No. 01-344 

In the Supreme Court of the United States 

TOMMY G. THOMPSON, 
SECRETARY OF HEALTH AND HUMAN SERVICES, 
ET AL., PETITIONERS 

v. 

WESTERN STATES MEDICAL CENTER, ET AL. 

ON PETITION FOR A WRIT OF CERTIORARI 
TO THE UNITED STATES COURT OF APPEALS 
FOR THE NINTH CIRCUIT 

PETITION FOR A WRIT OF CERTIORARI 

THEODORE B. OLSON 

Solicitor General 

Counsel of Record 

STUART E. SCHIFFER 

Acting Assistant Attorney 

General 

EDWIN S. KNEEDLER 

Deputy Solicitor General 

MATTHEW D. ROBERTS 

Assistant to the Solicitor 

General 

DOUGLAS N. LETTER 

Attorney 

Department of Justice 
Washington, D.C. 20530-0001 
(202) 514-2217 

QUESTION PRESENTED 

In the Food and Drug Administration Modernization 
Act of 1997 (FDAMA), Congress enacted a limited ex- 
emption from the new drug approval (and certain other) 
requirements of the Federal Food, Drug, and Cosmetic 
Act, for drugs compounded by pharmacists. See 
21 U.S.C. 353a. The question presented is whether 
FDAMA’s limitation of that exemption to pharmacists 
who do not solicit prescriptions for or advertise specific 
compounded drugs is consistent with the First Amend- 
ment. 

(I) 

II 

PARTIES TO THE PROCEEDINGS 

Petitioners are Tommy G. Thompson, Secretary of 
Health and Human Services, and Bernard A. Schwetz, 
Acting Principal Deputy Commissioner, United States 
Food and Drug Administration. Respondents are 
Western States Medical Center, Women’s International 
Pharmacy, Health Pharmacy, Apothecure, College 
Pharmacy, Lakeside Pharmacy, and Wedgewood Vil- 
lage Pharmacy. 

TABLE OF CONTENTS 

Page 

Opinions below ............................................................................... 
1 

Jurisdiction ...................................................................................... 2 

Constitutional and statutory provisions involved ................... 
2 

Statement ........................................................................................ 2 

Reasons for granting the petition ............................................... 
11 

Conclusion ....................................................................................... 26 

Appendix A ..................................................................................... 
1a 

Appendix B ..................................................................................... 
16a 

Appendix C ..................................................................................... 
60a 

Appendix D ..................................................................................... 
71a 

Appendix E ..................................................................................... 
78a 

Appendix F ..................................................................................... 
80a 

TABLE OF AUTHORITIES 

Cases: 

Board of Trustees v. Fox, 492 U.S. 469 (1989) ................. 

24 

Cedars North Towers Pharmacy, Inc. v. United 

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

L. Rep. (CCH) ¶ 38,200 (S.D. Fla. Aug. 28, 1978) ........... 

4-5 

Central Hudson Gas & Elec. Corp. v. Public Serv. 

Comm’n, 447 U.S. 557 (1980) .............................................. 

7-8 

Florida Bar v. Went For It, Inc., 515 U.S. 618 (1995) .... 

17, 24 

Greater New Orleans Broad. Ass’n v. United States, 

527 U.S. 173 (1999) ................................................................ 

9, 22 

Lorillard Tobacco Co. v. Reilly, 121 S. Ct. 2404 

(2001) ........................................................................................ 

17, 24 

Professionals & Patients for Customized Care v. 

Shalala, 847 F. Supp. 1359 (S.D. Tex. 1994), aff ’d, 

56 F.3d 592 (5th Cir. 1995) ............................................... 

3, 4, 15 

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

9 

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

(1993) ........................................................................................ 

16, 19 

United States v. Gainey, 380 U.S. 63 (1965) ..................... 11, 25 

(III) 

IV 

Cases—Continued: Page 

United States v. Rutherford, 442 U.S. 544 (1979) ...... 

11-12, 17 

United States v. Sene X, 479 F. Supp. 970 (S.D. Fla. 

1979), aff ’d, [1982-1983 Transfer Binder] Food Drug 

Cosm. L. Rep. (CCH) ¶ 38,207 (11th Cir. Jan. 12, 

1983) ......................................................................................... 4 

Warner-Lambert Co. v. Heckler, 787 F.2d 147 

(3d Cir. 1986) ................................................................... 

12, 17, 20 

Weinberger v. Hynson, Westcott & Dunning, 

412 U.S. 609 (1973) ....................................... 

3, 12, 15, 17, 20, 24 

Constitution and statutes: 

U.S. Const. Amend. I .......................................... 

2, 7, 8, 10, 11, 25 

Food and Drug Administration Modernization Act of 

1997, Pub. L. No. 105-115, 111 Stat. 2296 .......................... 

4, 11 

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

passim 

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

passim 

21 U.S.C. 353a(a)(1) (Supp. V 1999) ............................... 

6 

21 U.S.C. 353a(b)(1) (Supp. V 1999) ............................... 

9 

21 U.S.C. 353a(b)(1)(A) (Supp. V 1999) ......................... 

6, 21 

21 U.S.C. 353a(b)(1)(B) (Supp. V 1999) ......................... 

6, 21 

21 U.S.C. 353a(b)(1)(C) (Supp. V 1999) ......................... 

6 

21 U.S.C. 353a(b)(1)(D) (Supp. V 1999) ..................... 

6, 9, 21 

21 U.S.C. 353a(b)(2) (Supp. V 1999) ............................... 

6 

21 U.S.C. 353a(b)(3) (Supp. V 1999) ................ 

10, 21, 22, 23 

21 U.S.C. 353a(b)(3)(A) (Supp. V 1999) ......................... 

6 

21 U.S.C. 353a(b)(3)(B) (Supp. V 1999) ......................... 

6 

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

7, 8, 11, 21, 23, 24, 25 

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

301 et seq. ................................................................................. 

2, 11 

21 U.S.C. 321(p) ............................................................. 

2, 4, 12 

21 U.S.C. 331 (1994 & Supp. V 1999) ............................. 

3 

21 U.S.C. 331(d) ................................................................. 

2, 12 

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

3 

21 U.S.C. 352 (1994 & Supp. V 1999) ............................. 3 

V 

Statutes—Continued: Page 

21 U.S.C. 355(a) ................................................................. 

2, 12 

21 U.S.C. 355(b) (1994 & Supp. V 1999) ........................ 

2-3 

21 U.S.C. 360 ...................................................................... 

3 

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

3, 15 

21 U.S.C. 360(h) ................................................................. 

3 

21 U.S.C. 360(j) .................................................................. 

3 

21 U.S.C. 374(a)(2) ............................................................ 

15 

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

3 

Miscellaneous: 

143 Cong. Rec.: 

p. S9839 (daily ed. Sept. 24, 1997) .......................... 

5, 14, 15, 19 

p. S12,242 (daily ed. Nov. 5, 1997) ....................................... 

23 

FDA Reform Legislation: Hearings Before the Sub- 
comm. on Health and the Env’t of the House Comm. 

on Commerce, 104th Cong., 2d Sess. (1996) ........... 
13, 14, 18 

H.R. Conf. Rep. No. 399, 105th Cong., 1st Sess. 
(1997) .............................................................................. 
5, 13, 14, 18 

S. Rep. No. 43, 105th Cong., 1st Sess. (1997) ... 5, 13, 14, 18, 19 

In the Supreme Court of the United States 

No. 01-344 

TOMMY G. THOMPSON, 
SECRETARY OF HEALTH AND HUMAN SERVICES, 
ET AL., PETITIONERS 

v. 

WESTERN STATES MEDICAL CENTER, ET AL. 

ON PETITION FOR A WRIT OF CERTIORARI 
TO THE UNITED STATES COURT OF APPEALS 
FOR THE NINTH CIRCUIT 

PETITION FOR A WRIT OF CERTIORARI 

The Solicitor General, on behalf of the Secretary of 
Health and Human Services and the Acting Principal 
Deputy Commissioner of the Food and Drug Admini- 
stration, respectfully petitions for a writ of certiorari to 
review the judgment of the United States Court of 
Appeals for the Ninth Circuit in this case. 

OPINIONS BELOW 

The opinion of the court of appeals (App., infra, 1a- 
15a) is reported at 238 F.3d 1090. The opinion of the 
district court (App., infra, 16a-59a) is reported at 69 F. 
Supp. 2d 1288. An earlier opinion of the district court 
granting respondents’ motion for a temporary restrain- 
ing order (App., infra, 60a-70a) is unreported. 

(1) 

2 

JURISDICTION 

The judgment of the court of appeals was entered on 
February 6, 2001. A petition for rehearing was denied 
on April 27, 2001 (App., infra, 78a-79a). On July 15, 
2001, Justice O’Connor extended the time within which 
to file a petition for a writ of certiorari to and including 
August 25, 2001. The jurisdiction of this Court is 
invoked under 28 U.S.C. 1254(1). 

CONSTITUTIONAL AND STATUTORY 
PROVISIONS INVOLVED 

The First Amendment to the United States Consti- 
tution provides that “Congress shall make no law * * * 
abridging the freedom of speech, or of the press.” The 
pertinent provisions of the Food and Drug Administra- 
tion Modernization Act of 1997, 21 U.S.C. 353a (Supp. V 
1999), and the Federal Food, Drug, and Cosmetic Act, 
21 U.S.C. 301 et seq. (1994 & Supp. V 1999), are re- 
printed in an appendix to this petition. App., infra, 80a- 
107a. 

STATEMENT 

1. a. The Federal Food, Drug, and Cosmetic Act 
(FDCA), 21 U.S.C. 301 et seq. (1994 & Supp. V 1999), 
defines a “new drug” as “[a]ny drug * * * not 
generally recognized * * * as safe and effective for 
use under the conditions prescribed.” 21 U.S.C. 321(p). 
The FDCA generally requires that, before a new drug 
may be introduced into interstate commerce, the manu- 
facturer or distributor obtain the approval of the Food 
and Drug Administration (FDA). See 21 U.S.C. 355(a), 
331(d). In order to obtain that approval, the manufac- 
turer or distributor must demonstrate to the FDA’s 
satisfaction that the drug is both safe and effective for 
each intended use. See 21 U.S.C. 355(b) (1994 & Supp. 

3 

V 1999); Weinberger v. Hynson, Westcott & Dunning, 
412 U.S. 609, 613, 629, 632 (1973). 

The FDCA also imposes standards for the manu- 
facturing and labeling of drugs in order to ensure that 
manufacturing processes and drug ingredients are safe 
and effective and that consumers and physicians have 
adequate information about drug contents and effects. 
See 21 U.S.C. 351, 352 (1994 & Supp. V 1999). The 
FDCA prohibits the sale and distribution of “adulter- 
ated” or “misbranded” drugs. See 21 U.S.C. 331 (1994 
& Supp. V 1999). 

In addition, to facilitate regulatory oversight, the 
FDCA imposes registration, inspection, and reporting 
requirements on drug manufacturers. See 21 U.S.C. 
360 (requiring domestic drug manufacturers to register 
with the Secretary); 21 U.S.C. 360(h) (requiring inspec- 
tion of drug manufacturers at least once every two 
years); 21 U.S.C. 360( j ) (requiring each registered drug 
manufacturer to “file with the Secretary a list of all 
drugs” that it manufactures for commercial distri- 
bution). The FDCA contains a limited exemption from 
its registration and some of its inspection requirements, 
however, for pharmacies that comply with state regu- 
lations and that do not “manufacture” or “compound” 
drugs other than in “the regular course of their busi- 
ness of dispensing or selling drugs * * * at retail.” 21 
U.S.C. 360(g)(1), 374(a)(2)(A). 

b. Compounding is a process by which a pharmacist 
“combines, mixes, or alters ingredients to create a cer- 
tain medication for a patient.” Professionals & Pa- 
tients for Customized Care v. Shalala, 847 F. Supp. 
1359, 1361 (S.D. Tex. 1994), aff ’d, 56 F.3d 592 (5th Cir. 
1995). The process encompasses a range of pharmacy 
activities, including the modification of approved drugs 
“to provide medications that are not commercially 

4 

available, such as diluted dosages for children, or to 
alter the form of a medication for easier consumption.” 
Id. at 1361. 

When a pharmacy compounds a drug, the pharmacy 
creates a “new drug” because the compounded product 
is not generally recognized as safe and effective. See 21 
U.S.C. 321(p). For that reason, interstate distribution 
of compounded drug products without compliance with 
the FDCA’s approval requirements for new drugs was 
unlawful before enactment of the Food and Drug Ad- 
ministration Modernization Act of 1997 (FDAMA), Pub. 
L. No. 105-115, 111 Stat. 2296. See Professionals & 
Patients, 56 F.3d at 593 n.3; App., infra, 72a (1992 FDA 
Compliance Policy Guide). Nonetheless, the FDA rec- 
ognized that compounding in response to a valid pre- 
scription in order to meet the medical needs of an in- 
dividual patient for whom commercially available drugs 
are inadequate may serve an important public purpose 
for which the health benefits outweigh the risks. 
Therefore, “the FDA as a matter of policy [did] not his- 
torically [bring] enforcement actions against pharma- 
cies engaged in traditional compounding.” 56 F.3d at 
593 n.3. 

The FDA did take action, however, when compound- 
ing was outside the scope of normal pharmacy practice 
and compounded drugs were mass-produced and distri- 
buted in a manner tantamount to the manufacture of 
unapproved new drugs. See App., infra, 73a-74a. The 
FDA issued warning letters, see id. at 73a, and some- 
times brought judicial enforcement actions against 
pharmacies engaged in drug manufacturing under the 
guise of compounding. E.g., United States v. Sene X, 
479 F. Supp. 970, 978 (S.D. Fla. 1979), aff ’d, [1982-1983 
Transfer Binder] Food Drug Cosm. L. Rep. (CCH) 
¶ 38,207 (11th Cir. Jan. 12, 1983); Cedars North Towers 

5 

Pharmacy, Inc. v. United States, [1978-1979 Transfer 
Binder] Food Drug Cosm. L. Rep. (CCH) ¶ 38,200, at 
38,828 (S.D. Fla. Aug. 28, 1978). Among the factors that 
the FDA considered in determining whether a phar- 
macy was manufacturing drugs rather than engaging in 
traditional compounding were whether the pharmacy 
was “[s]oliciting business (e.g., promoting, advertising, 
or using sales persons) to compound specific drug 
products, product classes, or therapeutic classes of drug 
products,” or “[d]istributing inordinate amounts of 
compounded products out of state.” App., infra, 
76a-77a. 

2. Congress addressed the compounding issue when 
it enacted FDAMA in 1997. The section of FDAMA at 
issue in this case, now codified at 21 U.S.C. 353a (Supp. 
V 1999), “bring[s] the legal status of compounding in 
line with FDA’s longstanding enforcement policy of 
regulating only drug manufacturing, not ordinary phar- 
macy compounding.” 143 Cong. Rec. S9839 (daily ed. 
Sept. 24, 1997) (Sen. Kennedy). Section 353a seeks to 
“ensure continued availability of compounded drug pro- 
ducts as a component of individualized drug therapy, 
while limiting the scope of compounding so as to pre- 
vent manufacturing under the guise of compounding.” 
H.R. Conf. Rep. No. 399, 105th Cong., 1st Sess. 94 
(1997) (Conf. Rep.); accord S. Rep. No. 43, 105th Cong., 
1st Sess. 67 (1997) (S. Rep.). 

Rather than leaving to the enforcement discretion of 
the FDA the determination of when compounding 
should be restricted, Congress chose to delineate in the 
FDCA itself certain limited circumstances under which 
pharmacy compounding would be exempt from require- 
ments that apply to drug manufacturers. If certain con- 
ditions are met, Section 353a thus exempts compounded 
drug products from the FDCA’s provisions governing 

6 

good manufacturing practices, adequate directions for 
use, and new drug approval. Under those conditions, 
which echo the FDA’s pre-1997 practices regarding 
compounding, (1) the compounding must be performed 
by a licensed pharmacist or physician in response to a 
valid prescription made by a licensed practitioner, see 
21 U.S.C. 353a(a)(1) (Supp. V 1999); (2) the compound- 
ing must use only ingredients that comply with various 
quality-control standards, see 21 U.S.C. 353a(b)(1)(A) 
and (B) (Supp. V 1999); (3) the compounded product 
may not be a drug product identified by regulation as 
presenting difficulties for compounding that would 
adversely affect safety or efficacy, see 21 U.S.C. 
353a(b)(3)(A) (Supp. V 1999); (4) the compounding may 
not produce a drug that has been withdrawn from the 
market for safety reasons, see 21 U.S.C. 353a(b)(1)(C) 
(Supp. V 1999); and (5) the pharmacist may not com- 
pound regularly or in inordinate amounts any drug 
products that are essentially copies of a commercially 
available drug product, see 21 U.S.C. 353a(b)(1)(D), 
353a(b)(2) (Supp. V 1999). FDAMA also limits the total 
volume of compounded drug products that a pharmacy 
may distribute out of State. See 21 U.S.C. 353a(b)(3)(B) 
(Supp. V 1999). 

In addition, FDAMA makes the availability of the 
exemption of compounded drugs from certain FDCA 
requirements contingent upon the pharmacy’s com- 
pliance with limitations on advertising and promotion of 
compounded drug products. Section 353a(a) exempts 
pharmacy compounding from the new drug approval 
and other requirements only if the compounded drug 
is produced “based on the unsolicited receipt of a valid 
prescription order or a notation, approved by the pre- 
scribing practitioner, on the prescription order that a 
compounded product is necessary for the identified 

7 

patient.” 21 U.S.C. 353a(a) (Supp. V 1999). Section 
353a(c) further provides that a pharmacy is entitled to 
the exemption only if it “does not advertise or promote 
the compounding of any particular drug, class of drug, 
or type of drug.” 21 U.S.C. 353a(c) (Supp. V 1999). The 
advertising limitation does not, however, prevent the 
pharmacy from advertising that it performs compound- 
ing services generally. 21 U.S.C. 353a(c) (Supp. V 
1999). 

3. In November 1998, shortly before the relevant 
provisions of FDAMA took effect, respondent phar- 
macies, which regularly compound drugs in significant 
quantities, commenced this suit in the United States 
District Court for the District of Nevada against the 
Secretary and the Commissioner of Food and Drugs. 
Respondents sought a declaratory judgment that Sec- 
tions 353a(a) and (c) violate the First Amendment and 
an order enjoining enforcement of those provisions 
against them. 

The district court initially granted respondents a 
temporary restraining order that enjoined the govern- 
ment from enforcing Section 353a(c). App., infra, 60a- 
70a. The parties subsequently filed cross-motions for 
summary judgment. The district court concluded that 
Sections 353a(a) and (c) violate the First Amendment, 
granted respondents’ motion, denied the government’s 
motion, and permanently enjoined the FDA from en- 
forcing the solicitation and advertising restrictions in 
Sections 353a(a) and (c). App., infra, 16a-57a. The 
court further held that the restrictions are severable 
from the remainder of Section 353a. Id. at 58a-59a. 

4. The United States Court of Appeals for the Ninth 
Circuit affirmed in part and reversed in part. App., 
infra, 1a-16a. 

8 

a. Applying the four-part test enunciated in Central 
Hudson Gas & Electric Corp. v. Public Service Com- 
mission, 447 U.S. 557 (1980), for determining the consti- 
tutionality of restrictions on commercial speech, the 
court of appeals affirmed the district court’s holding 
that Sections 353a(a) and (c) violate the First Amend- 
ment. App., infra, 4a-12a. Because the government did 
not contest that the advertising and solicitation limita- 
tions in Section 353a apply to lawful, non-misleading 
speech, the court of appeals began its analysis with the 
second element in the Central Hudson analysis— 
whether the governmental interests that underlie 
Section 353a’s solicitation and advertising conditions 
are substantial. 

Id. at 5a. 
The court of appeals recognized that the government 
has a substantial interest in “protecting the public 
health and safety” and in “preserving the integrity of 
the drug approval process.” App., infra, 5a-6a. The 
court also recognized that “[t]he government’s effort to 
balance competing goals can be a substantial interest.” 
Id. at 6a. The court concluded, however, that the 
government had not demonstrated that “its interest in 
striking a balance between ensuring compounding 
availability and limiting widespread compounding is 
substantial.” Id. at 7a. The court reached that con- 
clusion because, in its view, “[t]here is insufficient evi- 
dence in the record to conclude that the government 
has a substantial interest in preventing widespread 
compounding.” Ibid. 

Turning to the third step in the Central Hudson 
analysis, the court further held that the solicitation and 
advertising limitations in Section 353a do not directly 
advance either of the asserted interests that the court 
did find to be substantial—protecting the public health 
and safety and preserving the integrity of the drug 

9 

approval process. App., infra, 7a-10a. The court rea- 
soned that the government “has not offered evidence or 
arguments to explain sufficiently why such restrictions 
will reduce the type of consumption of compounded 
drugs that is harmful, and even admits that it has a sub- 
stantial interest in ensuring the availability of com- 
pounded drugs.” Id. at 7a-8a. The court also was of the 
view that, “[w]ithout the advertising restrictions, other 
safeguards exist to protect the public.” Id. at 8a (citing 
21 U.S.C. 353a(a) (Supp. V 1999) (requiring valid pre- 
scription for compounded drug products), 353a(b)(1) 
(Supp. V 1999) (limiting substances that pharmacists 
may use in compounded products), and 353a(b)(1)(D) 
(Supp. V 1999) (preventing pharmacists from regularly 
compounding drugs that are essentially copies of com- 
mercially available products)). 

In addition, relying on Rubin v. Coors Brewing Co., 
514 U.S. 476 (1995), and Greater New Orleans Broad- 
casting Ass’n v. United States, 527 U.S. 173 (1999), the 
court concluded that Section 353a “is so riddled with 
exceptions that it is unlikely that the speech restric- 
tions would actually succeed in depressing the volume 
of compounded drugs.” App., infra, 9a. The court 
observed that “pharmacists can advertise their com- 
pounding services and promote their skills at medical 
trade events so long as they do not promote the 
compounding of any particular drug,” and that a phar- 
macist may call a physician and recommend a com- 
pounded drug if a patient comes in with a prescription 
for a commercial drug and provides information to the 
pharmacist that indicates that the patient might re- 
quire a compounded product. Ibid. In addition, the 
court noted that FDAMA permits compounded drugs 
to constitute at least 5% of the total interstate dis- 
tributions and 100% of the total intrastate distributions 

10 

by a particular pharmacy. Ibid. (citing 21 U.S.C. 
353a(b)(3) (Supp. V 1999)). 

The court next addressed the fourth Central Hudson 
factor and concluded that the advertising and solici- 
tation restrictions “are more extensive than necessary 
to achieve the asserted government interest.” App., 
infra, 10a. The court suggested that, instead of limiting 
advertising, the FDA could require disclaimers stating 
that the compounded drugs being advertised had not 
been subjected to the FDA’s approval process. Ibid. 
The court also offered the alternative of requiring all 
compounded drugs, including those created on an in- 
dividual basis as part of the traditional practice of 
pharmacy, to undergo the safety and effectiveness 
testing required for new drugs under the FDCA. Ibid. 
The court rejected the government’s argument that 
those alternatives would not address the interest in 
drawing a workable distinction between traditional, 
patient-based compounding and manufacturing of new 
drugs, noting that it had already determined that the 
government’s interest in balancing those competing 
goals is not substantial. Id. at 11a. 

b. Although the court of appeals affirmed the dis- 
trict court’s judgment insofar as it held that the 
solicitation and advertising provisions in Section 353a 
violate the First Amendment, the court, accepting the 
government’s submission, reversed the district court’s 
decision to sever those provisions from the rest of Sec- 
tion 353a. App., infra, 12a-15a. The court reasoned 
that “Congress intended to provide access to com- 
pounded drugs while preventing pharmacies from 
making an end run around the FDA’s drug manufactur- 
ing requirements.” Id. at 12a. Because “Congress 
meant to exempt compounding pharmacists from 
FDCA requirements only in return for a prohibition on 

11 

the promotion of specific compounded drugs,” the court 
concluded that the solicitation and advertising restric- 
tions could not be severed from the rest of Section 353a. 
Id. at 13a-14a. Accordingly, the court invalidated Sec- 
tion 353a in its entirety. Id. at 15a. 

REASONS FOR GRANTING THE PETITION 

The Food and Drug Administration Modernization 
Act of 1997 (FDAMA), 21 U.S.C. 353a (Supp. V 1999), 
provides a limited exemption from the new drug ap- 
proval and certain other requirements of the Federal 
Food, Drug, and Cosmetic Act (FDCA), 21 U.S.C. 301 
et seq., for drugs compounded by pharmacists. The 
court of appeals has held unconstitutional under the 
First Amendment the solicitation and advertising 
limitations that Congress adopted as conditions on the 
availability of that new exemption. In striking down 
those carefully crafted provisions of the federal food 
and drug laws, the court unduly limited Congress’s 
authority to regulate the interstate distribution of new 
drugs while at the same time accommodating individual 
needs for compounding of drugs, and thereby under- 
mined the ability of the Food and Drug Administration 
(FDA) to preserve the regulatory framework for 
protecting the public health and safety. That mistaken 
“exercise of the grave power of annulling an Act of 
Congress” warrants this Court’s review. See United 
States v. Gainey, 380 U.S. 63, 65 (1965).1 

1. As both Congress and this Court have recognized, 
the widespread distribution of drugs that have not been 

1 We agree with the court of appeals’ conclusion (App., infra, 
12a-15a) that, if the solicitation and advertising provisions in 
Sections 353a(a) and (c) are unconstitutional, they are not sever- 
able from the other provisions of Section 353a. We therefore do 
not seek review of that holding in this Court. 

12 

shown to be safe and effective poses substantial health 
risks. See United States v. Rutherford, 442 U.S. 544, 
556-557 (1979); Weinberger v. Hynson, Westcott & 
Dunning, 412 U.S. 609, 622 (1973). Congress enacted 
the FDCA to ensure that drugs are not introduced into 
interstate commerce unless they first have been deter- 
mined to be safe and effective. Accordingly, at the 
heart of the FDCA is the requirement that the manu- 
facturer or distributor of a new drug obtain approval 
for each of its intended uses from the FDA before 
distributing the drug in interstate commerce. See 21 
U.S.C. 321(p), 331(d), 355(a). That requirement rests on 
two related premises: first, proof of safety and efficacy 
must be established by rigorous, scientifically valid 
studies rather than the clinical impressions of individual 
doctors, who cannot by themselves compile and master 
the necessary information; and, second, those who pro- 
mote new drugs and realize profits from their distri- 
bution should bear the often substantial costs of the 
investigations necessary to establish safety and effi- 
cacy. See Hynson, Westcott & Dunning, 412 U.S. at 
619, 629-630; Warner-Lambert Co. v. Heckler, 787 F.2d 
147, 156 (3d Cir. 1986). The new drug approval require- 
ments ensure that drug manufacturers have the incen- 
tive to undertake the studies necessary to demonstrate 
that the drugs they seek to market are in fact safe and 
effective. For these reasons, the new drug approval 
process is a critical component of the FDCA’s regula- 
tory framework for the protection of public health and 
safety. 

Congress came to recognize, however, that com- 
pounding offers an important health benefit for in- 
dividual patients who, for particularized medical rea- 
sons such as allergies, cannot use the versions of drugs 
that have been approved by the FDA and are com- 

13 

mercially available. Because obtaining FDA approval is 
a costly process, requiring approval of all drug products 
compounded by pharmacies would, as a practical 
matter, eliminate the availability of compounded drugs 
for those individual patients who have no alternative 
treatment. See S. Rep. 67 (exemption from approval 
requirements needed to “ensure continued availability 
of compounded drug products as a component of in- 
dividualized drug therapy”); Conf. Rep. 94 (same). 
Congress therefore enacted Section 353a, which pro- 
vides an exemption from the new drug approval re- 
quirements for traditional pharmaceutical compound- 
ing. 

At the same time, Congress understood that an un- 
restricted exemption for compounded drugs from the 
new drug approval requirements would seriously 
impair the integrity of the drug approval process. A 
pharmacy could mass produce a particular drug prod- 
uct, stimulate demand for the product through adver- 
tising, and thereby effectively manufacture and distri- 
bute the drug in interstate commerce without com- 
plying with the drug approval requirements, which are 
critical to protecting the public health and safety. See 
FDA Reform Legislation: Hearings Before the Sub- 
comm. on Health and the Env’t of the House Comm. on 
Commerce, 104th Cong., 2d Sess. 31, 125 (1996) (Hear- 
ings) (testimony of Hon. David A. Kessler, Commis- 
sioner, FDA); id. at 59 (FDA Analysis). Indeed, regula- 
tory experience had shown that manufacturing under 
the guise of compounding was not a mere hypothetical 
threat, but an existing problem. See App., infra, 72a- 
74a; Hearings 120-121 (Kessler testimony). 

Permitting manufacturing to occur under the guise of 
compounding would have serious consequences beyond 
the potential for drugs that are unsafe or ineffective to 

14 

enter the marketplace. It would strike at the core of 
the drug approval requirements, and thus at the core of 
the FDCA itself. If drug producers could mass produce 
drugs through a pharmacy engaged in widespread 
compounding, and thus bypass the approval process, 
manufacturers would have far less incentive to bear the 
cost of establishing that the drugs they seek to market 
are in fact safe and effective. See Hearings 31, 59. 

Section 353a thus reflects a carefully balanced con- 
gressional effort to “ensure continued availability of 
compounded drug products as a component of indi- 
vidualized drug therapy, while limiting the scope of 
compounding so as to prevent manufacturing under the 
guise of compounding.” Conf. Rep. 94; accord S. Rep. 

67. Rather than rely (as it had in the past) on the 
FDA’s exercise of enforcement discretion to strike that 
balance, Congress sought instead to “bring the legal 
status of compounding in line with FDA’s longstanding 
enforcement policy.” 143 Cong. Rec. at S9839 (Sen. 
Kennedy) (emphasis added); see S. Rep. 67 (FDAMA 
“establishes the parameters under which compounding 
is appropriate and lawful”). Building on the FDA’s en- 
forcement experience, Congress sought to draw a clear 
line to distinguish traditional, individualized compound- 
ing from compounding that is tantamount to manufac- 
turing. See 143 Cong. Rec. at S9839 (Sen. Kennedy); 
ibid. (Sen. Hutchinson) (legislation “would exempt 
pharmacy compounding from several regulatory re- 
quirements but would not exempt drug manufacturing 
from the act’s requirements”). 

As the FDA had previously determined based on its 
enforcement experience, see App., infra, 72a, 76a, Con- 
gress reasonably concluded that advertising of partic- 
ular drug products is a business practice that distin- 
guishes manufacturing from traditional pharmaceutical 

15 

compounding. Traditional compounding involves the 
provision of a service in response to a physician’s pre- 
scription and an individual patient’s special medical 
need. See 21 U.S.C. 360(g)(1), 374(a)(2); Professionals 
& Patients, 56 F.3d at 593; App., infra, 71a-72a. Drug 
manufacturing, in contrast, is the mass production of a 
drug product, typically for a substantial market. Pro- 
motion of the manufactured product to physicians or 
the public is thus a common feature of manufacturing, 
but not of traditional compounding on an individualized 
basis in response to the medical needs of particular 
patients. See id. at 72a. By confining the compounding 
exemption to pharmacies that do not engage in conduct 
that is characteristic of manufacturing, Congress en- 
sured that “the exemption would not create a loophole 
that would allow unregulated drug manufacturing to 
occur under the guise of pharmacy compounding.” 143 
Cong. Rec. at S9839 (Sen. Kennedy). 

Focusing on promotion of the compounded drug as a 
trigger for application of the regulatory approval pro- 
cess also reflects the important underlying premise of 
the FDCA that the public health is best served when 
those who develop and promote new drugs bear the 
cost of proving that those drugs are safe and effective. 
See Hynson, Westcott & Dunning, 412 U.S. at 619, 629- 
630. If compounders could actively promote their prod- 
ucts through advertising without bearing those costs, 
they would enjoy an unfair advantage over traditional 
drug manufacturers, who must comply with the ap- 
proval requirements. That unfair advantage would 
undermine the incentive of all drug manufacturers to 
comply with those requirements, which is the FDCA’s 
central mechanism to ensure that drugs introduced into 
interstate commerce are safe and effective for their 
intended uses. Section 353a was drafted to accom- 

16 

modate these competing considerations while pro- 
moting the FDCA’s overriding goal of protecting the 
public health and safety. 

2. The court of appeals erred in striking down Con- 
gress’ carefully crafted approach to compounding. The 
court’s erroneous holding flowed from its threshold 
determination that one of the important interests 
asserted by the government is not substantial. As 
discussed above, in enacting Section 353a, Congress 
attempted to balance competing goals: (1) preserving 
the effectiveness and integrity of the new drug ap- 
proval process and the protection of the general public 
that it provides, and (2) preserving the availability of 
compounded drugs for those individual patients who, 
for particularized medical reasons, cannot use com- 
mercially available products that have been approved 
by the FDA. The court of appeals erroneously failed to 
apprehend and refused to credit the substantiality of 
the government’s interest in balancing those com- 
peting, but independently compelling, interests by 
carving out only a narrow exception to the drug 
approval process. That threshold error in turn led the 
court to the erroneous conclusion at step three of the 
Central Hudson analysis that Section 353a does not 
directly and materially advance the government’s goals, 
and at step four of the Central Hudson analysis that 
Section 353a is not sufficiently tailored to achieve those 
goals. 

a. The Ninth Circuit recognized that a “con- 
gressional policy of balancing [competing] interests [can 
be a] substantial government interest that satisfies 
Central Hudson.” App., infra, 6a (quoting United 
States v. Edge Broad. Co., 509 U.S. 418, 428 (1993)). 
The court of appeals nevertheless refused to credit the 
government’s interest in preventing the widespread 

17 

distribution and sale of drugs that have not been 
proven safe and effective, on the one hand, and per- 
mitting the compounding of drugs in limited circum- 
stances to address the particularized medical needs of 
individual patients, on the other. The court instead 
insisted on “convincing evidence” of “the health risks 
associated with large numbers of patients taking such 
[compounded] drugs.” App., infra, 6a-7a. The eviden- 
tiary demand imposed by the court of appeals is mis- 
placed, especially in this case. Even as a general 
matter, this Court has made clear that the government 
may “justify [advertising and solicitation] restrictions 
based solely on history, consensus, and ‘simple common 
sense.’ ” 

Lorillard Tobacco Co. v. Reilly, 121 S. Ct. 
2404, 2422 (2001) (quoting Florida Bar v. Went For It, 
Inc., 515 U.S. 618, 628 (1995) (citations and internal 
quotation marks omitted)). As explained more fully 
below, the government’s position here is supported by 
all of these factors, including considerable regulatory 
experience and congressional analysis. 

Furthermore, the court of appeals’ evidentiary de- 
mand is particularly inappropriate in this case, because 
it is based on a rejection of the fundamental premises of 
the FDCA—that the widespread distribution of drugs 
that have not first been shown to be safe and effective 
poses substantial health risks, and that the FDCA’s 
new drug approval requirements are a legitimate and 
effective means to address those risks. This Court it- 
self has acknowledged the validity of those premises, 
see Rutherford, 442 U.S. at 556-557; Hynson, Westcott 
& Dunning, 412 U.S. at 619, 622, and the court of ap- 
peals had no basis to question them here. See also 
Warner-Lambert Co. v. Heckler, 787 F.2d 147, 156 (3d 
Cir. 1986). The Ninth Circuit’s apparent insistence that 
the government introduce evidence in court to establish 

18 

the importance of the central purposes of the FDCA 
was wholly unwarranted. 

The court’s evidentiary demand appears to have 
stemmed from its misunderstanding of one of the basic 
governmental interests underlying Section 353a. That 
interest is not simply, as the court characterized it, in 
“preventing widespread compounding.” App., infra, 7a. 
Rather, the government’s interest is in preventing com- 
pounding that is tantamount to manufacturing, which 
would threaten the integrity of the statutory scheme 
for ensuring that drugs are found to be safe and effec- 
tive before they are introduced into commerce. Con- 
gress reasonably concluded that, at some point, high- 
volume compounding of one particular drug product is 
not meaningfully different from manufacturing that 
product. See Conf. Rep. 94; S. Rep. 67. At that point, 
compounders, like ordinary manufacturers, must be 
required to comply with the FDCA’s new drug ap- 
proval requirements, or those requirements will be 
substantially undermined. See Hearings 35, 59. As the 
court of appeals itself acknowledged, the government 
has a substantial interest in preserving the integrity of 
the drug approval process. App., infra, 5a-6a. 

Congress also recognized, however, that compound- 
ing can meet the particularized medical needs of 
individual patients who cannot use the versions of 
drugs that have been approved by the FDA and are 
commercially available. The court of appeals acknowl- 
edged that the government has a substantial interest in 
permitting limited compounding to meet that need. 
App., infra, 7a-8a. Congress was simply seeking to 
balance the interest in preserving the integrity of the 
new drug approval process with the interest in making 
compounded drug products available in limited circum- 
stances for those patients. See Conf. Rep. 94; S. Rep. 

19 

67; 143 Cong. Rec. at S9839 (statements of Sens. 
Hutchinson and Kennedy). Preserving and advancing 
those two compelling but competing interests is itself a 
substantial government interest. See Edge Broad. Co., 
509 U.S. at 428 (balancing competing governmental 
concerns can be a substantial governmental interest for 
purposes of the Central Hudson test). 

b. The court of appeals’ misapprehension of the 
government’s interests doomed from the outset its ap- 
plication of the third step in the Central Hudson 
analysis. The court of appeals concluded at that step 
that the government had failed to show that limiting 
the compounding exemption to pharmacies that do not 
promote particular compounded products directly and 
materially advances the government’s interests. App., 
infra, 7a-10a. The court understood the government to 
be arguing that Section “353a’s speech restrictions 
will keep the demand for particular compounded drugs 
artificially low, and thereby protect unwary con- 
sumers.” Id. at 8a. That was not the goal of Congress 
in enacting FDAMA. As explained above, Congress 
concluded that the advertising of a particular com- 
pounded drug product to the public reasonably identi- 
fies the point at which the interest in preserving the 
integrity of the drug approval requirement outweighs 
the interest in protecting the availability of traditional 
pharmaceutical compounding in response to individual 
medical needs. That congressional determination re- 
flects the fact that advertising and promotion of 
particular drug products are distinguishing characteris- 
tics of drug manufacturing but not traditional, indi- 
vidualized compounding by pharmacies. It is based 
upon the FDA’s prior enforcement experience. And it 
conforms to the premise of the FDCA that those who 
promote new drugs in order to realize profits from their 

20 

distribution should bear the cost of proving that those 
drugs are safe and effective for their intended uses 
before they are marketed. Congress reasonably 
determined that, when demand is great enough to 
justify a pharmacy’s decision to manufacture large 
quantities of a particular compounded product and to 
promote that product through advertising, the phar- 
macy, like other manufacturers, should be required to 
bear the costs of complying with the FDCA’s approval 
requirements and demonstrating that the new drug is 
safe and effective for its intended uses. 

The court of appeals also relied on its own assess- 
ment that other “safeguards exist to protect the 
public.” App., infra, 8a. The provisions of FDAMA on 
which the court relied, however, confirm the court’s 
misunderstanding of the governmental interests under- 
lying Section 353a. For example, the court noted that, 
under FDAMA, “[n]o compounded drug may be dis- 
pensed without a valid prescription from a licensed 
physician.” Id. at 8a-9a (citing 21 U.S.C. 355a(a) (Supp. 
V 1999)). That requirement alone, however, is insuffi- 
cient to advance the government’s interest in preserv- 
ing the integrity and safeguarding function of the 
FDCA’s drug approval process, which is based on 
Congress’s judgment that the ultimate determination 
whether a new drug is safe and effective cannot be left 
to individual doctors (who cannot by themselves com- 
pile and master the necessary information) but instead 
must be made by the FDA. See Hynson, Westcott & 
Dunning, 412 U.S. at 619, 630; Warner-Lambert Co., 
787 F.2d at 156 (“Congress rejected the notion * * * 
that individual physicians should be left to decide 
whether particular drugs were effective.”). 

The court of appeals also observed that a “pharmacist 
cannot regularly compound drugs that are essentially 

21 

copies of a commercially available drug product.” App., 
infra, 9a (citing 21 U.S.C. 353a(b)(1)(D) (Supp. V 1999)). 
Although that limitation furthers the government’s 
interest in preventing pharmacies from manufacturing 
products that are already available without complying 
with the FDCA’s provisions governing good manu- 
facturing practices, it does not address the problem of 
the manufacture through widespread compounding of 
products that are different from those that are com- 
mercially available. It is the latter form of compound- 
ing to which Sections 353a(a) and (c) are addressed, by 
ensuring that entities that promote the distribution in 
interstate commerce of new drug products will comply 
with the new drug approval requirements.2 

The Ninth Circuit also concluded that Section 353a 
fails the third Central Hudson inquiry because, in the 
court’s view, it “is so riddled with exceptions that it is 
unlikely that the speech restrictions would actually suc- 
ceed in depressing the volume of compounded drugs.” 
App., infra, 9a. The court noted, for example, that Sec- 
tion 353a permits pharmacies to advertise their general 
compounding services (see 21 U.S.C. 353a(c) (Supp. V 
1999)) and does not prevent pharmacies from dispens- 
ing significant quantities of drugs intrastate (see 21 
U.S.C. 353a(b)(3) (Supp. V 1999)). Contrary to the 
court of appeals’ view, however, those provisions do not 

2 Nor do 21 U.S.C. 353a(b)(1)(A) and (B), which limit the sub- 
stances that pharmacists may use in compounding, address the 
governmental interest in preventing manufacturing of new drugs 
under the guise of compounding. Those provisions require that the 
ingredients used in compounded products meet certain quality 
standards. They do not ensure the safety and effectiveness of the 
compounded drugs themselves, which are still unapproved new 
drugs, and they do not operate to prevent compounding activity 
that is on the scale and in the manner of manufacturing. 

22 

impede the accomplishment of Section 353a’s purpose of 
preventing manufacturing under the guise of com- 
pounding. 

If compounders could actively promote particular 
compounded drug products without complying with the 
drug approval requirements, they would enjoy an un- 
fair advantage over traditional drug manufacturers, 
which would significantly reduce the incentives for 
manufacturers to expend the resources necessary to 
prove that their new drugs are safe and effective. In- 
deed, under such a regime, traditional drug manufac- 
turers could establish their own compounding entities 
and circumvent the approval process. Advertising that 
a pharmacy provides general compounding services, 
however, does not suggest the existence, or foster the 
growth, of a market for any particular compounded 
drug, and therefore does not significantly distort the 
incentives of drug manufacturers to comply with the 
new drug approval requirements. Permitting phar- 
macies to advertise that they provide compounding 
services generally thus is consistent with Congress’s 
purpose of ensuring that particular drugs are widely 
distributed in commerce only after they have been 
proven to be safe and effective for their intended uses. 
At the same time, allowing a pharmacy to advertise its 
general compounding services furthers Congress’s in- 
terest in preserving the availability of medically neces- 
sary treatments for individual patients when demand is 
insufficient to justify the costs of obtaining advance 
FDA approval. Section 353a thus does not at all permit 
“speech that poses the same risks the Government 
purports to fear.” Greater New Orleans Broad., 527 
U.S. at 195. 

Section 353a(b)(3) likewise does not frustrate the ac- 
complishment of the purposes served by the limitations 

23 

on solicitations and advertising. Section 353a(b)(3) pro- 
vides that a pharmacy may avail itself of the com- 
pounding exemption only if it is located in a State that 
has entered into an agreement with the Secretary that 
addresses the interstate distribution of inordinate 
amounts of compounded drugs, or if the pharmacy’s 
total interstate distribution of compounded drug prod- 
ucts does not exceed five percent of the total of its pre- 
scription orders. See 21 U.S.C. 353a(b)(3) (Supp. V 
1999). That provision imposes a restraint in addition to 
and different in purpose from the advertising and 
solicitation conditions on the availability of the exemp- 
tion. The advertising and solicitation limitations pre- 
vent the manufacture and marketing of particular drug 
products under the guise of compounding. Section 
353a(b)(3) limits the volume of the pharmacy’s overall 
interstate sales of compounded drugs in order to ensure 
that the pharmacy retains its character as a pharmacy 
rather than a drug manufacturer engaged in interstate 
commerce. The volume limitation in Section 353a(b)(3) 
applies only to interstate distributions, so that the 
States may continue to play their traditional role in 
regulating pharmacy practice. See 143 Cong. Rec. 
S12242 (daily ed. Nov. 5, 1997) (Sen. Jeffords) (Con- 
gress intended “to establish a rational framework for 
pharmacy compounding [that] respects the State regu- 
lation of pharmacy while allowing an appropriate role 
for the FDA.”). The absence of volume limitations on 
overall intrastate distributions does not, however, de- 
tract from the importance of the advertising and 
solicitation limitations, which prevent the manufacture 
of particular drugs under the guise of compounding. 

c. Finally, the Ninth Circuit’s failure to appreciate 
the nature of the government’s interests also led to its 
erroneous conclusion that Sections 353a(a) and (c) are 

24 

not sufficiently tailored to satisfy the fourth step of the 
Central Hudson inquiry. As this Court has recently 
reiterated, “ ‘the least restrictive means’ is not the 
standard; instead, the case law requires a reasonable 
‘fit between the legislature’s ends and the means 
chosen to accomplish those ends.’ ” 

Lorillard Tobacco 
Co., 121 S. Ct. at 2422 (quoting Went For It, Inc., 515 
U.S. at 632 (quoting in turn Board of Trustees v. Fox, 
492 U.S. 469, 480 (1989))). 

The court of appeals incorrectly concluded that “clear 
alternatives exist that can advance the government’s 
asserted interest in a manner far less intrusive to the 
pharmacists’ free speech rights.” App., infra, 10a. On 
the contrary, the alternatives suggested by the court— 
requiring “disclaimers on compounded drugs explaining 
that they had not been subject to FDA approval,” or 
subjecting all compounded drug products to the 
FDCA’s new drug approval requirements, ibid.—would 
not only fail to advance, but would substantially hinder, 
the accomplishment of the purposes of Sections 353a(a) 
and (c). 

Reliance on disclaimers is fundamentally inconsistent 
with the purposes of the FDCA’s approval require- 
ments. Congress has determined that public health and 
safety are best protected by requiring manufacturers to 
demonstrate to the FDA that their drugs are safe and 
effective for their intended uses before they are distri- 
buted widely in commerce. See Hynson, Westcott & 
Dunning, 412 U.S. at 619, 630. Disclaimers would not 
accomplish that purpose. 

The other alternative suggested by the court of 
appeals—subjecting all compounded drugs to the new 
drug approval process—would be directly contrary to 
Congress’s purpose of making compounded drugs 
available in the limited and individualized circum- 

25 

stances in which a specific patient cannot use the com- 
mercially available version of the drug. The court of 
appeals thus erred in concluding that Section 353a is 
not narrowly tailored to achieve the government’s 
substantial interest in balancing the availability of 
compounding in response to the particular medical 
needs of individual patients with preventing manufac- 
turing under the guise of compounding, which would 
threaten the integrity of the drug approval require- 
ments. 

3. The court of appeals has held an Act of Congress 
unconstitutional. That action alone warrants this 
Court’s review. See Gainey, 380 U.S. at 65. The soli- 
citation and advertising limitations in Sections 353a(a) 
and (c) were enacted by Congress as essential con- 
ditions on the availability of the exemption from the 
FDCA’s new drug approval and other requirements. 
The court of appeals invalidated those limitations based 
on its misconception of the statutory provisions in- 
volved and its mistaken view of the First Amendment’s 
application in the critical context of protecting the 
public health and safety. As we have explained above, 
the court of appeals’ decision upsets the careful balance 
that Congress struck in Section 353a in specifying the 
point at which drug products should be subject to the 
FDCA’s generally applicable new drug approval re- 
quirements. Those requirements are the linchpin of the 
Nation’s laws regulating the manufacturing and distri- 
bution of drugs, and thus a central component of Con- 
gress’s efforts in the FDCA to protect the public health 
and safety. 

26 

CONCLUSION 

The petition for a writ of certiorari should be 
granted. 

Respectfully submitted. 

THEODORE B. OLSON 

Solicitor General 

STUART E. SCHIFFER 

Acting Assistant Attorney 

General 

EDWIN S. KNEEDLER 

Deputy Solicitor General 

MATTHEW D. ROBERTS 

Assistant to the Solicitor 

General 

DOUGLAS N. LETTER 

Attorney 

AUGUST 2001 

APPENDIX A 

UNITED STATES COURT OF APPEALS 
FOR THE NINTH CIRCUIT 

No. 99-17424 

WESTERN STATES MEDICAL CENTER, A 

NEVADA CORPORATION; WOMEN’S INTERNATIONAL 
PHARMACY, A WISCONSIN CORPORATION; HEALTH 

PHARMACY, A WISCONSIN CORPORATION; 
APOTHECURE, A TEXAS CORPORATION; COLLEGE 
PHARMACY, A COLORADO CORPORATION; 
LAKESIDE PHARMACY, A TENNESSEE CORPORATION; 
WEDGEWOOD VILLAGE PHARMACY, A NEW JERSEY 
CORPORATION, PLAINTIFFS-APPELLEES 

v. 

DONNA E. SHALALA, IN HER OFFICIAL CAPACITY 
AS SECRETARY, UNITED STATES DEPARTMENT OF 
HEALTH AND HUMAN SERVICES; 
JANE E. HENNEY, M.D., IN HER OFFICIAL CAPACITY AS 
COMMISSIONER, DEFENDANTS-APPELLANTS 

Appeal from the United States District Court 
for the District of Nevada 
David A. Ezra, District Judge, Presiding 
D.C. No. CV-98-01650-DAE(RLH) 

Argued and Submitted: Dec. 12, 2000 

Filed: Feb. 6, 2001 

(1a) 

2a 

Before: SCHROEDER, Chief Judge, HALL, and 
W. FLETCHER, Circuit Judges. 

CYNTHIA HOLCOMB HALL, Circuit Judge. 

This appeal requires us to assess the constitutionality 
of two subsections of the Food and Drug Administra- 
tion Modernization Act of 1997 (“FDAMA”), 21 U.S.C. 
§ 353a. Subsections §§ 353a(a) and (c) of FDAMA pro- 
hibit drug providers from promoting or advertising 
particular compounded drugs. In return, the providers 
are exempted from the standard drug approval require- 
ments imposed by the Food and Drug Administration. 
Plaintiffs seek to enjoin the enforcement of these 
subsections, contending that they violate the First 
Amendment’s guarantee of free speech. The district 
court agreed with Plaintiffs and granted their motion 
for summary judgment in a published opinion. See 
Western States Medical Ctr. v. Shalala, 69 F. Supp. 2d 
1288 (D. Nev. 1999). The district court exercised juris- 
diction pursuant to 28 U.S.C. §§ 1331 and 1361. We 
have jurisdiction over this appeal pursuant to 28 U.S.C. 
§ 1291. 

I 

Plaintiffs are a group of licensed pharmacies. They 
have prepared written promotional materials that they 
distribute by mail and at medical conferences to inform 
patients and physicians of the uses and effectiveness of 
specific compounded drugs. “Compounding” is a pro- 
cess in which a pharmacist mixes ingredients to create 
a medication for an individual patient. Compounding is 
typically used to prepare medications that are not com- 
mercially available, such as a medication for a patient 

3a 

who is allergic to an ingredient in a mass-produced 
product. Pharmacists can provide compounded drugs to 
individual patients only upon receipt of a valid 
prescription. See 21 U.S.C. § 353a(a). 

The Federal Food, Drug, and Cosmetic Act 
(“FDCA”), 21 U.S.C. §§ 301-397, regulates drug manu- 
facturing, marketing, and distribution. It invests the 
Food and Drug Administration (“FDA”) with enforce- 
ment powers to make sure that the regulations are 
followed. In 1997, Congress amended the FDCA to 
exempt compounding from certain requirements of the 
FDCA, but only if the compounding pharmacies fol- 
lowed several conditions, including refraining from 
promoting particular compounded drugs. The new 
legislation sets out several restrictions on compounding 
including prohibitions on advertisements, like those of 
the Plaintiffs, that promote particular compounded 
drugs. See 21 U.S.C. §§ 353a(a) and (c).3 Pharmacists 

3 The statutes provide: 

[Some FDCA requirements do not] apply to a drug product if 

the drug product is compounded for an identified individual 
patient based on the unsolicited receipt of a valid prescription 
order or a notation, approved by the prescribing practitioner, 
on the prescription order that a compounded product is 
necessary for the identified patient . . . . 

21 U.S.C. § 353a(a). 

A drug may be compounded under subsection (a) of this 

section only if the pharmacy, licensed pharmacist, or licensed 
physician does not advertise or promote the compounding of 
any particular drug, class of drug, or type of drug. The 
pharmacy, licensed pharmacist, or licensed physician may 
advertise and promote the compounding service provided by 
the licensed pharmacist or licensed physician. 

21 U.S.C. § 353a(c). 

4a 

may, however, inform the public that they offer general 
compounding services. See 21 U.S.C. § 353a(c). 

Plaintiffs challenged FDAMA’s advertising and 
solicitation restrictions in district court. They con- 
tended that the restrictions violate the Free Speech 
Clause of the First Amendment. In a well-reasoned 
opinion, the district court granted Plaintiff ’s motion for 
summary judgment, holding that the restrictions do not 
meet the test for acceptable government regulation of 
commercial speech set forth in Central Hudson Gas & 
Electric Corp. v. Public Service Commission, 447 U.S. 
557, 566, 100 S. Ct. 2343, 65 L. Ed. 2d 341 (1980). The 
district court also held that the unconstitutional pro- 
visions were severable from the rest of FDAMA. This 
Court reviews the district court’s grant of summary 
judgment de novo. See Gutowsky v. County of Placer, 
108 F.3d 256, 259 (9th Cir. 1997). “The evidence must 
be viewed in the light most favorable to the nonmoving 
party to determine whether there are any genuine 
issues of material fact for trial, and whether the district 
court correctly applied the relevant substantive law.” 
Federal Deposit Ins. Corp. v. O’Melveny & Meyers, 969 
F.2d 744, 747 (9th Cir. 1992). 

II 

In Central Hudson, the Supreme Court set out a 
four-part test for determining the constitutionality of a 
government restriction on commercial speech. The 
court must determine whether: 1) the regulated speech 
is misleading or concerns unlawful activity; 2) the gov- 
ernment has asserted a “substantial” interest in re- 
stricting the speech; 3) the government has demon- 
strated that the regulation “directly advances” the 
asserted interest; and 4) the restriction is not more 

5a 

extensive than necessary to achieve the asserted gov- 
ernmental interest. See Central Hudson, 447 U.S. at 
566, 100 S. Ct. 2343. Although the government has 
asserted substantial interests, they have failed to dem- 
onstrate that the speech restrictions directly advance 
those interests or that they are narrowly tailored to 
those interests. 

A 

The First Amendment does not protect commercial 
speech that is “inherently misleading” or concerns un- 
lawful activity. See id. at 563-64, 100 S. Ct. 2343. On 
appeal, the government does not contend that the 
prohibited speech is unlawful or misleading, and there 
is no indication in the record that Plaintiffs’ advertise- 
ments are untruthful. Therefore, the restricted speech 
must be evaluated according to the other three Central 
Hudson factors. 

B 

Under the second part of the Central Hudson test, 
the speech restriction must serve a “substantial” 
government interest. In the district court, the govern- 
ment argued that the challenged restrictions served 
three substantial interests: 1) protecting the public 
health and safety; 2) preserving the integrity of the 
drug approval process; and 3) balancing the need to 
preserve drug compounding for individual patients with 
particularized needs while preventing widespread dis- 
tribution of compounded drugs. The district court 
determined that the first two interests were substantial 
and satisfied the second prong of the Central Hudson 
test. Because “the Government has a significant in- 
terest in protecting the health, safety, and welfare of its 

6a 

citizens,” we agree that the first two interests are 
substantial. Rubin v. Coors Brewing Co., 514 U.S. 476, 
485, 115 S. Ct. 1585, 131 L. Ed. 2d 532 (1995). 

The third asserted interest was “insufficiently clear” 
to the district court. Western States, 69 F. Supp. 2d at 
1303. The court reasoned that for an interest in balanc- 
ing competing goals to be substantial, the goals 
themselves must be substantial. See id. at 1302. The 
court agreed that the goal of ensuring the continued 
availability of compounded drugs to individual patients 
was a substantial concern, but was not convinced that 
the government had a substantial interest in pre- 
venting widespread compounding. It held that if the 
government could not offer an adequate rationale for its 
goal of preventing widespread distribution of com- 
pounded drugs, then the government did not have a 
substantial interest in balancing this concern with the 
need for continued access to such drugs. See id. at 
1302-03. 

The government’s effort to balance competing goals 
can be a substantial interest worthy of government pro- 
tection. See United States v. Edge Broadcasting Co., 
509 U.S. 418, 428, 113 S. Ct. 2696, 125 L. Ed. 2d 345 
(1993) (holding that the “congressional policy of balanc- 
ing the interests of lottery and non-lottery States is the 
substantial government interest that satisfies Central 
Hudson”). But the government must supply a compell- 
ing argument or convincing evidence that it has a sub- 
stantial interest in achieving both goals. The govern- 
ment cannot carry its burden by “mere speculation or 
conjecture.” Edenfield v. Fane, 507 U.S. 761, 770-71, 
113 S. Ct. 1792, 123 L. Ed. 2d 543 (1993); cf. Florida Bar 

v. Went For It, Inc., 515 U.S. 618, 624, 115 S. Ct. 2371, 
132 L. Ed. 2d 541 (1995) (crediting the state’s interest 

7a 

as substantial on the basis of a two-year study con- 
taining statistical and anecdotal evidence). 

We agree with the district court that the government 
has not met its burden. There is insufficient evidence in 
the record to conclude that the government has a 
substantial interest in preventing widespread com- 
pounding. The government asserts that increased 
distribution of compounded drugs is dangerous because 
of the health risks associated with large numbers of 
patients taking such drugs. The government neither 
explains nor supports this contention. In fact, most of 
the evidence runs to the contrary. Compounding is not 
only legal under state law, but most states require their 
pharmacists to know how to compound. See Sen. Rep. 
No. 105-43, at 64 (1997). The government has failed to 
show that its interest in striking a balance between 
ensuring compounding availability and limiting wide- 
spread compounding is substantial. The only sub- 
stantial interests asserted by the government are pro- 
tecting the public’s health and preserving the integrity 
of the drug approval process. 

C 

Under the third Central Hudson factor, the speech 
regulation must “directly advance” the government 
interest. In essence, the government argues that the 
speech restrictions are necessary to prevent an in- 
crease in the demand for compounded drugs that would 
be injurious to the public health. But the government’s 
argument falls short of what is required to show that 
the speech restrictions will protect the public. The 
government has not offered evidence or arguments to 
explain sufficiently why such restrictions will reduce 
the type of consumption of compounded drugs that is 

8a 

harmful, and even admits that it has a substantial 
interest in ensuring the availability of compounded 
drugs. 

The government bears the burden of showing that its 
regulation will advance its interest “to a material de- 
gree.” See 44 Liquormart, Inc. v. Rhode Island, 517 
U.S. 484, 505, 116 S. Ct. 1495, 134 L. Ed. 2d 711 (1996). 
In 44 Liquormart, the Supreme Court held that a state 
statute prohibiting advertisement of liquor prices 
violated the First Amendment. The Court agreed with 
the State that “common sense supports the conclusion 
that a prohibition against price advertising . . . will 
tend to mitigate competition and maintain prices at a 
higher level than would prevail in a completely free 
market.” Id. at 505, 116 S. Ct. 1495. But the Court dis- 
agreed with the State’s argument that the prohibition 
would advance the State’s interest in promoting tem- 
perance and reducing demand “to a material degree.” 
The Court explained that it required evidentiary sup- 
port for such an argument, not mere speculation. See 
id. “Such speculation certainly does not suffice when 
the State takes aim at accurate commercial information 
for paternalistic ends.” Id. at 507, 116 S. Ct. 1495. Simi- 
larly, the government in this case contends that § 353a’s 
speech restrictions will keep the demand for particular 
compounded drugs artificially low, and thereby protect 
unwary consumers. The government offers no evidence 
demonstrating that its restrictions would succeed in 
striking the balance it claims is a substantial interest, or 
even would protect the public health. 

Without the advertising restrictions, other safe- 
guards exist to protect the public. No compounded 
drug may be dispensed without a valid prescription 
from a licensed physician to an individual patient. See 

9a 

§ 353a(a). FDAMA sets out specific requirements for 
the substances that can be used by the pharmacist to 
fashion a compounded drug. See § 353a(b)(1). A phar- 
macist cannot regularly compound drugs that are es- 
sentially copies of a commercially available drug 
product. See § 353a(b)(1)(D). 

In addition, FDAMA is so riddled with exceptions 
that it is unlikely that the speech restrictions would 
actually succeed in depressing the volume of com- 
pounded drugs. The exceptions also demonstrate that 
the restrictions do not directly advance the govern- 
ment’s interest in maintaining the integrity of the drug 
approval process. Under the statute, pharmacists can 
advertise their compounding services and promote 
their skills at medical trade events so long as they do 
not promote the compounding of any particular drug. 
It seems obvious that advertising that informs physi- 
cians that a pharmacy is available to compound drugs is 
likely to increase demand for compounding. Moreover, 
even with the ban on specific advertising, FDAMA 
provides significant incentives for pharmacies to in- 
crease their drug compounding business. The statute 
allows compounded drugs to constitute up to five 
percent of a pharmacy’s interstate drug distributions 
and 100 percent of its intrastate drug distributions. If a 
pharmacy has a Memorandum of Understanding with 
the Secretary of Health and Human Services, up to 
twenty percent of its interstate drug distributions can 
be in the form of compounded drugs. See § 353a(b)(3). 
Under FDAMA, a pharmacist can call a physician and 
recommend a drug compound when a patient comes in 
with a prescription for a commercial drug and provides 
information to the pharmacist that indicates that the 
patient might require a compounded product. When 

10a 

exemptions and inconsistencies counteract the alleged 
purpose of a speech restriction, the restriction fails the 
direct advancement test. See Greater New Orleans 
Broadcasting Ass’n v. U.S., 527 U.S. 173, 190, 119 S. Ct. 
1923, 144 L. Ed. 2d 161 (1999); Rubin, 514 U.S. at 488- 
89, 115 S. Ct. 1585 (1995). 

D 

Finally, the speech restrictions fail the fourth Cen- 
tral Hudson factor; they are more extensive than 
necessary to achieve the asserted government interest. 
If clear alternatives exist that can advance the govern- 
ment’s asserted interest in a manner far less intrusive 
to the pharmacists’ free speech rights, then the restric- 
tions are invalid. See Coors Brewing, 514 U.S. at 490- 
91, 115 S. Ct. 1585; Project 80’s, Inc. v. City of 
Pocatello, 942 F.2d 635, 637 (9th Cir. 1991). The district 
court proposed either disclaimers on compounded drugs 
explaining that they had not been subject to FDA ap- 
proval or a full-blown safety review like that imposed 
on manufactured drugs as alternatives that would be 
far less intrusive to free speech. See Western States, 69 
F. Supp. 2d at 1308-09. Disclaimers would satisfy the 
government’s substantial interest in preventing con- 
sumers from being misled into taking unsafe drugs. 
Full-scale FDA review of compounded drugs would 
satisfy the government’s interest in protecting the 
public health and serve as a much more precise way of 
preserving the integrity of the drug approval process. 
See Project 80’s, 942 F.2d at 638 (stating that where 
there are “far less restrictive and more precise means” 
to achieve the desired end, the speech restriction is 
more extensive than necessary and fails the fourth 
Central Hudson factor.) 

11a 

The government contends that the district court’s 
suggested alternatives are useless since they do not 
address the government’s substantial interest in bal- 
ancing the availability of compounded drugs with the 
need to limit their widespread “manufacture.” But the 
district court’s alternatives are viable because the 
government’s interest in balancing two competing goals 
failed to meet the second prong of Central Hudson. 
The alternatives do offer credible solutions for the gov- 
ernment’s substantial interests in safeguarding the 
public health and maintaining the integrity of the drug 
approval process. 

Even if the district court had not proposed compell- 
ing alternatives and the government had marshaled 
sufficient evidence to show that compounded drugs are 
dangerous and their volume should be limited, pro- 
hibitions on truthful speech are still strongly dis- 
favored. “We have never held that commercial speech 
may be suppressed in order to further the State’s 
interest in discouraging purchases of the underlying 
product that is advertised.” Central Hudson, 447 U.S. 
at 574, 100 S. Ct. 2343 (Blackmun, J., concurring). In 44 
Liquormart, the Court explained: 

Precisely because bans against truthful, nonmis- 
leading commercial speech rarely seek to protect 
consumers from deception or overreaching, they 
usually rest solely on the offensive assumption that 
the public will respond “irrationally” to the truth. 
The First Amendment directs us to be especially 
skeptical of regulations that seek to keep people in 
the dark for what the government perceives to be 
their own good. 

12a 

517 U.S. at 503, 116 S. Ct. 1495. Government prohibi- 
tions of truthful commercial messages are “particularly 
dangerous” and deserve “rigorous review.” Id. at 501, 
116 S. Ct. 1495. The government has failed to support 
adequately its assertion that lower demand for com- 
pounded drugs will protect the public. Workable 
alternatives to the speech restrictions exist. Therefore, 
FDAMA’s speech restrictions are more extensive than 
necessary. 

III 

Sections 353a(a) and (c) cannot be severed from the 
rest of FDAMA unless Congress would have enacted 
the constitutional provisions of FDAMA absent the un- 
constitutional provisions. See Alaska Airlines v. Brock, 
480 U.S. 678, 685, 107 S. Ct. 1476, 94 L. Ed. 2d 661 
(1987); Board of Natural Resources v. Brown, 992 F.2d 
937, 948 (9th Cir. 1993). A statute’s unconstitutional 
provisions are not severable if the entire statute is de- 
signed to strike a balance between competing interests. 
See United States v. Spokane Tribe of Indians, 139 F.3d 
1297, 1301 (9th Cir. 1998). FDAMA’s legislative history 
demonstrates that Congress intended to provide access 
to compounded drugs while preventing pharmacies 
from making an end run around the FDA’s drug 
manufacturing requirements. 

The first legislative proposal to address pharmacy 
compounding appeared in the House of Representatives 
in 1996. That bill would have exempted pharmacy com- 
pounding from FDCA requirements without restric- 
tions on advertising specific compounded products. See 
H.R. 3199, 104th Cong. § 18 (Apr. 30, 1996). FDA Com- 
missioner David Kessler expressed concern with the 
bill’s lack of safeguards, and the possibility of a massive 

13a 

increase in the number of drugs available that did not 
meet FDA standards: 

The [bill] has no constraints on the volume of 
compounding. It is likely to encourage large-scale 
manufacturing under the guise of pharmacy com- 
pounding. It would allow bulk drug suppliers or 
drug manufacturers to circumvent the approval 
requirements of the Act by shipping bulk drug sub- 
stances to pharmacies for reconstituting or other 
processing. A shadow industry of unapproved 
generic drugs is likely to develop. Moreover, the 
exemptions would allow potentially dangerous com- 
pounding. 

FDA Reform Legislation: Hearings Before the Sub- 
comm. on Health and Environ. of the House Comm. on 
Commerce, 104th Cong. 31, 125 (May 1 and 2, 1996) 
(statement of Hon. David A. Kessler). 

Subsequent versions of the legislation responded to 
the FDA Commissioner’s concerns. The new House bill 
provided that the compounded products would be 
exempt from FDCA requirements only if the com- 
pounding pharmacist “does no more than advertise or 
otherwise promote the compounding service and does 
not advertise or otherwise promote the compounding of 
a particular drug or device.” H.R. 1411, 105th Cong. 
§ 17 (Apr. 23, 1997). A similar Senate bill tied exemp- 
tion from FDCA requirements to a prohibition on 
advertising particular compounded drugs. See S. 830, 
105th Cong., § 809 (July 1, 1997). 

Evidence in the legislative record interpreting the 
final legislation demonstrates that Congress meant to 
exempt compounding pharmacists from FDCA require- 
ments only in return for a prohibition on the promotion 

14a 

of specific compounded drugs. A House report ex- 
plained that FDAMA was designed to “ensure con- 
tinued availability of compounded drug products as a 
component of individualized drug therapy, while 
limiting the scope of compounding so as to prevent 
manufacturing under the guise of compounding.” H.R. 
Conf. Rep. No. 105-399. Senator Kennedy noted that 
“some of [FDAMA’s] conditions are intended to ensure 
that the volume of compounding does not approach that 
ordinarily associated with drug manufacturing.” 143 
Cong. Rec. S9840 (Daily ed. Sept. 24, 1997). The Pre- 
sident’s comments upon signing FDAMA into law 
reflect a concern with striking a balance between com- 
pounding and manufacturing: “The Act will also re- 
solve the issue of pharmacy compounding-the process of 
making customized medicines-so that legitimate phar- 
macy compounding is allowed, while the manufacture of 
unapproved drugs is not.” Statement on Signing the 
Food and Drug Administration Modernization Act of 
1997, 33 Weekly Comp. Pres. Doc. 1885 (Nov. 21, 1997). 
Given these statements and the decision by both houses 
of Congress to add specific provisions to address the 
advertising or promotion of compounded products, we 
believe that Congress would not have passed FDAMA 
absent the restrictions on commercial speech. 

The existence of a severability clause at § 1391 of the 
FDCA does not change our interpretation of the legis- 
lative history.4 It is true that the presence of a 

4 The clause reads: 

If any provision of this Act is declared unconstitutional, or the 

applicability thereof to any person or circumstance is held 
invalid, the constitutionality of the remainder of the Act and 
the applicability thereof to other persons and circumstances 
shall not be affected thereby. 

15a 

severability clause creates a presumption that Con- 
gress did not intend for the validity of a statute to 
depend on the survival of its constitutionally offensive 
provisions. See Alaska Airlines v. Brock, 480 U.S. 
678, 686, 107 S. Ct. 1476, 94 L. Ed. 2d 661 (1987). But 
that presumption is not conclusive. See id. Because 
Congress approved this severability clause before 
FDAMA’s passage, it is less compelling evidence of 
legislative intent than a clause enacted simultaneously 
with FDAMA. Congress may have intended the 
original provisions of the FDCA to be severable, but 
meant for FDAMA’s provisions to stand or fall to- 
gether. Given the evidence in the legislative history of 
Congress’s desire to facilitate drug compounding while 
not allowing for widespread creation of drugs that have 
not been FDA approved, the FDCA’s severability 
clause is not persuasive. 

IV 

Thus, we hold that § 353a(a) and § 353a(c)’s restric- 
tions on commercial speech violate the First Amend- 
ment. These provisions may not be severed from the 
rest of the provisions in § 353a. Accordingly, § 353a is 
invalid in its entirety. 

AFFIRMED IN PART, REVERSED IN PART. 

21 U.S.C. § 391. 

16a 

APPENDIX B 

UNITED STATES DISTRICT COURT 
FOR THE DISTRICT OF NEVADA 

No. CV-S-98-01650(DAE)(RLH) 

WESTERN STATES MEDICAL CENTER, A 

NEVADA CORPORATION; WOMEN’S INTERNATIONAL 
PHARMACY, A WISCONSIN CORPORATION; HEALTH 

PHARMACY, A WISCONSIN CORPORATION; 
APOTHECURE, A TEXAS CORPORATION; COLLEGE 
PHARMACY, A COLORADO CORPORATION; 
LAKESIDE PHARMACY, A TENNESSEE CORPORATION; 
WEDGEWOOD VILLAGE PHARMACY, A NEW JERSEY 
CORPORATION, PLAINTIFFS 

v. 

DONNA E. SHALALA, IN HER OFFICIAL CAPACITY 
AS SECRETARY, UNITED STATES DEPARTMENT OF 
HEALTH AND HUMAN SERVICES; 
JANE E. HENNEY, M.D., IN HER OFFICIAL CAPACITY AS 
COMMISSIONER, DEFENDANTS 

Filed: Sept. 16, 1999 

ORDER DENYING DEFENDANTS’ MOTION FOR 
SUMMARY JUDGMENT AND GRANTING PLAINTIFFS’ 
CROSS-MOTION FOR SUMMARY JUDGMENT 

DAVID ALAN EZRA, Chief Judge. 

The court heard the parties’ motions on June 22, 
1999. Michael A. Reiter, Esq., and Howard M. 
Hoffman, Esq., appeared at the hearing on behalf of 

17a 

Plaintiffs; Gerald C. Kell, Esq., Patricia J. Kaeding, 
Esq., and Blaine T. Welsh, Esq., appeared at the hear- 
ing on behalf of Defendants. After reviewing the Mo- 
tions and the supporting and opposing memoranda, the 
court DENIES Defendants’ Motion for Summary Judg- 
ment and GRANTS Plaintiffs’ Cross-Motion for Sum- 
mary Judgment. 

I. BACKGROUND 

This case involves a First Amendment challenge to 
Section 503A of the Food and Drug Modernization Act 
of 1997 (the “Modernization Act”), codified at 21 U.S.C. 
§ 353a (“§ 353a”). The Modernization Act exempts 
“compounded drugs” from the standard drug approval 
requirements imposed by the Food and Drug Admini- 
stration (“FDA”). However, §§ 353a(a) and (c) con- 
dition this exemption on drug providers agreeing to not 
promote or advertise particular compounded drugs. 
Plaintiffs are licensed pharmacists seeking to enjoin the 
enforcement of these subsections of § 353a, contending 
that they violate the First Amendment’s guarantee of 
free speech.5 

5 Plaintiffs’ challenge here is focused on §§ 353a(a) and (c), 
which, taken together, restrict the advertisement or promotion of 
compounded drugs as well as the solicitation of business associated 
with their production. However, in their Complaint, Plaintiffs also 
challenge § 353a(b)(3), which limits the distribution of compounded 
drugs to no more than five percent of the total prescription orders 
dispensed outside the state, unless a Memorandum of Under- 
standing (“MOU”) is developed between a state and the Secretary 
of Health and Human Services which “addresses the distribution 
of inordinate amounts of compounded drug products interstate and 
provides for appropriate investigation by a State agency of com- 
plaints relating to compounding drug products distributed outside 
such States . . . .” In such a case, up to 20% of pharmacists’ total 

18a 

A. Factual Background 

Compounding is the process by which a pharmacist 
combines, mixes or alters ingredients to create a medi- 
cation that serves the unique needs of specific patients. 
Pharmacists may provide compounded drugs to in- 
dividual patients upon receipt of a valid prescription. 
Such drugs are produced for a variety of reasons, such 
as when the patient is allergic to an ingredient in the 
product or when the product is not available in the 
proper dosage. It is a process that is taught as part of 
the standard curriculum at most pharmacy schools, and 
most states have laws requiring that pharmacists have 
sufficient education and equipment to provide some 
compounding services. 

Plaintiffs are eight licensed pharmacies located in 
seven states. In addition to providing traditional phar- 
maceutical services, they regularly compound drugs in 
order to meet the specific needs of individual patients. 
To accomplish this task, Plaintiffs maintain that they 
have each pursued individual specializations in the 
compounding of certain drugs. As a result, compounded 
drugs represent between 60% and 90% of Plaintiffs’ 
total drug orders. 

orders distributed in interstate commerce may constitute com- 
pounded drugs. To this date, the Secretary has not developed an 
MOU with any state. Moreover, the Secretary issued a “Guidance 
for Industry on Enforcement Policy during Implementation for 
Section 503A for the Federal Food, Drug and Cosmetic Act,” 
which states that the FDA will exercise its discretion to not 
enforce § [353a(b)(3)] “[until] at least 90 days after the standard 
MOU is finalized and made available to the States for their con- 
sideration and signature.” Because the FDA has agreed not to 
enforce this Section, Plaintiffs are not currently seeking injunctive 
relief with respect to § 353a(b)(3). 

19a 

According to Plaintiffs, they have traditionally adver- 
tised their compounding services in order to both 
promote their products and inform physicians and 
patients of the variety of available compounded drugs. 
Plaintiffs explain that the compounding process 
requires them to consult with physicians and patients, 
and in some cases, make recommendations about the 
proper combination of drugs. Accordingly, they have 
prepared written promotional materials that they dis- 
tribute both by mail and at medical conferences, and 
they often include studies and other research to inform 
consumers and physicians of the uses and effectiveness 
of specific compounded drugs. 

B. Statutory History and Framework 

The Federal Food, Drug and Cosmetic Act (the 
“FDC Act”), 21 U.S.C. § 355(a), imposes stringent con- 
ditions on the manufacture and distribution of new 
drugs.6 The FDC Act imposes numerous requirements 
on the approval of new drugs, and provides that “[n]o 
person shall introduce or deliver for introduction into 
interstate commerce any new drug, unless an approval 
of an application . . . is effective with respect to such 
drug.” § 355(a). All new drugs must comply with these 
requirements unless Congress has provided an explicit 
exemption. 

Historically, while the FDA has subjected new drugs 
to its requirements, it has permitted pharmacists to 

6 “New drug” is defined as “any drug . . . generally recog- 
nized . . . as safe and effective for use under the conditions pre- 
scribed. . . .” 21 U.S.C. § 321(p). To obtain FDA approval of a 

new drug, the manufacturer must demonstrate to the FDA that 
the drug is safe and effective for each of its purported uses. 
21 U.S.C. § 355(b). 

20a 

compound drugs without meeting these stringent 
safety standards. In accordance with this policy, prior 
to the enactment of the Modernization Act in 1997, the 
FDA had never exercised its authority to subject com- 
pounded drugs to the FDC Act’s requirements. How- 
ever, the FDA had expressed concern over efforts by 
pharmacists and other drug providers to manufacture 
drugs under the guise of compounding. In 1992, the 
FDA issued a Compliance Policy Guide (“CPG”) that 
reflected the FDA’s policy regarding efforts to manu- 
facture drugs without obtaining FDA approval. The 
CPG set forth nine factors the FDA used to determine 
whether a drug provider’s efforts to produce a parti- 
cular drug justified the FDA’s exercise of enforcement 
action under the FDC Act. These factors included 
“[s]oliciting business (e.g., promoting, advertising, or 
using sales persons) to compound specific drug pro- 
ducts, product classes, or therapeutic classes of drug 
products,” and “[d]istributing inordinate amounts of 
compounded products out of state.” CPG at 153-54, 
attached as Exhibit A to Defendants’ Motion for Sum- 
mary Judgment. The CPG explained that such actions 
were more consistent with manufacturing than com- 
pounding, and enforcement of FDA regulations was 
thus necessary to prevent the “very real potential 
for causing harm to the public health when drug pro- 
ducts are manufactured and distributed in commercial 
amounts without FDA’s approval.” CPG at 152. 

In 1997, Congress formally recognized this policy by 
enacting the Modernization Act of 1997. Under the 
Modernization Act, pharmacists are free to produce 
compounded drugs without meeting the FDA’s restric- 
tive regulations, as long as they satisfy several con- 
ditions. First, under subsection (a), the drug product 

21a 

must be compounded “for an identified individual 
patient based on the unsolicited receipt of a valid pre- 
scription order.” Subsection (b) imposes numerous 
standards on the quality of the ingredients of the com- 
pounded drug, requiring, inter alia, that the drug 
product be compounded from a list of approved drug 
substances that have not been deemed unsafe or 
inappropriate for compounding. Finally, under sub- 
section (c), a drug may be compounded “only if the 
pharmacy, licensed pharmacist or licensed physician 
does not advertise or promote the compounding of any 
particular drug, class of drug, or type of drug.” 

On November 19, 1998, Plaintiffs filed their Com- 
plaint and Motion for Temporary Restraining Order, 
seeking injunctive and declaratory relief. They con- 
tended that because §§ 353a(a) and (c) allow pharma- 
cists to compound drugs only if they forego the 
advertising and promotion of their products, these 
subsections represent an unconstitutional condition in 
violation of the free speech clause of the First Amend- 
ment. On November 20, 1998, Plaintiffs filed a Motion 
for Temporary Restraining Order and Preliminary 
Injunction, requesting that the court enjoin the 
enforcement of the speech-related restrictions in 
§§ 353a(a) and (c). On December 18, 1998, after an 
evidentiary hearing held on December 4, 1998, the 
court granted Plaintiffs’ Motion in part and temporarily 
restrained the Government from enforcing § 353a 
(“TRO Order”). The parties stipulated to the extension 
of the TRO Order, pending resolution of the Summary 
Judgment Motions addressed here. 

22a 

II. STANDARD OF REVIEW 

Rule 56(c) of the Federal Rules of Civil Procedure 
provides that summary judgment shall be entered 
when: 

. . . the pleadings, depositions, answers to inter- 
rogatories, and admissions on file, together with the 
affidavits, if any, show that there is no genuine issue 
as to any material fact and that the moving party is 
entitled to a judgment as a matter of law. 

The moving party has the initial burden of “identi- 
fying for the court those portions of the materials on file 
that it believes demonstrate the absence of any genuine 
issue of material fact.” T.W. Elec. Serv., Inc. v. Pacific 
Elec. Contractors Ass’n, 809 F.2d 626, 630 (9th Cir. 
1987) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323, 
106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986)). The movant 
must be able to show “the absence of a material and 
triable issue of fact,” Richards v. Neilsen Freight 
Lines, 810 F.2d 898, 902 (9th Cir. 1987), although it need 
not necessarily advance affidavits or similar materials 
to negate the existence of an issue on which the non- 
moving party will bear the burden of proof at trial. 
Celotex, 477 U.S. at 323, 106 S. Ct. 2548. But cf., id., at 
328, 106 S. Ct. 2548 (White, J., concurring). 

If the moving party meets its burden, then the op- 
posing party may not defeat a motion for summary 
judgment in the absence of any significant probative 
evidence tending to support his legal theory. Com- 
modity Futures Trading Comm’n v. Savage, 611 F.2d 
270, 282 (9th Cir. 1979). The opposing party cannot 
stand on his pleadings, nor can he simply assert that he 
will be able to discredit the movant’s evidence at trial. 

23a 

See T.W. Elec., 809 F.2d at 630. Similarly, legal 
memoranda and oral argument are not evidence and do 
not create issues of fact capable of defeating an 
otherwise valid motion for summary judgment. British 
Airways Bd. v. Boeing Co., 585 F.2d 946, 952 (9th Cir. 
1978), cert. denied, 440 U.S. 981, 99 S. Ct. 1790, 60 
L. Ed. 2d 241 (1979). Moreover, “if the factual context 
makes the nonmoving party’s claim implausible, that 
party must come forward with more persuasive evi- 
dence than would otherwise be necessary to show that 
there is a genuine issue for trial.” California Architec- 
tural Bldg. Products, Inc. v. Franciscan Ceramics, 818 
F.2d 1466, 1468 (9th Cir. 1987), (citing Matsushita Elec. 
Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 
587, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986)) (original 
emphasis). 

The standard for a grant of summary judgment 
reflects the standard governing the grant of a directed 
verdict. See Eisenberg v. Insurance Co. of North 
America, 815 F.2d 1285, 1289 (9th Cir. 1987) (citing 
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 
S. Ct. 2505, 91 L. Ed. 2d 202 (1986)). Thus, the question 
is whether “reasonable minds could differ as to the 
import of the evidence.” Eisenberg, 815 F.2d at 1289. 

However, when “direct evidence” produced by the 
moving party conflicts with “direct evidence” produced 
by the party opposing summary judgment, “the judge 
must assume the truth of the evidence set forth by the 
nonmoving party with respect to that fact.” T.W. Elec., 
809 F.2d at 631. Also, inferences from the facts must be 
drawn in the light most favorable to the nonmoving 
party. Id. These inferences may be drawn both from 
underlying facts that are not in dispute, as well as from 

24a 

disputed facts which the judge is required to resolve in 
favor of the nonmoving party. Id. 

III. DISCUSSION 

In their Complaint, Plaintiffs argue that the restric- 
tions on advertising and promoting compounded drugs 
contained in subsections (a) and (c) of the Modernization 
Act violate Plaintiffs’ First Amendment rights to free 
speech. They challenge these sections on two bases: 

1) they are unconstitutional on their face; and 2) they 
are unconstitutional as applied to Plaintiffs. 

Defendants advance two arguments in support of the 
instant Motion for Summary Judgment. First, they 
contend that Plaintiffs lack standing to bring their “as- 
applied” challenge to § 353a, as they have not demon- 
strated that it either has been or will be applied to 
them. Second, they argue that § 353a is a valid limita- 
tion on Plaintiffs’ free speech rights, and therefore, 
does not violate the First Amendment. The court 
begins with the preliminary issue of standing, and then 
turns to the constitutionality of § 353a. 

A. Standing 

A plaintiff may challenge a regulation, ordinance or 
other government action on the grounds that it is 
unconstitutional on its face or unconstitutional as it 
applies to the plaintiff. Bd. of Trustees of the State 
Univ. of New York, 492 U.S. 469, 482, 109 S. Ct. 3028, 
106 L. Ed. 2d 388 (1989); Gaudiya Vaishnava Society v. 
City of Monterey, 7 F. Supp. 2d 1034, 1041 (N.D. Cal. 
1998). An ordinance will be deemed facially unconsti- 
tutional in either of two cases: “[E]ither . . . it is 
unconstitutional in every conceivable application, 
or . . . it seeks to prohibit such a broad range of 

25a 

protected conduct that it is unconstitutionally over- 
broad.” Members of City Council v. Vincent, 466 U.S. 
789, 104 S. Ct. 2118, 80 L. Ed. 2d 772 (1984) (“Vincent”). 
Where a regulation implicates only commercial speech, 
however, parties may generally not lodge a facial chal- 
lenge to a regulation of commercial speech on over- 
breadth grounds. See Village of Hoffman Estates v. 
Flipside, Hoffman Estates, Inc., 455 U.S. 489, 497, 102 
S. Ct. 1186, 71 L. Ed. 2d 362 (1982); Washington Mer- 
cantile Ass’n v. Williams, 733 F.2d 687, 689 (9th Cir. 
1984). Therefore, Plaintiffs’ facial challenge must be 
made on the ground that § 353a is unconstitutional in 
“every conceivable application.” 

Plaintiffs may also challenge the constitutionality of a 
statute as it applies to them. “An as-applied challenge 
contends that the law is unconstitutional as applied to 
the litigant’s particular speech activity, even though 
the law may be capable of valid application to others.” 
Foti v. City of Menlo Park, 146 F.3d 629, 635 (9th Cir. 
1998). “A determination that an ordinance’s application 
is unconstitutional as applied to a particular plaintiff 
does not necessarily render the ordinance invalid, it 
only invalidates the particular application of the ordi- 
nance.” Gaudiya Vaishnava Society v. City of Mon- 
terey, [7 F. Supp. 2d at] 1041 (N.D. Cal. 1998). 

Whether a party asserts a facial or as-applied 
challenge, Article III of the United States Constitution 
requires that there be an actual case or controversy 
before the court. See Flast v. Cohen, 392 U.S. 83, 94- 
101, 88 S. Ct. 1942, 20 L. Ed. 2d 947 (1968). To satisfy 
the case or controversy requirement, plaintiffs must 
demonstrate that they have suffered an actual or 
threatened injury as a result of the challenged conduct 
and that the injury will be redressed by a favorable 

26a 

decision. See Valley Forge Christian College v. 
Americans United for Separation of Church and State, 
Inc., 454 U.S. 464, 472, 102 S. Ct. 752, 70 L. Ed. 2d 700 
(1982). A party who fails to meet this requirement 
lacks standing to bring its claims. See Secretary of 
State of Maryland v. Munson, 467 U.S. 947, 955, 104 S. 
Ct. 2839, 81 L. Ed. 2d 786 (1984). 

In this case, Plaintiffs advance a “pre-enforcement” 
challenge to § 353a, explaining that they intend to en- 
gage in conduct that will put them within the statute’s 
reach and § 353a thus poses a threat of injury. Defen- 
dants do not contest Plaintiffs’ right to bring a facial 
pre-enforcement challenge. Defendants argue, how- 
ever, that Plaintiffs may not assert an as-applied chal- 
lenge because the statute has not actually been applied 
to them. Thus, at bottom, Defendants contend that 
facial pre-enforcement challenges and as-applied pre- 
enforcement challenges are subject to different stand- 
ing requirements. 

Courts discussing standing to bring “pre-enforce- 
ment” challenges have not typically differentiated be- 
tween as-applied and facial challenges. Rather, they 
have concluded generally that standing to bring a pre- 
enforcement challenge exists when the “plaintiff has 
alleged an intention to engage in a course of conduct 
arguably affected with a constitutional interest, but 
proscribed by a statute, and there exists a credible 
threat of prosecution.” Babbitt v. United Farm 
Workers Nat’l Union, 442 U.S. 289, 298, 99 S. Ct. 2301, 
60 L. Ed. 2d 895 (1979); see also Doucette v. City of 
Santa Monica, 955 F. Supp. 1192 (C.D. Cal. 1997). 

The Ninth Circuit has explained that unless a 
plaintiff lodges an overbreadth attack, which permits 
the plaintiff to assert the interests of third parties, the 

27a 

plaintiff must meet traditional standing requirements. 
N.A.A.C.P., Western Region v. City of Richmond, 743 
F.2d 1346, 1352 (9th Cir. 1984). In N.A.A.C.P., the 
court explicitly held that facial challenges alleging 
overbreadth allow “courts to ignore the prudential rule 
that a litigant has standing to vindicate only his own 
constitutional rights,” because such a challenge asserts 
that the statute “will chill the protected speech of third 
parties.” Id. at 1352. In contrast, the court explained 
that a “quite different” type of facial challenge is one 
that seeks relief on the ground that the statute is 
unconstitutional because it “restricts protected activity 
in every conceivable application.” Id., quoting Munson, 
467 U.S. at 964, 104 S. Ct. 2839. In the latter case, 
“[b]ecause the plaintiff asserts his own injury as the 
basis for judicial relief . . . the court can entertain his 
claim without departing from traditional standing 
concerns.” Id. Thus, under N.A.A.C.P., a facial chal- 
lenge attacking a statute in “every conceivable appli- 
cation” is subject to the same traditional standing 
requirements applied to as-applied challenges. 

In both their facial and their as-applied challenge, 
then, in order to establish standing, Plaintiffs must 
allege first that they have “an intention to engage in a 
course of conduct arguably affected with a consti- 
tutional interest, but proscribed by a statute,” and 
second, that “there exists a credible threat of prosecu- 
tion.” Babbitt v. United Farm Workers Nat’l Union, 
442 U.S. 289, 298, 99 S. Ct. 2301, 60 L. Ed. 2d 895 (1979). 
Because Plaintiffs have so alleged, as Defendants do not 
dispute, they are entitled to challenge § 353a both 
facially and as applied to them. See also Foti, 146 F.3d 
at 635 (concluding that “[i]nadequate evidence of the 

28a 

City’s alleged discriminatory enforcement of the 
ordinance does not defeat their as-applied challenge”). 

While Plaintiffs do have standing to bring either type 
of challenge to § 353a, however, there is no substantive 
distinction in this case between Plaintiffs’ two chal- 
lenges, as Plaintiffs have not identified any unusual 
application of § 353a to their specific circumstances. On 
the contrary, they appear to lodge a broad challenge to 
the constitutionality of the general application of § 353a: 

Plaintiffs, both in writing and orally, have ad- 
vertised, promoted, and solicited their compounded 
drugs for a long time prior to the enactment of 
Section 353a. Plaintiffs intend and need to continue 
to advertise, promote and solicit compounded drugs. 
Moreover, while the FDA argues that it has not 
“applied or enforced [Section 353a] against plaintiffs 
or any other individual or group” . . ., the FDA 
has “not indicated that [it] will not enforce the 
advertisement ban found in [§ 353a].” 

Thus, Plaintiffs simply present themselves as typical 
parties who may be harmed by the application of § 353a. 
Thus, Plaintiffs’ as-applied challenge is subsumed by 
their facial challenge, and any conclusion by this court 
that § 353a is unconstitutional as applied to Plaintiffs 
would also entail the conclusion that § 353a is unconsti- 
tutional “in every conceivable application.” See also 
Gaudiya Vaishnava Society, 7 F. Supp. 2d at 1043 n.6 
(concluding that where the plaintiff “failed to offer any 
evidence that the . . . Ordinance is unconstitutional in 
the manner in which it was applied to [the plaintiff’s] 
particular speech activity, a necessary element of an as- 
applied challenge,” the court’s conclusions with respect 
to the plaintiff’s facial and as-applied challenges apply 
with equal force to both arguments). 

29a 

B. Constitutionality of § 353a 

Plaintiffs challenge two subsections of § 353a. The 
first of these is contained in 353a(a), which requires that 
a prescription for the particular compounded drug be 
unsolicited and that it be prepared for an identified 
patient. That section provides: 

Sections 351(A)(2)(B), 352(f)(1), and 355 of this title 
shall not apply to a drug product if the drug product 
is compounded for an identified individual patient 
based on the unsolicited receipt of a valid prescrip- 
tion order or a notation, approved by the prescrib- 
ing practitioner, on the prescription order that a 
compounded product is necessary for the identified 
patient. 

(emphasis added). Subsection (c) of § 353a imposes a 
similar condition on the exemption, prohibiting any 
advertising and promotion of particular compounded 
drugs: 

A drug may be compounded under subsection (a) of 
this section only if the pharmacy, licensed pharma- 
cist, or licensed physician does not advertise or 
promote the compounding of any particular drug, 
class of drug, or type of drug. The pharmacy, li- 
censed pharmacist, or licensed physician may 
advertise and promote the compounding service pro- 
vided by the licensed pharmacist or licensed 
physician. 

21 U.S.C. § 353a(c) (emphasis added). Taken together, 
subsections (a) and (c) of § 353a establish that pharma- 
cists may compound drugs without being subject to the 
requirements of the Act, if 1) the compounded drug is 
prepared for an individual patient in response to an 
unsolicited prescription from a physician, and 2) the 

30a 

pharmacist refrains from advertising or promoting the 
compounding of particular drugs. 

Plaintiffs argue § 353a(a) and (c) impermissibly 
infringe on protected rights under the First Amend- 
ment. The parties agree that the speech implicated by 
these sections is limited to commercial speech, and the 
applicable test is therefore that set forth in Central 
Hudson. Such speech represents “expression related 
solely to the economic interests of the speaker and its 
audience,” see Central Hudson Gas & Electric Corp. v. 
Pub. Service Comm’n of New York, 447 U.S. 557, 561, 
100 S. Ct. 2343, 65 L. Ed. 2d 341 (1980), and “does no 
more than propose a commercial transaction.” Virginia 
State Bd. of Pharmacy v. Virginia Citizens Consumer 
Council, Inc., 425 U.S. 748, 752, 96 S. Ct. 1817, 48 L. Ed. 
2d 346 (1976). 

It is well-settled that “[t]he First Amendment . . . 
protects commercial speech from unwarranted govern- 
mental regulation.” Valley Broadcasting Co. v. United 
States, 107 F.3d 1328, 1330 (9th Cir.1997) (citing 
Central Hudson, 447 U.S. at 561-62, 100 S. Ct. 2343). 
However, “[i]f commercial speech only is threatened, 
the requirements of the First Amendment are less 
rigorous.” Washington Mercantile, 733 F.2d at 689. 
“The law has developed to ensure that advertising pro- 
vides consumers with accurate information about the 
availability of goods and services.” 44 Liquormart, Inc. 

v. Rhode Island, 517 U.S. 484, 496, 116 S. Ct. 1495, 134 
L. Ed. 2d 711 (1996). Consistent with this ideal, courts 
have encouraged and protected commercial speech, but 
have limited that protection to “the dissemination of 
truthful and nonmisleading commercial messages about 
lawful products and services.” Id. (citing Kozinski & 

31a 

Banner, The Anti-History and Pre-History of Com- 
mercial Speech, 71 Tex. L. Rev. 747 (1993)). 

In Central Hudson, the Supreme Court articulated 
the applicable test to evaluate the constitutionality of 
government regulations limiting commercial speech. 
The four-part Central Hudson test reflects a “more 
relaxed inquiry” than that applied to restrictions of 
non-commercial speech. Ass’n of Nat’l Advertisers, Inc. 

v. Lungren, 44 F.3d 726, 728-29 (9th Cir. 1994). The 
test provides: 

At the outset, we must determine whether the ex- 
pression is protected by the First Amendment. For 
commercial speech to come within that provision, it 
at least must concern lawful activity and not be 
misleading. Next, we ask whether the asserted 
governmental interest is substantial. If both 
inquiries yield positive answers, we must determine 
whether the regulation directly advances the gov- 
ernmental interest asserted, and whether it is not 
more extensive than is necessary to serve that 
interest. 

Id. at 566, 100 S. Ct. 2343. “Under this intermediate 
scrutiny, the asserted governmental interest must be 
‘substantial,’ rather than ‘compelling,’ and the regula- 
tion adopted must ‘directly advance’ this interest, 
rather than be ‘precisely drawn.’ ” Lungren, 44 F.3d at 
729 (citing Central Hudson, 447 U.S. at 566, 100 S. Ct. 
2343). 

The Central Hudson test can be distilled into four 
discrete questions: 1) As a threshold matter, is the 
targeted speech constitutionally protected; 2) has the 
Government asserted a “substantial” governmental 
interest; 3) does the regulation “directly advance” the 

32a 

asserted interest; and 4) is the restriction more exten- 
sive than necessary to achieve the asserted govern- 
mental interest. If factor (1) is answered in the affirma- 
tive, the court must proceed to an analysis of the three 
remaining factors to determine whether the statute is 
justified by the asserted governmental interest it 
purportedly serves. 

1. Is the Speech Targeted by § 353a Con- 
stitutionally Protected? 

The first factor of the Central Hudson test directs 
the court to analyze whether, as a threshold matter, the 
speech in question is protected by the First Amend- 
ment. Under Central Hudson, “for commercial speech 
to come within that provision, it must at least concern 
lawful activity and not be misleading.” 447 U.S. at 566, 
100 S. Ct. 2343. 

In this case, Defendants do not argue that the 
restrictions at issue involve illegal activity; rather, they 
contend that the targeted speech is misleading and may 
be restricted on that basis. Courts have divided the 
“misleading” element of the Central Hudson test 
into two categories: “inherently” misleading and “po- 
tentially” misleading. If speech is “inherently” mis- 
leading, it may be restricted without reference to the 
remaining three Central Hudson factors. To evaluate 
whether speech is “inherently misleading,” courts will 
consider whether the speech is “more likely to deceive 
the public than to inform it,” Central Hudson, 447 U.S. 
at 563, 100 S. Ct. 2343; whether there are substantial 
“possibilities for deception,” Friedman, 440 U.S. at 13, 
99 S. Ct. 887; whether experience has shown that such 
advertising is subject to abuse, In re R.M.J., 455 U.S. 
191, 203, 102 S. Ct. 929, 71 L. Ed. 2d 64 (1982); and 
whether the intended audience has the ability to 

33a 

evaluate the claims made. Id. Because inherently 
misleading speech carries substantial social harms, and 
the state obviously has a compelling interest in pre- 
venting such harms, speech that is inherently mis- 
leading may be regulated on that basis alone. See In re 
R.M.J., 455 U.S. at 203, 102 S. Ct. 929. 

If speech is merely “potentially” misleading, how- 
ever, it may not be proscribed under the commercial 
speech test without analysis under the remaining three 
factors. “If the protections afforded commercial speech 
are to retain their force we cannot allow rote invocation 
of the words potentially misleading to supplant [the 
government’s burden].” Ibanez v. Florida Dep’t of Bus. 
and Prof ’l Regulation, 512 U.S. 136, 146, 114 S. Ct. 
2084, 129 L. Ed. 2d 118 (1994) (internal citations and 
quotation marks omitted). Where the speech may or 
may not be misleading in any given case, it is only 
“potentially” misleading, and may not be subject to a 
blanket prohibition. Lungren, 44 F.3d at 731-32. In 
such cases, courts should evaluate a speech restriction 
“focusing on its potential for deception in light of the 
lessons of experience and the nature of the target 
audience.” Id. at 732. 

Here, Defendants contend that the speech at issue is 
inherently misleading, and thus may be prohibited 
without regard to the remaining Central Hudson fac- 
tors. In the alternative, they argue that the speech is 
at least potentially misleading, and that the Govern- 
ment is therefore allowed greater deference in its 
regulation. 

Defendants first argue that “[b]y their very nature,” 
advertisements for compounded drugs “make express 
and implicit statements” about the safety and effec- 
tiveness of such drugs. They further claim that 

34a 

“[b]ecause compounded drugs have not been shown to 
be safe and effective under the Act’s longstanding and 
universally recognized scientific standards, advertise- 
ments, promotions, and solicitations involving parti- 
cular unapproved compounded drugs are inherently 
misleading because they suggest that these unapproved 
drugs have therapeutic value.” 

Two considerations counsel the court to conclude that 
the speech targeted by the restrictions at issue is not 
“inherently misleading.” First, there is no evidence in 
this case that the prohibited statements contain any 
information that is actually false. On the contrary, 
Plaintiffs seek to provide truthful information about 
their compounding services, the various compounded 
drugs they produce, and in some cases, research 
materials on the safety and effectiveness of the parti- 
cular compounded drug. There is no false information 
in any of Plaintiffs’ promotions, a fact that Defendants 
do not dispute. Defendants’ unsupported assertion that 
the public will be misled into believing, by implication 
alone, that compounded drugs have passed FDA tests 
and been approved, is insufficient to warrant the con- 
clusion that the restricted speech is “inherently mis- 
leading.” 

Defendants’ own statement illustrates that the 
speech at issue is not inherently misleading. Defen- 
dants assert that the targeted speech is inherently mis- 
leading “because they suggest that these unapproved 
drugs have therapeutic value.” Yet Defendants them- 
selves presumably believe that compounded drugs have 
therapeutic value in some cases; otherwise, they would 
prohibit the unapproved use of such drugs altogether. 
Thus, even if it is true, as Defendants argue, that the 
promotion of compounded drugs suggests that they 

35a 

have therapeutic value, according to Defendants’ own 
argument, this is frequently an accurate and truthful 
claim about the drug’s benefits. 

Defendants rely on United States v. An Article . . . 
Acu-Dot, 483 F. Supp. 1311, 1315 (N.D. Ohio 1980) for 
the proposition that advertisements of unapproved 
drugs, such as the compounded drugs at issue here, are 
inherently misleading because they falsely indicate that 
the drugs have obtained FDA approval and that the 
drugs are therefore safe and effective. Defendants’ 
reliance on Acu-Dot, however, is misplaced. There, the 
defendants were manufacturers of a “small, pin-head 
sized magnet attached to the underside of a circular, 
adhesive patch,” which was designed to work as a minor 
pain reliever. The defendants marketed the product as 
useful “[f]or temporary relief of occasional minor aches 
and pains of muscles and joints.” 483 F. Supp. at 1312. 
The FDA brought suit against the defendants, claiming 
that the product had only a placebo effect, and there- 
fore, the defendants’ promotional statements about the 
product were misleading. The FDA relied on the 
testimony of several experts who testified that “the 
devices could not achieve the effect alleged by the 
labeling, other than through a placebo effect.” 483 
F. Supp. at 1313. The defendants apparently did not 
dispute that the drugs had only a placebo effect, but 
contended that the placebo effect was sufficient to 
warrant the defendants’ claims regarding the drugs’ 
health benefits. 

The court disagreed. The court emphasized that the 
device itself could not provide the benefits claimed in 
the advertisement; all physical benefits enjoyed by its 
users stemmed from a mental response to using the 
device. The court concluded that “the device often can 

36a 

achieve its claims of providing ‘temporary relief of 
occasional minor aches and pains of muscles and joints’; 
but this effect is the result of nothing more than 
sophisticated marketing chicanery.” 483 F. Supp. at 
1314. On these facts, the court held that the marketer’s 
claim that the device itself provided temporary relief of 
minor aches and pains was false, and thus also “mis- 
leading.” 

Here, there is neither evidence nor argument that 
Plaintiffs will attribute therapeutic benefits to their 
products that the products themselves are unable to 
provide. Defendants simply assert that their pro- 
motions “imply,” by omitting certain facts, that com- 
pounded drugs have obtained FDA approval. This 
assertion, without more, is clearly inadequate to war- 
rant the conclusion that the commercial speech tar- 
geted by § 353a is “inherently misleading.” 

A second consideration militating against the con- 
clusion that the speech is inherently misleading is that 
to the extent the targeted speech may have the po- 
tential to mislead, that misleading element can be 
reduced or removed altogether by the use of a nar- 
rower restriction. Were the FDA attempting to pre- 
vent the public from being misled by the implication 
that compounded drugs had been approved by the 
FDA, it could simply require pharmacists to include a 
disclaimer on their advertisements indicating that FDA 
approval had not been obtained.7 

7 A required disclaimer on each advertisement or solicitation 
indicating that the particular compounded drug has not been 
tested or approved by the FDA as safe and effective would satisfy 
this goal. 

37a 

A plurality of the United States Supreme Court 
reached a similar conclusion in Peel v. Attorney Regis- 
tration & Disciplinary Comm’n of Ill., 496 U.S. 91, 
110 S. Ct. 2281, 110 L. Ed. 2d 83 (1990). There, the 
Attorney Registration and Disciplinary Commission of 
Illinois brought disciplinary proceedings against the 
plaintiff under a rule prohibiting attorneys from repre- 
senting themselves to the public as specialists. The 
plaintiff, an attorney, was licensed to practice law in 
Illinois and other states, and also had obtained a 
“Certificate in Civil Trial Advocacy” from the National 
Board of Trial Advocacy. In his letterhead, the plaintiff 
stated his name, which was followed by a notation that 
read “Certified Civil Trial Specialist By the [Board],” 
and another notation that read “Licensed: Illinois, 
Missouri, Arizona.” The Commission asserted that by 
listing these pieces of information in this way, the 
plaintiff implied to the public that he was a certified 
legal specialist. The Illinois Supreme Court agreed, 
holding that the First Amendment did not protect the 
plaintiff’s letterhead because the public could confuse 
the State and the Board as the sources of the plaintiff’s 
certification and his license to practice. 

The Supreme Court reversed. The Court explained 
that a state may prohibit inherently misleading speech 
entirely, but it cannot impose an absolute prohibition if 
the information may be presented in a non-misleading 
manner. The Court emphasized that “[t]he facts stated 
on petitioner’s letterhead are true and verifiable,” and 
that there was no contention that “any potential client 
or person was actually misled or deceived” by the 
restricted speech. The Court recommended that as an 
alternative to a broad prohibition, the defendants could 
require a disclaimer to ensure that complete infor- 

38a 

mation about attorneys’ qualifications was provided to 
the public. It could not, however, broadly proscribe 
truthful information whose negligible misleading con- 
tent could be remedied by providing more information. 
See also Virginia Bd. of Pharmacy v. Virginia Citizens 
Consumer Council, Inc., 425 U.S. 748, 772 n.24, 96 S. 
Ct. 1817, 48 L. Ed. 2d 346 (1976) (noting that the state 
may regulate a commercial message so that it will 
“appear in such a form, or include such additional in- 
formation, warnings, and disclaimers, as are necessary 
to prevent its being deceptive”); Nutritional Health 
Alliance v. Shalala, 953 F. Supp. 526, 528 (S.D.N.Y. 
1997) (concluding that health claims not approved by 
the FDA are not inherently misleading where “at least 
some can be presented in a non-misleading fashion”). 

In Washington Legal Foundation v. Friedman, 13 
F. Supp. 2d 51 (D.D.C. 1998) (“WLF”), the court applied 
the same reasoning to a case involving FDA regula- 
tions. There, a public interest group sought to enjoin 
the enforcement of government restrictions regulating 
the promotion and advertisement of “off- label” uses for 
prescription drugs.8 The FDA argued that statements 
promoting off-label uses not approved by the FDA are 
“inherently misleading.” 

The court rejected the FDA’s argument, which it 
characterized as one claiming that “any and all scientific 
claims about the safety, effectiveness, contraindi- 
cations, side effects, and the like regarding prescription 
drugs are presumptively untruthful or misleading until 

8 “Off-label” uses involve using an FDA-approved drug for uses 
that have themselves not been approved, such as treating a 
condition not indicated on the label or treating the indicated 
condition but varying other factors, such as the dosing regimen. 

39a 

the FDA has had the opportunity to evaluate them.” 
13 F. Supp. 2d at 67. It stated that the FDA “exag- 
gerate[d] its overall place in the universe” by arguing 
that promotion of off-label drugs was “untruthful or 
inherently misleading merely because the FDA ha[d] 
not yet had the opportunity to evaluate the claim.” 
13 F. Supp. 2d at 67. The court concluded that the tar- 
geted statements about off-label uses were not “inher- 
ently misleading,” because “at least some can be pre- 
sented in a non-misleading fashion.” Id. (quoting Nutri- 
tional Health Alliance v. Shalala, 953 F. Supp. 526, 528 
(S.D.N.Y. 1997)). 

As indicated earlier, if the FDA believed that the 
targeted statements in this case were likely to mislead, 
it could simply require that pharmacists compounding 
drugs include disclaimers in their advertisements, 
clarifying that the compounded drug had not passed the 
FDA approval process required of new drugs. In doing 
so, any potential the targeted speech may have to 
mislead the public would be prevented, with no violence 
done to free speech. The availability of such a reason- 
able alternative restriction militates against the con- 
clusion that the speech at issue is “inherently mis- 
leading.” 

The court therefore concludes that the speech at 
issue in this case is not inherently misleading, and thus 
may not be prohibited without reference to the re- 
maining Central Hudson factors. The court recognizes, 
however, that the targeted promotional statements 
have the potential to mislead, because consumers may, 
under certain circumstances, believe that the drugs 
have survived the rigorous testing and labeling require- 
ments imposed on new drugs. “[T]he government may 
have more leeway” in restricting commercial speech 

40a 

when there is the potential to mislead on issues involv- 
ing public health. Pearson v. Shalala, 164 F.3d 650, 659 
(D.C. Cir. 1999). However, “it must still meet its bur- 
den of justifying a restriction on speech.” Id. If there is 
any likelihood that “truthful and nonmisleading 
expression will be snared along with . . . deceptive 
commercial speech, the State must satisfy the re- 
mainder of the Central Hudson test by demonstrating 
that its restriction serves a substantial state interest 
and is designed in a reasonable way to accomplish that 
end.” Id. at 768-69. Thus, the court must proceed to an 
analysis of the remaining factors to evaluate the 
constitutionality of § 353a, cognizant of the fact that the 
speech targeted by the restrictions are “potentially 
misleading,” and “focusing on its potential for deception 
in light of the lessons of experience and the nature of 
the target audience.” Lungren, 44 F.3d at 732. 

2. Does the Government assert a Substantial 
Government Interest? 

In this case, Defendants allege that three substantial 
interests are served by § 353a. First, Defendants point 
to the general goal of protecting the public health and 
safety. Plaintiffs do not dispute, as they cannot, that 
this is a substantial government interest entitled to 
federal protection. The Supreme Court has clearly 
stated that “the Government has a significant interest 
in protecting the health, safety, and welfare of its 
citizens.” Rubin, 514 U.S. at 485, 115 S. Ct. 1585. Thus, 
the court agrees with Defendants that its goal of serv- 
ing the public health and safety meet the substantial 
government interest request. 

Defendants also assert two more specific goals 
allegedly advanced by the statute. Defendants contend 
first that § 353a serves the goal of maintaining the 

41a 

integrity of the drug approval process. The court 
agrees that this interest is substantial. Congress has 
declared that all new drugs must be tested and ap- 
proved by the FDA. The purpose of this requirement is 
to ensure that new drugs introduced into the market 
meet basic standards of safety and effectiveness. The 
FDA’s approval gives consumers important information 
to evaluate a particular drug, and the integrity of this 
process is clearly necessary to its effectiveness and 
reliability. See also WLF, 13 F. Supp. 2d at 71 (con- 
cluding that encouraging manufacturers of approved 
drugs to subject off-label uses to the drug approval 
process is a substantial governmental interest). 

Finally, Defendants argue that they have a sub- 
stantial interest in balancing “the continued availability 
of compounded drug products as a component of 
individualized drug therapy, while limiting the scope of 
compounding so as to prevent manufacturing under the 
guise of compounding.” Defendants’ Motion at 20. The 
Supreme Court has confirmed that the government’s 
effort to balance competing goals may be a substantial 
interest worthy of governmental protection. See 
United States v. Edge Broadcasting Co., 509 U.S. 418, 
428, 113 S. Ct. 2696, 125 L. Ed. 2d 345 (1993) (“Edge”) 
(concluding that the “congressional policy of balancing 
the interests of lottery and nonlottery States is the 
substantial governmental interest that satisfies Central 
Hudson”). However, a finding that Defendants’ 
asserted interest in balancing its competing goals re- 
quires a finding by this court that the competing goals 
themselves are substantial. 

With respect to the first of these competing goals, 
Plaintiffs themselves echo Defendants’ claim that 
individual patients may benefit from the compounding 

42a 

of particular drugs to accommodate unique needs, such 
as age differences, allergies or unusual dosages. The 
court therefore agrees that the government has a 
substantial interest in ensuring the continued avail- 
ability of compounded drugs for use by individual 
patients. 

The court is not convinced, however, that Defendants 
have a substantial interest in preventing “compounding 
under the guise of manufacturing.” Defendants have 
offered no definition of either manufacturing or com- 
pounding, apparently because the Modernization Act 
itself offers no such definition. Thus, there is no 
coherent way for this court to determine whether 
Defendants have a substantial interest in encouraging 
one while limiting the other. In their argument, De- 
fendants appear to equate high volume distribution 
with manufacturing and low volume distribution with 
compounding. In their Motion, they insist that they 
must “limit the volume of compounding because of the 
increased health risks associated with a large number of 
patients receiving drugs that are not subject to the 
same quality control standards that apply to ordinary 
manufactured drugs.” Defendants’ Motion at 21. This 
framework, however, obviously cannot support Defen- 
dants’ asserted interest in preventing compounding 
allegedly done under the guise of manufacturing. First, 
it does nothing to clarify the difference between manu- 
facturing and compounding. Furthermore, even were 
the distinction clear, this argument neither explains nor 
supports the contention that there are “increased 
health risks associated with a large number of patients” 
receiving compounded drugs, but that compounded 
drugs in small quantities produce an overall benefit to 
the public health. 

43a 

If, on the other hand, Defendants believe that the 
relevant distinction is between those drugs that are 
FDA approved and those that are not, the court agrees 
that the FDA has a legitimate interest in preventing 
pharmacists from circumventing FDA requirements by 
changing the description of their products. To the 
extent this is the basis for Defendants’ distinction, the 
court agrees that it is substantial. The problem with 
this argument is that without more, it ultimately re- 
duces to equating manufacturing with approved drugs 
and compounding with unapproved drugs. At that 
point, any interest Defendants assert in making com- 
pounded drugs available to individual patients is no 
longer tenable. Therefore, on the facts before it, the 
court is unable to either identify or acknowledge the 
significance of the distinction between manufactured 
and compounded drugs.9 For this reason, it cannot 
agree with Defendants that the Government has a 

9 In reality, the practical difference in this case between 
Defendants’ notion of manufacturing and compounding may 
actually be embodied by the precise issue the court must address 
in this order. Specifically, it appears that Defendants would label 
pharmacy-initiated drug combining as manufacturing, and patient- 
or physician-initiated drug combining as compounding. This 
frames the distinction by looking to whether the pharmacist or 
other drug producer advertised, promoted or otherwise initiated 
the sale and use of the particular drug product. Of course, to 
accept Defendants’ distinction, and more importantly, to accept 
that Defendants have a substantial interest in preserving this 
distinction, is to agree that Defendants have a substantial interest 
in preventing pharmacists from advertising or promoting parti- 
cular compounded drugs, because to allow such promotion would 
be to allow pharmacists to manufacture under the guise of com- 
pounding. This conclusion begs the question before the court, 
which is whether the speech restrictions contained in § 353a are 
legitimate. 

44a 

substantial interest in achieving the imprecise and 
undefined balance it purportedly seeks here. 

The court thus concludes that Defendants’ asserted 
interests of protecting the public health and safety and 
preserving the integrity of the FDA approval process 
are substantial and worthy of protection under Central 
Hudson. However, Defendants third asserted interest 
of balancing the need for compounded drugs in in- 
dividual cases against the goal of preventing manufac- 
turing under the guise of compounding is insufficiently 
clear in this case to constitute a substantial govern- 
mental interest. For these reasons, whether § 353a 
withstands constitutional scrutiny turns on whether 1) 
it directly advances the government’s goals of pro- 
tecting the public health and welfare, and preserving 
the integrity of the FDA drug approval process, and 2) 
it is narrowly tailored to accomplish these goals. 

3. Does the Regulation “Directly Advance” the 
Governmental Interests Asserted? 

Under the third factor, the court examines whether 
the regulation at issue “directly advance[s] the state 
interest involved.” Central Hudson, 100 S. Ct. at 2350. 
Under this test, “the regulation may not be sustained if 
it provides only ineffective or remote support for the 
government’s purpose.” Id. Rather, to satisfy this 
requirement, “the government must demonstrate that 
‘its restrictions will in fact alleviate [the asserted 
harms] to a material degree.’ ” Valley Broadcasting Co. 

v. United States, 107 F.3d 1328, 1334 (9th Cir. 1997) 
(quoting Edenfield v. Fane, 507 U.S. 761, 769, 113 S. Ct. 
1792, 123 L. Ed. 2d 543 (1993)). 

In Edenfeld, the Supreme Court clarified that once 
the first two factors have been satisfied, the Govern- 

45a 

ment carries the burden of demonstrating that the 
challenged regulation advances the Government’s in- 
terest “in a direct and material way.” 507 U.S. at 767, 
113 S. Ct. 1792. That burden “is not satisfied by mere 
speculation or conjecture; rather, a governmental body 
seeking to sustain a restriction on commercial speech 
must demonstrate that the harms it recites are real and 
that its restriction will in fact alleviate them to a 
material degree.” Id. at 770-771, 113 S. Ct. 1792. 

To satisfy this burden, Defendants advance the 
following argument: “The advertising restrictions in 
subsections (a) and (c) ‘are intended to ensure that 
the volume of compounding does not approach that 
ordinarily associated with drug manufacturing.’ ” 

De- 
fendants’ Motion at 22 (quoting 143 Cong. Rec. S9840 
(statement of Senator Kennedy)). Thus, at bottom, 
Defendants assert that the speech-related restrictions 
in § 353a are necessary to limit the volume of com- 
pounded drugs, thereby ostensibly protecting the 
public against the purported health risks associated 
with compounded drugs. 
Defendants’ argument fails to draw the necessary 
connection between their asserted interests on the one 
hand, and restricting the volume of compounded drugs 
on the other. Defendants concede that all compounded 
drugs must be prescribed by a physician, and they even 
encourage the use of compounded drugs for individual 
patients when the drugs are requested by a physician 
or patient. Thus, Defendants freely admit that making 
compounded drugs available in some number repre- 
sents an overall benefit to the public health. However, 
as soon as the sale of the drug is encouraged by the 
pharmacist, Defendants insist that it poses a danger to 
the public health that warrants restriction. 

46a 

The D.C. Circuit rejected an argument similar to 
Defendants’ in Pearson v. Shalala, 164 F.3d 650 (D.C. 
Cir. 1999). There, similar to the FDA’s argument here, 
the FDA claimed that the public health would be 
advanced by prohibiting drug producers from making 
health claims about FDA-approved dietary supple- 
ments, where the health claims themselves had not 
been approved by the FDA. Rejecting the FDA’s argu- 
ment, the court stated: 

The government simply asserts its ‘common sense 
judgment’ that the health of consumers is advanced 
directly by barring any health claims not approved 
by the FDA. Because it is not claimed that the 
product is harmful, the government’s underlying—if 
unarticulated—premise must be that consumers 
have a limited amount of either attention or dollars 
that could be devoted to pursuing health through 
nutrition, and therefore products that are not indis- 
putably health enhancing should be discouraged as 
threatening to crowd out more worthy expendi- 
tures. We are rather dubious that this simplistic 
view of human nature or market behavior is sound, 
but, in any event, it surely cannot be said that this 
notion—which the government does not even dare 
openly to set forth—is a direct pursuit of consumer 
health; it would seem a rather indirect route, to say 
the least. 

Similar to the defendants in Pearson, Defendants in 
this case have not claimed that compounded drugs, in 
and of themselves, are harmful. Quite the contrary, 
they assert a “substantial interest” in ensuring the 
availability of such drugs in limited quantities. Instead, 
Defendants assert that the volume of compounded 

47a 

drugs must be controlled to protect the public safety, 
with no argument as to why compounded drugs in 
greater quantity pose a higher risk to public safety. 

10 

Apparently, Defendants believe that as the volume of 
compounded drugs increases, the balance shifts, so that 
the benefits of compounded drugs are outweighed by 
their costs. Defendants have produced no evidence that 
such a phenomenon is likely to occur. 

The only argument put forth by Defendants that may 
support this implicit claim is their unsupported asser- 
tion that physicians and consumers are unable to 
evaluate the health claims about compounded drugs 
made by advertising pharmacists. Defendants concede 
that Plaintiffs regularly include research and studies in 
their promotional materials, but boldly insist nonethe- 
less that “most practicing physicians do not have the 
time or the training to make independent assessments 

. . . and reach an independent, objective conclusion as 
to the benefits, risks, safety and effectiveness of a parti- 
cular compounded drug that has not undergone the 
approval process.” 

Several courts have considered and flatly dismissed 
Defendants’ argument, rejecting the “paternalistic” 
view that suppression of truthful speech is necessary to 
protect physicians and consumers from their own 
misuse of truthful information. In WLF, for example, 
the court faced the similar question of whether the 
state could prohibit pharmacists from promoting off- 
label uses of approved drugs. The court rejected the 
government’s assertion that a prohibition was neces- 

10 It must be kept in mind that all dispensing of compounded 
drugs must be under a valid prescription to an individual patient 
by a licensed physician. 

48a 

sary to prevent the misuse of drugs by physicians. It 
reasoned that “despite the FDA’s occasional state- 
ments in its briefs to the contrary, physicians are a 
highly educated, professionally-trained and sophisti- 
cated audience. In making prescribing decisions, 
doctors want (and need) to know first and foremost if 
the drug is the most safe and effective means to treat 
the conditions suffered by the patients.” WLF, 13 F. 
Supp. 2d at 63. See also 44 Liquormart, 517 U.S. at 503, 
116 S. Ct. 1495 (recognizing that “[t]he First Amend- 
ment directs us to be especially skeptical of regulations 
that seek to keep people in the dark for what the 
government perceives to be their own good”). 

Perhaps the most insightful rendering of this prin- 
ciple is that reflected in the Supreme Court’s decision in 
Virginia Bd. of Pharmacy. There, the court struck 
down a Virginia statute prohibiting pharmacists from 
advertising their prices for prescription drugs. In 
reaching its conclusion, the court expressed its aversion 
to the use of suppression as a means to prevent “unin- 
formed” individuals from misusing accurate informa- 
tion. The Court explained: 

There is, of course, an alternative to this highly pa- 
ternalistic approach. That alternative is to assume 
that this information is not in itself harmful, that 
people will perceive their own best interests if only 
they are well enough informed, and that the best 
means to that end is to open the channels of com- 
munication rather than to close them. If they are 
truly open, nothing prevents a “professional” phar- 
macist from marketing his own assertedly superior 
product, and contrasting it with that of the low-cost, 
high-volume prescription drug retailer. But the 
choice among these alternative approaches is not 

49a 

ours to make or the Virginia General Assembly’s. It 
is precisely this kind of choice, between the dangers 
of suppressing information, and the dangers of its 
misuse if it is freely available, that the First 
Amendment makes for us. 

Id. at 770, 96 S. Ct. 1817. 

The court agrees that suppression of truthful and 
accurate information as a means to protect society from 
its own misuse is anathema to the principles of the First 
Amendment. Were the FDA concerned with serving 
public health by preventing the purported harms of 
compounded drugs, it could certainly find a more direct 
route to that end than traveling through the protected 
area of speech. There is no evidence on the record that 
reducing the volume of compounded drugs will serve 
public health, and even if such evidence existed, broad 
prohibitions on truthful and accurate speech is an 
illegitimate method of achieving this goal. 

Nor does § 353a directly advance the goal of pre- 
serving the integrity of the FDA approval process. If 
the FDA were concerned with ensuring that drug 
producers not avoid FDA regulations, it could easily 
require that all drugs, including compounded drugs, 
obtain FDA approval before being introduced into the 
stream of commerce. This would certainly be a more 
“direct” route to maintaining the integrity of the ap- 
proval process. In actuality, there appears to be no 
logical connection between the regulation of speech on 
the one hand and the preservation of the integrity of 
the FDA’s drug approval process on the other. The re- 
maining sections of § 353a, which regulate the ingred- 
ients that may be used and limit the total amount of 
compounded drugs that may be distributed, would 
seem to more directly achieve those goals. 

50a 

Furthermore, even if § 353a did not suffer from these 
flaws, given the substantial exceptions to its application 
that dramatically limit its reach, this court cannot 
conclude that § 353a directly advances the FDA’s 
asserted interests. 

Pharmacists are free to advertise 
compounded services, as long as they do not advertise 
“any particular drug, class of drug, or type of drug.” 
Thus, a pharmacy may advertise its compounding 
experience, including promotional activities at edu- 
cational, professional and trade meetings, likely increas- 
ing the overall volume of compounded drugs, as long as 
it does not promote the compounding of any particular 
drug or class of drugs. 

Section 353a also does not prohibit consultations 
between the compounding pharmacist and patients or 
physicians. By its terms, § 353a specifically allows a 
compounded drug to be based on either an unsolicited 
prescription or “a notation, approved by the prescribing 
practitioner, on the prescription order that a com- 
pounded product is necessary for the identified pa- 
tient.” 21 U.S.C. § 353a(a). The provision permits a 
pharmacist to call a physician, after a patient has pre- 
sented a prescription that indicates a compounded 
product may be desirable, to discuss the possibility of 
prescribing a compounded product. Thus, the statutory 
scheme essentially bars pharmacists from promoting 
particular drugs, but leaves them free to either ad- 
vertise compounding services generally or initiate 
discussions with physicians or patients regarding parti- 
cular compounded products needed by individual pa- 
tients. It is difficult to see how the communication of 
the same information can both serve and undermine the 
public health, depending on which party initiates the 
contact or the method used to communicate it. 

51a 

Finally, if Defendants are concerned with limiting 
the volume of compounded drugs, as they allege, 
§ 353a(b)(3) would appear to undermine that goal, 
because it explicitly permits compounded drugs to con- 
stitute up to 5% of interstate drug distributions, and 
100% of intrastate drug distributions. Moreover, if a 
pharmacist has a Memorandum of Understanding 
(“MOU”) with the Secretary of Health and Human Ser- 
vices, it can distribute as much as 20% of its total 
interstate drug distributions in the form of compounded 
drugs. For a large pharmacy such as Payless or Wal- 
greens, this would permit the distribution of com- 
pounded drugs in substantial numbers, amounting to 
sales in the millions of dollars. 

In Rubin v. Coors Brewing Co., 514 U.S. 476, 115 S. 
Ct. 1585, 131 L. Ed. 2d 532 (1995), the court relied on 
similar considerations to strike down a federal restric- 
tion on alcohol advertising, reasoning that there was 
“little chance” the restriction could advance the govern- 
ment’s asserted goal, where “other provisions of the 
same Act directly undermine[d] and counteract[ed] 
its effects.” 514 U.S. at 489, 115 S. Ct. 1585. In the 
Supreme Court’s recent decision in Greater New Or- 
leans Broadcasting Ass’n v. United States, 527 U.S. 
173, 119 S. Ct. 1923, 144 L. Ed. 2d 161 (1999), the Court 
reached the same conclusion. There, the Court struck 
down a federal ban on gambling advertising, in part, 
because its application was riddled with exceptions, 
making it ineffective in serving its purported purpose. 
The Court explained that “[t]he operation of § 1304 and 
its attendant regulatory regime is so pierced by ex- 
emptions and inconsistencies that the Government 
cannot hope to exonerate it.” 527 U.S. at ——, 119 S. 
Ct. at 1925. Similarly, in this case, Defendants’ primary 

52a 

purpose for § 353a—limiting the volume of compounded 
drugs in order to serve the public health—is undercut 
by the exceptions allowed in its own provisions. Under 
these circumstances, § 353a does not “directly advance” 
Defendants’ asserted interests. 

The court therefore finds that the speech-related 
restrictions contained in § 353a do not directly advance 
the Government’s asserted interests, as required by the 
third Central Hudson factor. However, even were the 
court to conclude that the statute could satisfy this 
requirement, § 353a is also flawed because it fails the 
fourth factor of the Central Hudson, in that it is not 
narrowly tailored to achieve its stated purposes. 

4. Is the Speech Restriction more Extensive than 
Necessary to Serve the Interests that Support it? 

Under the fourth Central Hudson factor, the court 
must consider whether the restriction is “more exten- 
sive than is necessary to serve [the asserted state] 
interest.” Central Hudson, 447 U.S. at 566, 100 S. Ct. 
2343. “The fourth part of the test complements 
the direct-advancement inquiry of the third, asking 
whether the speech restriction is not more extensive 
than necessary to serve the interests that support it.” 
Greater New Orleans, 527 U.S. at ——, 119 S. Ct. at 
1932. 

Nearly twenty years after Central Hudson was 
decided, in the face of a disagreement over the appro- 
priate interpretation of the fourth Central Hudson 
factor, the Supreme Court revisited the issue in Bd. of 
Trustees of the State Univ. of New York v. Fox, 492 
U.S. 469, 109 S. Ct. 3028, 106 L. Ed. 2d 388 (1989). In 
Fox, the Court explained that contrary to the holdings 
of several circuits, the fourth factor does not require 

53a 

that a restriction be “absolutely the least severe that 
will achieve the desired end.” Rather, what is required 
is a 

‘fit’ between the legislature’s ends and the means 
chosen to accomplish those ends—a fit that is not 
necessarily perfect, but reasonable; that represents 
not necessarily the single best disposition but one 
whose scope is in proportion to the ends served; that 
employs not necessarily the least restrictive means 
but . . . a means narrowly tailored to achieve the 
desired objective. 

Fox, 492 U.S. at 480, 109 S. Ct. 3028 (quoting Posadas 
de Puerto Rico Assoc. v. Tourism Co. of Puerto Rico, 
478 U.S. 328, 341, 106 S. Ct. 2968, 92 L. Ed. 2d 266 
(1986)). While giving more deference to the state, the 
Fox Court noted at the same time that restrictions 
previously struck down under the Central Hudson test 
were usually “substantially excessive, disregarding ‘far 
less restrictive and more precise means.’ ” 

Fox, 492 
U.S. at 479, 109 S. Ct. 3028. 

The Ninth Circuit subsequently considered the impli- 
cation of Fox in Project 80’s, Inc. v. City of Pocatello, 
942 F.2d 635, 637 (9th Cir. 1991). Interpreting the Fox 
Court’s holding, the Ninth Circuit stated that in order 
to find a “reasonable fit” between the state regulation 
and its asserted interest, the court must conclude that 
the regulation is “narrowly tailored to serve substantial 
governmental interests.” Project 80’s, 942 F.2d at 637. 
The court reasoned: 

By pointing out the alternatives available to the 
cities to advance their interests, we do not impose a 
least restrictive means requirement. Rather, we 
conclude, as did the Supreme Court in Fox [sic], 

54a 

that restrictions which disregard far less restrictive 
and more precise means are not narrowly tailored. 

942 F.2d at 638. Thus, where there are “far less restric- 
tive and more precise means” that will achieve the 
desire end, the fourth factor under Central Hudson is 
not satisfied. Id.; see also Cal-Almond, Inc. v. United 
States Dep’t of Agriculture, 14 F.3d 429, 440 (9th Cir. 
1993) (striking down advertising regulations that were 
“more extensive than necessary to serve the interest” 
asserted). 

Applying this test to the instant case, it is clear that 
§ 353a is not “narrowly tailored.” As previously noted, 
were the FDA merely concerned with protecting the 
public from being misled about whether a drug has 
been FDA approved, it could require disclaimers to 
prevent any potential for confusion. The disclaimers 
could specifically state that the compounded drugs 
being advertised had not been subjected to the FDA’s 
drug approval process. Included in these disclaimers 
could be statements about the costs and benefits of 
compounded drugs. The FDA could even require phar- 
macists to indicate that compounded drugs are intended 
for the specific needs of individual patients that cannot 
be met with approved manufactured drug products. 

In Pearson, the court held that the FDA was re- 
quired to consider disclaimers as an alternative to an 
outright ban on advertising. The court reviewed 
several recent Supreme Court cases “repeatedly point- 
ing to disclaimers as constitutionally preferable to 
outright suppression.” 164 F.3d at 657; see Peel, 496 
U.S. at 110, 110 S. Ct. 2281; R.M.J., 455 U.S. at 206 

n.20, 102 S. Ct. 929; Shapero v. Kentucky Bar Ass’n., 
486 U.S. 466, 478, 108 S. Ct. 1916, 100 L. Ed. 2d 475 
(1988). The court concluded that where a statute 

55a 

prohibits “incomplete” advertising, “the preferred 
remedy is more disclosure, rather than less.” Id., 
(citing Bates v. State Bar of Arizona, 433 U.S. 350, 376, 
97 S. Ct. 2691, 53 L. Ed. 2d 810 (1977)). Here, too, 
Defendants could require disclaimers as an alternative 
to their prohibition on advertising compounded drugs, 
which would clearly represent a far less restrictive 
means to accomplish the FDA’s asserted goals. 

Alternatively, if Defendants’ intention is to protect 
the public health and welfare and to preserve the 
integrity of the FDA approval process, and they believe 
that compounded drugs threaten these concerns, they 
could subject compounded drugs to the safety testing 
imposed on new drugs. While this would of course 
represent a broader restriction on the production of 
compounded drugs, it would not threaten the free 
speech interests implicated by § 353a. 

Courts have repeatedly held that where the benefits 
reaped by restrictions on speech could be obtained 
through nonspeech restrictions, speech restrictions 
should be viewed with great suspicion. See, e.g., 
Greater New Orleans, 527 U.S. at —— - ——, 119 S. Ct. 
at 1934-35 (“It is well settled that the First Amendment 
mandates closer scrutiny of government restrictions on 
speech than of its regulation of commerce alone”); see 
also 44 Liquormart, 517 U.S. at 500, 116 S. Ct. 1495 
(recognizing that “special concerns arise from regula- 
tions that entirely suppress commercial speech in order 
to pursue a nonspeech-related policy”). In its recent 
decision in Greater New Orleans, the Court recognized 
the harms of restrictions that indiscriminately and 
unnecessarily capture innocent speech. The Court 
there held that the statute at issue was suspect because 
it “sacrifice[d] an intolerable amount of truthful speech 

56a 

about lawful conduct when compared to all of the po- 
licies at stake and the social ills that one could rea- 
sonably hope such a ban to eliminate.” Id. 

Thus, even were Defendants able to show that com- 
pounded drugs carry substantial health risks, and 
therefore that their volume should be limited, the 
proper remedy to such a problem is not broad prohi- 
bitions on truthful speech. The Greater New Orleans 
Court reminds us that “the power to prohibit or to 
regulate particular conduct does not necessarily include 
the power to prohibit or regulate speech about that 
conduct.” 527 U.S. at ——, 119 S. Ct. at 1934 (citation 
omitted). In this case, there is no question that Con- 
gress has the authority, indeed the responsibility, to 
regulate the availability of potentially dangerous drugs. 
Where such an end can be achieved without reliance on 
speech restrictions, however, Congress cannot, con- 
sistent with the First Amendment, use protected 
speech to accomplish its task. As the Court in 44 
Liquormart recognized, “[t]he First Amendment makes 
clear that the Constitution presumes that attempts to 
regulate speech are more dangerous than attempts to 
regulate conduct.” 517 U.S. at 511, 116 S. Ct. 1495. 

In sum, by enacting § 353a, Defendants have imper- 
missibly infringed on protected speech to advance 
interests that can be served through far less restrictive 
means. While Defendants have identified substantial 
government interests they seek to serve, § 353a does 
not directly advance these interests and is clearly not 
narrowly tailored to accomplish its purported goals. 
While the Government is given more deference in its 
regulation of commercial speech, this deference does 
not override the protections of the First Amendment, 
which prevent the unnecessary prohibition of truthful 

57a 

speech to achieve goals that may be served without 
implicating protected freedoms. 

C. Severability 

Having concluded that the speech-related portions of 
§§ 353a(a) and (c) are unconstitutional, the court must 
now turn to the question of whether these sections may 
be severed from § 353a. It is well-settled that “a court 
should refrain from invalidating more of the statute 
then is necessary.” Alaska Airlines, Inc. v. Brock, 480 
U.S. 678, 684, 107 S. Ct. 1476, 94 L. Ed. 2d 661 (1987) 
(quoting Regan v. Time, Inc., 468 U.S. 641, 104 S. Ct. 
3262, 82 L. Ed. 2d 487 (1984)). “Whenever an act of 
Congress contains unobjectionable provisions separable 
from those found to be unconstitutional, it is the duty of 
this court to so declare, and to maintain the act in so far 
as it is valid.” Regan, 468 U.S. at 652, 104 S. Ct. 3262 
(citations omitted). 

Consistent with these principles, the Supreme Court 
has stated that if the constitutionally permissible 
portions of a statute are “fully operative as a law,” the 
offending portions should be severed “[u]nless it is 
evident that the Legislature would not have enacted 
those provisions which are within its power, inde- 
pendently of that which is not.” Immigration & 
Naturalization Service v. Chadha, 462 U.S. 919, 931, 
103 S. Ct. 2764, 77 L. Ed. 2d 317 (1983) (quoting 
Buckley v. Valeo, 424 U.S. 1, 108, 96 S. Ct. 612, 46 L. 
Ed. 2d 659 (1976)). Thus, only if the remainder of the 
statute is unable to operate independently as law, or it 
is clear that Congress would not have enacted the 
statute but for the impermissible portions, may the 
court invalidate the entire statute. 

58a 

In this case, there is no question that the offending 
portions of subsections (a) and (c) can be severed from 
the remainder of § 353a. First, while extracting the 
speech-related provisions will certainly reduce the 
reach of § 353a, this modification will not render the 
statute unable to operate as law. The remaining 
portions of § 353a substantially limit and regulate 
pharmacists’ production and distribution of com- 
pounded drugs. Subsection (b), for example, contains 
numerous requirements relating to the quality of the 
drug’s ingredients and their effectiveness in com- 
pounding. Section 353a(b)(1)(A) requires that com- 
pounded drugs consist of drugs found on a list of “bulk 
drug substances,” as defined in the Code of Federal 
Regulations. Section 353a(b)(1)(C) prohibits com- 
pounding of any drug ingredients that have been 
deemed unsafe or ineffective. Section 353a(b)(1)(D) 
prevents an individual from compounding “inordinate 
amounts [of] any drug products that are essentially 
copies of a commercially available drug product.” 
Finally, § 353a(b)(3) limits pharmacists’ distribution of 
compounded drugs to no more than 5%, or in some 
cases up to 20%, of the pharmacists’ total interstate 
distribution of prescription orders. These remaining 
sections clearly represent independent requirements 
for the production of compounded drugs, allowing 
§ 353a to be “fully operative as a law” even in the 
absence of the offending speech-related sections. 

Furthermore, Defendants have presented no evi- 
dence that Congress would not have enacted § 353a in 
the absence of these provisions. Defendants simply 
point out that the exemption for compounded drugs in 
§ 353a, by its terms, applies only if “the drug meets the 
requirements of this section.” Defendants’ Reply at 19. 

59a 

Defendants infer from this statement that Congress 
would not have exempted compounded drugs from the 
FDA’s approval process in the absence of the speech- 
related sections. 

The evidence, however, is to the contrary. As 
Defendants concede, prior to Congress’ enactment of 
the Modernization Act, FDA testing and labeling 
requirements were not imposed on compounded drugs; 
the FDA exercised its enforcement discretion to permit 
pharmacists to compound drugs without meeting these 
stringent standards. It is difficult for this court to 
believe that after years of permitting pharmacists to 
compound drugs without satisfying the FDA’s 
stringent standards, the Government would now 
enforce these standards in the context of compounding 
because one of its alleged protections—the restriction 
of advertising—is unavailable. There is no evidence on 
the record to support this assumption; indeed, the facts 
support the opposite conclusion. Therefore, the court 
finds that the speech-related portions of the § 353a are 
severable, leaving the remainder of the statute to 
operate as it was enacted. 

CONCLUSION 

For the foregoing reasons, the court DENIES Defen- 
dants’ Motion for Summary Judgment and GRANTS 

Plaintiffs’ Cross-Motion for Summary Judgment, and 
enjoins the FDA from enforcing the speech-related 
restrictions contained in §§ 353a(a) and (c). 

IT IS SO ORDERED. 

60a 

APPENDIX C 

UNITED STATES DISTRICT COURT 
FOR THE DISTRICT OF NEVADA 

CV-S-98-01650-JBR (RLH) 

WESTERN STATES MEDICAL CENTER PHARMACY, A 

NEVADA CORPORATION; WOMEN’S INTERNATIONAL 
PHARMACY, A WISCONSIN CORPORATION; HEALTH 

PHARMACY, A WISCONSIN CORPORATION; 
APOTHECURE, A TEXAS CORPORATION; COLLEGE 
PHARMACY, A COLORADO CORPORATION; 
LAKESIDE PHARMACY, A TENNESSEE CORPORATION; 
WEDGEWOOD VILLAGE PHARMACY, A NEW JERSEY 
CORPORATION, PLAINTIFFS 

v. 

DONNA E. SHALALA, IN HER OFFICIAL CAPACITY 
AS SECRETARY, UNITED STATES DEPARTMENT OF 
HEALTH AND HUMAN SERVICES; AND 

MICHAEL A. FRIEDMAN, IN HIS OFFICIAL CAPACITY AS 
ACTING COMMISSIONER, UNITED STATES FOOD AND 
DRUG ADMINISTRATION, DEFENDANTS 

[Filed: Dec. 18, 1998] 

ORDER 

On November 19, 1998, Plaintiffs Western States 
Medical Center Pharmacy, Women’s International 
Pharmacy, Health Pharmacy Apothecure, College 
Pharmacy, Lakeside Pharmacy, and Wedgewood Vil- 
lage Pharmacy (jointly referred to hereinafter as 
“Pharmacies”) moved (#3) for a temporary restraining 

61a 

order against Defendants Donna Shalala, Secretary of 
the United States Department of Health and Human 
Services and Michael A. Friedman, Acting Commis- 
sioner of the United States Food and Drug Admini- 
stration (jointly referred to hereinafter as the “Govern- 
ment”). The Government opposed (#15) Pharmacies’ 
motion for a temporary restraining order, to which the 
Pharmacies replied (#17). 

In their motion, Pharmacies seek to prevent enforce- 
ment of two provisions of the Food and Drug Moderni- 
zation Act of 1997 (the “Modernization Act,” 21 U.S.C. 
§ 353a). The Modernization Act allows a pharmacy to 
compound drugs, without meeting the approval re- 
quirements established for new drugs, under certain 
conditions. Pharmacies claim that 21 U.S.C. § 353A(c), 
which allows a pharmacy to compound drugs only if the 
pharmacy “does not advertise or promote the com- 
pounding of any particular drug, class of drug, or type 
of drug,” is an abridgment of speech protected by the 
First Amendment. In their motion, Pharmacies further 
claim that 21 U.S.C. § 353a(b)(3) should also not be 
enforced. Section 353a(b)(3) allows a pharmacy to only 
distribute “compounded drug products out of the States 
in which they are compounded in quantities that do not 
exceed 5 percent of the total prescription orders 
dispensed. . . .” A pharmacy, however, would be 

allowed to distribute compounded drugs in greater 
quantity if the State where the drugs is compounded 
has entered into a memorandum of understanding 
(“MOU”) with the Secretary of Health and Human 
Services that “addresses the distribution of inordinate 
amounts of compounded drug products interstate and 
provides for appropriate investigation by a State 
agency of complaints relating to compounding drug 

62a 

products distributed outside such States. . . .” The 

Secretary, however, has not yet developed an MOU. 
Pharmacies argue that the 5 percent limitation should 
not be enforced until the Secretary actually develops 
the MOU. 

The Government argues the Pharmacies do not have 
standing to challenge the Modernization Act because 
the Pharmacies have not demonstrated a realistic 
danger that the Act will be enforced against them. The 
Government further argues that the Pharmacies’ right 
to freedom of speech has not been abridged because the 
First Amendment does not protect advertisements of 
illegal practices. The Government explains that com- 
pounding is illegal unless exempted under the Moderni- 
zation Act. In order for compounding drugs to be 
exempt under the Modernization Act, a pharmacy may 
not advertise the compounding of a particular drug. 
The Government also argues advertising the com- 
pounding of specific drugs. The ingredients used in the 
Pharmacies’ compounded drugs are approved by the 
Food and Drug Administration (the “FDA”). The 
specific combinations, proportions, dosages or uses, 
however, may not have been reviewed by the FDA’s 
approval process. 

Section 355(a) of the Federal Food, Drug and 
Cosmetic Act (the “Food and Drug Act,” 21 U.S.C. 
§ 301 et seq.), provides that “No person shall introduce 
or deliver into interstate commerce any new drug, 
unless an approval of an application . . . is effective 
with respect to such drug.” Section 321(p) of the Food 
and Drug Act defines a “new drug” as “any drug . . . 
not generally recognized, among experts qualified by 
scientific training and experience to evaluate the safety 
of drugs, as safe and effective for use under the condi- 

63a 

tions prescribed, recommended, or suggested in the 
labeling thereof . . . or . . . [a]ny drug . . . which 
has become so recognized [as safe and effective] but 
which has not . . . been used to a material extent or 
for a material time under such conditions.” Many of the 
compounded drugs produced by Pharmacies can 
properly be classified as new drugs under the Food and 
Drug Act. 

Previously, the Secretary had discretion to make 
exception to the above requirement, or has not histori- 
cally enforced these provisions as to compounded drugs. 
However, in 1997, Congress enacted the Food and Drug 
Modernization Act of 1997 (the “Modernization Act,” 21 
U.S.C. § 353a). Section 353a(a) of the Modernization 
Act provides that a compounded drug need not obtain 
an approval of an application normally required of a 
new drug “if the drug product is compounded for an 
identified individual patient based on the unsolicited 
receipt of a valid prescription order or notation, ap- 
proved by the prescribing practitioner, on the pre- 
scription order that a compounded product is necessary 
for the identified patient, if the drug meets the require- 
ments of this section and if the compounding is by . . . 
a licensed pharmacist in a State licensed pharmacy.” 
(Emphasis added). One of the requirements of this 
section, 21 U.S.C. § 353a(c) (hereinafter referred to as 
the “Non-Advertising Provision”), is that the pharmacy 
may not “advertise or promote the compounding of any 
particular drug” or promote the compounding service 
provided by the licensed pharmacist . . .” 

STANDING 

In Bland v. Fessler, 88 F.3d 729, 736-37 (9th Cir. 
1996), the Ninth Circuit held that a telephone adverti- 
ser that used computers to make automated phone calls 

64a 

had standing under the First Amendment to challenge 
the constitutionality of a State public utility code pro- 
hibiting the use of devices to make automated phone 
calls even though the State had never enforced the 
statute against anyone. The Ninth Circuit found that, 
“one does not have to await the consummation of 
threatened injury to obtain preventative relief . . . [i]f 
the injury is certainly impending . . .” Id. at 736. The 
court reasoned when the statute allegedly infringes on 
freedom of speech, the alleged danger is self-censorship 
because of fear of prosecution under the statute and is a 
harm that can be realized without actual prosecution. 
Id. at 737. The court also noted that the telephone 
advertiser would “face grave consequences for vio- 
lations of the civil statute, including civil fines and 
private suits for damages” and that the “State had not 
suggested that the newly enacted statute would not be 
enforced.” Id. at 736 n. 11, 737. The Ninth Circuit 
concluded that to have standing when challenging the 
constitutionality of the statute under the First Amend- 
ment, plaintiff need only show “an actual well-founded 
fear that the law will be enforced against them.” Id. 
at 737. 

In this case, the Government has not indicated that 
they will not enforce the advertisement ban found in 
the Modernization Act, and Pharmacies face the same 
self-censorship due to a fear of prosecution expressed in 
Bland. Additionally, Pharmacies face grave conse- 
quences from States for violations of the advertise- 
ments ban. States may impose civil fines or revoke 
Pharmacies’ licenses for failure to comply with federal 
drug safety statutes. Pharmacies have standing under 
the First Amendment to challenge the Modernization 
Act’s prohibition against advertising compounded 

65a 

drugs because they face an actual well-founded fear 
that the Act’s Non-Advertising Provision will be en- 
forced against them. 

The Government does not allege that advertising a 
particular compounded drug is inherently misleading. 
The Government does argue, however, that com- 
pounded drugs fall under the definition of “new drug” 
and cannot be introduced or delivered into interstate 
commerce without the approval of an application for 
such drug unless the compounded drug is exempted 
from the approval process under the Modernization 
Act. The Government further argues that in order for 
compounding drugs to be exempt under the 
Modernization Act, Pharmacies may not advertise the 
compounding of a particular drug. The Government 
concludes that because the distribution of compounded 
drugs by Pharmacies is illegal unless the Modernization 
exemption applies, the advertisement of a particular 
compounded drug is not protected by the First 
Amendment. 

The Court agrees that compounded drugs fall under 
the definition of a “new drug.” In Weinberger v. Bentex 
Pharmaceuticals, 412 U.S. 645, 652 (1973), the Supreme 
Court, construing 21 U.S.C. § 321(p), recognized that 
“whether a particular drug is a ‘new drug,’ depends in 
part on the expert knowledge and experience of scien- 
tists based on controlled clinical experimentation and 
backed by substantial support in scientific literature.” 
In United States v. Generix Drug Corporation, 460 U.S. 
453, 461 (1983), the Supreme Court held that all the 
ingredients of a drug, both active and inactive, are sub- 
ject to the requirements of § 321(p). While Pharmacies 
point out that the compounded drugs they distribute 
are listed in authoritative literature, they also admit 

66a 

that in many instances the specific drug formulas have 
been individualized for a specific patient. Pharmacies 
do not contend that these individualized formulas, or 
even all the actual formulas listed in the authoritative 
literature, have undergone the extensive controlled 
clinical testing necessary so that many of the com- 
pounded drugs, with all their ingredients as pro- 
portioned, no longer fall within the terms of § 201(p). 

The Court also agrees that, prior to the enactment of 
the Modernization Act, compounding a drug, which 
could be considered a “new drug,” may have been il- 
legal and that the Government used its enforcement 
discretion to not prosecute such cases when the 
Government believed that pharmacists were not en- 
gaged in manufacturing. By passing the Modernization 
Act, Congress decided to exempt compounding, under 
certain conditions, from the normal approval require- 
ments necessary for new drugs. One of those conditions 
may not be the prohibition of commercial speech unless 
the Government can assert a substantial reason for the 
prohibition and also show that the prohibition directly 
advances that interest. To hold otherwise, would make 
“commercial speech” unprotectable. The advertisement 
of any product or service, which is not itself protected 
by the Constitution, could be banned by the Govern- 
ment with impunity. For example, the Government 
could make the selling of all products and services 
illegal except in instances where the selling of the pro- 
duct or service is not advertised, thus eliminating all 
commercial speech. Once Congress decided to permit 
compounding, even under limited circumstances such as 
those found in the Modernization Act, Congress cannot 
thereafter limit the advertising of compounding without 
satisfying the remaining Central Hudson factors. 

67a 

Pharmacies, however, also take an untenable position 
with regards to legality of compounding and its re- 
lationship to the prohibition of advertising. Pharmacies 
argue that since compounding itself is not illegal, 
prohibiting the advertising of this perfectly legal con- 
duct cannot be justified. Such an argument totally 
eliminates the last three prongs of the Central Hudson 
test and is contrary to the body of Supreme Court 
precedent. 

While Justice Stevens, who authored the court’s 
opinion in 44 Liquormart v. Rhode Island, 517 U.S. 484 
(1996) without a clear majority, “indicated his view that 
all truthful and not misleading speech was protected by 
the First Amendment,” he dutifully applied all four 
prongs of the Central Hudson test and found that 
Rhode Island’s ban on alcohol price advertisements did 
not satisfy its third (‘directly advances’) prong nor its 
forth (‘not more extensive’) prong.” E.g., Nordyke v. 
Santa Clara County, 110 F.3d, 707, 712 (9th Cir. 1997). 
In concurring, Justice O’Connor, speaking for three 
other justices, also firmly supported “the Central 
Hudson test in all its four parts.” Id. The entire 
Central Hudson framework is premised on the notion 
that advertising of legal activities can be regulated, or 
even banned, if the government has a substantial in- 
terest and the regulation is no more extensive than 
necessary. 

Recently, the Supreme Court upheld an advertising 
ban even though the underlying activity ws legal. In 
Florida Bar v. Went For It, Inc., 515 U.S. 618 (1995), 
the Supreme Court upheld a Florida Bar rule that pro- 
hibited lawyers from using direct mail to solicit per- 
sonal injury or wrongful death clients within thirty 
days of an accident even though the representation of 

68a 

these clients was not only legal but necessary. The 
court upheld the ban because it found the Florida Bar’s 
interest in protecting the privacy of potential clients 
was substantial, and the prohibition no more extensive 
than necessary. Id. at 625-34. If the Government can 
provide a substantial reason for its ban on adverting 
specific compounded drugs and show that the prohibi- 
tion is not more extensive than necessary, the Moderni- 
zation Act prohibition on advertising could also be up- 
held. 

The Government has asserted a substantial reason 
for its ban on advertising of specific compounded drugs. 
The Government asserts that it is protecting the 
patients from untested and unproven medications. The 
Government alleges that before a drug is mass 
marketed, it has a substantial interest to ensure drug 
safety and effectiveness. The Supreme Court has 
continuously held that “the Government has a 
significant interest in protecting the health, safety, and 
welfare of its citizens. . . .” Rubin v. Coors Brewing 

Co., 514 U.S. 476, 485 (1995). This Court finds that the 
Government’s asserted interest to protect the public 
health is substantial. 

The Government, however, has not provide any evi- 
dence that the regulation on advertising found in the 
Modernization Act directly advances the governmental 
interest asserted, or that the regulation is not more 
extensive than is necessary to serve that interest. In 
Liquormart almost all the Justices agreed that the 
government bears the burden of showing that the ban 
on advertising is no more extensive than necessary. 
See 517 U.S. at 507, 516 (Stevens’ Opinion); 517 U.S. at 
532 (O’Connor concurrence). 

69a 

As the Supreme Court has explained, in order for a 
speech restriction to pass muster under the final prong, 
there must be “a ‘fit’ between the legislature’s ends and 
the means chosen to accomplish those ends, a fit that is 
not necessarily perfect, but reasonable; that represents 
not necessarily the single best disposition but one 
whose scope is ‘in proportion to the interest served,’ 
that employs not necessarily the least restrictive means 
but a means narrowly tailored to achieve the desired 
objective.” Florida Bar, 515 U.S. at 632. In Florida 
Bar, the government fulfilled that obligation by 
completing a 2-year study of the effects of lawyer 
advertising on public opinion, conducting hearings, 
commissioning surveys, reviewing extensive public 
commentary, and then determining that several 
changes to its advertising rules were in order. 515 U.S. 
at 620. This Court does not mean to suggest, however, 
that the Government’s evidence needs to be as 
extensive. But see Nordyke, 110 F.3d at 713 (indicating 
that to satisfy the fourth prong of Central Hudson the 
government possibly would have to provide a detailed 
study to substantiate the government’s reason for 
restricting speech). The Court only finds that the 
Government has offered no evidence that would 
indicate a reasonable fit between the Government’s 
stated interest and the adverting ban on specific 
compounded drugs. 

Irreparable Harm 

The Court must now decide whether Pharmacies 
have demonstrated the possibility of irreparable harm. 
In Elrod v Burns, 427 U.S. 347, 373 (1976), the Su- 
preme Court held that the “loss of First Amendment 
freedoms, for even minimal periods of time, unquestion- 
ably constitutes irreparable injury.” See also S.O.C., 

70a 

Inc. v. County of Clark, 152 F.3d 1136, 1148 amended 
by 160 F.3d 541 (9th Cir. 1998); Foti v. City of Menlo 
Park, 146 F.3d 629, 643 (9th Cir. 1998). As the Phar- 
macies have demonstrated probable success on the 
merits on their claim that 21 U.S.C. § 353a(c) infringes 
on their First Amendment right of freedom of speech, 
they have also demonstrated the possibility of irrepara- 
ble harm. Plaintiffs have therefore met the conditions 
necessary to secure a temporary restraining order. 
Accordingly, 

IT IS ORDERED that Pharmacies’ motion for a 
temporary restraining order (#3) is PARTIALLY 
GRANTED in that the Government is temporarily re- 
strained from enforcing 21 U.S.C. § 353a(c). 

DATED this 18th day of December 1998. 

/S/ JOHNNIE B. RAWLINSON 

JOHNNIE B. RAWLINSON 
United States District Judge 

71a 

APPENDIX D 

Compliance Policy Guide 7132.16 

Manufacture, Distribution, and Promotion of Adultered, 
Misbranded, or Unapproved New Drugs for Human 
Use by State-Licensed Pharmacies 

BACKGROUND: 

This compliance policy guide (CPG) reflects long- 
standing FDA policy that has been articulated in re- 
lated CPGs, warning letters, and federal court de- 
cisions. 

FDA recognizes that pharmacists traditionally have 
extemporaneously compounded and manipulated rea- 
sonable quantities of drugs upon receipt of a valid 
prescription for an individually identified patient from a 
licensed practitioner. This traditional activity is not the 
subject of this CPG. With respect to such activities, it 
is important to note that 21 U.S.C. 360(g)(1) exempts 
retail pharmacies from the registration requirements 
that include, among other things, a mandatory biennial 
FDA inspection. The exemption applies to “pharma- 
cies” that operate in accordance with state law and 
dispense drugs “upon prescriptions of practitioners 
licensed to administer such drugs to patients under the 
care of such practitioners in the course of their pro- 
fessional practice, and which do not manufacture, pre- 
pare, propagate, compound, or process drugs or devices 
for sale other than in the regular course of their 
business of dispensing or selling drugs or devices at 
retail” (emphasis added). See also 21 U.S.C. Sections 
374(a)(2) (exempting pharmacies that meet the fore- 
going criteria from certain inspection provisions) and 

72a 

353(b)(2) (exempting drugs dispensed by filling a valid 
prescription from certain misbranding provisions). 

It should be noted, however, that while retail phar- 
macies that meet the statutory criteria are exempted 
from certain requirements of the Federal Food, Drug, 
and Cosmetic Act (Act), they are not the subject of any 
general exemption from the new drug, adulteration, or 
misbranding provisions of the Act. 

FDA believes that an increasing number of establish- 
ments with retail pharmacy licenses are engaged in 
manufacturing, distributing, and promoting unap- 
proved new drugs for human use in a manner that is 
clearly outside the bounds of traditional pharmacy 
practice and that constitute violations of the Act. Some 
“pharmacies” that have sought to find shelter under 
and expand the scope of the exemptions identified 
above, have claimed that their manufacturing, distri- 
bution, and marketing practices are only retail dis- 
pensing; however, the practices of these entities are far 
more consistent with those of drug manufacturers and 
wholesalers than with retail pharmacies. The activities 
of the self-styled pharmacies are consistent with the 
activities of manufacturers in that they direct pro- 
motional activities at licensed practitioners and pa- 
tients. The promotional activities include employing 
detail persons and hiring marketing consultants to 
promote the company’s specialization of compounding 
specific products or therapeutic classes of drugs. The 
firms also receive and use in large quantity bulk drug 
substances to manufacture unapproved drug products 
and to manufacture drug products in large quantity, in 
advance of receiving a valid prescription for the pro- 
ducts. Moreover, the firms serve physicians and 

73a 

patients with whom they have no established individual 
or professional relationship. 

When less significant violations of the Act related to a 
pharmacy have occurred, FDA has worked coopera- 
tively with state regulatory agencies; generally, FDA 
will continue to defer such actions to state authorities. 
However, FDA regards the more extreme examples of 
the foregoing conduct as significant violations that 
constitute deliberate efforts to circumvent the new 
drug, adulteration or misbranding provisions of the Act. 

There is a very real potential for causing harm to the 
public health when drug products are manufactured 
and distributed in commercial amounts without FDA’s 
prior approval and without adequate record keeping (to 
retrace and recall harmful products), without labeling, 
or without adequate manufacturing controls to assure 
the safety, purity, potency, quality, and identity of the 
drug product. In one recent instance, an outbreak of 
eye infections in regional hospitals, and the loss of an 
eye by each of two patients, was attributed to a drug 
product compounded by a pharmacy. 

FDA has issued warning letters to several firms that 
were clearly manufacturing drugs for human use under 
the guise of traditional pharmacy practice. For ex- 
ample, one establishment manufactured over 300,000 
dosage units of albuterol sulfate and other inhalation 
therapy drugs per month for 6,000 patients, most of 
whom live out of state. Another firm manufactured a 
large quantity of a drug product at dosage levels that 
have not been determined by adequate and well con- 
trolled studies to be effective for the indicated use. A 
recent inspection of another company operating with a 
pharmacy license revealed that the firm had hundreds 
of bulk drug ingredients on hand to manufacture about 

74a 

165 different products. A review of the manufacturing 
dates of the “compounded” drugs on hand during the 
inspection of this firm revealed that 37 products had 
been produced over a year prior to the inspection, six 
products had been made between six and eleven 
months prior to the inspection, and 111 products had no 
recorded manufacturing date. 

The agency has initiated enforcement action when 
pharmacy practice extends beyond the reasonable and 
traditional practice of retail pharmacy. The courts have 
upheld FDA’s interpretation in those cases. See United 
States v. Sene X Eleemosynary Corp., 479 F. Supp. 970 
(S.D. Fla. 1979), aff ’d. [1982-1983 Transfer Binder] 
Food Drug Cosm. L. Rep. (CCH) para. 38,207 at 39,117 
(11th Cir. 1983); Cedars N. Towers Pharmacy, Inc., v. 
United States, [1978-79 Transfer Binder] Food Drug 
Cosm. L. Rep. (CCH) para. 38,200 at 38,826 (S.D. Fla. 
Aug. 28, 1978). See also United States v. Algon Chemi- 
cal, Inc., 879 F.2d 1154 (3d Cir. 1989), United States v. 
9/1 Kg. Containers, 854 F.2d 173 (7th Cir. 1988), cert 
denied. 489 U.S. 1010 (1989), and United States v. 
Rutherford, 442 U.S. 544 (1979), regarding limitations 
on sale of unapproved and otherwise unlawful products 
to licensed practitioners. 

POLICY: 

FDA recognizes that a licensed pharmacist may com- 
pound drugs extemporaneously after receipt of a valid 
prescription for an individual patient (i.e., an oral or 
written order of a practitioner licensed by state law to 
administer or order the administration of the drug to an 
individual patient identified and treated by the prac- 
titioner in the course of his or her professional practice). 
Pharmacies that do not otherwise engage in practices 
that extend beyond the limits set forth in this CPG may 

75a 

prepare drugs in very limited quantities before re- 
ceiving a valid prescription, provided they can docu- 
ment a history of receiving valid prescriptions that 
have been generated solely within an established pro- 
fessional practitioner-patient-pharmacy relationship, 
and provided further that they maintain the pre- 
scription on file for all such products dispensed at the 
pharmacy as required by state law. 

If a pharmacy compounds finished drugs from bulk 
active ingredient materials considered to be unap- 
proved new drug substances, as defined in 21 CFR 
310.3(g), such activity must be covered by an FDA- 
sanctioned investigational new drug application (IND) 
that is in effect in accordance with 21 U.S.C. Section 
355(i) and 21 CFR 312. 

In certain circumstances, it may be appropriate for a 
pharmacist to compound a small quantity of a drug that 
is only slightly different than an FDA-approved drug 
that is commercially available. In these circumstances, 
patient-by-patient consultation between physician and 
pharmacist must result in documentation that sub- 
stantiates the medical need for the particular variation 
of the compound. 

Pharmacies may not, without losing their status as 
retail entities, compound, provide, and dispense drugs 
to third parties for resale to individual patients. 

FDA will generally continue to defer to state and local 
officials regulation of the day-to-day practice of retail 
pharmacy and related activities. FDA anticipates that 
cooperative efforts between the states and the agency 
will result in coordinated investigations, referrals, and 
follow-up actions by the states. 

76a 

FDA may, in the exercise of its enforcement discretion, 
initiate federal enforcement actions against entities and 
responsible persons when the scope and nature of a 
pharmacy’s activity raises the kinds of concerns nor- 
mally associated with a manufacturer and that results 
in significant violations of the new drug, adulteration, 
or misbranding provisions of the Act. In determining 
whether to initiate such an action, the agency will 
consider whether the pharmacy engages in any of the 
following acts: 

1. Soliciting business (e.g., promoting, advertising, or 
using sales persons) to compound specific drug pro- 
ducts, product classes, or therapeutic classes of drug 
products. 

2. Compounding, regularly, or in inordinate amounts, 
drug products that are commercially available in the 
marketplace and that are essentially generic copies 
of commercially available, FDA-approved drug pro- 
ducts. 

3. Receiving, storing, or using drug substances with- 
out first obtaining written assurance from the sup- 
plier that each lot of the drug substance has been 
made in an FDA approved facility. 

4. Receiving, storing, or using drug components not 
guaranteed or otherwise determined to meet official 
compendia requirements. 

5. Using commercial scale manufacturing or testing 
equipment for compounding drug products. 

6. Compounding inordinate amounts of drugs in 
anticipation of receiving prescriptions in relation to 
the amounts of drugs compounded after receiving 
valid prescriptions. 

77a 

7. Offering compounded drug products at wholesale to 
other state licensed persons or commercial entities 
for resale. 

8. Distributing inordinate amounts of compounded 
products out of state. 

9. Failing to operate in conformance with applicable 
state law regulating the practice of pharmacy. 

The foregoing list of factors is not intended to be 
exhaustive and other factors may be appropriate for 
consideration in a particular case. 

FDA guidelines and other CPGs interpret or clarify 
agency positions concerning nuclear pharmacy, hospital 
pharmacy, shared service operations, mail order 
pharmacy, and the manipulation of approved drug 
products. 

REGULATORY ACTION GUIDANCE: 

Pharmacies engaged in promotion and other activities 
analogous to manufacturing and distributing drugs for 
human use are subject to the same provisions of the Act 
as manufacturers. District offices are encouraged to 
consult with state regulatory authorities to assure 
coherent application of this CPG to establishments 
which are operating outside of the traditional practice 
of pharmacy. 

FDA-initiated regulatory action may include issuing a 
warning letter, seizure, injunction, and/or prosecution. 
Charges may include, but need not be limited to, vio- 
lations of 21 U.S.C. Sections 351(a)(2)(B), 352(a), 
352(f )(1), 352(o), and 355(a) of the Act. 

Issued: 3/16/92 

78a 

APPENDIX E 

UNITED STATES COURT OF APPEALS 
FOR THE NINTH CIRCUIT 

File No. DC #98-01650-DAE(RLH) 

WESTERN STATES MEDICAL CENTER, A 

NEVADA CORPORATION; WOMEN’S INTERNATIONAL 
PHARMACY, A WISCONSIN CORPORATION; HEALTH 

PHARMACY, A WISCONSIN CORPORATION; 
APOTHECURE, A TEXAS CORPORATION; COLLEGE 
PHARMACY, A COLORADO CORPORATION; 
LAKESIDE PHARMACY, A TENNESSEE CORPORATION; 
WEDGEWOOD VILLAGE PHARMACY, A NEW JERSEY 
CORPORATION, PLAINTIFFS-APPELLEES 

v. 

DONNA E. SHALALA, IN HER OFFICIAL CAPACITY 
AS SECRETARY, UNITED STATES DEPARTMENT OF 
HEALTH AND HUMAN SERVICES; 
JANE E. HENNEY, M.D., IN HER OFFICIAL CAPACITY AS 
COMMISSIONER, DEFENDANTS-APPELLANTS 

Filed: Apr. 27, 2001 

Before: SCHROEDER, Chief Judge, HALL, and 

W. A. FLETCHER, Circuit Judges. 

The panel has voted to deny appellants’ petition for 
rehearing en banc. The full court has been advised of 
the petition for rehearing en banc and no active judge 
has requested a vote on whether to rehear the matter 
en banc. Fed. R. App. P. 35. 

79a 

The petition for rehearing en banc is DENIED. 

80a 

APPENDIX F 

STATUTORY PROVISIONS 

1. Section 353a of Title 21, United States Code, pro- 
vides: 

Pharmacy compounding 

(a) In general 

Sections 351(a)(2)(B), 352(f )(1), and 355 of this title 
shall not apply to a drug product if the drug product is 
compounded for an identified individual patient based 
on the unsolicited receipt of a valid prescription order 
or a notation, approved by the prescribing practitioner, 
on the prescription order that a compounded product is 
necessary for the identified patient, if the drug product 
meets the requirements of this section, and if the 
compounding— 

(1) is by— 

(A) a licensed pharmacist in a State licensed 
pharmacy or a Federal facility, or 

(B) a licensed physician, 

on the prescription order for such individual patient 
made by a licensed physician or other licensed 
practitioner authorized by State law to prescribe 
drugs; or 

(2)(A) is by a licensed pharmacist or licensed 
physician in limited quantities before the receipt of a 
valid prescription order for such individual patient; 
and 

(B) is based on a history of the licensed pharma- 
cist or licensed physician receiving valid prescrip- 

81a 

tion orders for the compounding of the drug 
product, which orders have been generated solely 
within an established relationship between— 

(I) the licensed pharmacist or licensed physi- 
cian; and 

(ii)(I) such individual patient for whom the 
prescription order will be provided; or 

(II) the physician or other licensed practitioner 
who will write such prescription order. 

(b) Compounded drug 

(1) Licensed pharmacist and licensed physician 

A drug product may be compounded under 
subsection (a) of this section if the licensed pharmacist 
or licensed physician— 

(A) compounds the drug product using bulk drug 
substances, as defined in regulations of the Secre- 
tary published at section 207.3(a)(4) of title 21 of the 
Code of Federal Regulations— 

(i) that— 

(I) comply with the standards of an appli- 
cable United States Pharmacopoeia or National 
Formulary monograph, if a monograph exists, 
and the United States Pharmacopoeia chapter on 
pharmacy compounding; 

(II) if such a monograph does not exist, are 
drug substances that are components of drugs 
approved by the Secretary; or 

(III) if such a monograph does not exist and 
the drug substance is not a component of a drug 

82a 

approved by the Secretary, that appear on a list 
developed by the Secretary through regulations 
issued by the Secretary under subsection (d) of 
this section; 

(ii) that are manufactured by an establishment 
that is registered under section 360 of this title 
(including a foreign establishment that is 
registered under section 360(i) of this title); and 

(iii) that are accompanied by valid certificates of 
analysis for each bulk drug substance; 

(B) compounds the drug product using ingredi- 
ents (other than bulk drug substances) that comply 
with the standards of an applicable United States 
Pharmacopoeia or National Formulary monograph, 
if a monograph exists, and the United States Phar- 
macopoeia chapter on pharmacy compounding; 

(C) does not compound a drug product that 
appears on a list published by the Secretary in the 
Federal Register of drug products that have been 
withdrawn or removed from the market because 
such drug products or components of such drug pro- 
ducts have been found to be unsafe or not effective; 
and 

(D) does not compound regularly or in inordinate 
amounts (as defined by the Secretary) any drug 
products that are essentially copies of a com- 
mercially available drug product. 

(2) Definition 

For purposes of paragraph (1)(D), the term “essen- 
tially a copy of a commercially available drug product” 
does not include a drug product in which there is a 
change, made for an identified individual patient, which 

83a 

produces for that patient a significant difference, as 
determined by the prescribing practitioner, between 
the compounded drug and the comparable commercially 
available drug product. 

(3) Drug product 

A drug product may be compounded under sub- 
section (a) of this section only if— 

(A) such drug product is not a drug product 
identified by the Secretary by regulation as a drug 
product that presents demonstrable difficulties for 
compounding that reasonably demonstrate an ad- 
verse effect on the safety or effectiveness of that 
drug product; and 

(B) such drug product is compounded in a State— 

(i) that has entered into a memorandum of 
understanding with the Secretary which ad- 
dresses the distribution of inordinate amounts of 
compounded drug products interstate and pro- 
vides for appropriate investigation by a State 
agency of complaints relating to compounded 
drug products distributed outside such State; or 

(ii) that has not entered into the memoran- 
dum of understanding described in clause (i) and 
the licensed pharmacist, licensed pharmacy, or 
licensed physician distributes (or causes to be 
distributed) compounded drug products out of the 
State in which they are compounded in quantities 
that do not exceed 5 percent of the total prescrip- 
tion orders dispensed or distributed by such 
pharmacy or physician. 

The Secretary shall, in consultation with the National 
Association of Boards of Pharmacy, develop a standard 

84a 

memorandum of understanding for use by the States in 
complying with subparagraph (B)(i). 

(c) Advertising and promotion 

A drug may be compounded under subsection (a) of 
this section only if the pharmacy, licensed pharmacist, 
or licensed physician does not advertise or promote the 
compounding of any particular drug, class of drug, or 
type of drug. The pharmacy, licensed pharmacist, or 
licensed physician may advertise and promote the com- 
pounding service provided by the licensed pharmacist 
or licensed physician. 

(d) Regulations 

(1) In general 

The Secretary shall issue regulations to implement 
this section. Before issuing regulations to implement 
subsections (b)(1)(A)(i)(III), (b)(1)(C), or (b)(3)(A) of 
this section, the Secretary shall convene and consult an 
advisory committee on compounding unless the Secre- 
tary determines that the issuance of such regulations 
before consultation is necessary to protect the public 
health. The advisory committee shall include repre- 
sentatives from the National Association of Boards of 
Pharmacy, the United States Pharmacopoeia, phar- 
macy, physician, and consumer organizations, and other 
experts selected by the Secretary. 

(2) Limiting compounding 

The Secretary, in consultation with the United States 
Pharmacopoeia Convention, Incorporated, shall promul- 
gate regulations identifying drug substances that may 
be used in compounding under subsection (b)(1)(A) 
(i)(III) of this section for which a monograph does not 
exist or which are not components of drug products 

85a 

approved by the Secretary. The Secretary shall include 
in the regulation the criteria for such substances, which 
shall include historical use, reports in peer reviewed 
medical literature, or other criteria the Secretary may 
identify. 

(e) Application 

This section shall not apply to— 

(1) compounded positron emission tomo- 
graphy drugs as defined in section 321(ii) of this 
title; or 

(2) radiopharmaceuticals. 

(f ) Definition 

As used in this section, the term “compounding” does 
not include mixing, reconstituting, or other such acts 
that are performed in accordance with directions con- 
tained in approved labeling provided by the product’s 
manufacturer and other manufacturer directions 
consistent with that labeling. 

2. Section 321(p) of Title 21, United States Code, 
provides: 

(p) The term “new drug” means- 
(1) Any drug (except a new animal drug or an 
animal feed bearing or containing a new animal drug) 
the composition of which is such that such drug is not 
generally recognized, among experts qualified by scien- 
tific training and experience to evaluate the safety and 
effectiveness of drugs, as safe and effective for use 
under the conditions prescribed, recommended, or sug- 
gested in the labeling thereof, except that such a drug 
not so recognized shall not be deemed to be a “new 

86a 

drug” if at any time prior to June 25, 1938, it was 
subject to the Food and Drug Act of June 30, 1906, as 
amended, and if at such time its labeling contained the 
same representations concerning the conditions of its 
use; or 

(2) Any drug (except a new animal drug or an 
animal feed bearing or containing a new animal drug) 
the composition of which is such that such drug, as a 
result of investigations to determine its safety and 
effectiveness for use under such conditions, has become 
so recognized, but which has not, otherwise than in such 
investigations, been used to a material extent or for a 
material time under such conditions. 

3. Section 331 of Title 21, United States Code, provides, 
in relevant part: 

Prohibited acts 

The following acts and the causing thereof are 
prohibited: 

(a) The introduction or delivery for introduction 
into interstate commerce of any food, drug, device, 
or cosmetic that is adulterated or misbranded. 

(b) The adulteration or misbranding of any food, 
drug, device, or cosmetic in interstate commerce. 

(c) The receipt in interstate commerce of any 
food, drug, device, or cosmetic that is adulterated or 
misbranded, and the delivery or proffered delivery 
thereof for pay or otherwise. 

87a 

(d) The introduction or delivery for introduction 
into interstate commerce of any article in violation 
of section 344 or 355 of this title. 

* * * * * 

4. Section 351 of Title 21, United States Code, provides, 
in relevant part: 

(a) Poisonous, insanitary, etc., ingredients; adequate 
controls in manufacture 

(1) If it consists in whole or in part of any filthy, 
putrid, of decomposed substance; or (2)(A) if it has been 
prepared, packed, or held under insanitary conditions 
whereby it may have been contaminated with filth, or 
whereby it may have been rendered injurious to health; 
or (B) if it is a drug and the methods used in, or the 
facilities or controls used for, its manufacture, pro- 
cessing, packing, or holding do not conform to or are not 
operated or administered in conformity with current 
good manufacturing practice to assure that such drug 
meets the requirements of this chapter as to safety and 
has the identity and strength, and meets the quality 
and purity characteristics, which it purports or is 
represented to possess; or (C) if it is a compounded 
positron emission tomography drug and the methods 
used in, or the facilities and controls used for, its 
compounding, processing, packing, or holding do not 
conform to or are not operated or administered in 
conformity with the positron emission tomography 
compounding standards and the official monographs of 
the United States Pharmacopoeia to assure that such 
drug meets the requirements of this chapter as to 
safety and has the identity and strength, and meets the 
quality and purity characteristics, that it purports or is 
represented to possess; or (3) if its container is com- 

88a 

posed, in whole or in part, of any poisonous or deleteri- 
ous substance which may render the contents injurious 
to health; or (4) it bears or contains, for purposes of 
coloring only, a color additive which is unsafe within the 
meaning of section 379e(a) of this title, or (B) it is a 
color additive the intended use of which in or on drugs 
or devices is for purposes of coloring only and is unsafe 
within the meaning of section 379e(a) of this title; or (5) 
if it is a new animal drug which is unsafe within the 
meaning of section 360b of this title; of (6) if it is an 
animal feed bearing or containing a new animal drug, 
and such animal feed is unsafe within the meaning of 
section 360b of this title. 

(b) Strength, quality, or purity differing from official 
compendium 

If it purports to be or is represented as a drug the 
name of which is recognized in an official compendium, 
and its strength differs from, or its quality or purity 
falls below, the standard set forth in such compendium. 
Such determination as to strength, quality, or purity 
shall be made in accordance with the tests or methods 
of assay set forth in such compendium, except that 
whenever tests or methods of assay have not been 
prescribed in such compendium, or such tests or meth- 
ods of assay as are prescribed are, in the judgment of 
the Secretary, insufficient for the making such deter- 
mination, the Secretary shall bring such fact to the 
attention of the appropriate body charged with the 
revision of such compendium, and if such body fails 
within a reasonable time to prescribe tests or methods 
of assay which, in the judgment of the Secretary, are 
sufficient for purposes of this paragraph, then the 
Secretary shall promulgate regulations prescribing 
appropriate tests or methods of assay in accordance 

89a 

with which such determination as to strength, quality, 
or purity shall be made. No drug defined in an official 
compendium shall be deemed to be adulterated under 
this paragraph because it differs from the standard of 
strength, quality, or purity therefor set forth in such 
compendium, if its difference in strength, quality, or 
purity from such standard is plainly stated on its label. 
Whenever a drug is recognized in both the United 
States Pharmacopoeia and the Homeopathic Pharma- 
copoeia of the United States it shall be subject to the 
requirements of the United States Pharmacopoeia 
unless it is labeled and offered for sale as a homeopathic 
drug, in which case it shall be subject to the provisions 
of the Homeopathic Pharmacopoeia of the United 
States and not to those of the United States Pharma- 
copoeia. 

(c) Misrepresentation of strength, etc., where drug is 
unrecognized in compendium 

If it is not subject to the provisions of paragraph (b) 
of this section and its strength differs from, or its purity 
or quality falls below, that which it purports or is 
represented to possess. 

(d) Mixture with or substitution of another 
substance 

If it is a drug and any substance has been (1) mixed 
or packed therewith so as to reduce its quality or 
strength or (2) substituted wholly or in part therefor. 

* * * * * 

90a 

5. Section 352 of Title 21, United States Code, provides, 
in relevant part: 

Misbranded drugs and devices 

A drug or device shall be deemed to be misbranded- 
(a) False or misleading label 

If its labeling is false or misleading in any particular. 
Health care economic information provided to a formu- 
lary committee, or other similar entity, in the course of 
the committee or the entity carrying out its responsi- 
bilities for the selection of drugs for managed care or 
other similar organizations, shall not be considered to 
be false or misleading under this paragraph if the 
health care economic information directly relates to an 
indication approved under section 290aa-4 or under 
section 262(a) of Title 42 for such drug and is based on 
competent and reliable scientific evidence. The require- 
ments set forth in section 290aa-4(a) or in section 262(a) 
of Title 42 shall not apply to health care economic 
information provided to such a committee or entity in 
accordance with this paragraph. Information that is 
relevant to the substantiation of the health care eco- 
nomic information presented pursuant to this para- 
graph shall be made available to the Secretary upon 
request. In this paragraph, the term “health care 
economic information” means any analysis that identi- 
fies, measures, or compares the economic consequences, 
including the costs of the represented health outcome of 
the use of a drug to the use of another drug, to another 
health care intervention, or to no intervention. 

(b) Package form; contents of label 

If in package form unless it bears a label containing 
(1) the name and place of business of the manufacturer, 
packer, or distributor; and (2) an accurate statement of 

91a 

the quantity of the contents in terms of weight, mea- 
sure, or numerical count: Provided, That under clause 
(2) of this paragraph reasonable variations shall be 
permitted, and exemptions as to small packages shall be 
established, by regulations prescribed by the Secretary. 

(c) Prominence of information on label 

If any word, statement, or other information required 
by or under authority of this chapter to appear on the 
label or labeling is not prominently placed thereon with 
such conspicuousness (as compared with other words, 
statements, designs, or devices, in the labeling) and in 
such terms as to render it likely to be read and 
understood by the ordinary individual under customary 
conditions of purchase and use. 

* * * * * 

(e) Designation of drugs or devices by established 
names 

(1)(A) If it is a drug, unless its label bears, to the 
exclusion of any other nonproprietary name (except the 
applicable systematic chemical name or the chemical 
formula)— 

(i) the established name (as defined in subpara- 
graph (3)) of the drug, if there is such a name; 

(ii) the established name and quantity or, if 
determined to be appropriate by the Secretary, the 
proportion of each active ingredient, including the 
quantity, kind, and proportion of any alcohol, and 
also including whether active or not the established 
name and quantity or if determined to be appropri- 
ate by the Secretary, the proportion of any bro- 
mides, ether, chloroform, acetanilide, acetophen- 

92a 

detidin, amidopyrine, antipyrine, atropine, hyoscine, 
hyoscyamine, arsenic, digitalis, digitalis glucosides, 
mercury, ouabain, strophanthin, strychnine, thy- 
roid, or any derivative or preparation of any such 
substances, contained therein, except that the 
requirement for stating the quantity of the active 
ingredients, other than the quantity of those 
specifically named in this subclause, shall not apply 
to nonprescription drugs not intended for human 
use; and 

(iii) the established name of each inactive ingred- 
ient listed in alphabetical order on the outside 
container of the retail package and, if determined to 
be appropriate by the Secretary, on the immediate 
container, as prescribed in regulation promulgated 
by the Secretary, except that nothing in this sub- 
clause shall be deemed to require that any trade 
secret be divulged, and except that the require- 
ments of this subclause with respect to alphabetical 
order shall apply only to nonprescription drugs that 
are not also cosmetics and that this subclause shall 
not apply to nonprescription drugs not intended for 
human use. 

(B) For any prescription drug the established 
name of such drug or ingredient, as the case may be, 
on such label (and on any labeling on which a name 
for such drug or ingredient is used) shall be printed 
prominently and in type at lease half as large as 
that used thereon for any proprietary name or 
designation for such drug or ingredient, except that 
to the extent that compliance with the require- 
ments of subclause (ii) or (iii) of clause (A) or this 

93a 

clause is impracticable, exemptions shall be estab- 
lished by regulations promulgated by the Secretary. 

* * * * * 

(3) As used in subparagraph (1), the term 
“established name”, with respect to a drug or ingredi- 
ent thereof, means (A) the applicable official name 
designated pursuant to section 358 of this title, or (B), if 
there is no such name and such drug, or such ingredi- 
ent, is an article recognized in an official compendium, 
then the official title thereof in such compendium, or 
(C) if neither clause (A) nor clause (B) of this subpara- 
graph applies, then the common or usual name, if any, 
of such drug or of such ingredient, except that where 
clause (B) of this subparagraph applies to an article 
recognized in the United States Pharmacopoeia and in 
the Homeopathic Pharmacopoeia under different 
official titles, the official title used in the United States 
Pharmacopoeia shall apply unless it is labeled and 
offered for sale as homeopathic drug, in which case the 
official title used in the Homeopathic Pharmacopoeia 
shall apply. 

* * * * * 

(f ) 
Directions for use and warnings on label 

Unless its labeling bears (1) adequate directions for 
use; and (2) such adequate warnings against use in 
those pathological conditions or by children where its 
use may be dangerous to health, or against unsafe 
dosage or methods or duration of administration or 
application, in such manner and form, as are necessary 
for the protection of users, except that where any 
requirement of clause (1) of this paragraph, as applied 

94a 

to any drug or device, is not necessary for the pro- 
tection of the public health, the Secretary shall promul- 
gate regulations exempting such drug or device from 
such requirement. 

(g) Representations as recognized drug; packing and 
labeling; inconsistent requirements for designa- 
tion of drug 

If it purports to be a drug the name of which is 
recognized in an official compendium, unless it is pack- 
aged and labeled as prescribed therein. The method of 
packing may be modified with the consent of the 
Secretary. Whenever a drug is recognized in both the 
United States Pharmacopoeia and the Homeopathic 
Pharmacopoeia of the United States, it shall be subject 
to the requirements of the United States Pharma- 
copoeia with respect to packaging and labeling unless it 
is labeled and offered for sale as a homeopathic drug, in 
which case it shall be subject to the provisions of the 
Homeopathic Pharmacopoeia of the United States, and 
not to those of the United States Pharmacopoeia, ex- 
cept that in the event of inconsistency between the 
requirements of this paragraph and those of paragraph 
(e) as to name by which the drug or its ingredients shall 
be designated, the requirements of paragraph (e) shall 
prevail. 

(h) Deteriorative drugs; packing and labeling 

If it has been found by the Secretary to be a drug 
liable to deterioration, unless it is packaged in such 
form and manner, and its label bears a statement of 
such precautions, as the Secretary shall by regulations 
require as necessary for the protection of the public 
health. No such regulation shall be established for any 
drug recognized in an official compendium until the 

95a 

Secretary shall have informed the appropriate body 
charged with the revision of such compendium of the 
need for such packaging or labeling requirements and 
such body shall have failed within a reasonable time to 
prescribe such requirements. 

(i) Drug; misleading container; limitation; offer for 
sale under another name 

(1) If it is a drug and its container is so made, 
formed, or filled as to be misleading; or (2) if it is an 
imitation of another drug; or (3) if it is offered for sale 
under the name of another drug. 

( j) 
Health-endangering when used as prescribed 

If is dangerous to health when used in the dosage or 
manner, or with the frequency or duration prescribed, 
recommended, or suggested in the labeling thereof. 

* * * * * 

(n) Prescription drug advertisements: established 
name; quantitative formula; side effects, con- 
traindications, and effectiveness; prior approval; 
false advertising; labeling; construction of the 
Convention on Psychotropic Substances 

In the case of any prescription drug distributed or 
offered for sale in any State, unless the manufacturer, 
packer, or distributor thereof includes in all advertise- 
ments and other descriptive printed matter issued or 
caused to be issued by the manufacturer, packer, or 
distributor with respect to that drug a true statement 
of (1) the established name as defined in paragraph (e) 
of this section, printed prominently and in type at least 
half as large as that used for any trade or brand name 
thereof (2) the formula showing quantitatively each 
ingredient of such drug to the extent required for labels 

96a 

under paragraph (e) of this section, and (3) such other 
information in brief summary relating to side effects 
contraindications, and effectiveness as shall be required 
in regulations which shall be issued by the Secretary in 
accordance with the procedure specified in section 
371(e) of this title, except that (A) except in extra- 
ordinary circumstances, no regulation issued under this 
subsection shall require prior approval by the Secre- 
tary of the content of any advertisement, and (B) no 
advertisement of a prescription drug, published after 
the effective date of regulations issued under this 
subsection applicable to advertisement of prescription 
drugs, shall with respect to the matters specified in this 
subsection or covered by such regulations, be subject to 
the provisions of sections 52 to 57 Title 15. This para- 
graph (n) shall not be applicable to any printed matter 
which the Secretary determines to be labeling as 
defined in section 321(m) of this title. Nothing in the 
Convention on Psychotropic Substances, signed at 
Vienna, Austria, on February 21, 1971, shall be con- 
strued to prevent drug price communications to 
consumer. 

(o) Drugs or devices from nonregistered establish- 
ments 

If it was manufactured, prepared, propagated, com- 
pounded, or processed in an establishment in any State 
not duly registered under section 360 of this title, if it 
was not included in a list required by section 360(j) of 
this title, if a notice or other information respecting it 
was not provided as required by such section or section 
360(k) of this title, or if it does not bear such symbols 
from the uniform system for identification of devices 
prescribed under section 360(e) of this title as the 
Secretary by regulation requires. 

97a 

(p) Packaging or labeling of drugs in violation of 
regulations 

If it is a drug and its packaging or labeling is in 
violation of an applicable regulation issued pursuant to 
section 1472 or 1473 of Title 15. 

* * * * * 

6. Section 355 of Title 21, United State Code, provides, 
in relevant part: 

New drugs 

(a) Necessity of effective approval of application 

No person shall introduce or deliver for introduction 
into interstate commerce any new drug, unless an 
approval of an application filed pursuant to subsection 
(b) or (j) of this section is effective with respect to such 
drug. 

* * * * * 

7. Section 360 of Title 21, United States Code, provides, 
in relevant part: 

Registration of producers of drugs or devices 

(a) Definitions 

As used in this section— 

(1) the term “manufacture, preparation, pro- 
pagation, compounding, or processing” shall include 
repackaging or otherwise changing the container, 
wrapper, or labeling of any drug package or device 
package in furtherance of the distribution of the 
drug or device from the original place of manu- 
facture to the person who makes final delivery or 
sale to the ultimate consumer or user; and 

98a 

(2) the term “name” shall include in the case of a 
partnership the name of each partner and, in the 
case of a corporation, the name of each corporate 
officer and director, and the State of incorporation. 

(b) Annual registration 

On or before December 31 of each year every person 
who owns or operates any establishment in any State 
engaged in the manufacture, preparation, propagation, 
compounding, or processing of a drug or drugs, or a 
device or devices shall register with the Secretary his 
name, places of business, and all such establishments. 

(c) New producers 

Every person upon first engaging in the manu- 
facture, preparation, propagation, compounding, or 
processing of a drug or drugs or a device or devices in 
any establishment which he owns or operates in any 
State shall immediately register with the Secretary his 
name, place of business, and such establishment. 

(d) Additional establishments 

Every person duly registered in accordance with the 
foregoing subsections of this section shall immediately 
register with the Secretary any additional establish- 
ment which he owns or operates in any State and in 
which he begins the manufacture, preparation, pro- 
pagation, compounding, or processing of a drug or 
drugs or a device or devices. 

(e) Registration number; uniform system for 
identification of devices intended for human use 

The Secretary may assign a registration number to 
any person or any establishment registered in 
accordance with this section. The Secretary may also 

99a 

assign a listing number to each drug or class of drugs 
listed under subsection (j) of this section. Any number 
assigned pursuant to the preceding sentence shall be 
the same as that assigned pursuant to the National 
Drug Code. The Secretary may by regulation prescribe 
a uniform system for the identification of devices 
intended for human use and may require that persons 
who are required to list such devices pursuant to 
subsection (j) of this section shall list such devices in 
accordance with such system. 

(f ) 
Availability of registrations for inspection 

The Secretary shall make available for inspection, to 
any person so requesting, any registration filed 
pursuant to this section; except that any list submitted 
pursuant to paragraph (3) of subsection (j) of this 
section and the information accompanying any list or 
notice filed under paragraph (1) or (2) of that subsection 
shall be exempt from such inspection unless the Secre- 
tary finds that such an exemption would be inconsistent 
with protection of the public health. 

(g) Exclusions from application of section 

The foregoing subsections of this section shall not 
apply to— 

(1) pharmacies which maintain establishments in 
conformance with any applicable local laws regu- 
lating the practice of pharmacy and medicine and 
which are regularly engaged in dispensing prescrip- 
tion drugs or devices, upon prescriptions of practi- 
tioners licensed to administer such drugs or devices 
to patients under the care of such practitioners in 
the course of their professional practice, and which 
do not manufacture, prepare, propagate, compound, 
or process drugs or devices for sale other than in 

100a 

the regular course of their business of dispensing or 
selling drugs or devices at retail; 

(2) practitioners licensed by law to prescribe or 
administer drugs or devices and who manufacture, 
prepare, propagate, compound, or process drugs or 
devices solely for use in the course of their pro- 
fessional practice; 

(3) persons who manufacture, prepare, propa- 
gate, compound, or process drugs or devices solely 
for use in research, teaching, or chemical analysis 
and not for sale; 

(4) any distributor who acts as a wholesale dis- 
tributor of devices, and who does not manufacture, 
repackage, process, or relabel a device; or 

(5) such other classes of persons as the Secretary 
may by regulation exempt from the application of 
this section upon a finding that registration by such 
classes of persons in accordance with this section is 
not necessary for the protection of the public health. 

In this subsection, the term “wholesale distributor” 
means any person (other than the manufacturer or the 
initial importer) who distributes a device from the 
original place of manufacture to the person who makes 
the final delivery or sale of the device to the ultimate 
consumer or user. 

(h) Inspection of premises 

Every establishment in any State registered with the 
Secretary pursuant to this section shall be subject to 
inspection pursuant to section 374 of this title and every 
such establishment engaged in the manufacture, pro- 

101a 

pagation, compounding, or processing of a drug or 
drugs or of a device or devices classified in class II or 
III shall be so inspected by one or more officers or 
employers duly designated by the Secretary at least 
once in the two-year period beginning with the date of 
registration of such establishment pursuant to this 
section and at least once in every successive two-year 
period thereafter. 

* * * * * 

( j) 
Filing of lists of drugs and devices manufactured, 

prepared, propagated and compounded by regis- 
trants; statements; accompanying disclosures 

(1) Every person who registers with the Secretary 
under subsection (b), (c), or (d) of this section shall, at 
the time of registration under any such subsection, file 
with the Secretary a list of all drugs and a list of all 
devices and a brief statement of the basis for believing 
that each device included in the list is a device rather 
than a drug (with each drug and device in each list 
listed by its established name (as defined in section 
352(e) of this title) and by any proprietary name) which 
are being manufactured, prepared, propagated, com- 
pounded, or processed by him for commercial distri- 
bution and which he has not included in any list of drugs 
or devices filed by him with the Secretary under this 
paragraph or paragraph (2) before such time of reg- 
istration. Such list shall be prepared in such form and 
manner as the Secretary may prescribe and shall be 
accompanied by— 

(A) in the case of a drug contained in the appli- 
cable list and subject to section 355 or 360b of this 
title, or a device intended for human use contained 
in the applicable list with respect to which a per- 

102a 

formance standard has been established under 
section 360d of this title or which is subject to 
section 360e of this title, a reference to the author- 
ity for the marketing of such drug or device and a 
copy of all labeling for such drug or device; 

(B) in the case of any other drug or device 
contained in an applicable list— 

(i) which drug is subject to section 353(b) 
of this title, or which device is a restricted device, 
a copy of all labeling for such drug or device, a 
representative sampling of advertisements for 
such drug or device, and, upon request made by 
the Secretary for good cause, a copy of all ad- 
vertisements for a particular drug product or 
device, or 

(ii) which drug is not subject to section 
353(b)(1) of this title or which device is not a 
restricted device, the label and package insert for 
such drug or device and a representative 
sampling of any other labeling for such drug or 
device; 

(C) in the case of any drug contained in an 
applicable list which is described in subparagraph 
(B), a quantitative listing of its active ingredient or 
ingredients, except that with respect to a particular 
drug product the Secretary may require the sub- 
mission of a quantitative listing of all ingredients if 
he finds that such submission is necessary to carry 
out the purposes of this chapter; and 

(D) if the registrant filing a list has determined 
that a particular drug product or device contained 
in such list is not subject to section 355 or 360b of 

103a 

this title, or the particular device contained in such 
list is not subject to a performance standard 
established under section 360d of this title or to 
section 360e of this title or is not a restricted device 
a brief statement of the basis upon which the 
registrant made such determination if the Secretary 
requests such a statement with respect to that 
particular drug product or device. 

(2) Each person who registers with the Secretary 
under this section shall report to the Secretary once 
during the month of June of each year and once during 
the month of December of each year the following 
information: 

(A) A list of each drug or device introduced by 
the registrant for commercial distribution which has 
not been included in any list previously filed by him 
with the Secretary under this subparagraph or 
paragraph (1) of this subsection. A list under this 
subparagraph shall list a drug or device by its 
established name (as defined in section 352(e) of this 
title) and by any proprietary name it may have and 
shall be accompanied by the other information 
required by paragraph (1). 

(B) If since the date the registrant last made a 
report under this paragraph (or if he has not made a 
report under this paragraph, since February 1, 
1973) he has discontinued the manufacture, pre- 
paration, propagation, compounding, or processing 
for commercial distribution of a drug or device in- 
cluded in a list filed by him under subparagraph (A) 
or paragraph (1); notice of such discontinuance, the 
date of such discontinuance, and the identity (by 
established name (as defined in section 352(e) of this 

104a 

title) any by any proprietary name) of such drug or 
device. 

(C) If since the date of registrant reported 
pursuant to subparagraph (B) a notice of discon- 
tinuance he has resumed the manufacture, prepara- 
tion, propagation, compounding, or processing for 
commercial distribution of the drug or device with 
respect to which such notice of discontinuance was 
reported; notice of such resumption, the date of 
such resumption, the identity of such drug or device 
(each by established name (as defined in section 
3529(e) of this title) and by any proprietary name), 
and the other information required by paragraph 
(1), unless the registrant has previously reported 
such resumption to the Secretary pursuant to this 
subparagraph. 

(D) Any material change in any information 
previously submitted pursuant to this paragraph or 
paragraph (1). 

(3) The Secretary may also require each registrant 
under this section to submit a list of each drug product 
which (A) the registrant is manufacturing, preparing, 
propagating, compounding, or processing for 
commercial distribution, and (B) contains a particular 
ingredient. The Secretary may not require the 
submission of such a list unless he has made a finding 
that the submission of such a list is necessary to carry 
out the purposes of this chapter. 

* * * * * 

105a 

8. Section 374 of Title 21, United States Code, provides, 
in relevant part: 

(a) Right of agents to enter; scope of inspection; 
notice; promptness; exclusions 

(1) For purposes of enforcement of this chapter, 
officers or employees duly designated by the Secretary, 
upon presenting appropriate credentials and a written 
notice to the owner, operator, or agent in charge, are 
authorized (A) to enter, at reasonable times, any 
factory, warehouse, or establishment in which food, 
drugs, devices, or cosmetics are manufactured, pro- 
cessed, packed, or held, for introduction into interstate 
commerce or after such introduction, or to enter any 
vehicle being used to transport or hold such food, drugs, 
devices, or cosmetics in interstate commerce; and (B) to 
inspect, at reasonable times and within reasonable 
limits and in a reasonable manner, such factory, ware- 
house, establishment, or vehicle and all pertinent equip- 
ment, finished and unfinished materials, containers, and 
labeling therein. In the case of any factory, warehouse, 
establishment, or consulting laboratory in which 
prescription drugs, nonprescription drugs intended for 
human use, or restricted devices are manufactured, 
processed, packed, or held, the inspection shall extend 
to all things therein (including records, files, papers, 
processes, controls, and facilities) bearing on whether 
prescription drugs, nonprescription drugs intended for 
human use, or restricted devices which are adulterated 
or misbranded within the meaning of this chapter, or 
which may not be manufactured, introduced into inter- 
state commerce, or sold, or offered for sale by reason of 
any provision of this chapter, have been or are being 
manufactured, processed, packed, transported, or held 
in any such place, or otherwise bearing on violation of 

106a 

this chapter. No inspection authorized by the pre- 
ceding sentence or by paragraph (3) shall extend to 
financial data, sales data other than shipment data, 
pricing data, personnel data (other than data as to 
qualifications of technical and professional personnel 
performing functions subject to this chapter), and 
research data (other than data relating to new drugs, 
antibiotic drugs, and devices and subject to reporting 
and inspection under regulations lawfully issued 
pursuant to section 355(i) or (k), section 360i, or 360j(g) 
of this title, and data relating to other drugs or devices 
which in the case of a new drug would be subject to 
reporting on inspection under lawful regulations issued 
pursuant to section 355( j) of this title). A separate 
notice shall be given for each such inspection, but a 
notice shall not be required for each entry made during 
the period covered by the inspection. Each such in- 
spection shall be commenced and completed with 
reasonable promptness. 

(2) The provisions of the second sentence of para- 
graph (1) shall not apply to— 

(A) pharmacies which maintain establishments 
in conformance with any applicable local laws 
regulating the practice of pharmacy and medicine 
and which are regularly the practice engaged in 
dispensing prescription drugs or devices, upon pre- 
scriptions of practitioners licenses to administer 
such drugs or devices to patients under the care of 
such practitioners in the course of their professional 
practice, and which do not, either through a sub- 
sidiary or otherwise, manufacture, prepare, propa- 
gate, compound, or process drugs or devices for sale 
other than in the regular course of their business of 
dispensing or selling drugs or devices at retail; 

107a 

(B) practitioners licensed by law to prescribe or 
administer drugs, or prescribe or use devices, as the 
case may be, and who manufacture, prepare, propa- 
gate, compound, or process drugs, or manufacture 
or process devices, solely for use in the course of 
their professional practice; 

(C) persons who manufacture, prepare, propa- 
gate, compound, or process drugs or manufacture or 
process devices, solely for use in research, teaching, 
or chemical analysis and not for sale; 

(D) such other classes of person as the Secre- 
tary may by regulation exempt from the application 
of this section upon a finding that inspection as 
applied to such classes of persons in accordance 
with this section is not necessary for the protection 
of the public health. 

(3) An officer or employee making an inspection 
under paragraph (1) for purposes of enforcing the 
requirements of section 350a of this title applicable to 
infant formulas shall be permitted, at all reasonable 
times, to have access to and to copy and verify any 
records— 

(A) bearing on whether the infant formula 
manufactured or held in the facility inspected meets 
the requirements of section 350a of this title, or 

(B) required to be maintained under section 
350a of this title. 

* * * * *