the ones that regulate the pharmacies, the state boards of pharmacy do. We don’t see anything changing that way coming 2025, but I would not be surprised to see some things in place where FDA can’t make a decision like today here’s the law and tomorrow here’s the new law. 

Scotty Sykes, CPA, CFP®: I think that’s a fair assumption. 

Brad Howard: And then there are a lot of judges being appointed, will continue to be appointed to have a little bit different view about what the government can do. And sometimes the court of appeals won’t agree with them and will take their decision down. But what we’re seeing more of are decisions coming out where federal court judges are looking at, hey, did the federal government have rulemaking authority to come up with this rule kind of overnight or on the fly? And they’re challenging, you know, challenging that authority. So, I think we’re going to see a lot more challenges to federal authority in the next few years. And then we’re gonna see states having an even more important role, which Michael and I, you know we deal with states all day long. We’re okay with that because you just have to know what the law is or know enough people to figure out what the law is that’s not written down. And once you do that, then you can help pharmacies navigate all that. 

Scotty Sykes, CPA, CFP®: Yep. Well, it’ll be interesting for sure for everybody in all areas, I reckon. Sure. That they’ll have plans for the IRS. The IRS is 30 years behind the times. So good Lord, anything’s gonna help them. 

Brad Howard: Yeah, well for you guys too, I who knows? 

Michael Alexander: Yeah, and then you overlay the whole administration change with, Loper-Brite got struck down. What has it been, oh gosh, Brad, was that last Supreme Court term or the one before? But we’re going to see the impact of, you know we get all this FDA draft guidance. It’s like, well, how much is this subject challenged now that Loper-Brite’s gone? And how much are we gonna see, you know, 

Michael Alexander: The challenges to rulemaking authority come in and say, no, no, no, no, you don’t, you, don’t get to do that. Chevron’s gone. We don’t have to give you deference anymore. That’s going to shake out at the FDA level as well. And to the extent states have, have adopted Chevron, might impact that as well. That’s going to be to a lesser extent because they’re, their own co-equal sovereign. So it’s just like, but the administration change plus the whole regulatory landscape already being in shift because Chevron was struck down through Loper-Brite is going to lead to  some I don’t want to say chaos in the industry but some uncertainty in the industry moving forward but 

Brad Howard: So we’ll keep reading the law late at night and we’ll read the law first thing in the morning so we can stay on top of it because it’s going to be… 

Scotty Sykes, CPA, CFP®: Uncertainty is good for the podcast because we get you on here and we try to figure out the uncertainty. 

Brad Howard: Well, yeah, your stuff is so recent. People, I watched a few of your podcasts last week just to prepare for this one and like, you to see what works. you what I found was everybody’s giving very current information and their take on things. And it’s still all very relevant months and months later. So it’s a privilege to be here and talk about it. And we’d to come back and talk about what it looks like, you know, early in 2025. 

Scotty Sykes, CPA, CFP®: Well, we love having you, Brad, Michael, thank you for coming on and everybody listening in. Thank you, thank you, Brad. Thank you, Michael. We appreciate y’all coming on.