Reply Brief — Thompson v. Western States Medical Center

w xT Court, U.S.

No. 01-344 1L EOD

1 19

In the Supreme Court of the United stator

CLFPK

Tommy G. THOMPSON,

SECRETARY OF HEALTH AND HUMAN SERVICES,

ET AL., PETITIONERS

*.

WESTERN STATES MEDICAL CENTER, ET AL.

ON WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

REPLY BRIEF FOR THE PETITIONERS

THEODORE B. OLSON

Solicitor General

ALEX M. AZAR, II Counsel of Record

General Counsel Department of Justice

U.S. Department of Health Washington, D.C. 20530-0001

and Human Services (202) 514-2217

DANIEL E. TROY

Chief Counsel

U.S. Food & Drug

Administration

Washington, D.C. 20857

0

TABLE OF CONTENTS

(I)

Page

1. Section 353a furthers substantial governmental

interests 3

2. Section 353a directly and materially advances

the government’s interests 16

3. Section 353a is no more extensive than necessary a

to further the government’s interests 17

TABLE OF AUTHORITIES

Cases:

Alberty Food Prods. v. United States, 194 F.2d

463 (9th Cir. 1952) . 13

Baker v. United States, 932 F. 2d 813 (9th Cir.

1991) 15

Cedars North Towers Pharmacy, Inc. v. United

States, [1978-1979 Transfer Binder] Food Drug

Cosm. L. Rep. (CCH) 1 38,200 (S.D. Fla. Aug.

229 ccececscnssnspueesvenssnsevassnesssnsssensnssnenensapsnentymmnstsecensvesnesssecees 9, 10

Central Hudson Gas & Elec. Corp. v. Public

Serv. Comm., 447 U.S. 557 (1980) . . . . .. 1. 16

Dolan v. City of Tigard, 512 U.S. 374 (1994) 20

44 Liquormart, Inc. v. Rhode Island, 517 U.S. 484

(1996) 18, 19, 20

International Union of Operating Engers v. Flair

Builders, Inc., 406 U.S. 487 (1972) x

Kadis v. United States, 373 F.2d 370 (Ist Cir.

1967) 9

Lorillard Tobacco Co. v. Reily, 533 U.S. 525 (2001) 16

Marks v. United States, 310 F. 2d 49 (5th Cir. 1962) 9

Pittsburgh Press Co. v. Human Relations Comm'n,

413 US. 376 (1973) 19

II

Posadas de Puerto Rico Assoc. v. Tourism Co.,

478 U.S. 328 (1986) 16

Professionals & Patients for Customized Care v.

Shalala, 56 F.3d 592 (5th Cir. 1995) 10, 15

Rubin v. Coors Brewing Co., 514 U.S. 476 (1995) 18, 19

Rush v. United States, 370 F. 2d 520 (8th Cir.

1967) 9

United States v. Algon Chem., Inc., 879 F.2d 1154

(3d Cir. 1989) 10, 13

United States v. Arnold’s Pharmacy, 116 F. Supp.

310 (D. N. J. 153) 9

United States v. Articles of Drug, 625 F 2d 665

(5th Cir. 1980) 13

United States v. Baxter Healthcare Corp., 712

F. Supp. 1352 (N. D. III. 1989) aff’d 901 F.2d 1401

(7th Cir. 1990) 13

United States v. Carlisle, 234 F.2d 196 (5th Cir.

1956) 5

United States v. Dianovin Pharm., Inc., 475 F. 2d

100 (1st Cir.), cert. denied, 414 U.S. 830 (1973) 15

United States v. Edge Broad. Co., 509 U.S. 418

(1993) 16

United States v. Gibson, 135 F. Supp. 807 (E.D.

Pa. 1955) 5 9

United States v. 9/1 Kg. Containers, 854 F. 2d 173

(7th Cir. 1988) 10, 13

United States v. Rutherford, 442 US. 544 (1979) 13

United States v. Sene X Eleemosynary Corp.,

[1982-1983 Transfer Binder] Food Drug Cosm. L.

Rep. (CCH) 4 38,207 (11th Cir. Jan. 12, 1983) 5, 9, 10

United States v. Sullivan, 332 U.S. 689 (1948) 9

Virginia State Bd. of Pharmacy v. Virginia

Citizens Consumer Council, Inc., 425 U.S. 748

(1976) 12, 18, 19

Weinberger v. Hynson, Westcott, & Dunning, Inc.,

412 U.S. 609 (1973)

III

Constitution, statutes and regulations:

U.S. Const. Amend. I

Act of June 25, 1938, ch. 675, § 291(p)(1), 52 Stat.

1041

Drug Amendments of 1962, Pub. L. No. 87-781,

76 Stat. 780

Federal Food Drug and Cosmetic Act, 21 U.S.C.

301 et seq. _ *

21 U.S.C. 321(g)(1XD)

21 U.S.C. 21 N

21 U.S.C. 381(d)

21 U.S.C. 331(k)

21 U.S.C. 351(a(2)(B) (1994 & Supp. V 1999)

21 U.S.C. 35200

21 U.S.C. 38200000) 4

21 U.S.C. 353(b)\(1)(B) (1994 & Supp. V 1999)

21 U.S.C. 3530) 2)

——

21 U.S.C. 353a (Supp. V 1999)

21 U.S.C. Saal) (Supp. V 1999)

21 U.S.C. 358a(a\(2)\(A) (Supp. V 1999)

21 U.S.C. 353a(c) (Supp. V 1999)

21 U.S.C. 355

21 U.S.C. 355(a)

21 U.S.C. 360(a)(1)

21 U.S.C. 360(b)-(d)

21 U.S.C. 360(g)\(1)

21 U.S.C. 374(aX(2)(A)

21 US. C. ST

21 U.S.C. 501(aX(2)B

21 U.S.C. 505

21 U.S.C. 5026001)

Mont. Code Ann. (2001):

§ 37-7-101(7)

§ 37-7-101(17)

IV

Statutes and regulations—Continued:

Ohio Rev. Code Ann. § 3715.01(14) (Anderson 2001)

Tex. Oce. Code Ann. (West 2001):

§ 551.0039)

§ 551.003(23)

21 C.F.R. 130.39 (1968)

21 C. F. R. (2001):

Pt.:

Section 201.5

Section 201.100 et seq.

Pt. 210

Pt. 211

Miscellaneous:

ASHP Gears Up Multistate Action Plan Regarding

Sterile Drug Products, 48 Am. J. Hosp. Pharm.

386 (1991)

J. Avorn, et al., Scientific versus Commercial Source

of Influence on the Prescribing Behavior of Phy-

sicians, 73 Am. J. of Med. 4 (July 1982)

17 Fed. Reg. 6818 (1952)

33 Fed. Reg. 7758 (1968)

J. Feinberg, Compounding Sterile Products: What

is Good Pharmacy Practice?, 7 The Consultant

Pharmacist 1012 (1992)

H.R. Conf. Rep. No. 399, 105th Cong., Ist Sess.

(1997)

R. Merrill, The Architecture of Government Regula-

tion of Medical Products, 82 Va. L. Rev. 1753

(1996)

NAPB, The Model State Pharmacy Act and Model

Rules of the NAPB (1996)

J. O’Donnell, Cardioplegia Litigation and Recommen-

dations, 6 J. Pharm. Practice 151 (1993)

S. Rep. No. 43, 105th Cong., Ist Sess. (1997)

L. Trissel, Compounding Our Problems, 51 Am. J.

Hosp. Pharm. 1534 (1994)

15

11

In the Supreme Court of the United States

No. 01-344

TomMMY G. THOMPSON,

SECRETARY OF HEALTH AND HUMAN SERVICES,

ET AL., PETITIONERS

U.

WESTERN STATES MEDICAL CENTER, ET AL.

ON WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

REPLY BRIEF FOR THE PETITIONERS

The Food and Drug Administration Modernization Act of

1997 (FDAMA) creates a limited exemption from the re-

quirements of the Federal Food, Drug, and Cosmetic Act

(FDCA), 21 U.S.C. 301 et seg., governing the approval of new

drugs, adequate directions for use, and good manufacturing

practice for drugs compounded by pharmacists. See 21

U.S.C. 353 (Supp. V. 1999). The exemption is contingent on

the pharmacist’s compliance with various conditions, in-

cluding that the pharmacist not solicit prescriptions for,

advertise, or promote any particular compounded drug or

class of compounded drug. 21 U.S.C. 353a(a) and (e) (Supp.

V 1999). That condition is consistent with the First Amend-

ment under Central Hudson Gas & Electric Corp. v. Public

Service Commission, 447 U.S. 557 (1980).

(1)

Section 353a is designed to advance the substantial gov-

ernmental interest in balancing two important but com-

peting goals. The first goal is to safeguard the integrity of

the FDCA’s new drug approval process, which protects the

public from the health risks of widespread distribution of

drugs that have not been proven safe and effective. See Pet.

Br. 19-23. The second is to make compounded drugs avail-

able when necessary to meet the particularized medical

needs of individual patients. See id. at 23-26. Those goals

are in tension with each other but that tension may be

accommodated and reconciled: It typically is not feasible to

subject drugs compounded by a pharmacy in response to in-

dividual medical needs to the expensive premarket approval

process. Id. at 26-27. At the same time, a blanket exemption

from that process for anyone holding a pharmacy license

would undermine the process by allowing drugs to be mass-

produced outside the stringent regulatory framework estab-

lished by Congress, and, by thereby reducing the incentive

for other manufacturers to establish the safety and effective-

ness of their products. Id. at 28-29.

The solicitation and advertising conditions thus directly

advance the government’s interest in balancing those com-

peting goals. Promotion of particular drugs reasonably dis-

tinguishes large-scale drug manufacturing, which can and

should be subject to premarket approval, from compounding

in response to the particularized medical needs of specific

individuals. See Pet. Br. 32-35. Conditioning the exemption

from the approval requirements on the absence of promotion

of particular drugs also reflects the FDCA’s underlying pre-

mise that the public health is best served when those who

develop, promote, and mass-distribute new drugs prove that

they are safe and effective. Because all persons who com-

pound new drugs (whether traditional manufacturers or

those holding a pharmacy license) are unable to promote

specific products through advertising unless they comply

with the approval process, they are unable to take advantage

of a mass-market without complying with the process. The

integrity of the process and the incentive for drug

manufacturers to prove that the drugs that they distribute

in interstate commerce are safe and effective are thereby

preserved. Id. at 35-36. The advertising and solicitation

limitations are thus carefully crafted to meet the

government’s goals. See id. at 42-46.

1. Section 353a Furthers Substantial Governmental

Interests

a. Respondents contend (Br. 18-23) that the government

has not established a substantial interest in subjecting com-

pounding that is tantamount to manufacturing to the new

drug approval process. They first argue (Br. 18, 20-21) that

the government has not adequately and properly delineated

the difference between compounding and manufacturing.

The government’s opening brief, however, differentiates be-

tween the two processes in terms similar to those used by

the National Association of Boards of Pharmacy (NABP)

itself. See Pet. Br. 33-35 & n.6. Traditional compounding

involves the provision of a service in response to a

physician’s prescription and the particular medical needs of

an individual patient that cannot be met by commercially

available products. Id. at 33. Because traditional com-

pounding responds to idiosyncratic medical needs of specific

individuals, advertising of particular compounded drug pro-

ducts is not one of its necessary or common characteristics.

Id. at 33-34. Manufacturing, in contrast, is the large-scale

production of a drug product, typically for a substantial

market that can support the expense and other rigors of the

premarket approval process. Because manufacturing in-

volves creation of a homogenous product that addresses the

shared medical need of a large group of people, advertising

of that product is one of its common and typically critical

features. See id. at 34-35.

4

Respondents argue (Br. 21-22, 30, 44) that the widespread

distribution of unapproved compounded drugs is not harm-

ful. The very premise of the FDCA, however, is that wide-

spread distribution of drugs that have not been proven safe

and effective poses substantial risks to public health and that

premarket approval is necessary to protect against those

risks. See Pet. Br. 23, 30. That premise is supported by

many decades of experience showing that neither the self-

interest of drug producers nor physician screening is suffi-

cient to protect the public. See id. at 20-23. The widespread

distribution of unapproved new drugs threatens the integr-

ity of the drug approval process and the public health

whether or not the manufacturer has a pharmacy license

under state law. See id. at 27.29.

Respondents (Br. 12, 20) and amicus National Community

Pharmaciste-Association (NCPA) (Br. 24-25) also contend

that advertising of particular drugs does not reasonably

distinguish manufacturing from traditional compounding. As

just described, however, promotion of the manufactured pro-

duct is a common and typically critical feature of commercial

drug manufacturing, but not of traditional compounding.

Indeed, NABP’s Model State Pharmacy Act distinguishes

between manufacturing and compounding based on the pre-

sence or absence of promotional activity. Compare § 105(u)

(defining “manufacturing” to include “the promotion and

Although respondents assert (Br. 30) that the government has

offered oniy “one anecdotal incident” documenting the health risks from

drugs compounded by pharmacists, the articles cited in the government’s

opening brief (at 28) discuss several incidents, and there is ample

additional documentation of these risks. See, .., ASHP Gears Up

Multistep Action Plan Regarding Sterile Drug Products, 48 Am. J. Hosp.

Pharm. 386 (1991); J. Feinberg, Compounding Sterile Products: What is

Good Pharmacy Practice?, 7 The Consultant Pharmacist 1012, 1013

(1992); J. O’Donnell, Cardioplegia Litigation and Recommendations, 6 J.

of Pharm. Practice 151, 151-152 (1993); L. Trissel, Compounding Our

Problems, 51 Am. J. Hosp. Pharm. 1534 (1994).

marketing” of drugs) with § 105(e) (omitting promotion and

marketing from definition of compounding) (reprinted in

NABP, The Model State Pharmacy Act and Model Rules of

the NABP 1.2, 1.4 (1996)). Many state laws draw a similar

distinction. See Am. Pharm. Ass’n (APhA) Amicus Br. 15

n.19 (citing 10 state statutes); Mont. Code Ann. § 37-7-101(7)

and (17) (2001); Ohio Rev. Code Ann. § 3715.01(14) (Ander-

son 2001); Tex. Occ. Code Ann. § 55 1.0039) and (23) (West

2001). Moreover, the NABP’s Good Compounding Practices

Applicable to State Licensed Pharmacies prohibit a phar-

macist from soliciting prescriptions for, advertising or other-

wise promoting specific compounded drugs. NABP, supra,

at App. C.2.

b. Respondents argue (Br. 12, 19-20, 29) that the govern-

ment lacks a substantial interest in preventing manufactur-

ing under the guise of pharmacy compounding because

“compounding can never be manufacturing and manufactur-

ing can never be compounding.” Id. at 19. Respondents

assert (ibid.) that pharmacy compounding differs from manu-

facturing because drugs compounded by pharmacists are

dispensed directly to patients based on prescriptions arising

from physician/patient/pharmacist relationships. Those

characteristics do not, however, distinguish compounding

from large-scale drug production that can and should be

subject to premarket approval. Pharmacies (or traditional

manufacturers that form entities with a pharmacy license)

could still “compound” new drugs in the manner of tradi-

tional manufacturing even if they dispensed the drugs

pursuant to patient prescriptions. In United States v. Sene

X Eleemosynary Corp., [1982-1983 ‘Transfer Binder] Food

Drug Cosm. L. Rep. (CCH) 1 38,207 (11th Cir. Jan. 12, 1983),

for example, the “pharmacy” dispensed the drugs it

produced pursuant to prescriptions for individual patients.

The court nonetheless concluded that the “pharmacy” was

manufacturing, id. at 39,118, and respondents agree (Br. 41).

6

Under respondents’ theory, nothing would prevent a

“compounding pharmacy” from producing the next Prozac

and marketing it nationwide to millions of individuals, with-

out first proving the drug’s safety and effectiveness to the

FDA, provided only that the pharmacy made its sales pur-

suant to prescriptions mailed or telephoned in by physicians.

Thus, respondents’ approach would allow wholesale circum-

vention of the drug approval process and seriously under-

mine the FDCA’s central mechanism to protect the public at

large from the risks of drugs that have not been proven safe

and effective.

Respondents assert, without support, that, “if and when

demand for a compound ever increases to a level where man-

ufacturing becomes practical (se., profitable), a manu-

facturer may bring it to market, whereupon pharmacies will

stop making it.” Resp. Br. 19. If, however, pharmacies were

already meeting the demand for a product through com-

pounding, and doing so without bearing the costs of FDA

approval, there would be little incentive for a prospective

manufacturer to undertake the expense of obtaining FDA

approval, particularly if pharmacies could sell the product at

a lower price because they do not have to recoup the costs of

the approval process. Further, if pharmacies knew that they

could sell the drug at a lower price and thus enjoy an ad-

vantage over potential competitors, the pharmacies would be

unlikely to give up their existing, profitable business.

e. Respondents and their amici proffer one additional

reason why the government purportedly lacks a substantial

interest in preventing circumvention of the new drug ap-

proval process: They assert that drugs compounded in the

ordinary practice of pharmacy are not subject to the ap-

proval process in the first place and thus may legally be

introduced into interstate commerce or held for sale without

FDA approval. See Resp. Br. 3, 12-14, 16, 29, 34-45, 46;

7

Amicus Br. of Int'l Academy of Comp. Pharm. (IACP) 2-22;

NCPA Br. 10-15; APhA Br. 20-24.

i. As an initial matter, compounded drugs are not ex-

empt from the new drug approval requirements. If they

were, Congress would have had no need to create the ex-

emption from those requirements that Section 353a pro-

vides. See 21 U.S.C. 353a(a) (Supp. V 1999) (stating that

Section 355, which contains the approval requirements,

“shall not apply” to compounded drugs under specified con-

ditions). Thus, the enactment of Section 353a itself estab-

lishes that compounding by pharmacists is otherwise

covered by the new drug approval requirements.

As explained in the government’s opening brief (at 4),

compounded drugs fall within the definition of a “new drug”

in 21 U.S.C. 321(p\(1). They are thus subject to the approval

requirements, which provide that /n person shall in-

troduce or deliver for introduction into interstate commerce

any new drug” without prior FDA approval. 21 U.S.C.

355(a) (emphasis added). Neither respondents nor their

amici identify any provision of the FDCA that exempts

drugs compounded by pharmacies from the definition of new

drug or the approval requirements.”

2 Respondents incorrectly assert (Br. 12, 16, 34-35) that the

government conceded in the court of appeals that introduction of com-

pounded drugs into interstate commerce without FDA approval is legal.

The government took the same position in that court that it takes here:

Because Section 353a itself provides that introduction of compounded

drugs into interstate commerce without FDA approval is legal under

carefully circumscribed conditions, the government did not and does not

argue that respondents’ proposed advertisements of compounded drugs

concern illegal activity under the first component of the Central Hudson

test. See Pet. Br. 18; Appellants Br. 27 n.10. That does not mean, how-

ever, that introduction of unapproved compounded drugs into interstate

commerce, or holding such drugs for sale, was legal before FDAMA, or is

legal today absent compliance with the conditions in Section 353a. On the

contrary, as the government’s court of appeals’ brief stated, “before

8

Respondents argue that compounded drugs are not “men-

tioned or included in” the definition of “new drug.” Br. 4; see

id. at 35, 37, 39. That definition, however, includes ſa/ ny

drug” that “is not generally recognized, among experts

qualified by scientific training and experience to evaluate the

safety and effectiveness of drugs, as safe and effective for

use.” 21 U.S.C. 321(p)(1) (emphasis added). The use of the

modifier “any” eliminates the need explicitly to include

drugs compounded by pharmacists. See International

Union of Operating Eng’rs v. Flair Builders, Inc., 406 U. S.

487, 491 (1972). Respondents do not contend that com-

pounded drugs are generally recognized among experts as

safe and effective. Indeed, respondents argue (Br. 35-37)

that compounded drugs are not new drugs precisely because

they are (according to respondents) incapable of being

evaluated by experts. That fact, if true, however, demon-

strates the opposite proposition—that compounded drugs

necessarily are “new drugs.”

ii. Respondents also argue more broadly (Br. 4, 8, 13, 37-

40) that pharmacies are entirely exempted from the FDCA

by 21 U.S.C. 360(a)(1), 360(gX(1), and 374(a)(2)(A). Section

360(a)(1), however, provides no exemption from any pro-

vision of the FDCA for any entity. Rather, it stipulates that

repackaging or relabeling constitutes “manu‘acture, pre-

paration, propagation, compounding, or processing” that

generally subjects the person engaged in such conduct to the

registration requirements contained in Section 360(b)-(d).

Section 360(g)(1) exempts pharmacies that engage in only

the ordinary pharmacy practice of dispensing or selling

drugs at retail from registration requirements, and Section

374(aX(2)(A) exempts such pharmacies from certain (but not

Congress enacted FDAMA in 1997, the FDCA did not exempt com-

pounding from the Act’s new drug, adulteration, and misbranding re-

quirements,” id. at 27, and “the interstate distribution of any compounded

drug product without approval was illegal.” Id. at 31.

— ee

all) of the inspection requirements in Section 374(a)(1).

Those provisions do not, however, exempt pharmacies from

any other provisions of the FDCA, including those governing

new drug approval, misbranding, and adulteration. Pet. Br.

3. Indeed, the existence of express exemptions from the

registration and inspection requirements confirms that phar-

macies are generally subject to the FDCA and that they are

not exempt (except to the extent expressly provided in

Section 353a) from those other requirements.

iii. Respondents claim that the FDA has demonstrated a

“complete lack of regulation or enforcement activity towards

pharmacies.” Br. 14. That claim cannot be reconciled with

United States v. Sullivan, 332 U.S. 689 (1948), in which this

Court upheld a misbranding action brought against a

pharmacist less than a decade after the FDCA was enacted.

See also Kadis v. United States, 373 F.2d 370 (1st Cir. 1967);

Rush v. United States, 370 F.2d 520 (8th Cir. 1967); Marks v.

United States, 310 F.2d 49 (5th Cir. 1962); United States v.

Carlisle, 234 F.2d 196 (5th Cir. 1956); United States v.

Gibson, 135 F. Supp. 807 (E.D. Pa. 1955); United States v.

Arnold’s Pharmacy, 116 F. Supp. 310 (D.N.J. 1953). As

described in the 1992 Compliance Policy Guide (CPG) on

compounding, the FDA has long taken the position that

drugs compounded by pharmacies are subject to the new

drug approval requirements. See Pet. Br. 4-5; Pet. App. 71a,

72a (CPG). Respondents and some amici mistakenly contend

(Resp. Br. 25, 43; ICPA Br. 5, 14; NCPA Br. 12) that the

FDA had not taken that position before promulgating the

CPG. The FDA made clear that compounded drugs are new

drugs and subject to the approval requirements many years

before the 1992 CPG. See Pet. App. 74a; Pet. Br. 6 (citing

Sene X and Cedars North Towers Pharmacy, Inc. v. United

States, [1978-1979 Transfer Binder] Food Drug Cosm. L.

Rep. (CCH) 4 38,200, at 38,828 (S.D. Fla. Aug. 28, 1978), in

which the FDA successfully contended that drugs com-

10

pounded by pharmacists were subject to the approval re-

quirements).

The government’s position that compounded drugs are

subject to the new drug approval requirements is supported

by lower court decisions rendered well before FDAMA

confirmed that coverage in 1997. See Pet. Br. 5, 6 (citing

cases). Respondents and their amici (Resp. Br. 40-42; APhA

Br. 17-20; [ACP Br. 5 n.4; NACP Br. 12 n.44) attempt to

distinguish those cases on various grounds. The facts re-

main, however, that, in two of the cases, the courts held that

drugs compounded by pharmacies were new drugs subject to

the approval process. Sene A, [1982-1983 Transfer Binder]

Food Drug Cosm. L. Rep. (CCH) 1 38,207, at 39,118; Cedars

North Towers Pharmacy, [1978-1979 Transfer Binder] Food

Drug Cosm. L. Rep. (CCH) 1 38,200, at 38,827. In two

others, the courts held that bulk drugs intended for use in

compounding by veterinarians were not covered by a

regulatory exception from the FDCA’s misbranding pro-

visions because the compounded drugs would be “new

drugs” for which the veterinarians had not filed approval

applications. United States v. Algon Chem., Inc., 879 F. 2d

1154, 1158 (3d Cir. 1989); United States v. 9/1 Kg.

Containers, 854 F.2d 173, 178 (7th Cir. 1988). And, in a fifth

case, the court stated that the FDCA “does not expressly

exempt ‘pharmacies’ or ‘compounded drugs’ from the new

drug, adulteration, or misbranding provisions.” Pro-

fessionals & Patients for Customized Care v. Shalala, 56

F.3d 592, 593 n.3 (5th Cir. 1995). Respondents and their

amici, on the other hand, cite no case holding that drugs

compounded by pharmacists are not “new drugs” or that

they are exempt from the approval requirements, and we

are aware of none.

iii. Respondents’ amici contend that Congress could not

have subjected compounded drugs to the approval process

because that would have been “tantamount to the outlawing

11

of compounding.” APhA Br. 22; see also Resp. Br. 36-37;

IACP Br. 3-4. They argue that Congress would not have

outlawed compounding when it enacted the FDCA in 1938

because most prescriptions at that time required com-

pounding. APhA Br. 21-22; [ACP Br. 11; NCPA Br. 8, 11-13.

That argument rests on the mistaken premise that, if all

drugs compounded by pharmacists are new drugs under the

current version of the FDCA, then all compounded drugs

must also have been new drugs under the FDCA as enacted

in 1938. In fact, most compounded drugs would not have

been “new drugs” under the definition in the 1938 Act. That

definition excluded drugs that had been marketed before

1938 and did not classify a drug as a “new drug” based on

lack of general recognition of its effectiveness. See Act of

June 25, 1938, ch. 675, § 201(p)(1), 52 Stat. 1041; Pet. Br. 21;

Weinberger v. Hynson, Westcott, & Dunning, Inc., 412 U.S.

609, 630 (1973). In addition, the 1938 Act was understood to

permit the manufacture and marketing without approval of

drugs similar to approved drugs in reliance on an approved

“pioneer” drug application, and the FDA often issued ad-

visory opinions that such products were not new drugs. See

id. at 614; R. Merrill, The Architecture of Government

Regulation of Medical Products, 82 Va. L. Rev. 1753, 1772

(1996) (estimating that nearly 40,000 drugs similar to 4000

approved drugs were marketed without formal FDA ap-

proval before 1962).

In 1962, Congress expanded the scope of the new drug ap-

proval requirements by, among other things, expanding the

definition of “new drug” to encompass drugs not generally

recognized as effective for the uses prescribed, recom-

mended, or suggested in their labeling, and requiring effec-

tiveness to be established for each use of a new drug before

the drug can be marketed for that use. See Pub. L. No. 87-

781, 76 Stat. 780; Pet. Br. 22-23. In 1968, in response to the

1962 amendments, the FDA stopped providing informal

12

opinions that unapproved products were not new drugs,

revoked all previously issued opinions, and made clear that

changes “in formulation, manufacture, control, or labeling”

may render a product a new drug. See 33 Fed. Reg. 7758

(1968) (codified at 21 C.F.R. 130.39 (1968)). As a result, most

compounded drugs were not new drugs subject to premarket

approval until the mid-1960s. By that time, less than five

percent of prescriptions involved compounding. See NCPA

Br. 8; Virginia State Bd. of Pharmacy v. Virginia Citizens

Consumer Council, Inc., 425 U.S. 748, 753, 766 (1976) (esti-

mating that the same percentage of prescriptions involved

compounding in the mid-1970s). Shortly thereafter, and well

before FDAMA was enacted, the FDA took formal enforce-

ment action against some pharmacies based on failure to

comply with the new drug approval requirements. See p. 9,

supra.

The compounding and sale of new drugs by pharmacies

triggered the application of the FDCA in several ways under

the Act as it then existed. First, the FDCA prohibits the

“introduction or delivery for introduction into interstate

commerce” of any “new drug,” unless it is covered by an

approved new drug application. 21 U.S.C. 331(d), 355(a).

Whether a local pharmacist’s dispensing of a compounded

drug entails or causes “introduction or delivery for intro-

duction into interstate commerce” depends on the particular

circumstances. It was less likely to do so in the middle of the

20th century, when interstate commerce was far less exten-

sive than it is today. Respondents, however, are not the

prototypical “local” pharmacist; between 60% and 95% of

respondents’ total sales of compounded drugs are to out-of-

state customers. See Compl. I 26 (C. A. E. R. 7).

Because pharmacies like wise are not exempt from the

FDCA’s misbranding and adulteration provisions, those pro-

visions also applied to compounding by pharmacies. Com-

pounded drugs of the sort traditionally created by phar-

13

macies are prescription drugs. The FDA has interpreted the

FDCA to provide that all unapproved prescription drugs are

misbranded, and the lower courts have sustained that

interpretation. See, ¢.g., United States v. Articles of Drug,

625 F. 2d 665, 673, 675 (5th Cir. 1980); United States v. Baxter

Healthcare Corp., 712 F. Supp. 1352, 1359 (N.D. Ill. 1989),

aff d, 901 F.2d 1401 (7th Cir. 1990); see also Algon Chem.,

supra (appiying this interpretation to bulk drugs to be used

as components of compounded veterinary drugs); 9/1 Kg.

Containers, supra (same).

Under 21 U.S.C. 352(f)(1), a drug is misbranded unless its

labeling bears “adequate directions for use,” which the FDA

has long defined to mean “directions under which the layman

can use a drug safely and for the purposes for which it is

intended.” See 17 Fed. Reg. 6818 (1952) (promulgating 21

C.F.R. 201.5); Alberty Food Prods. v. United States, 194

F. 2d 463, 464 (9th Cir. 1952). The FDA has determined that

directions under which the layperson can use a drug safely

cannot be written for an approved prescription drug because

such drugs, by definition, are “not safe for use except under

the supervision of a practitioner licensed by law to admin-

ister” them, 21 U.S.C. 353(b)(1)(B) (1994 & Supp. V 1999),

and are therefore unsuitable for self-medication. See

Articles of Drug, 625 F.2d at 672-673. In the case of unap-

proved new drugs, adequate directions for use cannot be

written as a matter of law, even by a physician. See Algon

Chem., 879 F.2d at 1159-1161 (explaining that the FDC A

was intended to control the availability of drugs for pre-

scribing by physicians, and prescriptions for compounded

drugs that are unapproved new drugs are not exempted

from the Act as an aspect of the practice of medicine) (citing

United States v. Rutherford, 442 U.S. 544 (1979)); 9/1Kg.

Containers, 854 F. 2d at 176-177 (also citing Rutherford).

3 The FDCA provides an exemption from the requirement that drugs

contain adequate directions for use for la ny drug dispensed by filling or

14

In addition, before enactment of FDAMA, compounded

drugs and their components often would have been con-

sidered adulterated under the FDCA, because a drug is

adulterated whenever it is “manufacture[d], process{ed],

pack{ed], or hleld] under methods, facilities or controls that

“do not conform to or are not operated or administered in

conformity with current good manufacturing practice.” 21

U.S.C. 351(aX2XB) (1994 & Supp. V 1999). FDA regulations

(21 C.F.R. Parts 210 and 211) establish the minimum

requirements. Because those requirements were stringent,

especially as they developed over time, compliance with

them was costly, and most pharmacy compounding processes

and facilities would not have complied.

The FDCA prohibits “the doing of any * * * act with

respect to, * drug „ if such act is done while

such article is held for sale (whether or not the first sale)

after shipment in interstate commerce and results in such

article being adulterated or misbranded.” 21 U.S.C. 331(k).

The definition of drug includes not only the finished product

itself, but also its components. 21 U.S.C. 321(g1)(D). Thus,

if a drug or one of its components had been shipped in inter-

state commerce, and the drug or its components became

adulterated or misbranded while the drug or the components

were held for sale after that shipment, Section 331(k) was

- refilling a written or oral prescription of a practitioner licensed by law to

administer such drug.” 21 U.S.C. 353(b)(2). That exemption, however,

applies only at the time the drug is “dispensed.” Thus, when compounded

drugs are prepared in advance of dispensing, for example “in limited

quantities before the receipt of a valid prescription order for such in-

dividual patient,” 21 U.S.C. 353a(a)(2)(A) (Supp. V 1999), they lack

adequate directions for use, and thus are mir hranded unless they qualify

for a regulatory exemption from the adequate-directions-for-use require-

ment. See 21 U.S.C. 352(f) (authorizing Secretary to exempt drugs from

that requirement); 21 C.F.R. 201.100 et seg. (exemptions). Unapproved

new drugs that are not intended solely for investigational use do not

qualify for any of the regulatory exemptions. See ibid.

15

violated. See, e. g., Baker v. United States, 932 F.2d 813, 814-

815 (9th Cir. 1991); United States v. Dianovin Pharm., Inc.,

475 F.2d 100, 103 (Ist Cir.), cert. denied, 414 U.S. 830 (1973).

It was against the background of those statutory pro-

visions and the FDA announcement and implementation of

its enforcement policy in 1992 (see Pet. App. 7la; Profes-

sionals & Patients, 56 F.3d at 593-594, 599) that Congress

enacted Section 353a to specify in the FDCA itself the

circumstances in which compounding by pharmacists would

be lawful under the FDCA. Section 353a refleeted “exten-

sive” consultation by committees of Congress with the FDA

and other interested parties to reach a consensus on how “to

ensure the continued availability of compounded drugs as a

component of individualized therapy, while limiting the

scope of compounding to prevent manufacturing under the

guise of compounding.” H.R. Conf. Rep. No. 399, 105th

Cong., Ist Sess. 94 (1997); accord S. Rep. No. 43, 105th Cong.,

Ist Sess. 67 (1997). As enacted by Congress, Section 353a

responds to the application of the new drug approval, mis-

branding, and adulteration provisions of the FDCA, as de-

scribed above, by exempting pharmacy compounding from

Sections 355 (new drug approval), 352(f)(1) (adequate direc-

tions for use) and 3510 g) (good manufacturing practice)

of Title 21 if the compounding complies with the conditions in

Section 353a.

iv. Even if drugs compounded in the ordinary practice of

pharmacy were exempt from the premarket approval re-

quirements, the government still would have a substantial

interest in preventing abuse of that exemption by phar-

macies engaged in compounding that exceeds the ordinary

practice of pharmacy and is tantamount to manufacturing.

Pharmacies that engage in such activity directly circumvent

the new drug approval process and undermine the incentives

for traditional manufacturers to comply with that process.

Section 353a’s solicitation and advertising conditions are well

16

calibrated to that interest, because a pharmacy that is com-

pounding without complying with those conditions is not

engaged in the ordinary practice of pharmacy, which as

described above, does not include advertising or promoting

particular compounded drugs. See pp. 3, 4-5, supra.

2. Section 353a Directly And Materially Advances

The Government's Interests

Respondents contend (Br. 25-32) that Section 353a does

not directly and materially advance the government’s in-

terests. Much of respondents’ argument (Br. 26-29, 30-32) is

devoted to demonstrating that Section 353a does not ad-

vance a supposed governmental interest in reducing demand

for compounded drugs. The government’s interest is not,

however, in suppressing demand for compounded drugs. See

Pet. Br. 38. The government’s interest is in balancing the

competing goals of protecting the integrity of the drug

approval process and preserving the availability of com-

pounding by pharmacists in response to individual medical

needs. Thus, the government seeks to ensure that a com-

pounded drug is subjected to premarket approval when de-

mand is or may be widespread and advertising could channel

demand to that unapproved new drug.

Respondents’ arguments that advertising does not drive

demand for compounded drugs because physicians act as a

brake (Br. 28), that advertising generally only channels and

does not create demand (Br. 29), and that this Court and

other courts have rejected prohibitions on advertising as a

means of suppressing demand (Br. 26-28) are thus beside the

point. In any event, there is support in this Court’s cases for

demand as well as channels it. See Lorillard Tobacco Co. v.

Reilly, 533 U.S. 525 (2001); Central Hudson, 447 US. at 567-

569; United States v. Edge Broad. Co., 509 U.S. 418, 434

(1993). Posadas de Puerto Rico Assoc. v. Tourism Co., 478

U.S. 328, 341-342 (1986). This common-sense proposition

17

would seem to apply to physicians as well. J. Avorn, et al.,

Scientific versus Commercial Sources of Influence on the

Prescribing Behavior of Physicians, 73 Am. J. of Med. 4, 6

(July 1982) (“Physicians who held advertising-oriented

beliefs about the index drugs were generally unaware that

they were strongly influenced by non-scientific sources.”).

The FDAMA provisions that respondents assert under-

mine the government’s interest (Br. 30-32) do not undermine

the government’s actual interest in preventing manu-

facturing of unapproved new drugs under the guise of

compounding. FDAMA permits a pharmacy to advertise its

compounding services generally because that kind of

advertising does not suggest the existence of, or foster the

growth of, a market for any particular compounded drug.

Such advertising therefore does not distort the incentives of

drug manufacturers to comply with the new drug approval

provisions. At the same time, advertising of compounding

services promotes the governmental interest in preserving

the availability of pharmacy compounding in response to

individual medical needs. Pet. Br. 40. Likewise, the absence

of more stringent volume limitations on the aggregate distri-

bution of compounded drugs does not undermine the

advertising and solicitation provisions, which are designed to

prevent compounding without premarket approval of a

particular drug that is tantamount to manufacturing. /d. at

41.

3. Section 353a Is No More Extensive Than Neces-

sary To Further The Government's Interest

Respondents also contend (Br. 13, 32-33) that Section

353a’s advertising and solicitation provisions are more ex-

tensive than necessary to accomplish the government’s aims.

Respondents argue (Br. 32-33) that disclaimers could pre-

vent consumers from being misled into believing that com-

pounded drugs are FDA-approved. They do not explain,

however, how disclaimers are consistent with the goal of

18

preserving the integrity of the new drug approval pro-

visions. Instead, respondents suggest (Br. 13) that the

government’s concern about the new drug approval process

is misplaced because compounded drugs are not subject to

preapproval. As discussed above, however, that suggestion

is incorrect. See pp. 6-15, supra. Respondents’ contention

(Br. 44) that a physician prescription provides adequate

protection for patients who receive compounds suffers from

a similar flaw. The very premise of the FDCA, based on de-

cades of experience, is that physician screening is not

sufficient to protect against the risks of widespread distri-

bution of drugs that have not been proven safe and effective.

See Pet. Br. 20-23.

Respondents suggest (Br. 45) that Section 353a’s advertis-

ing and solicitation provisions are unnecessary to safeguard

the new drug approval process because the FDA can take

enforcement action against a pharmacy that threatens that

process by operating beyond the ordinary practice of phar-

macy. According to the NABP itself, however, solicitation

or advertising of specific compounded drugs is activity out-

side the ordinary practice of pharmacy. See p. 5, supra.

Moreover, the FDA historically considered whether a phar-

macy was engaging in promotional activity in determining

whether the pharmacy was exceeding the bounds of ordinary

pharmacy practice. Pet. Br. 6, 32-33.

Respondents also incorrectly contend that the solicitation

and advertising provisions are more extensive than neces-

sary because they are “absolute restrictions upon truthful

speech” and “prevent the very types of advertisement and

promotion that this Court held could not be restricted in

other cases.” Resp. Br. 33 (citing 44 Liquormart, Inc. v.

Rhode Island, 517 U.S. 484 (1996), Rubin v. Coors Brewing

Co., 514 U.S. 476 (1995), and Virginia State Bd. of Phar-

macy, supra). Section 353a does not absolutely prohibit any

speech. A pharmacy that wishes to mass-produce a parti-

19

cular drug and promote that product by advertising may do

so—just as any other manufacturer may—if it complies with

the FDCA’s new drug approval and related requirements.

It is only if the pharmacy desires to avail itself of the

exemption from those otherwise generally applicable re-

quirements that it must limit its promotional activities.

Moreover, even when a pharmacy takes advantage of the

exemption, it is permitted to advertise its compounding

services generally. 21 U.S.C. 353a(c) (Supp. V 1999).

Section 353a’s advertising and solicitation provisions are

thus significantly less onerous than the absolute prohibitions

on speech involved in 44 Liquormart, 517 U.S. at 489-490

(categorical ban on advertisement of alcohol prices); Coors

Brewing, 514 U.S. at 480-481 (prohibition on disclosure of

alcohol content on beer labels); and Virginia State Board of

Pharmacy, 425 U.S. at 752 (effective prohibition on ad-

vertising or other affirmative dissemination of all pre-

scription drug price information).

Finally, respondents contend (Br. 46-48) that, even if com-

pounded drugs are subject to the new drug approval require-

ments, the First Amendment categorically prohibits con-

ditioning an exemption from such a generally applicable

requirement on relinquishment of First Amendment rights.

But, to the extent that pharmacy compounding violated the

FDCA before FDAMA was enacted (see pp. 12-15, supra),

respondents had no First Amendment right to advertise the

sale of compounded drugs. See Pittsburgh Press Co. v.

Human Relations Comm n, 413 U.S. 376, 388 (1973). They

therefore were not required to relinquish any First Amend-

ment right in exchange for the benefit of the exemption.

In any event, respondents’ contention is not correct. Re-

spondents rely on the plurality opinion in 44 Liquormart.

See Resp. Br. 46-47 (citing 517 U.S. at 510-514 (opinion of

Stevens, J., joined by Kennedy, Thomas, and Ginsburg, JJ.)).

That opinion, however, did not state that the government

may never condition an exemption from a generally appli-

cable requirement on the beneficiary’s agreement to a

speech limitation. The opinion merely rejected the argument

that the “greater” power to deny the exemption altogether

always legitimizes the “lesser” power to condition the ex-

emption on the surrender of First Amendment rights. See

517 U.S. at 510-513. Such a condition is subject to scrutiny

under the Court’s unconstitutional conditions doctrine, but

that scrutiny is no more demanding than the Central

Hudson test. See Dolan v. City of Tigard, 512 U.S. 374, 385,

391 (1994) (noting that government may not condition bene-

fit on relinquishment of a constitutional right unless waiver

of right is reasonably related to benefit and citing First

Amendment cases). As explained above and in our opening

brief, the solicitation and advertising condition on the ex-

emption provided by Section 353a satisfies scrutiny under

Central Hudson.

- & * *

For the foregoing reasons, and the reasons stated in our

opening brief, the judgment of the court of appeals should be

reversed, and the case should be remanded with instructions

to enter judgment for the petitioners.

Respectfully submitted.

THEODORE B. OLSON

Solicitor General

ALEX M. AZAR, II

General Counsel

U.S. Department of Health

and Human Services

DANIEL E. TROY

Chief Counsel

U.S. Food & Drug

Administration

FEBRUARY 2002