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America's Shadow Pharmacies


America's Shadow Pharmacies

Photograph by Daniel Shea for Bloomberg Businessweek

(An earlier version of this story ran online.)
 
 
In October 2003, the Senate Committee on Health, Education, Labor, and Pensions assembled for hearings on compounding pharmacies. These state-licensed retail businesses mix and sell medications, but without the federal safety approval required for mass-produced drugs. Then-Senator Christopher Bond (R-Mo.) convened the hearing by warning of “a significant number of very real problems caused by compounded drugs.” The committee, he said, had “received reports of non-sterile eye drops causing blindness; spinal injections contaminated with bacteria and/or fungus, resulting in hospitalizations and, in some cases, death; and children poisoned as a result of pharmacy compounding errors.” In one case, a pharmacist in Bond’s home state had been convicted in 2002 and sent to prison for diluting more than 4,000 doses of chemotherapy drugs.

Expert witnesses testified that to address such dangers, Congress should give the Food and Drug Administration authority over compounders. Not everyone agreed. Senator Pat Roberts (R-Kan.) commented from the dais that he’d met privately with a physician named Steven Hotze, who was “eager to provide the committee with his input on this important topic.” That input bore the stamp of Hotze’s free-market philosophy. “Regulatory agencies,” he asserted in written testimony, “cannot prevent an individual from committing a criminal act. However, regulatory agencies can, and often do, adversely affect the efficient, safe, and productive practice of business.”

The Skeptic: Pharmacist Sarah Sellers quit compounding over inadequate sterilization and other practices. The influence of anti-aging compounders, she says, “has been surprising and not well understood”Photograph by Daniel Shea for Bloomberg BusinessweekThe Skeptic: Pharmacist Sarah Sellers quit compounding over inadequate sterilization and other practices. The influence of anti-aging compounders, she says, “has been surprising and not well understood”

The impresario of a nationally prominent alternative-medicine practice in Houston, Hotze has helped popularize what he calls the Wellness Revolution and what others call the anti-aging movement. With roots in the timeless quest for rejuvenation, the disparate products and treatments associated with anti-aging became a booming business in the mid-1990s. Defined expansively to include everything from dietary supplements such as resveratrol to hormone-replacement capsules and creams, the anti-aging industry generates annual sales of $80 billion, according to the research firm Global Industry Analysts.

Hotze promotes an eight-step regime emphasizing “bio-identical” estrogen, testosterone, and other plant-derived hormones, which are made and sold at the Hotze Pharmacy, an arm of the 90-employee Hotze Health & Wellness Center, which resembles not a Walgreens (WAG) but a high-end spa in a suburban Houston neighborhood. Suzanne Somers, the former Three’s Company sitcom actress, Thigh Master marketer, and best-selling health-tips author, sings Hotze’s praises. So do patients who appear in his advertising videos or on his four-day-a-week Houston radio show. A conservative activist, Hotze has gone to court and coordinated online campaigns to thwart federal oversight of compounding pharmacies, some of which resemble conventional drug stores. He and other anti-aging advocates are a vital subset of the compounding industry. Indeed, compounders continue to operate in a regulatory gray zone, in part because of Hotze and his anti-aging colleagues, according to Sarah Sellers, a pharmacist who has advised the FDA. “Their influence,” she says, “has been surprising and not well understood.”

Congress didn’t act on compounding after the Senate hearings nine years ago. Legislation surfaced in 2007, but again, it didn’t get far. Now, in the wake of a meningitis outbreak linked to a compounding pharmacy in Framingham, Mass., bills are being introduced once more. Eclipsed temporarily by the hurricane in the Northeast and the presidential election, the New England Compounding Center (NECC) scandal has exposed the dangers rogue compounders pose to the public. On Oct. 6, NECC announced it would recall more than 17,000 vials of a back-pain steroid after the Centers for Disease Control and Prevention linked its tainted doses to cases of fungal meningitis. So far, the CDC says, 438 people nationwide have suffered infections, leading in many cases to strokes and to swelling of the membranes covering the brain or spinal column; 32 patients have died.

Neither Hotze nor other anti-aging practitioners are implicated in the meningitis outbreak. Many mainstream physicians and researchers question the efficacy and potential side-effects of certain anti-aging treatments, but that’s a separate issue from whether compounding needs better oversight. This is the story of the little-noticed role Hotze and other wellness entrepreneurs play in the compounding industry—and, in particular, how they’ve helped compounders avoid more stringent federal regulation.
 
 
Hotze, 62, holds proudly defiant views on many issues, none stronger than his hostility to what he sees as government overreaching. On compounding, he says: “They want to regulate us to death. That’s what we’ve fought against.”

A 1976 graduate of the University of Texas Medical School, Hotze began his career conventionally, as an emergency room physician and then general practitioner. Mainstream medicine, though, left him frustrated. Many patients seemed not to respond to FDA-approved drugs he prescribed. In 1988 he had an awakening. An elderly woman told him: “Ever since I threw away all the medications you gave me, I feel like a million dollars.” He shared this revelation with his wife, Janie. They “knelt before God,” according to his center’s website, “and asked Him to give them a way that they could help their patients get well, and at the same time build a practice that could support their eight children.”

Their prayers were answered. Hotze became a leading evangelist of alternative treatment aimed at correcting hormonal imbalances rather than “masking” symptoms with what he disparages as “anti drugs”—antibiotics, antihistamines, antidepressants, and so forth. “We are able to help you regain and prolong your quality of life by utilizing bio-identical hormones, vitamins, and minerals, and an optimal eating regime, all of which restore hormones to optimal levels, strengthen the immune system, and increase energy levels,” he promises in promotional literature. “Get back your life” is the slogan at the Hotze center. The nattily attired proprietor refers to his patients as “guests,” adding: “I’m in the hospitality business, and in that context, we provide health care.”

The Wellness Guru: “They want to regulate us to death. That’s what we’ve fought against”Photograph by Daniel Shea for Bloomberg BusinessweekThe Wellness Guru: “They want to regulate us to death. That’s what we’ve fought against”

By the early 2000s, enterprising pharmacists all across the country were benefiting from the spreading popularity of anti-aging therapies. A central tenet of this movement is that patients ought to seek natural remedies whenever possible and avoid at all costs what Hotze calls “counterfeit” hormones manufactured under patent by large FDA-regulated corporations. He points to mainstream research showing that these drugs raise the risk of breast cancer and heart attack. He advocates instead unpatented mixtures made by compounding pharmacies—like his. His bio-identicals are formulated from yams and soybeans and, he says, “fit perfectly into the hormone receptors found in the cells of the body.”

Although compounding may conjure images of cloaked apothecaries hunched over mortar and pestle, the practice was widespread until big manufacturers systematized drug production 60 to 70 years ago. Even after the FDA began regulating the safety of new drugs in 1938, state-chartered pharmacies continued to provide specialty medications that weren’t otherwise commercially available: a syrup with a flavor added to appeal to a sick child, a pill reformulated to remove an allergen, a customized intravenous solution for a cancer sufferer. Viewing compounders as a disappearing breed operating on a small scale, the FDA didn’t require that their one-off mixtures receive federal approval as new drugs.

Meanwhile, the advent of compounded wellness remedies proved a godsend for struggling mom-and-pop pharmacies competing against discount retailers, in part because most chains didn’t bother carrying hormones, which often aren’t covered by health insurance. In her 2010 book Selling the Fountain of Youth, author and former Businessweek senior writer Arlene Weintraub tells how pharmacists “could go into a back room, mix up hormones according to a doctor’s instructions, and sell them straight to patients.” By 2003 more than 30 million prescriptions for compounded drugs were being written every year. Today about 3 percent of all prescriptions call for compounded drugs, according to the International Academy of Compounding Pharmacists (IACP), a trade group.

Not all pharmacists were gung-ho about the revival of compounding, which was also spurred by compounders’ ability to provide versions of drugs that large companies ceased to manufacture. As a rookie pharmacist in Florida in the early 1990s, Sellers, the former FDA adviser, observed what she considered inadequate sterilization of compounded spinal injections and a lack of potency testing. She suggested switching exclusively to patented, FDA-approved products. Her employer refused, telling her that doing so would reduce profits. Sellers quit and began doing broader research on sterile compounding. In 1998 the FDA invited her to serve on its Advisory Committee on Pharmacy Compounding. The panel was charged with helping to implement a federal law enacted in 1997 to clarify the rules that applied to compounders.

The FDA had grown concerned that some compounding pharmacies had evolved out of the one-patient, one-prescription model to become, essentially, drug manufacturers. The agency took this anxiety to Congress, which, as part of the 1997 FDA Modernization Act, said compounding could remain exempt from federal safety review, but only in its traditional prescription-by-prescription form. If they produced drugs in bulk and not to fill individual patient scripts, pharmacists would be considered manufacturers. In a provision that would prove fateful, Congress sought to deter mass production by prohibiting pharmacists from advertising compounded drugs.

Some doctors and pharmacists viewed the federal action as an intrusion. “We’re regulated as it is,” Hotze says. “We have state regulation that is thorough and sufficient.” David Miller concurs. The chief executive of the IACP, to whose political action committee Hotze contributes, Miller notes that “doctors, nurses, and hospitals are all state-regulated. The FDA’s repeated efforts to oversee us—that is just an attempt to do something without jurisdictional authority. We have made our voice heard in opposition.”
 
 
That they did. In 1998, before the Modernization Act had even been enforced, pharmacists in six states (although not Hotze) filed suit in federal court in Nevada claiming their constitutional rights were endangered. When the litigation reached the Supreme Court four years later, the IACP filed a brief pointing out that compounding enjoyed a storied tradition in America: John Winthrop (1606-76), son of the first governor of Massachusetts, was one of the country’s first pharmacists in an era when compounding was the entire game. The ban on ads for compounded drugs, industry lawyers argued, infringed pharmacists’ First Amendment right to free speech. The argument worked. By a 5-4 vote, the justices ruled that preventing large-scale compounding was an insufficient rationale to justify compromising “commercial speech.”

In addition to the recent meningitis outbreak, one congressman’s survey found records documenting 23 deaths and at least 86 serious illnesses or injuries since 2001 associated with improper compounding practicesPhotograph by Daniel Shea for Bloomberg BusinessweekIn addition to the recent meningitis outbreak, one congressman’s survey found records documenting 23 deaths and at least 86 serious illnesses or injuries since 2001 associated with improper compounding practices

In the years that followed, Hotze and another group of pharmacists stayed on the offensive. In 2004, nine months after he personally lobbied the Senate committee, Hotze was back on Capitol Hill, telling a House subcommittee not to trust federal drug regulators. “The drugs that the FDA approves kill Americans every day,” he said. Later that year he helped organize a group of compounding pharmacists to sue the FDA again, this time in Texas. The suit aimed to settle once and for all whether the agency had authority over the drug mixers. Instead, it added to the muddle.

A federal trial judge initially ruled for the pharmacists, but in 2008 a three-judge appellate panel said the Supreme Court’s decision six years earlier should be read narrowly to allow compounding with a modicum of FDA oversight. The upshot was that the federal agency claimed it still had some authority while compounders insisted it had almost none.

Simultaneously, Hotze spearheaded a lobbying campaign to block a bill introduced in 2007 by the late Senator Edward Kennedy of Massachusetts that would have given the FDA the unmistakable clout to inspect and regulate compounding pharmacists. A Hotze-sponsored online group called Project: FANS (Freedom for Access to Natural Solutions) organized telephone and e-mail campaigns to urge members of Congress to oppose the Kennedy bill. FANS warned that “the bureaucrats at the FDA would determine which pharmaceutical company drug is best for you.”

Compounders know how to mobilize. During the 2007 Compounders on Capitol Hill campaign, the IACP sent 404 members to pay in-person visits to 285 congressional offices. Since 2000 the IACP has spent $1.1 million on lobbying in Washington, according to the nonpartisan Center for Responsive Politics. That money has purchased the services of such engineers of influence as Parry, Romani, DeConcini & Symms and Arnold & Porter. Never a top priority for either party, the Kennedy bill died. The FDA continued to write the occasional warning letter about compounders whose conduct resembled that of an interstate manufacturer; lacking clear authority, however, the agency mostly stayed on the sidelines.
 
 
Hotze’s personal brand is familiar to many Houstonians whether or not they partake of the Wellness Revolution. On one recent morning he arrived at the health center after an appearance on Great Day Houston on the local CBS affiliate, during which he puckishly recommended that middle-aged men seek testosterone replacement therapy to “put a tiger back in your tank.” Clad in a camera-friendly cerulean blazer and paisley pocket square, the doctor hustled to his office, where a film crew from out of town was set to shoot a video for his website. “It’s all about marketing,” Hotze says. “That’s where the leads come from.”

Over the past 15 years, Hotze estimates, his 20,000-square-foot center has served 25,000 guests. Hotze says 20 percent of his patients come from out of state, some because they’ve seen his ads in airline magazines. The elegantly appointed second-floor waiting area resembles a luxury hotel lounge. The mostly female staff of nurses, medical assistants, and telemarketers with headsets wear identical, trimly cut black pantsuits. In the spotless compounding lab, technicians in protective hats, tunics, and booties weigh and mix the powders and creams purchased by guests. The Hotze Pharmacy handles about 450 prescriptions a day. As many insurance companies won’t cover the remedies Hotze prescribes, customers pay out of their own pockets.

The doctor’s interests extend beyond medicine. The Houston Chronicle calls Hotze “a powerhouse” in local Republican primaries. Opposing gay causes and candidates has been one of his main missions, although he hasn’t always been as successful on that score as he has in thwarting federal pharmacy regulation. In a 1990 video entitled, “Restoring America: How You Can Impact Civil Government,” Hotze told viewers: “There is no neutrality. Civil government will either reflect biblical Christianity, or it will reflect anti-Christian positions. You can make the difference.”

Hotze merged several of his concerns into a campaign in 2010 against Barack Obama’s health overhaul bill. The FANS website urged citizens to lobby members of Congress to kill the legislation. “Do we want to kiss goodbye to medical innovation, like possible cures for cancer and other life-saving medical treatments?” FANS asked. “Keep the government out of medical care and let the free market work its magic.”
 
 
The NECC scandal—which, to repeat, did not involve Hotze or anti-aging therapies—has restarted the debate about whether state-level regulation is sufficient to ensure the safety of compounded drugs, or if it’s time to reconsider the type of oversight Hotze and the IACP have frustrated so far. (“What went on up there in Massachusetts, I can’t say,” Hotze notes. “I don’t know the facts.”)

In an Oct. 29 survey of pharmacy board records from all 50 states, the office of Representative Edward Markey (D-Mass.) concluded that the agencies “do not, as a general rule, appear to undertake enforcement actions that relate to the safety or scope of compounding pharmacy practices.” Rather, the states “focus more on compliance with traditional pharmacy licensing, controlled substances, and other requirements.” Massachusetts health officials have fired the director of the state’s pharmacy board for failing to investigate a complaint about NECC. Markey, in whose district NECC operated until October, has introduced a bill that would authorize the FDA to inspect and oversee compounding pharmacies.

In addition to the recent meningitis outbreak, Markey’s staff has found records documenting 23 deaths and at least 86 serious illnesses or injuries since 2001 associated with improper compounding practices. “These totals should be considered to be conservative,” the staff concluded, “since in many cases the reviewed documents noted the existence of adverse events but did not specify the type or quantity.”

Hotze and the IACP note the FDA had a chance to crack down on NECC and missed it. Because of hints that the business was compounding on a large scale, the federal agency inspected NECC and in 2006 issued a warning letter. “The FDA suspected this was a drug manufacturer, not a legitimate compounding pharmacy, and they had jurisdiction to close down a drug manufacturer but did not,” Miller of the IACP says. “It seems facile,” he adds, to propose giving the FDA more power when the agency already has the ability to shut rogue drug factories.

More power is exactly what FDA Commissioner Margaret Hamburg requested on Nov. 14 when she began two days of testimony before congressional committees investigating the NECC affair. “In light of growing threats to the public health,” she said, “the administration urges Congress to strengthen federal standards for nontraditional compounding.” Echoing arguments by the compounding industry, subcommittee chairman Cliff Stearns of Florida and other Republicans questioned Hamburg as to whether the FDA had failed to employ muscle it already has.

Sitting in the committee room audience was Hotze, who returned to Washington to monitor the hearings and meet privately with several members of Congress. “The last thing we need,” he says, referring to the NECC case, “is for Washington to overreact to one bad actor.”

Barrett_190
Barrett is an assistant managing editor and senior writer at Bloomberg Businessweek. His new book, Law of the Jungle, which tells the story of the Chevron oil pollution case in Ecuador, will be published by Crown in September 2014.

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