Guest Column | October 25, 2016

FDA's New Compounded Drug Guidances — What The Pharma Industry Needs To Know

By Peter H. Calcott, Ph.D., president and CEO, Calcott Consulting LLC


As a member of the pharmaceutical industry, you might be thinking, “Why should I read an article about how the FDA is tackling problems at drug compounding centers? My work has nothing to do with that industry, so these issues don’t affect me.” In some ways, your thought process would be correct. However, these compounders are actually operating closer to your business than you might think. They are taking approved drugs and essentially “copying” them, but often with a slight twist. At present, their applications are very local and low-volume, but in the future — especially with the advent of personalized medicine — you can expect the compounding industry to grow. And with that comes more competition for pharmaceutical companies.

However, remember that executing an aseptic manipulation within a pharmacy setting can be challenging. Even the most experienced pharmaceutical companies often run into problems in this area. So, patient safety remains a major concern, in both industries. So, paying attention to how the FDA maneuvers in the drug compounding setting may give you a preview of how the agency may regulate your industry in the future.

FDA’s mission is to protect the health of the U.S. population “by assuring the safety, efficacy, and security” of drugs and biologics (among other things). But the agency is hampered by the provision that it only has authority over drugs that cross state lines in commerce. This is a classic debate of federal versus state jurisdiction. Activities that occur within state borders are governed through means other than FDA, such as the state boards of pharmacy. However, FDA does have the authority to intercede when there is significant risk to the population or if other laws are broken.

And that is exactly what it did back in 2012, when batches of compounded drugs for parenteral use were contaminated at the New England Compounding Center, resulting in 60 deaths and over 500 fungal meningitis infections.1 The FDA had a public health crisis on its hands. The incident was attributed to faulty aseptic practices in the pharmacy compounding center. FDA stepped in and inspected, and it found problems resulting in the issuance of a form 483.2 This led to many more inspections of other pharmacies and the issuance of scores of warning letters.

Very soon after the inspections, FDA began to develop its strategy to help plug the holes in the regulatory framework. Examination of the regulations in place revealed several weak areas, including the apparent lax operations in the pharmacies for dispensing drugs, particularly parenterals, and retaining sterility of the materials (deficient GMP operations). Pharmacies were also dispensing prescription drugs without obtaining prescriptions. In addition, necessary and required drug information was not always supplied.

The goal of this article is to examine how the FDA, within its constraints, has acted to protect the public health in areas where its authority is less than broad and comprehensive. It will show how the agency might very well approach the regulation of other areas — including traditional pharmaceutical manufacturing — where health risk exists and its authority is not so clear. The implications of how FDA actions may encourage or discourage activity in this sector could impact your industry and operations.

Regulatory Response to the New England Compounding Center Outbreak

Among other things, the Drug Quality and Security Act of 2013 helped define the relationships between state boards of pharmacy, the FDA, and compounding pharmacies. It reaffirmed that pharmacies were exempt from FDA oversight if they met certain criteria. Section 503A states that compounded drugs must be requested by prescription for an individual patient in limited quantities. These drugs were described for “office use” — in other words, hospitals, clinics, and healthcare providers could keep some compounded drugs on-hand to meet the immediate needs of patients at that location. Compounding pharmacies could not engage in significant interstate commerce. Their operations had to follow the standards for compounded drugs in the U.S. Pharmacopeia (USP). However, if the FDA suspected that the compounding was not conducted under these conditions, they could intercede.

A second category of centers, described as “outsourced facilities,” were defined and were required to register with the FDA. These centers, governed by section 503B (a new addition to the Federal Food, Drug, and Cosmetic Act), could commercially make compounded drugs for other pharmacies. Outsourced facilities were exempted from FDA labeling requirements and did not have to obtain an approval for the drugs they were compounding. However, they were required to follow good manufacturing practices (GMPs) and to introduce new measures for securing the supply chain. These regulations were implemented through the Compounding Quality Act in 2014 and 2015.

From 2013 through 2016, FDA issued a number of guidances in an attempt to clarify this highly contentious business. FDA requested input from industry to identify a list of drugs that should be allowed to be compounded with justification, as well as a list of those where difficulty had been encountered, such as a lack of USP-NF standards.

July 2014 heralded a cGMP guidance to aid compounders in the 503B category.3 In early 2015, another guidance was issued related to the actual repackaging of drugs, the very heart of compounding.4 There were a number of exemptions to this guidance, for instance biological products, which was dealt with by a separate guidance issued at the same time.5

Clearly, in response to the problems that surfaced in 2012, the FDA revamped its pharmacovigilance systems in order to capture potential adverse events due to compounding. Late in 2015, a guidance was issued that reinforced the reporting of adverse events focusing on 503B facilities.6 (There was already one in place for 503A facilities.)

Four New Guidances for 2016

The pace of new regulations related to drug compounding has continued this year, with the issuance of four separate guidances covering pharmacies in the 503A and 503B areas. Each document covers a particular type of situation, in an attempt to clarify and delineate the rules by which compounding pharmacies would operate.

Pharmacy Compounding of Human Drug Products under Section 503A of the Federal Food, Drug, and Cosmetic Act describes requirements that must be met to exempt a compounder from the FDA general requirements. These include having a valid prescription, as well as conditions to allow compounding, distribution, and office use.7 The key requirement is that the compounded drug can be made available with a prescription that calls for the specific drug for a specific patient who has a specific need that is not met by a commercially available product. This could be due to tablet size (difficulty to swallow) or allergens present in the commercial drug. If any of the following are met when compared with the commercially available drug, then the drug can be compounded:

  • Different active ingredient(s)
  • Different route of administration
  • Different dosage form
  • Different dosage strength
  • Different excipients

There is flexibility regarding the timing of compounding, but at the end of the day, the pharmacist must have the key document (prescription), clearly demonstrating the need, in his possession. There is a limitation on quantities and stocks allowed to be kept based on the history of the pharmacy and the “30-day rule” (kept in stock for no more than 30 days prior to anticipated use). The pharmacy must also keep adequate records of activities to assure compliance to these rules. This compounding must be performed by a licensed pharmacist or physician.

The guidance also defines what drugs can and cannot be compounded. The compounded drug must be described in the USP-NF, and if it is not, it must meet all of the following requirements:

  1. It must be a drug substance that is part of an approved drug product.
  2. It must be accompanied by a valid certificate of analysis.
  3. Any additions to the compounded drug must be referenced in the USP-NF.
  4. It must not be on the withdrawn list of drugs because of safety issues.
  5. It must not be held in large quantities if it is the same as a licensed product.
  6. It must not be one on the “difficult to compound” list.
  7. It must not be the subject of a memorandum of understanding between FDA and the local board of pharmacy.

The guidance also outlines any disciplinary actions that may arise if compounders are found to be out of compliance.

At the same time, a separate guidance covering compounding at 503B facilities was issued.8 It allows drugs that meet the criteria for the 503A guidance to be compounded but includes certain other restrictions. For instance, exact copies of approved drugs can be made if they are included in the drug shortage list. And like the restrictions on the 503A establishments, a drug must be included in the “acceptable to compound” list and must not pose a safety risk. The bulk substance must be procured from a licensed manufacturer, be accompanied by a valid certificate of analysis, and comply with a monograph as applicable. Other requirements for 503B establishments must be met, such as operating under GMP.

The review of the list of drugs is an ongoing activity (over 2,590 were submitted) and the reviews have not all been completed — only when a drug has been cleared can it be compounded. Some drugs have been reviewed and rejected for safety reasons or because they are biologics (covered under a different guidance). Others have been submitted and returned because of lack of supporting data. These will have to wait their turn for review, after all the original submissions have been completed.

To further define the situations surrounding 503A compounding, the FDA issued in July another guidance detailing the compounding of “essentially copies” of approved drugs.9 They reinforced the exemptions that are already in place (cGMP of operations, labeling and need for a drug applications) provided that the pharmacist does not make an exact copy of the approved drug frequently or in large quantities. However, there are no restrictions for making a change to the drug presentation (dose, strength, formulation, format, etc.), provided a prescription has been obtained. The key is that patient must need a drug in a scientifically different form from the commercially available drug, and this need must be described on the prescription. The guidance did stress that while oversight of these compounders is lower than for commercially licensed manufacturers or registered compounders, and there will be added risk to patients, FDA does track reported adverse events and those can trigger an inspection.

At the same time, the agency issued a similar guidance directed at the licensed compounders governed by 503B.10 It reaffirmed the requirements imposed in the Drug Quality and Security Act, but it also defined certain further conditions, similar to those for 503A centers. That is, a center must not produce “essentially copies” of already licensed drugs, though there were exceptions if there is a drug shortage, for instance, or if the compounded drug is expected to yield a different clinical outcome. Further, 503B-registered compounders are not allowed to compound unapproved drugs — e.g., OTC drugs — that require no prescription.


Have the issues surrounding drug compounding centers finally been put to rest? No, it’s still a work in progress and will remain so for many years to come. Expect to see clarifications and reinforcements from FDA, but the matter is, and will remain, a hot topic as long as federal and the state organizations continue flex their respective muscles.

And how is the issue impacting the pharmaceutical industry, including the manufacture of proprietary drugs, generics, and over-the-counter (OTC) products? FDA has clearly stated that compounders cannot make copies of OTC drugs. However, they have restricted the quantity of prescription drugs that can be made even if there is a scientific and technical difference between the compounded drug and original. Thus, they must not operate as mass producers of the drug. Not only that, but the drug must be focused on an individual patient with a fully documented reason (prescription clearly describing the difference and why), and the quantities in reserve must not exceed 30 days’ supply.

FDA is clearly walking a tightrope between servicing patient needs and maintaining effective control on licensing and manufacturing. Concessions have been made to the compounders, at least for now, with respect to GMP oversight and labeling, but with the introduction of the 503B classification, the GMP oversight exemption has been whittled away. Over the next few years, expect other elements to be tightened, all in the name of striking a balance between supplying the market and patient safety.

What might these elements be? For instance, as personalized medicine moves into the mainstream, expect to see an increase in compounding, where tailor-made cocktails of several drugs are compounded in specific ratios. These drugs may come from different manufacturers and represent “new” therapies thought up by progressive doctors who are operating and prescribing off-label for their patients. Of course, all the permutations and combinations would be impossible to manufacture by conventional means. However, an increase in such activity brings with it increased risks to patients, other accidents will likely occur in time. As a result, expect FDA to further whittle away the number of exemptions.


  1. New England Compounding Center (NECC) Potentially Contaminated Medication: Fungal Meningitis Outbreak, FDA Medwatch, Updated Oct. 06, 2012.
  2. FDA Form 483 issued to New England Compounding Center, Oct. 26, 2012.
  3. Current Good Manufacturing Practice — Interim Guidance for Human Drug Compounding Outsourcing Facilities Under Section 503B of the FD&C Act, FDA Draft Guidance for Industry, July 2014.
  4. Repackaging of Certain Human Drug Products by Pharmacies and Outsourcing Facilities, FDA Draft Guidance for Industry, Feb. 2015.
  5. Mixing, Diluting, or Repackaging Biological Products outside the Scope of an Approved Biologics License Application, FDA Draft Guidance for Industry, Feb. 2015.
  6. Adverse Event Reporting for Outsourcing Facilities under Section 503B of the Federal Food, Drug, and Cosmetic Act, FDA Guidance for Industry, Oct. 2015.
  7. Pharmacy Compounding of Human Drug Products under Section 503A of the Federal Food, Drug, and Cosmetic Act, FDA Guidance, June 2016
  8. Interim Policy on Compounding Using Bulk Drug Substances Under Section 503B of the Federal Food, Drug, and Cosmetic Act Guidance for Industry, FDA Guidance for Industry, June 2016.
  9. Compounded Drug Products That Are Essentially Copies of a Commercially Available Drug Product under Section 503A of the Federal Food, Drug, and Cosmetic Act, FDA Draft Guidance for Industry, July 2016.
  10. Compounded Drug Products That Are Essentially Copies of Approved Drug Products under Section 503B of the Federal Food, Drug, and Cosmetic Act, FDA Draft Guidance for Industry, July 2016.

About the Author:

Peter H. Calcott, Ph.D., is president and CEO of Calcott Consulting LLC, which is focused on delivering solutions to pharmaceutical and biotechnology companies in the areas of corporate strategy, supply chain, quality, clinical development, regulatory affairs, corporate compliance, and enterprise e-solutions. He is also an academic program developer for the University of California, Berkeley in biotechnology and pharmaceutics postgraduate programs. Previously, he was executive VP at PDL BioPharma, where he was responsible for development and implementation of quality and compliance strategy across the corporation. He has held numerous positions in quality and compliance, research and development, regulatory affairs, process development and manufacturing at pharmaceutical companies including Chiron, Immunex, SmithKline Beecham, and Bayer. He has successfully licensed products in the biologics, drugs, and device sectors on all six continents. Dr. Calcott holds a doctorate in microbial physiology and biochemistry from the University of Sussex in England.