Most prescription drugs are required to:

• undergo premarket approval to demonstrate safety and efficacy;
• be labeled with adequate directions for use so patients can safely use drugs for their intended purposes; and
• be manufactured according to current good manufacturing practice (CGMP) requirements, which are intended to assure the identity, strength, quality, and purity of drugs by requiring adequate control of manufacturing operations.

These requirements provide important protections to patients. Under certain conditions, however, compounded drug products are not subject to these requirements. Other protections, such as the prohibition on preparing drugs under insanitary conditions, apply to all drug products, including compounded drugs.

What is Drug Compounding?

Drug compounding is often regarded as the process of combining, mixing, or altering ingredients to create a sterile or non-sterile medication tailored to the needs of a patient. Compounded drugs are not FDA-approved.

A drug may be compounded for a patient who cannot be treated with an FDA-approved medication, such as a patient who has an allergy and needs a medication to be made without a certain dye, or an elderly patient or a child who cannot swallow a tablet or capsule and needs a medicine in a liquid dosage form that is not otherwise available. Practitioners in hospitals, clinics, and other health care facilities sometimes administer or dispense compounded drugs to patients when an FDA-approved drug is not medically appropriate to treat them.

In these situations, compounding can serve an important patient need. However, some compounders engage in inappropriate compounding activities. For example, FDA is aware that some compounders produce drugs for patients even though an FDA-approved drug may have been medically appropriate for them. FDA has also observed that some compounders have advertised compounded drugs as safe and effective, sometimes for the treatment of serious diseases, incorrectly suggesting the drugs had met the standard for FDA approval.

Risks of Compounded Drugs

Because compounded drugs are not FDA-approved, FDA does not verify their safety, effectiveness, or quality before they are marketed. FDA also has observed that the labeling of compounded drugs often omits important information such as directions to help ensure that the drugs are used safely and warnings about possible side effects and drug interactions. In addition, and of particular concern, poor compounding practices can result in serious drug quality problems, such as contamination or medications that do not possess the strength, quality, and purity they are supposed to have. This can lead to serious patient injury and death.

In October 2012, the United States faced the most serious outbreak associated with contaminated compounded drugs in recent history. A pharmacy in Massachusetts shipped contaminated compounded drugs to patients and health care providers throughout the country. The drugs, which were contaminated with fungal growth, were injected into patients’ spines and joints. More than 750 people in 20 states developed fungal infections, and more than 60 people died as a result. Approximately 14,000 patients received injections from the lots of contaminated drug product (See 2012 Fungal Meningitis Outbreak: Persons with Fungal Infections Linked to Steroid Injections, by State, Centers for Disease Control and Prevention).

The 2012 fungal meningitis outbreak was not an isolated event. It was the most serious in a long history of serious adverse events associated with contaminated, super-potent, mislabeled, or otherwise poor quality compounded drugs. In addition, many serious adverse events linked to poor quality compounded drugs, including outbreaks of infections and deaths have occurred since then. And, because most compounders do not report adverse events to FDA, the agency may not be aware of adverse events associated with compounded drugs unless a health care provider submits an adverse event report regarding his or her patients or a state official notifies FDA.

To balance the public health need for compounded drugs and the risks such drugs can present to patients, Congress enacted two provisions that provide for human drug compounding without, for example, obtaining FDA approval, but only if certain conditions are met. These two provisions are sections 503A and 503B of the FD&C Act.

Section 503A of the FD&C Act

During the 1990s, there was significant growth in the number of entities compounding drugs, and in particular, entities that were supplying large quantities of compounded drugs to hospitals and other customers nationwide. In 1997, Congress enacted a provision to address the growing sector, codified in section 503A of the FD&C Act.

Under section 503A, drug products that are compounded according to certain conditions are exempt from three requirements of the FD&C Act:

• premarket approval requirements,
• the requirement for labeling with adequate directions for use, and
• CGMP requirements.

Among the conditions to qualify for exemptions are that the drug must be compounded by a licensed pharmacist in a state-licensed pharmacy or federal facility, or by a licensed physician, based on the receipt of a valid patient-specific prescription. Other conditions address, for example, the kinds of bulk drug substances that can be used in compounding, and restrictions on the compounding of drugs that are essentially copies of commercially available drug products.

Compounded drugs that meet the conditions of section 503A are still subject to other public health protections in the FD&C Act, such as the prohibition on insanitary conditions. Compounded drugs that do not meet the conditions of section 503A (or the conditions of section 503B, discussed below) are subject to all of the requirements of the FD&C Act applicable to conventional drug manufacturers.

“It is the intent of the conferees to ensure continued availability of compounded drug products as a component of individualized therapy, while limiting the scope of compounding so as to prevent manufacturing under the guise of compounding. Section 503A establishes parameters under which compounding is appropriate and lawful . . . .”  Joint Explanatory Statement of the Congressional Committee of Conference regarding to the enactment of section 503A in 1997

When it was added to the FD&C Act in 1997, section 503A included restrictions on the advertising of compounded drugs. In 2002, the United States Supreme Court struck down these advertising restrictions as unconstitutional but did not address whether they were severable or rendered all of section 503A invalid. The Court’s decision, and conflicting rulings from federal circuit courts, contributed to uncertainty about the applicability of section 503A, and led to disputes about FDA’s authority to regulate compounders.

DQSA and Section 503B of the FD&C Act

On November 27, 2013, a year after the 2012 fungal meningitis outbreak, Congress enacted the Compounding Quality Act of the DQSA to clarify and enhance the public health protections applicable to compounded drug products, and to help prevent a recurrence of tragedies like the 2012 fungal meningitis outbreak and the other serious adverse events and deaths that occurred before then. Specifically, the DQSA removed the advertising provisions from section 503A that had been found to be unconstitutional, which removed uncertainty about the validity of section 503A. Congress otherwise left section 503A intact, including the requirement for drugs to be compounded based on the receipt of a valid patient-specific prescription.

The DQSA also added a new section 503B to the FD&C Act. In section 503B, Congress established a new, voluntary category of compounders known as outsourcing facilities. Like compounders that produce drugs under section 503A, outsourcing facilities compound drugs intended to meet the needs of specific patients for whom an approved or over the-counter drug is not medically appropriate. However, outsourcing facilities can compound such drugs either pursuant to a patient-specific prescription or in response to an order from a health care provider, such as a hospital, without first obtaining patient-specific prescriptions.

The CGMP requirements, enhanced oversight, and other conditions in section 503B are important because outsourcing facilities may distribute large quantities of compounded drugs to health care facilities nationwide without receiving patient-specific prescriptions.

If a compounder elects to become an outsourcing facility by registering with FDA, it must meet CGMP requirements, be inspected by FDA according to a risk-based schedule, report adverse events associated with its products to FDA, and meet certain other conditions in section 503B.

Drugs compounded by outsourcing facilities that meet the conditions in section 503B are exempt from three requirements of the FD&C Act:

• premarket approval requirements,
• the requirement for labeling with adequate directions for use, and
• drug supply chain security requirements.

The New Outsourcing Facility Sector

Outsourcing facilities range in size and may or may not obtain patient-specific prescriptions. Some outsourcing facilities operate on a large scale, distributing drug products without patient-specific prescriptions to health care facilities nationwide, while others are small and distribute drugs primarily within the state in which they are located pursuant to prescriptions for identified individual patients. Many outsourcing facilities are state-licensed pharmacies, but some are not, and many outsourcing facilities engage in patient-specific and non-patient specific compounding.

Outsourcing facilities also differ with respect to the types of drugs produced. Some outsourcing facilities compound and distribute thousands of different drug products, while others compound and distribute just a few. The number of units (e.g., vials or syringes) of each drug product compounded can also vary tremendously, with some outsourcing facilities producing large batches of 100,000 units, and other outsourcing facilities producing small batches of less than 10 units. In addition, while all outsourcing facilities compound sterile drugs, many also compound non-sterile drugs, and most, but not all, outsourcing facilities compound drugs from bulk drug substances. The types of drug products compounded by outsourcing facilities include, for example, ophthalmics, anesthetics, antibiotics, hormones, steroids, dermatologic products, and vitamin injections.

As of November 27, 2016, 67 compounders are registered with FDA as outsourcing facilities. FDA encourages health care facilities that purchase compounded drugs to obtain them from outsourcing facilities because they are subject to increased quality standards and federal oversight.

FDA encourages entities, such as hospitals, that purchase compounded drugs, to obtain the drugs from outsourcing facilities. This is because there are greater assurances of quality when drugs are compounded by outsourcing facilities that meet the conditions of section 503B and CGMP requirements than there are for drugs compounded by entities that are not required to comply with CGMP requirements and are not routinely overseen by FDA.

However, drugs compounded by outsourcing facilities pose more significant risks than FDA-approved drugs from conventional manufacturers. In contrast to FDA-approved drugs, drugs compounded by outsourcing facilities are not subject to requirements relating to premarket review for safety and efficacy or manufacturing quality, labeling with adequate directions for use, and drug supply chain security.