There are two types of compounders in Australia i.e. the Therapeutic Goods Administration (TGA)-licensed compounders and the non-TGA-licensed compounders. TGA-licensed compounders receive $60 per compounded item whilst the payment to non-TGA-licensed compounders is reduced to $40 per compounded item.

The payment differential has raised a number of major questions for hospital operators and owners of pharmacy compounding businesses, not the least of which are:

• Can chemotherapy compounding remain a financially sustainable business at $40 per compounded item?
• Is there an acceptable return on investment (ROI) for the expenditure required to bring a compounding facility to TGA standards?
• Why should there be this differential in the chemotherapy compounding fee if there’s no evidence that the quality of product produced by a non-TGA facility is inferior to that of a TGA-licensed facility?
• What needs to be done to provide both peace of mind and assurances of quality in compounded products if my facility is not TGA-licensed?

The financial sustainability of chemotherapy compounding

The question of the financial sustainability of a chemotherapy compounding business at $40 per compounded item can only be answered on a facility-by-facility basis. In the absence of reliable data on the cost of producing a compounded chemotherapy item, the Department of Health can hardly be criticised for opting for a figure which it believes is reasonable for a facility which does not incur the set-up, operational and ongoing maintenance costs of a TGA-licensed facility. It would seem that an independent study to calculate the cost to hospitals of compounding chemotherapy from a range of different sized facilities / chemotherapy centres, would be useful in providing the evidence of the actual costs versus the value of the compounding fee.

ROI from bringing a compounding facility up to TGA standards

The following are estimates of costs which might be incurred in bringing a non TGA-licensed pharmacy compounding facility up to TGA-licence standards.

Based on a clean room in operation for less than 10 years, with two cytotoxic drug safety cabinets and two aseptic cabinets with appropriate rooms and air pressures, the estimated total upgrade cost may be in the order of $400,000 to $850,000 which includes:

• facility renovation: between $100,000 and $500,000
• monitoring equipment: $150,000
• development and deployment of a quality management system: $50,000 to $100,000, and
• facility, equipment and process qualification work: $100,000

In addition, the estimated on-going costs may be in the order of $200,000 to $250,000 per year which include:

• maintenance, sampling, certification and revalidation costs: $50,000 to $100,000 per year, and
• Quality Manager salary: $150,000 per year.

To offset this expenditure, it would require in the order of 20,000 to 42,500 compounded items (which could be amortised over the life of the facility) at the additional $20 fee, and approximately 10,000 to 12,500 items annually to cover the upgrade costs and recurrent expenditure of the TGA-licensed facility.

Quality of product from a non-TGA-licensed facility versus product from a TGA-licensed facility

It is often claimed that there is no evidence that the quality of chemotherapy product compounded in a non-TGA-licensed facility is any different from that compounded in a TGA-licensed facility.

Random sampling of products from each type of facility may well demonstrate this.  However the level of assurance of safety, purity and efficacy that a TGA-licensed facility can provide across every single product is the edge that the licensed facility has over an unlicensed facility.

This level of assurance is achieved through constant and rigorous monitoring, robust written procedures and continuous analysis and improvement through a Quality Management System.  Quality Risk Management is a key aspect of this process and is used to assess all aspects of the day-to-day operations, ensuring that all risks are assessed, understood and effectively managed.

Providing assurances of quality

A Quality Risk Management (QRM) system typically evaluates:

• the risks that exist
• the consequences of the risk
• the probability of the risk occurring
• the probability of detection
• the changes that need to be made to mitigate these risks, and
• the new level of risk post-mitigation.

To implement effective QRM systems the following is needed:

• detailed knowledge of the compounding process
• data related to these process, and
• someone from outside of the facility with expertise in this area, to assess the evaluation that has been done internally, and to provide the prompts to think about the things that the internal staff may not consider.

TGA-licensed facilities must have QRM integrated throughout all of their quality management processes.  Therein lies one of the biggest differences between TGA-licensed and non-TGA-licensed facilities. From a risk perspective, a TGA-licensed facility knows exactly what happens at every step in the compounding process and can retrospectively review every part of the process. In contrast, a non-TGA-licensed facility usually can only conduct checks of the compounding process at points in time and has little capacity to genuinely carry out a  retrospective review should something untoward happen.

It is important to note that the risk discussed here, from a TGA perspective, is specifically focused on the risk to the patient.  It does not deal with operator safety, or with the business risk to which a non-TGA-licensed facility is exposed i.e. the ability of a compounding business to survive should errors of magnitude occur.  However the QRM process can be easily extended to incorporate these aspects of facility operation.

Until the same or comparable level of risk assessment is in place in non-TGA-licensed facilities it is unlikely that the Commonwealth will see the value of providing comparable compounding fees for TGA-licensed and non-licensed facilities.

Michael Ryan

Managing Director

PharmConsult Pty Ltd

May 2022