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Examining the regulatory framework for drug compounding: industry views and experiences

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EXAMINING THE REGULATORY FRAMEWORK FOR DRUG COMPOUNDING:
INDUSTRY VIEWS AND EXPERIENCES

by

Victor J. Gangi

A Dissertation Presented to the
FACULTY OF THE USC SCHOOL OF PHARMACY
UNIVERSITY OF SOUTHERN CALIFORNIA
In Partial Fulfillment of the
Requirements for the Degree
DOCTOR OF REGULATORY SCIENCE

December 2021

Copyright 2021 Victor J. Gangi

ii
Dedication
I dedicate this dissertation to my family. To my wife, Cyndie, for her love, support, patience,
encouragement to continue, and understanding of my aspiration to complete this work. To my three
children, Alexander, Carina and Sonia, for their support of “dad the student”. I hope to provide you all the
support in school and life that you need to achieve your own goals. To my own dad, who provided
encouragement to me in all my educational endeavors. And finally, to my mom, an avid reader and seeker
of knowledge who always had a book in her hands and who would have enjoyed reading this work from
her son.

ii
Acknowledgments
I would first and foremost like to sincerely thank my thesis advisor, Dr. Eunjoo Pacifici, Ph.D.,
for her encouragement, positive attitude, and continued support throughout the multi-year journey of this
project. Her tireless dedication to my project, while simultaneously advising other candidates, teaching
classes, and leading the regulatory science department, is admirable. Her background in pharmacy was
invaluable to provide insights into my research of drug compounding, especially as my own work
experiences were from the pharmaceutical development and manufacturing side. Second, I would like to
thank Dr. Frances Richmond, Ph.D., for her guidance, leadership, and development of the doctoral
program, whose coursework provided valuable skills for my career. Third, I would like to thank and
acknowledge my committee members, including Dr. Raffi Svadjian, PharmD. and Dr. Terry Church,
DRSc. for their questions and suggestions for my dissertation and survey development. Fourth, I would
like to acknowledge members of my focus group, in particular Dr. Nyan Patel, PharmD., who assisted me
with identifying potential survey respondents. Fifth, I would like to thank the ever-responsive and helpful
regulatory science staff that assisted in navigating the administrative aspects of the USC program. Finally,
I would like to thank my fellow students in the 2014 doctoral cohort for their support and friendship, and
especially Dr. Katherine St. Martin for her advice and encouragement to keep writing.

ii
TABLE OF CONTENTS
Dedication ....................................................................................................................................... ii
Acknowledgments........................................................................................................................... ii
List of Tables ...................................................................................................................................v
List of Figures ................................................................................................................................ vi
Abstract ........................................................................................................................................ viii
Chapter 1. Overview ........................................................................................................................1
1.1 Introduction ................................................................................................................. 1
1.2 Statement of the Problem ............................................................................................ 3
1.3 Purpose of the Study ................................................................................................... 4
1.4 Importance of the Study .............................................................................................. 5
1.5 Limitation, Delimitations, Assumptions ..................................................................... 5
1.6 Organization of Thesis ................................................................................................ 6
1.7 Definitions ................................................................................................................... 6
Chapter 2. Literature Review ...........................................................................................................8
2.1 History of Drug Compounding and Manufacturing .................................................... 8
2.1.1 Early History of Drug Preparation ................................................................. 9
2.1.2 Early Control of Drug Preparation .............................................................. 10
2.2 Emergence of Pharmaceutical Industry .................................................................... 12
2.2.1 Growth and Expansion of the Pharmaceutical Industry .............................. 13
2.2.2 Regulating Pharmaceutical Manufacturing ................................................. 14
2.3 Modern Drug Compounding ..................................................................................... 18
2.3.1 Compounding in the Community Pharmacy Setting ................................... 19
2.3.2 Compounding in the Hospital Pharmacy Setting ......................................... 20
2.3.3 Large Drug Compounding Operations ........................................................ 21
2.3.4 Regulating Drug Compounding ................................................................... 24
2.3.4.1 Traditional Pharmacy Drug Compounding .................................... 24
2.3.4.2 Large Scale Compounding Operations .......................................... 28
2.4 Compounding Quality Act (CQA) ............................................................................ 37
2.4.1 Legislative Process Leading to Passage of CQA ......................................... 37
2.4.2 Overview of CQA ........................................................................................ 42
2.4.3 Implementation of CQA .............................................................................. 45
2.4.3.1 Enhancing communications between the states and FDA .............. 46
2.4.3.2 Substances Allowed for Compounding ........................................... 49
2.4.3.3 Substances Prohibited from Compounding .................................... 52
2.4.3.4 Operating Requirements for Outsourcing Facilities ...................... 52
2.4.3.5 Impact of CQA on Stakeholders ..................................................... 56
2.5 Research Framework ................................................................................................. 61

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Chapter 3. Methodology ................................................................................................................65
3.1 Introduction ............................................................................................................... 65
3.2 Stakeholder Analysis and Respondent Selection ...................................................... 65
3.3 Development of the Survey ....................................................................................... 66
3.4 Survey Deployment and Data Analysis .................................................................... 67
Chapter 4. Results ..........................................................................................................................70
4.1 Survey Logistics ........................................................................................................ 70
4.2 Profiles and Backgrounds of Respondents ................................................................ 71
4.3 Views on 503B facility registration .......................................................................... 77
4.4 Communication ......................................................................................................... 82
4.4.1 Raising Awareness of CQA ......................................................................... 84
4.4.2 Clarifying Regulatory Oversight ................................................................. 85
4.4.3 Views on Standard MOU............................................................................. 86
4.4.3.1 Regulation and Enforcement .......................................................... 88
4.4.3.2 Quality and Safety........................................................................... 89
4.4.3.3 Operations ...................................................................................... 89
4.4.4 Keeping Informed ........................................................................................ 91
4.4.5 Stakeholder Engagement ............................................................................. 93
4.4.5.1 503A Guidance Document .............................................................. 94
4.4.5.2 503A Bulks List ............................................................................... 97
4.4.5.3 503B Bulks List ............................................................................... 97
4.4.5.4 Difficult to Compound Drug List .................................................... 98
4.5 Substances to compound ........................................................................................... 99
4.5.1 503A Bulks list .......................................................................................... 100
4.5.1.1 Views regarding FDA’s Category 1 policy................................... 100
4.5.1.2 Views on 503A Bulks list............................................................... 101
4.5.2 503B Bulks List ......................................................................................... 102
4.5.2.1 Views regarding FDA’s Category 1 policy................................... 102
4.5.2.2 Views on 503B Bulks list............................................................... 103
4.5.3 The Drug Shortage List (DSL) .................................................................. 104
4.5.3.1 DSL Process ................................................................................. 105
4.5.3.2 Grace Period to Continue Distributing DSL Products ................. 108
4.5.3.3 Copying Approved Drug Products ............................................... 111
4.6 Inspections .............................................................................................................. 113
4.6.1 FDA Inspections ........................................................................................ 113
4.6.1.1 Frequency of FDA Inspections ..................................................... 114
4.6.1.2 Views on FDA Inspector Knowledge ............................................ 114
4.6.2 State Inspections ........................................................................................ 115
4.6.2.1 Frequency of State Inspections ..................................................... 116
4.6.2.2 Views on State Inspector Knowledge ............................................ 117
4.6.2.3 Views on State Inspection Resources ............................................ 118

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4.7 Operations and Compliance .................................................................................... 120
4.7.1 503A Compounding Standards .................................................................. 121
4.7.2 Challenges to Operate 503B Facilities ...................................................... 123
4.7.3 Complying with CGMP ............................................................................. 124
4.7.3.1 503B Responses ............................................................................ 125
4.7.3.2 Pharma Responses ........................................................................ 128
4.7.4 FDA’s CGMP Guidance for 503Bs ........................................................... 130
4.7.4.1 Exemptions with most agreement ................................................. 130
4.7.4.2 Exemptions with most disagreement ............................................. 130
4.7.5 Safety Reporting for 503Bs ....................................................................... 133
4.8 CQA ........................................................................................................................ 136
4.8.1 Importance of compounded drugs to healthcare in the US ........................ 136
4.8.2 Comparing the quality, safety and efficacy of compounded drugs with drugs
manufactured by pharmaceutical companies ............................................. 137
4.8.3 Prevalence of 503As distributing without patient-specific prescriptions .. 140
4.8.4 Impact of 503B outsourcing facilities ........................................................ 141
4.8.5 Effectiveness of CQA ................................................................................ 143
4.8.6 Future of CQA ........................................................................................... 146
4.9 Other thoughts ......................................................................................................... 150
5.1 Overview ................................................................................................................. 154
5.2 Methodological Considerations .............................................................................. 154
5.3 Consideration of Results ......................................................................................... 158
5.3.1 Quality and Safety of Products .................................................................. 159
5.3.1.1 Differing views on CQA’s impact on product quality ................... 159
5.3.1.2 Differing views on CQA’s impact on product safety .................... 160
5.3.2 Equal Requirements and Standards for Industry ....................................... 162
5.3.2.1 Bulks List process is viewed as stifling compounding
operations ..................................................................................... 163
5.3.2.2 Differing CGMP requirements create unequal standards ............ 164
5.3.3 Efficiencies in Commercialization and Costs ............................................ 166
5.3.3.1 503As view CQA as threatening their business ............................ 166
5.3.3.2 503Bs view CQA as discouraging entrepreneurship .................... 168
5.3.3.3 Pharmaceutical Manufacturers would like to see higher
standards for compounded drugs ................................................. 171
5.4 Future Directions and Concluding Thoughts .......................................................... 173
References ....................................................................................................................................175
Appendix A: Survey ....................................................................................................................192
Appendix B: Survey Data ............................................................................................................212

v
List of Tables
Table 1: Terms and Acronyms ....................................................................................................7
Table 2: Pharmacy compounding acts of concern to FDA (CPG 460.200) ..............................26
Table 3: Comparison of Selected Quality System Requirements between FDA CGMPs
and USP <797> ......................................................................................................32
Table 4: Distribution of Respondents by Job Title ...................................................................73
Table 5: Size of Company (as measured by number of employees) .........................................74
Table 6: Affiliated Comments on Clarity of FDA Regulations and Guidance for 503B
OF Registration ......................................................................................................80
Table 7: Ranking of Hurdles Preventing Registration as a 503B OF .......................................82
Table 8: Views on a Final Standardized MOU .........................................................................90
Table 9: Affiliated Comments on Time Allowed for Distribution of 503B
Manufactured Products after Removal from DSL ...............................................110
Table 10: Affiliated Comments on Whether CQA Allowing Compounding Copies of
Approved Drug Products Creates Unfair Business Advantage ...........................112
Table 11: FDA Inspection Frequency .......................................................................................114
Table 12: State Inspection Frequency .......................................................................................117
Table 13: Affiliated Comments on Whether States are Sufficiently Resourced to
Regulate 503A Compounding Activities .............................................................120
Table 14: Affiliated Comments on Requiring 503A Pharmacies to Comply with
USP<797> for Sterile Compounding ...................................................................122
Table 15: Ranked Challenges to Operating a 503B Facility .....................................................124
Table 16: Agreement with Exemptions from CGMPs for Sterile Human Drug
Compounding .......................................................................................................131
Table 17: Affiliated Comments on Adequacy of 503B AE Reporting .....................................135
Table 18: Difficulty Ranking of Adverse Event Reporting ......................................................136
Table 19: Affiliated Comments on Whether the CQA has been Effective at Improving
Compounded Product Quality..............................................................................144
Table 20: Affiliated Comments on Whether the CQA has been Effective at Improving
Compounded Product Safety ...............................................................................146
Table 21: Suggestions for Revising CQA .................................................................................148
Table 22: Affiliated Comments on Which Parts of the CQA Should be Revised ....................149
Table 23: Other Thoughts on the Topic of Drug Compounding ..............................................150

vi
List of Figures
Figure 1: DQSA Act and Key Provisions of the CQA ...............................................................43
Figure 2: Framework for Stakeholder Assessment of the Compounding Quality Act
(CQA) ....................................................................................................................63
Figure 3: Distribution of Respondents by Facility Type ............................................................71
Figure 4: Respondent Companies Making Sterile Drug Products .............................................75
Figure 5: Quantity of Sterile Human Drugs Produced ...............................................................77
Figure 6: 503B Registration Renewal ........................................................................................78
Figure 7: 503A Respondent Experience and Views of 503B OF Registration ..........................79
Figure 8: Clarity of Guidance for 503B OF Registration ...........................................................80
Figure 9: Communication Level Between Industry and the FDA .............................................83
Figure 10: Communication Level Between Industry and the States ............................................84
Figure 11: Compounding Quality Act (CQA) Familiarity ...........................................................85
Figure 12: Effectiveness of the CQA Related to Clarifying Responsibilities Between the
States and FDA ......................................................................................................86
Figure 13: Familiarity with the MOU Between States and FDA .................................................87
Figure 14: Frequency of Monitoring FDA Guidance for Drug Compounding ............................92
Figure 15: Frequency of Monitoring State Guidance for Drug Compounding ............................93
Figure 16: Engaged by FDA on the 503A Guidance Document ..................................................94
Figure 17: Engaged by FDA on the 503B Guidance Documents ................................................96
Figure 18: Engagement by FDA for Bulk Drug Substance/Product Lists ...................................99
Figure 19: Compounding of Category 1 Bulk Substances .........................................................100
Figure 20: Views of 503A Respondents Regarding 503A Bulks List .......................................102
Figure 21: Compounding with Substances on the 503B Category 1 Bulks List ........................103
Figure 22: 503B Respondent Views of the 503B Bulks List .....................................................104
Figure 23: Agreement with DSL Accuracy and Timeliness ......................................................106
Figure 24: Agreement on the Drug Shortage List Processes .....................................................108
Figure 25: Grace Period to Continue Distribution of Product after Removal from DSL ..........109
Figure 26: Advantage to Compound Copies of Approved Products ..........................................111
Figure 27: FDA Inspection History ............................................................................................113
Figure 28: FDA Inspector Knowledge .......................................................................................115
Figure 29: State Inspection History ............................................................................................116
Figure 30: State Inspector Knowledge .......................................................................................118
Figure 31: Sufficient Resourcing of States ................................................................................119
Figure 32: 503A Adherence to USP General Chapter “Pharmaceutical Compounding –
Sterile Preparations” ............................................................................................121
Figure 33: 503B Respondent Views to Compliance with CGMPs ............................................127
Figure 34: Pharmaceutical Manufacturer Views to Compliance with CGMPs .........................129

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Figure 35: Adequacy of AE Reporting for 503B OFs ...............................................................134
Figure 36: Quality of Compounded Drugs .................................................................................138
Figure 37: Safety of Compounded Drugs ..................................................................................139
Figure 38: Effectiveness of Compounded Drugs .......................................................................140
Figure 39: Views on Prevalence of Distribution of Sterile Drugs Without a Valid
Prescription ..........................................................................................................141
Figure 40: Views of Introducing 503B Outsourcing Facilities ..................................................142
Figure 41: Has CQA Improved the Quality of Compounded Drugs ..........................................143
Figure 42: Has CQA Improved the Safety of Compounded Drugs ...........................................145
Figure 43: View of the Compounding Quality Act ....................................................................147

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Abstract
The deadly outbreak of meningitis in 2012 traced to poorly compounded drugs spurred the
United States Congress to pass the Compounding Quality Act (CQA) to increase federal
oversight of compounding facilities. The new system divided compounding activities into two
categories: section 503A for traditional compounding that remained primarily under state
jurisdiction; and section 503B for high volume compounding by the newly created “outsourcing
facility” that falls under the FDA jurisdiction. Hence, the law created a new entity with similar
privileges to licensed pharmaceutical manufacturers but without obtaining pre-market approvals
or being subject to the same regulations regarding production and quality controls. In effect,
CQA has established a regulatory landscape that allows medications to be produced under three
different regulatory standards. The objective of the study was to examine the views of
compounding pharmacies, outsourcing facilities, and the licensed pharmaceutical manufacturers
on the current law and regulatory policies for drug compounding. The research was conducted
using a novel survey-based on Triad Purpose of Regulation framework: ensuring product quality
and safety, establishing equal requirements and standards for industry, and fostering efficiencies
in commercialization and costs. Results were obtained from 115 respondents across 503A
compounding pharmacies, 503B outsourcing facilities, and pharmaceutical manufacturers. The
findings of the study indicate a lack of consensus regarding the effectiveness of CQA in that
many view the law and the associated FDA regulatory policies as inadequate, unnecessary, or
overly restrictive. While the 503As seem to view the CQA as regulatory over-reach by the FDA,
the 503Bs indicate that the current regulatory framework impedes the growth of their industry.
On the other hand, the pharmaceutical industry may view compounded drugs to be inferior to its’
products but is disengaged when it comes to regulatory issues pertaining to drug compounding.

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The findings from this study should help to inform the FDA and other policy makers as they
assess and modify their approaches to CQA implementation.

1
Chapter 1. Overview
1.1 Introduction
In today’s world, most drugs are made by pharmaceutical companies, but if commercial
formulations are not available, patients must turn to pharmacists to compound their needed
medication. Historically, drug compounding has been performed in local pharmacies and
hospitals to meet the specific needs of individual patients. For example, an elderly or a pediatric
patient may have difficulty swallowing a tablet or capsule and need the medicine in a liquid
dosage form, which may not be commercially available. In these situations, a pharmacist could
crush the tablets or empty the contents of capsules to prepare a liquid formulation as requested
by the physician. But the compounding practice has expanded over the years by some operations
to produce large quantities of drug products categorized as “office stock” to be sold and
distributed much more widely. These large compounding operations behaved like
pharmaceutical manufacturers without having to comply with the federal requirements for
licensure or quality standards. Over time, these practices inevitably led to adulterated products
that caused serious harm to patients.
Between 2000 and 2012, hundreds of adverse events were associated with poorly
compounded drugs that resulted in infectious outbreaks across multiple states (Staes et al., 2013).
But it was the deadly outbreak of fungal meningitis in 2012, which caused over 100 deaths
across the nation, that finally prompted the lawmakers to take decisive action. This tragic
incident was traced to contamination associated with injectable methylprednisolone drug
products made by the New England Compounding Center (NECC) in Framingham,
Massachusetts. Licensed by the state as a compounding pharmacy, NECC operated more like a
pharmaceutical manufacturer than a pharmacy by mass producing and distributing its drug

2
products across state boundaries without obtaining FDA approval or complying with federal
quality standards. The public outcry from this incident spurred Congress to pass the
Compounding Quality Act (CQA) on November 27, 2013, with the aim to increase federal
oversight of compounding facilities and improve the quality of compounded drugs.
The new system divides compounding activities into two categories. Some facilities
would pursue compounding in the traditional way, for a single patient under a single physician’s
prescription. However, others would fall into a new category of compounding pharmacy, called
an “outsourcing facility”, that would come under the U.S. Food and Drug Administration (FDA)
jurisdiction and be allowed to produce high volumes of sterile drug products that can be sold and
distributed across state lines without patient-specific prescriptions. These new operations were
described in section 503B of the new law and thus are often called “503B” outsourcing facilities
(503B OFs), differentiating them from the traditional “503A” compounding pharmacies. This
provision allows 503B OFs to operate like a licensed pharmaceutical manufacturer. However,
unlike the pharmaceutical manufacturers, the 503B OFs do not need to obtain pre-market
approvals or be subject to the same stringent regulations regarding product quality and labeling.
Thus, the new law has established a regulatory landscape that allows medications to be produced
by different entities that operate under different regulatory standards. While the 503B OFs are
required to adhere to CGMPs and are subject to FDA inspections on a risk-based schedule, the
registration process is voluntary and, hence, it is not clear as to which pharmacies may be
performing 503B operations. Moreover, even many that have registered as 503B OFs faced
challenges adhering to the 503B regulatory requirements, as evidenced by dozens of Warning
Letters issued to firms after FDA inspections (FDA, 2021c). FDA’s most recent report on the
state of drug compounding from 2018 indicated that the FDA had conducted nearly 500

3
inspections and issued more than 180 warning letters advising compounders of significant
violations of federal law (FDA, 2018a).
Since 2013, FDA has initiated and partially implemented some of its planned activities.
Still many of the Guidance for Industry documents were not issued until 2017, and clarity around
responsibilities between FDA and the states has continued to lag. The CQA, which was hastily
written and rapidly pushed through the legislative process on the heels of the 2012 meningitis
outbreak, may not have fully considered the inputs from all the stakeholders or potential
consequences. Hence, the new legislation enacted to help clarify federal regulation of drug
compounding to mitigate a public health crisis may have introduced additional complexities and
created an uneven playing field for the different categories of drug producers.
1.2 Statement of the Problem
Although pharmaceutical companies and compounding pharmacies both represent key
stakeholder groups in the drug production landscape, it is unclear whether the views and expert
advice of both groups were adequately solicited and considered during the development of the
CQA. The new 503B OF entities, introduced by CQA, have the potential to change the
commercial landscape as they compete in the marketplace established over many decades by the
pharmaceutical industry. Pharmaceutical companies comprise a large and sophisticated industry
with a gross sales revenue in 2020 of $528 billion in the United States alone (IQVIA, 2021).
Their activities are regulated rigorously by the FDA, which works to ensure the quality, safety,
and efficacy of the pharmaceutical supply in its overarching mission to protect public health.
Similar to the pharmaceutical manufacturers, 503B OFs are also allowed to produce and
distribute drugs for interstate commerce, but they do not need to meet the same regulatory
requirements for licensure and manufacturing standards. But most healthcare providers and

4
patients are not aware of these differences. For 503B OFs, the ability to operate has been limited
by delays in the full implementation of CQA by the FDA. Although the FDA has issued draft
guidance documents to clarify its expectations and requirements for 503B OFs, many are still in
preliminary form, and some provisions of the CQA remain yet to be implemented. For example,
the process for approving bulk ingredients for 503B compounding and the FDA’s negotiations
with the states regarding communication and enforcement responsibilities, have not been
finalized.
The current regulatory landscape under CQA still allows poorly compounded products to
escape regulatory scrutiny. Since 2013, FDA inspections of compounding pharmacies continue
to discover unacceptable and insanitary conditions, including the presence of moldy ceiling tiles
and performance of non-aseptic technique while preparing sterile drugs (Woodcock and Dohm,
2017). Hence, it is not clear if the CQA has been well thought out as a long-term solution to the
compounding problems. It is also not clear if the Congress and the FDA considered the input of
all the appropriate stakeholders in developing and implementing the new regulatory framework.
And as we move toward marking the first decade since the passage of CQA, we still do not have
a clear picture of the views of compounding pharmacies, 503B OFs, and licensed pharmaceutical
manufacturers on the impact of CQA.
1.3 Purpose of the Study
The purpose of the study was to understand the perspectives of compounding pharmacies,
503B OFs, and the licensed pharmaceutical manufacturers on the current regulatory framework
for drug compounding. The study used a survey tool to obtain the views of these key
stakeholders on the creation of the 503B OF as a new category of drug manufacturer and the
adequacy and fairness of the new regulations. The research framework used was based on the

5
three objectives that pharmaceutical regulations are designed to accomplish: 1) to help ensure the
safety and effectiveness of drug products, 2) to equalize requirements and standards for the
industry, and 3) to facilitate efficiencies in the management of research, commercialization, and
costs (Ramsey, 2013). The views of the three stakeholder groups on the strategy and progress of
the compounding policies and guidance, the impact of the regulations on their operations, and the
quality and safety of compounded drug products were assessed.
1.4 Importance of the Study
The findings from this study could inform the FDA and other policy makers as they look
to modify their approaches in implementing CQA. Understanding the views of compounders and
pharmaceutical manufacturers would help to shape regulations and guidance to be clear and
effective. This in turn could assist the compounding pharmacists in performing their work so that
safe and effective medicines can be provided to the American public. For the pharmaceutical
manufacturers, the findings from this study could help clarify how best to involve and position
themselves in the regulatory forums and the marketplace as CQA is implemented.
1.5 Limitation, Delimitations, Assumptions
The study was delimited to 503A compounding pharmacies, 503B outsourcing facilities,
and licensed pharmaceutical manufacturers. The selection of the survey participants was derived
from professional networks, professional organization membership rosters, and referrals. The
study was also delimited to drug compounding in the United States because pharmacy practice,
drug compounding, and regulations differ internationally.
A potential limitation of this research was obtaining an adequate response rate due to
many industry professionals being busy in their day-to-day work and may not see a benefit in
participating. Also, this same limitation to obtain a meaningful number of responses within each

6
of the three facility type subgroups would make it challenging to stratify and cross-tabulate the
data based on respondent industry populations. Another limitation was the potential for
participants to believe that responding to the survey could attract unwanted attention from the
FDA or a state regulatory agency. This limitation was controlled by clearly informing potential
participants of their anonymity and by anonymizing the survey results, though perception of risk
may have persisted, nonetheless.
I assumed that all respondents were truthful in their responses and expressed their own
opinions and experiences on the subject matter. In addition, I assumed that the participants
possessed a sufficient understanding of the subject matter to provide meaningful answers to the
questions.
1.6 Organization of Thesis
The outlined research contains five (5) chapters. Chapter 1 provides an overview of the
background and introduction to the study including the problem statement, the purpose and
importance of the study, and the delimitations, limitations, and assumptions of the study. Chapter
2 provides a more detailed overview of the history and evolution of pharmaceutical drug
preparation and the regulations and oversight of drug manufacturing and compounding. Chapter
3 describes the research methodology used for the study, including the research framework that
was used to help develop the survey instrument. Chapter 4 provides a detailed summary of the
data collected from the survey responses. Chapter 5 is a discussion of the research results
including conclusions and implications.
1.7 Definitions
The key terms and acronyms as used within this study are defined as in Table 1.

7
Table 1: Terms and Acronyms
AE Adverse Event
BoP Board of Pharmacy
CGMP Current Good Manufacturing Practice
CPG Compliance Policy Guide
CQA Compounding Quality Act
DQSA Drug Quality and Security Act
FDA Food and Drug Administration
FDCA Federal Food, Drug and Cosmetic Act
GAO Government Accounting Office
MOU Memorandum of Understanding
NAPB National Association of Boards of Pharmacy
503B OF 503B Outsourcing Facility
USP United States Pharmacopeia

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Chapter 2. Literature Review
2.1 History of Drug Compounding and Manufacturing
Drug compounding is the process of combining, mixing or altering a drug or its
ingredients to create a medication tailored to the needs of a patient (GAO, 2013). It has had a
long history, in which patients were given drugs in various forms by shamans, medicine men,
physicians and religious leaders (Porter and Porter, 1989). In the last few centuries, however, it
became more typical for this role to be played by pharmacists who prepared medicines extracted
from raw materials in small batches for individual patients. But the industrialization of
pharmaceutical manufacturing that took place in the 20th century, moved drug making out of
pharmacies and into large manufacturing facilities so that by the late 1960s, the role of a
pharmacist had narrowed to focus more on dispensing of finished pharmaceuticals produced by
the industry and less on using raw ingredients to compound medicines for individual patients.
Compounding, however, remained as an essential part of pharmacy practice in the hospital
setting, to serve the immediate needs of patients within their care and, in the community setting,
to meet the needs of individual patients whose needs could not be met by commercially available
products. Then a shift in the drug compounding emerged in the 1980s whereby some pharmacies
began to compound larger quantities of medicines that they could make and store in advance for
healthcare provider customers (FDA, 2017b). As these large operations grew in number and
expanded their scope, the line between traditional compounding and industrial manufacturing
became blurred. In the sections below, the circuitous history of drug compounding, from early
apothecaries to the modern large compounding operations will be examined in more detail.

9
2.1.1 Early History of Drug Preparation
The discovery and use of medicinal substances derived from plants, animals, and
minerals to prevent disease, heal injury or illness or alleviate pain has been practiced by humans
for millennia. Until the 1600s, the medicinal preparations remained traditional, relying upon
simple remedies and the time-honored herb-based galenicals (Porter and Porter, 1989). In the
subsequent centuries, however, advances in chemistry and technology enabled the isolation and
purification of active medicinal ingredients from natural sources as well as the creation of new
substances through chemical synthesis (Debus, 1972). The early pharmacists, also known as
apothecaries or chemists, prepared raw materials supplied by wholesalers into finished dosage
forms like tinctures, extracts, and pills. Without instrumentation to test the quality of the
incoming raw materials, the pharmacists relied primarily on the trust in relationships with their
suppliers. Lack of quality standards or regulatory oversight allowed the marketplace to become
crowded with adulterated and substandard products.
A challenge for the apothecaries during this time was the nascent production and limited
quality control of chemical medicines, which were expensive and required specialized equipment
and expertise (Crosland, 2005). To address adulteration in the marketplace, pharmacists in
Europe established guilds, such as the Society of Apothecaries formed in 1617 in London, to
oversee the practice of apothecaries and standards for medicinal preparations. For example, the
Apothecaries’ Hall built in 1672 provided a dedicated laboratory for producing high quality
chemical medicines for the members of The Society of Apothecaries to sell in their shops
(Simmons, 2014). The United States during this period was a young colony and did not possess
proficiency in compounding or manufacturing of medicines. It had no established raw material
suppliers or trained apothecaries, and, hence, the medicinal ingredients, finished products, and
compounding know-how were all imported from Europe. Following the American Revolution,

10
however, domestic capabilities of pharmacists expanded, and a variety of medicinal products,
including tinctures, elixirs, and other derivative products, were made from locally sourced
botanicals (Higby, 1994). Records show that medicinal products used during the American Civil
War included indigenous plants such as dogwood root, bark, poppies, sorghum, and alcohol,
which were procured, tested, and distributed under the control of the Union and Confederate
armies (Hasegawa, 2000). By the mid-1800s, apothecaries in the U.S. flourished and became
increasingly entrepreneurial. They were creating their own unique formulations and selling
preparations like essences of peppermint, spruce, and mustard and engaging in aggressive
marketing tactics that included exaggerated and baseless therapeutic claims (Gabriel, 2014).
Moreover, these so-called “patent medicines” were trademarked but rarely patented and
misled the public to believe that the ingredients were proprietary. In reality, most of these
products were composed of commonly obtained ingredients like vegetable extracts, alcohol,
opium, morphine, or cocaine, all of which had long been sold in the colonies (Gabriel, 2014).
Controlling the quality of medicines has been a challenging endeavor from its earliest days to
modern times.
2.1.2 Early Control of Drug Preparation
Early written records on the preparation of medicines such as treatises were numerous
throughout history and included well-known works by Dioscorides (40 – 90 AD) and Galen
(129-200 AD). The use of treatises to prepare medicinal preparations (herbal, mineral, animal,
and later chemical substances) was a common practice throughout Asia, the Middle East,
Europe, and in the early colonial period in the U.S. (Ricodel and Jazi, n.d.). One of the oldest
written standards for the quality of medicinal preparations is found in one of the proclamations
of the Salerno Medical Edict issued by Fredrick II of Sicily (1240 AD), which ordered

11
apothecaries to prepare remedies always in the same way (Rago and Santoso, 2008). These
writings serve as pre-cursers to the official pharmacopoeias that started to appear in Europe in
the 16th century and subsequent quality standards for drug products.
The development and publishing of pharmacopeias was an important step in the
establishment of quality standards for drug products. These pharmacopoeias contained lists of
chemicals or natural substances with information on their identification, quality, preparation, and
use as drugs or medicines. The first pharmacopeia in Europe is thought to be the Italian
“Ricettario Fiorentino”, also known as the “Antidotarium Florentinum”, published in 1498 under
the order of the local Guild of Physicians and Apothecaries in Florence, Italy (Cipriani, n.d.).
The pharmacopeia was written to make more readily available practical instructions for
apothecaries to consistently prepare chemical, botanical, and natural medicines in the same
manner. An important distinction from the earlier treatises on medicinal preparations written by
individuals was the content of most pharmacopeias were written and agreed by an appointed
group of physicians and apothecaries (Tirumalai and Long, 2021). Pharmacopeias in other
European cities followed with their own published versions, such as Barcelona (Spain) in 1511,
Nuremberg (Germany) in 1546, and the London Pharmacopoeia in 1618, the first national
pharmacopeia (Bueno, n.d.; Friedrich, n.d.; Anderson, n.d.). During its early years as an
independent nation, the United States lagged behind Europe in establishing quality standards for
drugs and became a dumping ground for adulterated products. The American Pharmaceutical
Association (APhA) (now known as the American Pharmacists Association) was founded in
1852 to improve the quality of medicines in the United States and worked closely with the
United States Pharmacopeial Convention (USP) to develop the national pharmacopeia (Tirumalai
and Long, 2021). It was around this time that states asserted jurisdiction over pharmacies and the

12
pharmacy profession. With the cooperation of pharmacists and the APhA, states passed their
legislation for the pharmacy profession and pharmacy operations, including drug compounding
(Brushwood, 2000). Hence, in order to perform pharmacy practice, which includes the act of
compounding medications, a pharmacist needs to meet the requirements outlined by the
designated state board of pharmacy and obtain a professional license.
2.2 Emergence of Pharmaceutical Industry
To meet the increasing demand for medicines, many of the early pharmacists in Europe
started small to medium-sized businesses that specialized in drug manufacturing. In their article
on the history of English drug industry, Roy and Dorothy Porter describe family firms and
partnerships that started as small “backroom pharmacies” that became successful enough to
expand and grow into larger operations (Porter and Porter, 1989). Along with this more
centralized approach to compounding, family-run pharmacies and entrepreneurial partnerships
also expanded their production capacities to multiple sites across Europe and the United States.
In France, Pierre-Joseph Pelletier and Joseph Caventou pioneered alkaloidal research to enable
large-scale production of new drugs in the early 1800s (Cowen, 2002). In Germany, Heinrich
Emanuel Merck, in 1821, turned his more than one hundred fifty-year-old family-operated
apothecary into E. Merck AG, which manufactured morphine and other alkaloids in bulk
(Cowen, 2002). The newly established drug companies also collaborated with universities and
medical centers to apply scientific discoveries in chemistry and biology toward the development
and commercialization of innovative medicines (Gabriel, 2016). This was the beginning of an era
that gave rise to a variety of important medicinal products, including antibiotics, insulin, and
vaccines.

13
2.2.1 Growth and Expansion of the Pharmaceutical Industry
As the chemical industry rapidly expanded in Europe, the resulting pharmaceutical
products found their way to the American market. Preparations such as sulfuric ether, mercury,
morphine, strychnine, piperine, and quinine were widely used in America (Gabriel, 2014). The
United States over time established its own domestic manufacturing capabilities founded initially
by individual pharmacists like John K. Smith of Philadelphia, who founded Smith, Kline, and
French Laboratories in 1830, Louis Dohme and Alpheus Phineas Sharp of Baltimore, who
established Sharp and Dohme in 1845, and Eli Lilly, of Indianapolis who founded the Eli Lilly
Company in 1876 (Cowen, 2002).
Following World War I, it became increasingly common for university researchers and
physicians employed by hospitals and government institutions to work closely with the drug
industry to develop and commercialize new products (Swann, 1988). In 1921, Canadian
professor Frederick Banting in collaboration with drug manufacturer Eli Lilly and Co.,
developed a manufacturing process to produce insulin from biological cells on a scale larger than
that of previous known methods that extracted insulin directly from animals (Rosenfeld, 2002).
Following World War II, pharmaceutical companies also began to form relationships with
physicians in large medical centers and hospitals (Furman and MacGarvie, 2007). Important new
drugs such as streptomycin, the first effective antibiotic treatment for tuberculosis, was
discovered in 1943 during a Merck-funded research program in the Rutgers University lab of
Selman Waksman (Kingston, 2004). Important vaccines were discovered, including Jonas Salk’s
1954 polio vaccine developed with funding from the non-profit National Foundation for Infantile
Paralysis (Lambert and Markel, 2000), and the measles vaccine developed in 1962 by the Boston
Children's Medical Center and later refined, produced, and licensed to Merck (Conniff, 2013).

14
Through these collaborations, the pharmaceutical industry charted its path for translating basic
research into commercially available therapeutics.
The late twentieth century saw increased growth and the global expansion of the
pharmaceutical drug industry as novel products were discovered and developed through
scientific and technological advances. In addition, the generic drug industry grew rapidly in the
U.S. following the passage of the Hatch-Waxman Act of 1984, which streamlined the approval
process for generic drugs (FDA, 1984). Soon thereafter, advances in the field of biotechnology
and genomics led to the introduction of novel biological products. The large global
pharmaceutical companies now research, develop, manufacture, and supply the majority of the
small molecule and biologic drug products globally (Danzon et al., 2007). Drug products became
more complex, and the regulatory requirements for manufacturing controls became more
rigorous, as will be further examined in section 2.2.2. With the growth of a sophisticated
pharmaceutical industry and the availability of high-quality medicines, the need for drug
compounding diminished, and pharmacy practice focused primarily on dispensing finished drug
products.
2.2.2 Regulating Pharmaceutical Manufacturing
With the establishment of the pharmaceutical industry in the 20th century, drug
‘manufacturing’ became differentiated from drug ‘compounding’ and the regulation of the two
activities bifurcated. While the practice of pharmacy came under state jurisdiction in the late
1800s, manufacturing of drugs by pharmaceutical companies was not regulated until the United
States Congress passed the Food and Drugs Act of 1906, which made it illegal to sell
contaminated (adulterated) food and drugs in interstate commerce and required the labeling on
products to be accurate and truthful (NAC, 1906). The law also legalized USP standards by

15
mandating that drugs “sold under or by a name recognized in the United States Pharmacopeia or
National Formulary” must meet the standards of strength, quality, or purity stipulated in the
compendia (NAC, 1906). The new law introduced legal measures to remove violative products
from the market, including seizures and criminal prosecution, with the enforcement authority
given to the Federal Bureau of Chemistry, whose name was changed in 1930 to the present-day
Food and Drug Administration (Swann, 2018). When over 100 people died, many of them
children, from poisoning by the antibiotic drug Elixir Sulfanilamide, the incident revealed
deficiencies in the 1906 law and prompted the passage of the 1938 Federal Food, Drug and
Cosmetic Act (FDCA) with provisions requiring new drugs to demonstrate safety before being
allowed on the market (FDA, 1938). A drug manufacturer was required to submit to the FDA for
review a new drug application (NDA) with data to verify that a new drug was safe, usually
through studies in animals. The new law, which increased regulatory burden for bringing new
drugs to the market, clearly favored larger companies as they had the financial resources to
conduct the required quality and safety studies to file NDAs (Riley, 2004). The FDCA did not
impact the compounding activities of family-run or independent apothecaries and pharmacies,
which remained under state jurisdiction as practice of pharmacy profession. Thus, a dichotomy
emerged in how pharmaceutical products were regulated based on whether the producer was a
drug company that manufactured its products for distribution nationwide or a pharmacy that
compounded its products for individual patients. The FDCA also expanded the scope of FDA’s
jurisdiction to include cosmetics and medical devices; and gave FDA the authority to conduct
factory inspections and impose injunctions to stop companies from manufacturing and
distributing violative products.

16
In subsequent years, additional laws were passed to amend the FDCA as new
advancements were made in science and technology. For example, the 1941 Insulin Amendment
required FDA to test and certify the purity and potency of insulin drugs sold and used to treat
diabetes, and the 1945 Penicillin Amendment required FDA testing and certification of the safety
and effectiveness of penicillin antibiotic products. The 1951 Durham-Humphrey Amendment
separated drugs into those that needed patient-specific prescriptions from the physician from
those that can be purchased freely over the counter (FDA, 2018g). But the Kefauver-Harris Drug
Amendments, which was enacted in 1962, may be considered by many as the foundation of the
modern U.S. regulatory framework.
The Kefauver-Harris Drug Amendment was passed after a widely marketed drug,
thalidomide caused more than 10,000 birth defects around the world and prompted the U.S.
Congress to strengthen the new drug approval process to protect the public from potential
adverse events (FDA, 2018g). Under the new law, the drug applications required both proof of
safety and efficacy so that the regulators can assess the benefit-risk profile of a drug in their
review process. Many of the concepts that are central to the modern drug development were
embedded in this law. For example, substantial evidence of efficacy of a new drug must be
demonstrated through well-controlled clinical trials, adverse events must be properly reported,
and the product labeling must be approved prior to the marketing of a new drug (FDA, 1962).
The law also included mandatory registration and routine inspections of manufacturing sites of
companies that had drugs on the market. The importance of this aspect of the law to ensure
product quality and safety is evidenced by the large number of inspections FDA conducts each
year (1,258 Drug Quality Surveillance Inspections from the 4,273 registered drug manufacturing
facilities in FY2019) (FDA, 2020g). The NDA was also required to include sufficient chemistry,

17
manufacturing, and controls (CMC) information to confirm the drug was safe for use. However,
the key change relating to drug safety was the new requirement for adequate controls in
manufacturing according to current good manufacturing practices (CGMPs) to assure the
purported identity, strength, quality, and purity of the drug. While the 1962 law had general
language requiring controls for manufacturing, the draft CGMP regulations issued in 1963
provided specific expectations for drug manufacturers relating to buildings and facilities,
personnel, equipment, drug components and containers, production, packaging and labeling, and
record- keeping (FDA, 1963). These new requirements posed enormous burden on the industry,
and only the larger companies had the resources, technological know-how, and the relationships
with the medical community to conduct the necessary research and meet the manufacturing
standards to bring new drugs to the market (FDAReview, 2021). The companies that were able
to successfully compete in this new regulatory environment, however, were able to thrive and
grow. And the decades following Kefauver-Harris saw the emergence of big drug manufacturers
that define the large pharmaceutical industry of today.
As the pharmaceutical industry continued to expand, additional federal regulations were
put in place to better control product quality. One of the most impactful regulations occurred in
1976 with updates to the CGMPs to accommodate technological advances and include specific
requirements to assure the quality of finished drug products (FDA, 1978). The new CGMP
requirements were extensive, specifically citing the minimum expectations of drug
manufacturers to have appropriate facilities, personnel, manufacturing processes, quality
controls, and testing to ensure the safety, identity, strength, purity, and quality of their products.
In addition, a significant change for FDA enforcement activities was a new interpretation of what
constituted an adulterated drug product. Previously, a drug would be considered adulterated if it

18
was not labeled truthfully or did not meet the quality standards for the product. Now, a drug
could be declared adulterated if a product was merely documented by FDA as not manufactured
(processed, tested, packed, or held) according to CGMPs, even if meeting its declared identity
and purity. The updated CGMPs combined with routine facility inspections to monitor firm
compliance were powerful tools for FDA enforcement and for the consumer to have confidence
in a safe supply of drug products. Despite the heavy regulatory burden for pharmaceutical
manufacturers, the industry continued to grow, fueled by advances in new drug discovery,
development of convenient dosage forms, innovative approaches to marketing, and relationships
forged with prescribing physicians (Furman and MacGarvie, 2007). Moreover, the increased
regulatory requirements placed on this industry further differentiated drugs manufactured by the
pharmaceutical companies from those compounded by pharmacies.
2.3 Modern Drug Compounding
By the 1990s, pharmacies had, for the most part, moved away from compounding drugs
to dispensing finished products manufactured by the industry. In fact, less than one percent of all
drug prescriptions were being compounded (Fink, 1995). The remaining compounding activity
was typically limited to situations where commercially available products could not meet the
special needs of individual patients. Today, pharmacists continue to compound drugs as
prescribed by physicians to serve the needs of the patients in the community setting and those in
the hospital setting. However, the third type of compounding operation that emerged in the 1990s
in the form of larger compounding operations produced bulk quantities of medicines for
nationwide distribution. The three forms of compounding will be further examined below.

19
2.3.1 Compounding in the Community Pharmacy Setting
A typical drugstore around the turn of the twentieth century in the United States was a
general emporium, selling not only prescription drugs and over-the-counter remedies but all
kinds of non-medical goods and items such as cosmetics, magazines, tobacco, stationery, and
candy (Higby, 1997). These shops were similar to the regional and national chain pharmacies we
see today. The practice of compounding medicines by the pharmacist continued to decline with
the increased demand for more convenient dosage forms of prescription medicines, such as pills,
pre-made solutions, and syrups, made popular by the pharmaceutical industry (Higby, 1997).
With the 1951 passage of the Durham-Humphrey Amendment, the pharmacist’s role changed
dramatically. The new law required certain drugs to be dispensed only upon receipt of a
prescription written by a licensed physician. With pharmaceutical companies directing their sales
and marketing to the physicians, prescriptions were typically written for brand name products
and, hence, the compounding role of the pharmacist diminished further (FDA, 1951;
FDAReview, 2021). But compounding by the pharmacist continued in the community to address
three areas of need (GAO, 2013). The first is compounding for an individual patient according to
the physician’s written prescription, usually for a need that cannot be met through commercially
available product. The second is compounding in anticipation of receiving a prescription based
on an established relationship between the pharmacist and the prescriber. The third is
compounding in bulk to supply “office stock” for a prescriber, with the understanding that the
product will be released for use when accompanied by a written prescription. These three types
of compounding, along with a limited scope of interstate distribution were presumed by the FDA
to fall within the practice of pharmacy under corresponding state regulation s (Kessler, 1992).

20
2.3.2 Compounding in the Hospital Pharmacy Setting
Hospitals had different needs, and their pharmacies evolved accordingly. With the rise in
the use of intravenous injections in the hospital setting in the 1960s, the pharmacy became
responsible for supplying customized intravenous injections, including large-volume solutions
prepared in bottles and bags as well as small-volume injections prepared in vials and syringes
(Myers, 2013). Although many of these sterile compounded items were prepared from sterile
products obtained from licensed manufacturers, they required dilution, mixing, or repackaging
into different containers before being administered to patients. These activities required greater
control over product consistency and quality, which could be achieved through centralized
pharmacies in hospitals that were equipped with sterile facilities and procedures (Dudrick, 2009;
Myers, 2013). But a major change in the reimbursement scheme occurred in 1983 that would
change the history of sterile compounding in the hospital setting. The Medicare program in the
U.S. initiated standard reimbursements to hospitals based on “diagnosis related group”
classification system to encourage cost containment (CMS, 2021). This new approach reduced
the overall reimbursement and, consequently, incentivized hospitals to reduce the lengths of in-
patient stays. In addition, the healthcare system expanded ambulatory care services such as
same-day surgeries to reduce costs (Buie et al., 2010). But shortening hospital stays created a
need for continued medical care for patients after they were discharged to home, hence,
Medicare began paying for home infusions (U.S. Congress, 1992). Because community
pharmacies did not have the capability to produce sterile products and the hospitals did not want
to obtain retail pharmacy licenses for distributing their products outside the hospital setting, a
new pharmacy business model was created in the form of independent home infusion services
(U.S. Congress, 1992). As these services became established, so did home healthcare across
various therapeutic areas.

21
2.3.3 Large Drug Compounding Operations
The 1992 U.S. Congress Office of Technology Assessment report on home drug infusion
therapy indicated that sterile infusion compounding had expanded out of the hospitals into a new
paradigm whereby both specialty home infusion providers and community pharmacies expanded
their services to address the needs of patients receiving healthcare at home (U.S. Congress,
1992). The sterile infusion products spanned across therapeutic areas to encompass cancer
chemotherapy, pain management, and antimicrobial therapy (Monk-Tutor, 1998b). The specialty
compounding businesses that emerged in the 1980s began to market their services to extend their
reach to increase sales. Soon, they were compounding large quantities of drugs for physician’s
offices and medical clinics located in other states (Miller, 2012). These compounding operations
used their status as pharmacies claiming compliance with state regulations as a shield from the
many federal requirements of traditional pharmaceutical manufacturing (Fink, 1995). For
example, Baxter Healthcare established regional compounding facilities where they purchased
antibiotic powders and concentrates and prepared them into large quantities of ready-to-use
dosage packages, which were shipped to distant hospitals and clinics across the country
(McLaughlin, 1990). By producing high volumes of finished pharmaceutical products for
distribution across state lines, Baxter Healthcare caught the attention of the FDA who argued
successfully in court that the company’s activities extended beyond pharmacy compounding and
should be viewed as pharmaceutical manufacturing (McLaughlin, 1990). Following the court
ruling, Baxter ceased their high-volume compounding activities. But the Baxter case was not the
first time that FDA had accused pharmacy compounding operations of manufacturing
unapproved drug products.
As early as 1978, the FDA took regulatory action against Acne Health Care, which was
operating ten acne treatment clinics in Florida and distributing compounded medications to

22
customers not only within Florida but also in Illinois and California (Fink, 1995; FTC, 1980).
The FDA took action in 1980 against a Minnesota pharmacy that was compounding and
distributing sterile irrigation solutions to nursing homes across ten states (Fink, 1995). Despite
actions taken by the FDA over the years, pharmacy compounding continued to expand as more
companies produced large quantities of compounded drugs to be marketed and distributed
nationwide to clinics and hospitals (FDA, 2017b). These companies were allowed to operate
without federal oversight because they were registered as pharmacies across the different states
in which they distributed their products. Two compounding businesses were launched in the
1990s and established themselves as large producers of sterile injectables: Central Admixture
Pharmacy Service (CAPS) (now under the B. Braun group) and COMPASS Services (originally
launched by Baxter Healthcare, then PharMEDium Healthcare Corp) (Cantrell, 2016). These
operations compounded sterile admixture products, such as total parenteral nutrition, pre-filled
anesthesia syringes, and cardioplegia solutions (CAPS, 2021). As the companies grew and
expanded their reach, they were accepted by the healthcare providers and payers as a cost-
effective solution for the special needs of some patients (Monk-Tutor, 1998a). Frequent and
sometimes long-lasting drug shortages in the 1990s fueled the proliferation of home infusion
pharmacies that provided sterile preparations of injectable medications that were difficult to
obtain in another way (Baumer et al., 2004). Some compounding pharmacies, in fact, expanded
their production capacity and were compounding hundreds to thousands of dosage units of sterile
and non-sterile products. At the 1992 American Pharmacists Association Annual Meeting, FDA
Commissioner David Kessler cited an example of an establishment that produced more than
300,000 dosage units per month of an inhalation medicine for 6000 out-of-state patients (Fink,
1995). This was clearly a case in which a pharmacy was behaving like a pharmaceutical

23
manufacturer by producing large quantities of drug products and selling across state lines, but
without meeting the federal regulatory requirements of the FDA. At that meeting, Dr. Kessler
clarified the intent of the FDA to direct their enforcement activities toward establishments that
were manufacturing and distributing in a manner that clearly violated the FDCA. He also
reassured the group that the FDA would not interfere with the traditional practice of legitimate
pharmacy compounding (Fink, 1995). But the FDA continued to have serious concerns regarding
the lack of adequate quality standards for compounded drugs.
In 2001, the FDA tested 29 samples of drugs compounded by a group of community
pharmacies located throughout the United States and found that 34% failed one or more quality
tests performed by the FDA laboratory. This failure rate was much higher than the 2 percent
failure rate observed in drugs manufactured by pharmaceutical companies, sampled between
1996 and 2001 (FDA, 2018f). Nevertheless, the decade following this survey saw an even
greater expansion of the large-scale compounding operations and, along with it, an increase in
morbidity and mortality attributed to compounded medications. Between 2000 and 2012, at least
a dozen infectious outbreaks in the U.S. were caused by contaminated products from
compounding pharmacies (Staes et al., 2013). It became clear that poorly compounded drugs
distributed nationwide with little or no federal oversight were causing serious public health
consequences. Healthcare providers and patients were generally not aware that drugs
compounded by pharmacies were regulated differently than from drugs manufactured by
pharmaceutical companies. In the section below, certain key differences in the regulation of
these products will be examined and compared.

24
2.3.4 Regulating Drug Compounding
While the pharmaceutical industry became subject to greater regulatory oversight,
pharmacy practice remained under the jurisdiction of state Boards of Pharmacy (BoP) in the state
in which the pharmacy operates (Conference Presentation. NCSL, 2014). Thus, compounding
activities, even when they involved formulating new drug products, were not affected by the
CGMP regulations imposed on the pharmaceutical drug manufacturers. To the extent that
compounding provided the needs of individual patients in the community, the activity fit within
the scope envisioned by the existing regulatory framework, where each state oversaw the
profession that served their population. But as some pharmacy operations embarked on a new
direction with large scale compounding, the boundary between drug compounding and
pharmaceutical manufacturing became blurred (Newton, 2003). The two types of compounding,
the traditional approach, and the new large-scale operations will be examined in detail below.
2.3.4.1 Traditional Pharmacy Drug Compounding
Compounding pharmaceutical ingredients into a patient-ready product in an independent
chain, clinic, or hospital pharmacy has been regulated historically by individual states. These
traditional compounders, therefore, operate pursuant to their respective state pharmacy laws and
regulations. These regulations may be unique for each state, although they are based on the
Model State Pharmacy Act, a common template that outlines the requirements and expectations
of state-licensed pharmacies (NABP, 1995). All states mandate and inspect for compliance to
general requirements for licensed pharmacies such as recordkeeping, labeling, safety protocols,
authenticity, chain of custody, expiration dates, purity, sterility, and storage (Conference
Presentation. NCSL, 2014). Pharmacies are not required to register with FDA as drug
manufacturers and are exempt from FDA oversight and inspections. However, a drug produced

25
under insanitary conditions could be considered adulterated and in violation of federal law, and
therefore, subject to FDA oversight (FDA, 1997). In addition, the language in the FDCA states
that when a new dosage form is compounded using an approved drug or active pharmaceutical
ingredient, the finished dosage form is considered a “new drug” (21USC§353, 2021). Since the
language does not explicitly exclude licensed pharmacies from this definition, some pharmacy
compounding activity could be interpreted in a strict sense as making a new drug and thus
subject to FDA oversight (Fink, 1995). As hospital compounding expanded in the 1970s, the
FDA recognized that the definition of a “new drug” in the FDCA could cause confusion for both
pharmacists and the FDA regulators. Hence, the FDA issued a regulatory compliance policy
guide, CPG 460.100, to clarify that compounding activities typically conducted by hospital
pharmacies to meet the needs of their patients were not subject to the FDA requirements of
facility registration, CGMPs, inspections, labeling, or new drug applications (FDA, 1980). While
CPGs are non-binding policies, they are intended to provide guidance to both affected industry
and FDA staff on how the agency will enforce relevant laws. The CPG, however, had an
unintended consequence in that some entities began to claim falsely that their operations were an
extension of the hospital compounding practice and, therefore, not subject to federal drug
manufacturing regulations (Boodoo, 2010). As such, compounding operators continued to
produce large quantities of ready-to-use drug products with limited government oversight.
The FDA continued to grapple with assessing how to regulate compounding pharmacies
that were operating like pharmaceutical manufacturers (Fink, 1995). As a non-binding policy,
CPG 460.100 was ineffective in stifling the expansion of compounding pharmacies that
continued throughout the late 1980s and into the early 1990s to meet the needs of hospitals
seeking to outsource their compounding activities and the growing home healthcare sector

26
(Cantrell, 2016). The FDA did recognize that there were instances when hospitals and healthcare
providers relied on products supplied by compounding operations. Hence, the FDA used their
enforcement discretion to give permissions to companies to provide sterile drug preparations for
hospitals and home healthcare use. For example, PharMEDium was allowed to produce large
quantities of compounded products under the condition that it registered with the FDA,
employed pharmacists, met a limited number of CGMP requirements, and used a tracking system
to link the compounded drugs they supplied to the patient after administration. (FDA, 2013b).
While these pharmacy operations initially provided compounding services only for patient-
specific preparations, they soon progressed to produce non-patient specific preparations
(Kastango and Douglass, 2014). As the free-standing compounding operations continued to
flourish, the FDA recognized that it needed to further clarify its enforcement position by issuing
a second guidance, in a manner similar to what it had done a decade earlier for hospital
pharmacy compounding. Therefore, in 1992, the FDA published CPG 7312.16 (later renumbered
to 460.200) to describe when FDA may take enforcement action on a pharmacy operation that
crossed the line from pharmacy practice to pharmaceutical manufacturer (FDA, 2002). Table 2
lists the nine types of compounding acts that the FDA would consider when determining
enforcement action on a pharmacy.
Table 2: Pharmacy compounding acts of concern to FDA (CPG 460.200)
1. Compounding of drugs in anticipation of receiving prescriptions, except in very limited quantities in
relation to the amounts of drugs compounded after receiving valid prescriptions.
2. Compounding drugs that were withdrawn or removed from the market for safety reasons. Appendix
A provides a list of such drugs that will be updated in the future, as appropriate.
3. Compounding finished drugs from bulk active ingredients that are not components of FDA approved
drugs without an FDA sanctioned investigational new drug application (IND) in accordance with 21
U.S.C. § 355(i) and 21 CFR 312.

27
Table 2: Pharmacy compounding acts of concern to FDA (CPG 460.200) (continued)
4. Receiving, storing, or using drug substances without first obtaining written assurance from the
supplier that each lot of the drug substance has been made in an FDA-registered facility.
5. Receiving, storing, or using drug components not guaranteed or otherwise determined to meet
official compendia requirements.
6. Using commercial scale manufacturing or testing equipment for compounding drug products.
7. Compounding drugs for third parties who resell to individual patients or offering compounded drug
products at wholesale to other state licensed persons or commercial entities for resale.
8. Compounding drug products that are commercially available in the marketplace or that are
essentially copies of commercially available FDA-approved drug products.
9. Failing to operate in conformance with applicable state law regulating the practice of pharmacy.

Although the guidance listed these specific activities, vague language like “very limited
quantities” was confusing to interpret for pharmacists and FDA officials alike. As a result, there
were inconsistencies in how individual FDA inspectors enforced the FDCA through the CPG.
For example, an FDA district office issued a Warning Letter in 1992 to an independent pharmacy
stating that a drug made from an active ingredient compounded into a different dosage form or
strength was considered an unapproved new drug, even though it was filled according to a valid
prescription (Conlan, 1992). This incident alarmed the national pharmacy organizations,
mobilizing them to protect the rights of pharmacists and take measures to deflect federal
government’s intrusion into their professional practice (Fink, 1995).
To prevent further encroachment of FDA on the practice of pharmacy, organizations like
the National Association of Boards of Pharmacy (NABP) and the American Society of Health-
System Pharmacists took on the responsibility of promoting quality in compounding operations.
For example, a Technical Assistance Bulletin was published in 1992 entitled “Quality Assurance
for Pharmacy-Prepared Sterile Products” that provided pharmacists and technicians instructions

28
for compounding sterile preparations (Lu and Okeke, 2005). Another document embraced by the
professional organizations was the USP General Information Chapter on “Sterile Drugs for
Home Use” FDA (Newton and Trissel, 2004). However, these guidance documents, which
represent the minimum expected practices, were voluntary and not enforceable by the state BoP
or the. And, hence, large operations continued to expand their businesses without much
oversight.
2.3.4.2 Large Scale Compounding Operations
According to Kastango and Douglass, large-scale compounding entities were
manufacturing and distributing commonly prescribed products, including sterile injectables, to
clinics and physician offices to be kept as office stock (Kastango and Douglass, 2014). But many
of these sterile injectable products were being compounded using bulk ingredients that were not
sterile. While pharmaceutical manufacturers producing sterile injectable drugs must adhere to
robust quality control and manufacturing practices such as those described under CGMP
regulatory requirements, compounding operations were not subject to such oversight. Pharmacy
professional organizations, including the Professional Compounding Centers of America, fought
fiercely against any encroachment by the FDA on the rights of the pharmacist to compound
sterile drugs, both for identified patients and office stock (Kastango and Douglass, 2014). Thus,
compounding entities were able to continue producing large quantities of drugs for interstate
commerce with minimal federal oversight under the banner of licensed pharmacies.
Recognizing the gap in their ability to enforce the growing drug compounding sector, the
FDA looked for an opportunity to amend the FDCA to put into law the 1992 policy as outlined in
CPG 460.200. The opening arose through the Prescription Drug User Fee Act (PDUFA) renewal
in 1997 when the Food and Drug Administration Modernization Act (FDAMA) added Section

29
503A to the FDCA defining the nature of pharmacy compounding that would be exempt from
FDA jurisdiction (FDA, 1997). Specifically, the practice is exempt if a drug is compounded in
anticipation of receipt or response to receipt of a valid prescription order. The practice is also
exempt from FDA jurisdiction if the interstate distribution of compounded products is kept
below 5% of total prescription orders dispensed or distributed from a pharmacy site. In addition,
substances used to make the compounded drug must either be compliant with a USP/NF
monograph, be a component of an FDA-approved drug, or appear on the 503A bulks list
developed and published by FDA. Products cannot be compounded if they are essentially copies
of FDA-approved drugs, if commercially available, or are products that have been withdrawn or
removed from the market for safety reasons. In addition, Section 503A prohibits the advertising
and promotion a specific drug, class of drug, or type of drug but allows promotion of general
compounding services. Compounded products meeting these requirements would then be exempt
from three parts of the FDCA that were generally applied to drug manufacturers. The first
exemption was from the expectation that the compounding must be done under full CGMPs. The
second exemption was from requiring labeling containing extensive directions for use. The third
was the exemption from submitting a new drug application or an abbreviated new drug
application for compounded products when meeting the 503A requirements (FDA, 1997).
Section 503A also included the requirement for FDA to work more closely with states on
identifying potential issues with compounded products. Specifically, a standard Memorandum of
Understanding (MOU) between the FDA and states to address interstate distribution of
compounded products was to be written by FDA in consultation with the NABP. The MOU
would define a state’s responsibilities to share with FDA the details of their investigations of
product complaints related to compounded products distributed interstate. Once agreed and

30
signed by an individual state, a 503A entity in that state would then be exempt from FDA
oversight even if the interstate distribution of its compounded products represents more than 5%
of its total number of prescriptions (FDA, 1997). Although the MOU was initially drafted in
1999 by the FDA and the NABP, finalization stalled due to inability at the time to agree on
interstate distribution limits and the legal challenges against Section 503A that arose on the
constitutionality of the advertising and labeling restrictions, as further described below.
The validity of section 503A was swiftly challenged in court by compounding
pharmacists, who argued successfully that the inclusion of prohibiting the advertising and
promotion of compounded products was an unconstitutional violation of free speech. The U.S.
Court of Appeals for the Ninth Circuit upheld the original ruling and further ruled that the
unconstitutional provision was not severable from the rest of section 503A, thereby designating
the entire 503A as unconstitutional (Western States Medical Center v. Shalala, 2001). In 2002,
the Supreme Court affirmed the ruling (Thompson v. Western States Medical Center, 2002).
Without the authority of 503A to enforce limits on interstate distribution and ensure safety of
compounded products, the FDA resorted to reliance on their existing policies or even
resurrecting defunct policies to facilitate compounding quality. One example was reinstating
CPG 460.200, the content on which section 503A was based but superseded once 503A became
law (FDA, 2002). This CPG, however only reiterated expectations for drug compounders as to
how the Agency intended to exercise their enforcement discretion for large-scale and violative
pharmacy compounding.
The FDA remained concerned that some sterile products were not being compounded to
appropriate quality standards. For sterile drug products, it is critical for the pharmacist or
operator to ensure and maintain the sterility of each material or component used in processing.

31
Materials such as the active ingredient or drug substance, transfer tubing, syringes, and IV bags
need to be handled using proper aseptic technique, a highly technical activity needed to prevent
contaminating any of the materials. According to the FDA, nearly all drugs recalled due to non-
sterility or lack of sterility assurance in the period spanning 1980-2000 were produced via aseptic
processing (Kastango and Douglass, 2014). It was already mandatory for pharmaceutical
manufacturers to abide by national standards for their sterile drug products, such as the General
Chapters of the USP. However, the states were not harmonized with each other in their
requirements for sterile compounding (Wilson, 2016). As such, the FDA proposed during the
July 2000 Pharmacy Compounding Advisory Committee (PCAC) meeting that USP Information
Chapter <1206> “Sterile Drugs for Home Use” shall (meaning must) be followed for sterile
compounding for pharmacies (Newton and Trissel, 2004). It was atypical for FDA to expect
mandatory compliance to a USP Information Chapter and unusual because the individual states
had responsibility to set pharmacy compounding requirements. However, this action spoke to the
FDA conviction that quality controls were necessary and critical to ensure the safety of sterile
compounded products. The FDA proposal was not agreed to by the meeting participants but did
activate successful efforts with the USP to elevate Informational Chapter <1206> from a
guidance to a recognized standard through conversion to General Chapter <797>
“Pharmaceutical Compounding - Sterile Preparations” (USP, 2020). Although USP General
Chapters must be followed where mandated, since many states used their discretion to not
mandate adherence to USP standards, the likelihood for product contamination resulting in
injuries and death was not fully mitigated (Wilson, 2016). While many, but not all, state-licensed
pharmacies were expected to comply with USP <797>, all licensed pharmaceutical
manufacturers producing sterile drug products were being held by FDA to very-high quality and

32
regulatory standards for their products (PEW, 2016). As an example, during that time, the FDA
issued a Guidance for Industry document on aseptic processing to provide detailed guidance to
pharmaceutical manufacturers on the FDA manufacturing expectations related to CGMP
requirements. The FDA stressed the fact that aseptic processing poses higher risks compared to
other sterilization methods; thus, more careful control is needed for manual or mechanical
manipulation of the sterilized components prior to or during aseptic assembly to prevent
contamination (FDA, 2004). Both USP Chapter <797> and FDA CGMP regulations and
guidelines include expectations for production of sterile drug products. The CGMP requirements
in 21 CFR 211 required for licensed pharmaceutical manufacturers, however, impose a more
comprehensive quality system for manufacturing and testing to better ensure quality and safety
of aseptically produced sterile drug products when compared to USP <797> expectations for
drug compounders (CFR, 2020a). To understand the major differences in the quality system
requirements between the CGMPs and USP <797>, a simplified comparison is provided in
Table 3 below (table reproduced from the Clinical IQ report (Kastango and Douglass, 2014)).
Table 3: Comparison of Selected Quality System Requirements between FDA CGMPs
and USP <797>
Quality System Requirement CGMPs USP General Chapter
<797>
Engineering Control Smoke Studies to
Assess Proper Air Flow
Yes
a
Yes
Inbound Component ID Test Yes No
b

Stability Testing of Formulation via
Stability Indicating Method to Assign
Expiration / Beyond-Use Date
Yes No
c

Sterility Testing as Release Test (USP
General Chapter <71>)
Yes Limited
d

33
Table 3: Comparison of Selected Quality System Requirements between FDA CGMPs
and USP <797> (continued)
Quality System Requirement CGMPs USP General Chapter
<797>
Cleaning Validation Yes No
Continuous Particle Count Yes No
Use of Sterile Disinfectants Yes Only Isopropyl Alcohol
Environmental Monitoring During
Production
Yes (Air, surface,
personnel)
No
Frequency of Environmental Monitoring
Daily (Air, surface,
personnel)
Air (twice yearly), Surface
(routinely), Personnel
(initially and 1-2 /year)
Sterile Garb Yes Only sterile gloves
Reserve Samples Yes No
a. Critical to demonstrate that unidirectional first-air is delivered from the HEPA filter through the critical site and
out of the device without refluxing or rollout into the critical site.
b. There is no requirement for direct testing of bulk non-sterile active pharmaceutical ingredients (API).
Certificate of Analysis from FDA registered supplier is acceptable if component is part of an FDA approved
drug.
c. Peer-reviewed literature acceptable
d. Only w/extended dating & High-Risk batches > 25 units

Some individual state BoPs have nonetheless been hesitant to mandate even the less
stringent quality requirements of USP <797> for pharmacy compounding of sterile drug products
(PEW and NABP, 2018). Throughout the 2000s, the state regulation of sterile pharmacy
compounding across the U.S. was inconsistent and quite disparate. Most states had little
commitment and limited resources to regulate such activities (Galston, 2003). The FDA
enforcement authority was also stifled by the 2002 Supreme court ruling affirming the
unconstitutionality of Section 503A (357, 2002). Without proper regulatory oversight, the drugs
made by large compounding operations were increasingly associated with adverse events and
outbreaks. According to a literature review by Staes et al., poorly compounded drug products

34
have led to hundreds of adverse events and at least a dozen infectious outbreaks between 2000
and 2012 (Staes et al., 2013). The authors found that the outbreaks were associated with thirteen
different sterile compounded drug products; the infectious agents included both bacterial and
fungal pathogenic agents. One outbreak from 2001 was from a compounded batch of
betamethasone used for spinal injections that was contaminated with bacteria of the genus
Serratia, resulting in dozens of patients being hospitalized, three of whom contracted meningitis
and died (Kastango, 2002). The impact of engaging in interstate commerce without federal
oversight is exemplified by the multistate outbreak of Serratia marcescens in 2005 associated
with contaminated intravenous preparation of magnesium sulfate distributed by a compounding
pharmacy (Sunenshine et al., 2007). According to the literature, most of the outbreaks caused by
contaminated compounded drugs involved patients across multiple states. The implicated drugs
cited by Staes et al. were predominantly sterile compounded preparations such as ophthalmic
drugs, corticosteroids, heparin flush solutions, cardioplegia products, IV magnesium sulfate, total
parenteral nutrition, and fentanyl solutions. These outbreaks led to hundreds of patients to suffer
from infections leading to substantial morbidity and an 8% mortality rate (Staes et al., 2013).
Outbreaks like those described above received the public’s attention and prompted
legislators in the U.S. to conduct hearings and propose new laws to regulate drug compounding.
In 2003, the U.S. Senate held hearings and, in 2007, proposed legislation to transfer the
responsibility of compounding to the FDA (GAO, 2003; Outterson, 2012). However, as
expected, these bills were vigorously and successfully opposed by the pharmacy associations
(Outterson, 2012). The validity of Section 503A, implying compounded drugs were considered
“new drugs” and thus regulated by the FDA, was raised again by compounding pharmacies in
2008 as it was in 2001. While previously, the courts ruled that the entire 503A was

35
unconstitutional, the courts in 2008 ruled that the section on restricting advertising and
promotion could be separated from the rest of the FDCA, thereby allowing the FDA to enforce
the remaining portions of section 503A (Medical Center Pharmacy v. Mukasey, 2008). However,
because of the conflicting rulings by the two federal courts, the FDA did not revise their existing
policies or guidance and were hesitant to carry out enforcement action against large-scale
compounders (Kastango and Douglass, 2014). Thus, compounding operations were allowed to
produce great quantities of drugs and distribute to customers across the country with little federal
oversight.
In 2012, the most tragic incident in compounding history occurred when a nationwide
meningitis outbreak was traced to fungal contamination associated with injectable
methylprednisolone drug products made by the New England Compounding Center (NECC) in
Framingham, Massachusetts. This outbreak was the largest in U.S. history, with almost 800 cases
of fungal infections across 20 states resulting in more than 100 deaths (DOJ, 2019). NECC was a
large compounding pharmacy founded in 1998 that manufactured and distributed several types of
injectable drug products nationwide (Smith et al., 2013). Although NECC was operating as a
state-licensed pharmacy, some of the drug compounding activities were more akin to drug
manufacturing but without appropriate registration or quality controls for sterile operations. A
2013 congressional staff report documented the FDA and state interactions with NECC leading
up to the 2012 outbreak. The report found that the FDA was alerted as early as 2002 to potential
product quality and safety issues at NECC (USHR, 2013). The FDA inspected their facility in
March 2002 upon reports of adverse events (AE) of betamethasone injections and documented
violations of sterility assurance and failures in recordkeeping. After additional AE reports and
contaminated methylprednisolone product from NECC was confirmed, a meeting was held in

36
2003 between the FDA and the Mass. Dept of Public Health to discuss regulatory oversight. The
decision was made at the time that NECC should be treated as a compounding pharmacy, and
thus, the state should take the lead on any further regulatory actions. The FDA, however,
inspected NECC again in September 2004 under their CPG 460.200 for manufacturing copies of
commercially available drug products. The FDA issued a Warning Letter but then did not carry
out any further actions, even while NECC continued to receive many complaints nationally from
customers for the next several years. Officials from the Massachusetts State Board of Pharmacy
(MSBP) toured the NECC facility in 2011 and assessed their sterile processing areas to be
“satisfactory” (USHR, 2013). Hence, despite audits and facility inspections by both the state BoP
and the FDA, the lack of clear enforcement authority for drug compounding oversight could not
stop the firm from continuing the poor-quality compounding practices in the facility that allowed
interstate distribution of products contaminated with bacteria and fungi.
The NECC incident shed a national spotlight on the drug compounding industry and the
need to conduct a serious review of the adequacy of drug compounding regulations to protect the
public health. Many institutions were blamed for the tragedy, not only the compounding entities
who were directly responsible for distributing the tainted products but the FDA, the state BoP,
and Congress. The ambiguity in the regulations and inconsistencies in the expected quality
standards had created a two-tiered manufacturing system creating an uneven playing field
between licensed manufacturers and pharmacy compounding entities. The regulatory framework
was recognized to be inadequate to oversee the compounding industry and to prevent such an
event from happening and thus, prompted new legislative activity, one major action being the
Compounding Quality Act (CQA), an Act within the Drug Quality and Security Act (DQSA) of
2013.

37
2.4 Compounding Quality Act (CQA)
The NECC incident was a catalyst for Congress to finally work together in conjunction
with key stakeholders to reform drug compounding regulations. In the year following the NECC
tragedy, the true state of drug compounding and regulatory oversight was revealed during
congressional hearings and other forums. It became evident that FDA should have greater
jurisdiction over non-traditional drug compounding and that the respective responsibilities of the
state BoPs and the FDA needed to be clarified (GAO, 2013). As a result, the CQA differentiated
non-traditional drug compounding from traditional compounding and pharmaceutical
manufacturing by creating the new category of compounders called 503B outsourcing facilities
(503B OFs). The law also defined FDA’s responsibilities for developing processes and guidance
documents to clarify oversight responsibilities between the state BoPs and the FDA for the two
categories of compounding pharmacies. The CQA will be examined in detail below, starting with
the legislative process that led to its passage, the legal requirements for compounders, and the
implementation status of the CQA activities to date.
2.4.1 Legislative Process Leading to Passage of CQA
The magnitude of the nationwide meningitis outbreak was a critical tipping point that
fueled the public’s demand for effective regulations to protect consumers. Although regulations
are oftentimes thought of as overbearing on one’s freedoms, they could also be viewed as a
means to ensure quality and safety of an activity or product while ensuring equal and fair
requirements and standards for all stakeholders. Congress, as the representative of the American
public, was tasked to determine why the government was not able to prevent the deadly NECC
outbreak. Through the course of six congressional hearings held between November 2012 to
May 2013, various stakeholders testified on why the outbreak occurred and mechanisms that

38
could be put in place to improve the safety of compounded drugs and prevent future outbreaks
(Glassgold, 2013).
Of many who were asked to provide testimony, the FDA was a key stakeholder called
upon repeatedly to explain why the agency was not able to prevent the NECC tragedy or address
the pervasive quality and safety issues associated with compounded drug products. FDA
Commissioner at the time, Dr. Margaret Hamburg, spoke to the issue of the historical difficulty
for FDA to regulate drug compounding, stating “FDA’s ability to take action against
compounding that exceeds the bounds of traditional pharmacy compounding and poses risks to
patients has been hampered by gaps and ambiguities in the law, which have led to legal
challenges to FDA’s authority to inspect pharmacies and take appropriate enforcement actions.”
(FDA, 2012b). Likewise, FDA’s Dr. Janet Woodcock also described why FDA could not prevent
the NECC incident, pointing to the unclear boundary lines between who is a drug manufacturer,
a traditional compounder, or a large-scale compounding manufacturer (FDA, 2013c). Dr.
Woodcock stated, “entities could be masquerading as traditional compounders who really were
competing with the generic drug industry or the innovator drug industry and should have gone
through the established drug approval process” (Hearings. US Congress, 2014a, p. 23). The FDA
proposed to the Congress a new risk-based framework to better protect the public health by
recommending the addition of a new category of drug compounding. Thus, while the existing
category of traditional pharmacy compounding would remain under the state jurisdiction as
practice of pharmacy, a new category of “compound manufacturing” would be created for higher
risk products like sterile injectables that could be made in large quantities, shipped interstate, or
dispensed to someone other than the end-user. FDA proposed that the new entities would be
subject to federal oversight and be required to comply with a higher level of quality and

39
compliance controls such as CGMP, facility registration, facility inspection, labeling controls,
and adverse event reporting (Hearings. US Congress, 2014a).
To better understand how drug compounding was being regulated by the FDA and the
states, the United States Government Accounting Office was asked to update its 2003 testimony
on drug compounding. The original 2003 GAO report described efforts by different states to set
quality standards for compounding pharmacies and strengthen state oversight but concluded that
not all states have the same level of necessary resources (GAO, 2003). According to the updated
2013 GAO report, the FDA’s authority to oversee compounding pharmacies had been confusing
due to the differing decisions made by two separate federal circuit courts in two different parts of
the country (GAO, 2013). Moreover, although both the FDA and the national pharmacy
organizations agreed that compounding pharmacies should be regulated at the state level and
pharmaceutical manufacturing at the federal level, there was no such agreement as to whether
compounding large quantities of drugs without existing prescriptions for interstate commerce
would fall under FDA’s jurisdiction. Hence, FDA only inspected compounding pharmacies in
response to product complaints or adverse events. A retrospective review was performed of FDA
records from 2002 to 2012 and found 63 of the 194 “for cause” inspections resulted in written
FDA inspection observations, and half of those (31/63) were issued warning letters (GAO,
2013). Problems cited during inspections included bacterial and fungal contamination in sterile
clean rooms and in finished product samples, as well as improper hygiene and failure to conduct
appropriate quality testing on drug products. Although warning letters were issued for significant
violations, no other enforcement actions were taken by FDA at the time. The GAO report
concluded that FDA lacked timely and reliable information to oversee the entities that compound

40
drugs and recommended that the Congress clarify FDA’s oversight authority, including the
ability to differentiate drug compounders from manufacturers.
After testimonies by stakeholders and reviewing the 2013 GAO report conclusions, a
congressional hearing was held in July 2013 to debate three legislative bills (Hearings. US
Congress, 2014b). The legislative proposals ranged in scope from adding new oversight and
authority for FDA to only minimally revising existing enforcement authority. The first proposal
was the Senate-sponsored bill S.959, the “Pharmaceutical Compounding Quality and
Accountability Act.” This bill was the most comprehensive of the three, proposing a new
category of sterile compounder to help alleviate gaps in availability of medicines due to supply
interruptions or lack of typically prescribed products not commercially available (S. 959, 2013).
It also incorporated some of the risk-based regulatory framework previously proposed by the
FDA. The second proposal was the House-sponsored bill H.R.2186 entitled “Verifying Authority
and Legality in Drug (VALID) Compounding Act of 2013”. This House bill included many of
the same elements as the Senate bill, such as defining the types of bulk substances that should be
permitted or prohibited for compounding, FDA inspection authority, and improved coordination
between FDA and the states (HR 2186, 2013). The third proposal was a discussion draft put
forward by Rep. Morgan Griffith entitled “Compounding Clarity Act of 2013”, which proposed
only minimal changes to the existing section 503A and no additional FDA oversight of drug
compounding (APhA, 2013). The Griffith proposal was supported by the pharmacist
organizations but was still in draft form and did not gain much traction during deliberations.
Congress sought views from stakeholder organizations including the FDA, National
Community Pharmacists Association (NCPA), American Society of Health-System Pharmacists
(ASHP), Pharmaceutical Research and Manufacturers of America (PhRMA), Generic

41
Pharmaceutical Association (GPhA), International Academy of Compounding Pharmacists
(IACP), National Association of Boards of Pharmacy (NABP), and the PEW Charitable Trust.
As expected, there was a divergence of opinions. The Senate bill S. 959, which established the
“compound manufacturer” as a new entity, was strongly supported by the FDA, with Janet
Woodcock stating, “We feel that is a good start” (Hearings. US Congress, 2014b, p. 23). This bill
was also the preferred option for many other stakeholder groups (ASHP, NABP, PhRMA,
GPhA, and Pew Charitable Trust) who wanted to see the FDA’s authority expand to include non-
traditional compounding (APhA, 2013). To clarify, the pharmaceutical drug manufacturers were
not in favor of adding a new category of compounding pharmacy, but if such an entity were to be
created, they wanted this new entity to be held to the same manufacturing standards as their
industry. This view is illustrated by a prepared statement made to the congressional committee
by Jeffrey Francer representing PhRMA, stating, “Large-scale, commercial manufacturing of
prescription medicine should be governed by the same high standards, whether the commercial
producer is designated as a pharmacy or as a manufacturer” (Hearings. US Congress, 2014b, pp.
34-35).
Following the congressional hearings, a final bill entitled Drug Quality and Security Act
(DQSA) was produced by combining the core elements of S. 959 for compounding quality with
House bill H.R. 1919 that addressed drug supply chain security (McGuireWoods, 2013). The
DQSA was signed into law on November 27, 2013, and is composed of two titles (FDA, 2013a).
Title I, the “Compounding Quality Act (CQA)”, has provisions to strengthen the oversight of
drug compounding operations, and Title II is the “Drug Supply Chain Security Act (DSCSA)”
with provisions to secure the U.S. drug supply against counterfeiting and falsified medicines in a

42
global market. The focus of my research will be on the development and implementation of the
CQA (Title I) and will exclude the DSCSA (Title II).
2.4.2 Overview of CQA
The Compounding Quality Act (CQA) amended the FDCA with respect to human drug
compounding by slightly modifying section 503A and adding a new category of drug
compounding defined in section 503B. The previous text in section 503B regarding television
advertising of drugs was re-designated as section 503C so that the new category of compounding
in 503B would immediately follow section 503A for pharmacy compounding (FDA, 2013a).
Figure 1 provides a high-level overview of how the CQA fits within the DQSA and presents the
key attributes and provisions for each of the two-drug compounding categories within the CQA.

43
Figure 1: DQSA Act and Key Provisions of the CQA

TITLE I: Compounding Quality Act (CQA)
TITLE II:
Drug Supply
Chain Security
Act (DSCSA)
Section 503B
Outsourcing Facilities (OF)

CQA added new type of compounder

503B OF can compound:
- If on 503B bulk drug substance list
- If on drug shortage list
- Sterile and non-sterile drugs
- If not a copy of an approved drug
- If not on Difficult to Compound List
- If not a withdrawn or removed drug

503B OF Distribution:
- No prior written prescription required
- No limit on interstate quantities
- Prohibited to wholesale products

503B OF Operating Requirements
- Register facility with FDA
- Subject to risk-based FDA inspection
- Adhere to 503B CGMPs
- Report adverse events
- Submit periodic distribution reports

Exempt from FDCA requirements:
- NDA/ANDA new drug applications
- Label w/ adequate directions for use
- Supply chain security
Section 503A
Traditional
Pharmacies

CQA amended 21 USC
353a by removing certain
restrictions on advertising
and promotion.
Otherwise, NO CHANGE
to existing federal
regulations, drug
compounding for identified
patients (or anticipatory
compounding) as allowed
by practice of pharmacy
regulated by State Boards
of Pharmacy with
substances that are
USP/NF, API of approved
drug, or on the 503A bulk
list.
“TRACK and
TRACE”

Formally requires
plan to establish a
fully integrated
(interoperative)
electronic system
to track and trace
drug product to
the smallest
individually
saleable unit.
DQSA (Drug Quality and Security Act)

44
While no significant changes were made to the compounding regulations within section
503A upon enactment of the CQA, the FDA took the opportunity to remove the language
restricting the unsolicited advertising and promotion of compounded drugs that was previously
declared unconstitutional in 2002. Aside from that change, section 503A remained intact and did
not place any additional federal oversight on state-licensed traditional pharmacy compounding
operations.
Under Section 503B, the new, voluntary category of non-traditional drug compounders
called 503B outsourcing facilities was established. Unlike the compounders operating under
section 503A, 503B OFs can engage in compounding sterile drug products for distribution to
healthcare providers without first obtaining patient-specific prescriptions (FDA, 2013a). Once
registered with the FDA, these OF operations are subject to risk-based routine FDA inspections
and must operate in compliance with CGMPs and all the requirements of section 503B. The
requirements and responsibilities for 503B OFs listed in the CQA include registration of the
facility and reporting of products that are manufactured and distributed. A 503B OF can
compound a drug if it is on the drug shortage list or made with a substance on the 503B bulks
list, but not a copy of an approved drug, and not a drug on the difficult to compound list. The
OFs are provided with an exemption from the federal drug laws for labeling drugs with adequate
directions for use, the requirement to submit a new drug application (NDA), and compliance
with certain drug supply chain security requirements (FDA, 2013a). While the pharmaceutical
industry argued, during the Congressional deliberations, against the addition of a new entity to
manufacture finished drug products under a different regulatory standard, the designation of the
503B OF through the CQA created just that.

45
In addition to listing the requirements and expectations for 503B OFs as described above,
the CQA also listed requirements for the FDA to implement the law. The requirements for the
FDA can be grouped into three categories: enhancing communications between the states and the
FDA to facilitate sharing of information, developing lists of the permitted and prohibited drugs
and substances for compounding, and creating procedures for 503B OFs related to registration,
inspections, and operational compliance. Therefore, the FDA is required to promulgate new or
revised rules, policies, or processes to facilitate implementing these requirements. This process
has been ongoing now for nearly a decade, and there are signs that the implementation of CQA
has not been smooth.
2.4.3 Implementation of CQA
The activities defined in the CQA were meant to fill the gaps in oversight of high-risk
drug compounding that were identified during the congressional hearings in 2012 and 2013.
While the intent was to provide clarity of regulations and expectations for drug compounding,
the law may have created greater blurring of the lines between 503B OFs and the pharmaceutical
manufacturers and also between 503B and 503A compounders. The FDA’s comprehensive
summary report in 2017 and statements through 2019 have revealed mixed progress against its
own deliverables and objectives. Although positive results were noted in the area of facilitating
recalls, the FDA still finds insanitary conditions during facility inspections and faces challenges
in collaborating with the states (FDA, 2017b; Gottlieb and Abram, 2019). In addition, the
process of developing the lists of permitted and prohibited substances for compounding has been
slow and challenging. As the FDA continues in its efforts to implement the CQA, it would be
helpful to examine its progress in the three key areas: enhancing communications between the
states and the FDA; defining the substances used for compounding, and the type of products

46
allowed to be compounded, and ensuring facility compliance and product quality. Successful
implementation of a new initiative requires engaging the key stakeholders throughout the process
to understand how they are impacted. Hence, stakeholder involvement with the implementation
of the CQA activities was also reviewed.
2.4.3.1 Enhancing communications between the states and FDA
As pharmacy practice typically falls under state jurisdiction, having open, clear, and
defined channels of communication between individual states and the FDA is integral to avoid
gaps in regulatory responsibilities. The CQA acknowledges that both the FDA and the individual
states have responsibilities to regulate the preparation of compounded drug products, with the
states having primary responsibility for 503A entities and the FDA having primary responsibility
for 503B entities. Following the 2012 meningitis outbreak, it became clear that the existing
process for sharing critical information between the state and federal agencies was inadequate,
and a more formal communication mechanism was necessary. While the Federal-State
Information Sharing Agreement (ISA) allows for the federal agencies to share confidential
information with the states, there was no similar mechanism for the states to share confidential
information with the federal agencies. Hence, the CQA included elements to facilitate enhanced
information sharing between the states and the FDA.
As part of enhancing communications between the FDA and the states, there needs to be
a mechanism for the FDA to share their non-public information (e.g. inspection reports, warning
letters, and enforcement actions), which requires formal confidentiality agreements to be in place
(FDA, 2020h). The Federal-State Information Sharing Agreement, ISA, (21 CFR 20.88), which
has been in existence for a long time, could be used for this purpose. But due to the short span (1
year) of the contracts and the requirement of many signatures from state officials, the ISA was

47
deemed too burdensome (FDA, 2020i). To encourage a more widespread use of ISAs, the FDA
suggested using a new long-term (5 year) drug compounding ISA mechanism only requiring one
state official signature prior to sharing information across departments (FDA, 2020a). This
mechanism remains voluntary for the states, and the FDA has discretion on determining what
information to share. Even with the changes to streamline the process, only 31 states have
entered into the agreements with the FDA and, thus, sharing of compounding issues between the
two authorities remains incomplete (FDA, 2020e).
According to the CQA, the FDA is required to work with NABP to develop a process to
receive information from the states regarding enforcement actions taken against a drug
compounder for violating state pharmacy compounding regulations or concerns of product
quality. The FDA is also required to develop a process to receive alerts from the state BoP if they
suspect that a compounding pharmacy may be acting contrary to section 503A (e.g.,
compounding copies of approved drugs or with substances not allowed for 503A compounding)
(FDA, 2013a). The FDA should likewise reciprocate by notifying a state if they discover that a
pharmacy is acting contrary to the 503A regulation or if they receive alerts from a state that
could impact other regions. The FDA initially established a simple email procedure to receive
both enforcement action information and suspected 503A violation alerts from the states (FDA,
2021d). The FDA has since worked with the NABP to develop a more formal process for state
pharmacy data collection. Although FDA will be able to directly view and access information in
the network database managed by NABP, the information may still be limited since state BoPs
are not required to enter data about pharmacies compounding human drugs or complaints against
a pharmacy (NABP, 2020c).

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The primary mechanism meant to authorize the sharing of information from the states to
the FDA is the standard memorandum of understanding (MOU) that specifically addresses
interstate distribution of compounded products by traditional (503A) pharmacies. Introduced in
1997 in Section 503A, the MOU is an agreement between the FDA and the states meant to share
regulatory and enforcement oversight. In states that sign the MOU, pharmacies are exempt from
FDA oversight regardless of the quantity of compounded products distributed interstate (FDA,
1997). The scope of information to be shared by states was initially limited to investigations
conducted for product complaints. However, the draft MOU document prepared by the FDA in
2015 expanded the scope to meet their obligations in section 105 of the CQA, to also require
submission of any state investigation of serious adverse drug experiences or serious product
quality issues, and detailed information on pharmacies that distribute “inordinate amounts” of
compounded products interstate (FDA, 2015d). The FDA would use this information to prioritize
its oversight based on risk. In addition, the FDA proposed to increase the interstate distribution
limit to 30%, but the pharmacist stakeholders still expressed concern that such a limit could
impede access to compounded specialized drugs for patients (Gottlieb, 2018). The draft released
in 2018 further increased the limit to 50% and gave the states more time to notify FDA of issues
(FDA, 2018c). The data collection burden by the states, along with the distribution limit impasse,
had hampered progress since 1999. Finally, in 2020, the final MOU language was endorsed by
the NABP and became available for states to sign (FDA, 2020j). However, it had long been
anticipated that only about half of the states would voluntarily enter into the agreement (Gottlieb,
2018). The hesitation by individual states to sign the MOU has persisted to date (NABP, 2020b).
And without all states signing the MOU, the information FDA receives from the states on
compounded products with potential quality or safety issues will be limited.

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2.4.3.2 Substances Allowed for Compounding
Because compounded drugs are not evaluated by the FDA for safety, efficacy, or quality
before they reach patients, both 503A and 503B entities must adhere to using only specified
substances for their compounding activities. Most of the substances permitted for use in
compounding are either defined by general categories (e.g., USP/NF for 503A) or found on
existing drug product lists (e.g., the FDA drug shortage list for 503B). But there are other
substances that are needed to meet the clinical needs of patients. Hence, as part of CQA
implementation, the FDA has been developing the 503A bulk substance list and the 503B bulk
substance list. This process is lengthy, starting with the public nominations of substances,
followed by review and assessment of the nominations by FDA in conjunction with an advisory
committee.
Development of the 503A bulks list was originally started in 1997 and was re-initiated by
the FDA upon enactment of the CQA. The majority of the 2000-plus substances nominated
between 2013 and 2015 came from independent pharmacy stakeholders (FDA, 2015b). After
review and consultation with the Pharmacy Compounding Advisory Committee (PCAC), the
FDA decided not to place any substances onto the 503A bulks list. This was because many were
already authorized, others did not include sufficient information, some were on the FDA’s
withdrawn or removed list, and some were biological products, which are not allowed to be
compounded (FDA, 2015b). The FDA placed the substances that could be considered for the
bulk list into one of three categories for further review: Category 1-substance currently under
evaluation, may be eligible; Category 2- raise significant safety concerns, and Category 3-
nominated without adequate support. Although none of these substances are legally allowed for
compounding, the FDA has stated that they would not take enforcement action on 503A
compounders using substances in the Category 1 list (45 bulk drug substances listed per most

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recent FDA update March 2019) (FDA, 2017c; FDA, 2019a). This interim action was made
following arguments by pharmacists that the substances were needed to meet the needs of
patients. This is an example of how FDA’s process of developing the bulk list has been fraught
with challenges and delays.
The first 503A bulks list, published by FDA in February 2019, contained six substances:
Brilliant Blue G, cantharidin, diphenylcyclopropenone, N-acetyl-D-glucosamine, squaric acid
dibutyl ester, and thymol iodide (FDA, 2019c). At the same time, the FDA rejected four of the
nominated substances, oxitriptan, piracetam, silver protein mild, tranilast. But following a
petition by pharmacists and caregivers to allow compounding of oxitriptan for patients with BH4
deficiency, FDA issued a specific compliance policy to allow compounding of this substance
(FDA, 2019b). In addition, the FDA has also been criticized by pharmacy trade associations for
not always including a compounding pharmacist with voting privileges on the PCAC (Hearings.
US Congress, 2018). The process for reviewing substances and creating separate compliance
policies for single substances highlight the challenges for pharmacists and for FDA in
developing appropriate compounding guidance on substances and products.
While 503A pharmacies can use any substance found in the U.S. Pharmacopeia (USP) or
the National Formulary (NF), in addition to the 503A bulks list, the 503B entities can only use
substances that are on the 503B bulks list. According to the CQA, the FDA should establish a
503B bulks list through a nomination and review process to determine inclusion based on clinical
need. Similar to the development of the 503A bulks list, the 503B bulks list also received over
2000 substance nominations, none of which were added by FDA to the list (FDA, 2015c). While
additional substances have been nominated in the subsequent six years and the FDA has
proposed adding 5 substances to the 503B Bulks list, none have officially been added (FDA,

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2021f). In the absence of an authorized 503B bulks list, the FDA is allowing compounding with
substances on the 503B Category I list while they are still under evaluation by the FDA (FDA,
2017d). Allowing 503B compounding with these substances was meant to foster growth of the
503B OF industry. As of June 2021, 279 substances are listed on the Category I list, which
include, for example, epinephrine, heparin sodium, ketamine, methylprednisolone acetate,
morphine, and oxytocin (FDA, 2021a). These substances are reflective of products frequently
compounded by 503B OFs for hospital use (OIG, 2019). But some consumer advocacy groups
oppose 503B OFs being allowed to use substances that have not undergone the full regulatory
evaluation process (Public Citizen, 2016). In addition, drug products compounded from the
Category 1 bulk substances in their finished forms could resemble products sold by
pharmaceutical companies, potentially creating confusion in the marketplace.
Although 503B OFs are not allowed to compound drugs that are essentially copies of
those already on the market, they can do so for drugs on the FDA’s Drug Shortage List. The drug
shortage list was established prior to the CQA by the FDA in 2012 to address drug shortages in
the U.S. (FDA, 2012a). Drug Shortages can occur for various reasons, including voluntary
discontinuation or manufacturing problems. A limitation for 503B OFs is that these drug
products have to be on the list at the time of compounding, distribution, and dispensing. The
accuracy of this list is dependent on the voluntary reporting by pharmaceutical manufacturers.
Hence, if the reporting is not accurate or timely, then OFs will not be able to compound those
drugs to meet the needs of healthcare providers and patients (PEW, 2017). In addition, 503B OFs
may have difficulty obtaining the ingredients needed to manufacture these products or find that
the business case for making the upfront investment is weak because the product may fall off the
list with little notice (PEW, 2017). For example, a survey conducted in 2017 found that a third of

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hospitals typically obtaining compounded products from 503B OFs were unable to obtain a drug
on FDA’s drug shortage list (OIG, 2019). Thus, even with the establishment of 503B OFs
through CQA, drug shortages are still impacting U.S. healthcare.
2.4.3.3 Substances Prohibited from Compounding
There are three categories of substances that are prohibited from compounding. The first
category is any drug that is essentially a copy of an approved drug, defined by the FDA as a drug
that is identical or nearly identical to an approved drug by having the same API, the same or
similar API dosage strength, and the same route of administration (FDA, 2018d). The exception
is for a 503A pharmacy to compound these products in limited quantities and also during public
health emergencies like the 2020 COVID-19 pandemic (FDA, 2020l). The second category
contains products that have been withdrawn or removed from the market because they have been
found unsafe or not effective. The third category contains drugs that are considered difficult to
compound and may be ineffective or harmful if compounded. This last category involves a
public nomination and FDA review process, which has also been slow and challenging. With
over 70 nominations received to date, primarily from pharmaceutical companies, the list remains
empty (FDA, 2017a).
2.4.3.4 Operating Requirements for Outsourcing Facilities
The CQA, in establishing 503B OFs, created requirements that allow direct oversight by
the FDA to ensure that the products are safe and manufactured to meet quality standards. An
entity wishing to perform 503B compounding must self-identify and register as a 503B OF with
the FDA and be subject to FDA inspections, compound drugs in accordance with CGMPs, report
adverse events, and submit product distribution reports. In addition, an OF is required to pay an
annual facility registration fee of approximately $19,000 (FDA, 2021e). This amount is

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considerably lower than the prescription drug program fee of about $336,000 per year imposed
on many pharmaceutical drug products (FDA, 2020k).
Facility Registration
The registration of 503B OFs is a cornerstone of ensuring operational compliance and
effective regulatory oversight of the industry in that it identifies entities that fall under FDA’s
jurisdiction. The FDA inspects all 503B OFs shortly after initial registration and then conduct
periodic re-inspections with timing and frequency based on risk-based factors such as
compliance history and the types of drugs compounded (FDA, 2019e). But the number of
compounders registering is much lower than FDA had expected. With only 73 entities registered
as 503B OFs in 2021, this sector has essentially stayed at the same level for the past five years
(FDA, 2021g). To understand the reasons behind this lack of growth, the FDA has initiated a
research project, including surveying 503B OFs, to identify barriers preventing compounding
pharmacies from becoming OFs (FDA, 2020a). But the FDA has provided scant information on
their progress of this activity for the past two years, struggling to elicit 503B OF feedback related
to business viability, compliance to policies, and interactions with FDA (FDA, 2020c).
It is estimated that about 7,500 of the 56,000 community-based pharmacies in the U.S.
specialize in compounding services, including compounding of sterile products that are
distributed in large quantities (APhA, 2021). Some of these entities may be operating like 503B
OFs but are not registered. Non-compliance with the registration process could be attributed to
pharmacies thinking that their compounding activities are not subject to 503B regulations, or
falsely claiming they only perform 503A compounding to avoid FDA oversight. However, if
entities performing high-risk compounding are not registered as 503B OFs, the FDA would not
be aware of their activities unless they receive reports of adverse events or complaints.

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CGMP Compliance
The FDA require 503B OFs to follow CGMPs when producing their compounded
products but not to the extent required by the pharmaceutical industry. Although CQA stated that
503B OFs should comply with CGMPs, the original FDA draft guidance was revised based on
stakeholder feedback to customize its expectations and enforcement for the compounding sector
(FDA, 2018b). For example, the FDA will not enforce strict compliance for some production
controls such as release testing, stability testing, and expiration dates (FDA, 2020f). The FDA
CGMP guidance for 503B OFs is flexible in that the agency applies a risk-based approach to
enforcement tailored to the size and scope of the 503B OF operations. Although the FDA took
this flexible approach to encourage compounders to register as 503B OFs, its enforcement
approach may not be clear due to conflicting language in the draft guidance document. One part
of the guidance states that 503B OFs are still subject to the full CGMP requirements until FDA
issues the final guidance, while another part lists the conditions under which FDA does not
intend to take regulatory action prior to issuing a final guidance (FDA, 2020f).
During the first four years after CQA was enacted, FDA conducted almost 500
inspections of pharmacy drug compounders resulting in more than 180 warning letters issued for
significant violations of both sections 503A and 503B (FDA, 2018h). In FY 2016, almost 100
product recalls were performed, four compounders entered into consent decrees, and 54 of the
110 total warning letters issued by FDA were to compounding pharmacies with most related to
sterility issues (FDA, 2017b; Cox, 2017). This trend continued in 2017 with 63 warning letters
and 41 recalls, and in 2018 with 23 warning letters and 50 recalls (FDA, 2019f; Gottlieb and
Abram, 2019). FDA Warning letters and recalls of compounded products continue to today
(FDA, 2021c). Hence, even with CGMP requirements modified for their operations,
compounding pharmacies appear to find compliance challenging.

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Reporting Requirements
Under CQA, the two main reporting requirements for 503B OFs are for product
distribution and adverse events. The product distribution reports should be submitted every six
months and contain a list of drugs compounded with the details of the active ingredients,
including strength, dosage form, and route of administration; and the number of individual units
produced and distributed (FDA, 2016c). This reporting requirement is similar to that for the
pharmaceutical manufacturers, which are required to submit drug product distribution data in
their NDA/ANDA Annual Reports.
The FDA uses the adverse event (AE) reporting system to identify signals of drug safety
and quality problems. The PEW research group identified 1,562 adverse events (AEs), including
116 deaths associated with compounding errors that occurred between 2001 and 2019 (PEW,
2020b). While the pharmaceutical manufacturers are required to submit reports for all AEs in
any category (serious and unexpected, serious but expected, non-serious), 503B OFs are only
required to report an AE if it is categorized as serious and unexpected (FDA, 2015a). However,
because compounded products do not typically have product labeling listing known adverse drug
experiences, it is difficult to determine what would be considered unexpected. For this reason,
the FDA encourages the 503B OFs to report all serious adverse events. To facilitate the reporting
by the public, 503B OFs are required to label their drugs to facilitate adverse event reporting. But
AE reporting has been an area of challenge for the 503B OFs. This was brought to light when an
FDA inspection discovered that a 503B OF failed to submit over 4000 adverse events that may
have been associated with the use of its compounded hormone pellets (Woodcock, 2019). The
under-reporting of AEs associated with compounded products is a problem for both 503A and
503B entities. A PEW survey published in 2016 found that only 30 percent of states (13 of the 43
that responded) require sterile compounding pharmacies to report AEs (PEW, 2016).

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2.4.3.5 Impact of CQA on Stakeholders
The stakeholders involved in or affected by drug compounding regulations include the
federal and state regulatory agencies, physicians, patients, compounding pharmacies, 503B
outsourcing facilities, trade associations, and the pharmaceutical industry. Many of these
stakeholders have provided input into the implementation of the CQA through the Federal
Register commenting process and by participating in working groups and FDA-sponsored
meetings.
The FDA was charged with developing the regulations, policies, procedures, and
guidance to implement the requirements of sections 503A and 503B. The Federal Register
process is used to solicit input and post advance notice of draft guidance and policies. However,
this process of commenting by the public and subsequent review by the FDA is lengthy and
frequently requires multiple revisions of a document over many years prior to its being finalized.
In addition, the FDA holds annual meetings as “listening session” meetings to receive feedback
directly from organizations representing pharmacies, hospitals, and consumers. These informal
meetings provide the opportunity for interested stakeholders the provide feedback on FDA
policies related to office-use compounding, FDA inspections of pharmacies, and the FDA-state
MOU (APhA, 2018). Since CQA established 503B OFs as a new category of compounders,
which falls under FDA’s jurisdiction, new procedures needed to be established, including a
process for facility registration, expectations for regulatory compliance, and approaches for
conducting facility inspections of 503B OFs.
The states are responsible for regulating the traditional pharmacies performing 503A
compounding by conducting audits and inspections according to their state BoP regulations. The
new compounding category of 503B OFs, although regulated by FDA, has added complexity to
the state oversight since they must differentiate between 503A compounders and 503B OFs.

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While there is no evidence that the states were involved in the initial development of the CQA,
they have since been engaged by the FDA through the annual Intergovernmental Working
Meetings on Drug Compounding. This forum brings together participants from the state Boards
of Pharmacy, state Health Departments, the National Association of Boards of Pharmacy, and the
Federation of State Medical Boards to discuss key topics of concern raised by the states,
including expectations for facility inspections, CGMP requirements, and reporting of
enforcement information to the FDA (FDA, 2020i). During these meetings, the states have
expressed concerns about the lack of trained inspectors to conduct compounding facility
inspections and thought that FDA training of state inspectors would be helpful (FDA, 2018e).
The standard MOU between the states and FDA on interstate distribution of compounded
products, as described in detail in section 2.4.3.1, although endorsed by NABP, is still under
discussion among the individual states. The final version has been considered overly burdensome
by many state authorities as it requires them to collect and analyze enormous amounts of
information on drug compounders to be made available to the FDA (FDA, 2018c). For the
traditional compounders, the CQA did not define any new regulations or requirements, but the
law has enabled full implementation of 503A, which had been stalled for many years. There are
several aspects of pending or completed implementation activities that affect the 503A pharmacy
compounders. With the publishing of the 503A bulks substance list and the allowance for
compounding with substances on the Category 1 bulks list, the traditional compounders are able
to expand their practice (FDA, 2017a). And with the allowance of anticipatory compounding, the
situation lends itself for 503A compounders to potentially overstep its boundaries and potentially
behave more like 503B OF manufacturers. The FDA has finalized a guidance to provide
compounders and state regulatory agencies with examples of manufacturing conditions the FDA

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considers insanitary and which could cause a drug product to become contaminated or cause
patient harm (FDA, 2020h). The aim of the guidance is to help compounders identify, remediate,
or prevent occurrences of insanitary conditions, thereby reducing the likelihood of FDA
intervention in their business. While some 503A pharmacies, including hospital pharmacies, may
wish to enter the 503B compounding sector, the current number of 503B OFs suggest that the
requirements to become a 503B OF may be too onerous for most (FDA, 2020a). Although the
CQA and the FDA guidance documents aim to serve the compounding community and the
patients, it is not clear how 503A compounders view the CQA and FDA’s approach to its
implementation.
For 503B OFs, the CQA provides a framework for compounding large quantities of
sterile drugs to be distributed to clinics and hospitals all over the country. However, the strict
requirements for operating a 503B OF may be discouraging businesses from entering this sector.
In addition, the delays in establishing the 503B bulks list and the fluctuations in the drug
shortage lists further pose challenges for the 503B OF business model, which requires significant
upfront investments in equipment and facilities (PEW, 2020a). The FDA has initiated projects to
engage 503B OFs, compounders, and other stakeholders. One example is the research initiated in
2019 to survey 503B OFs as described above in section 2.4.3.4. Another example is the
Compounding Quality Center of Excellence, established to offer training on manufacturing
quality and policies and to sponsor annual conferences to discuss compounding topics (FDA,
2020e).
Because many states still allow 503A pharmacies to compound sterile products for office
stock, the line between compounding by traditional pharmacies and 503B OFs is not clear. The
FDA has repeatedly ignored congressional appropriations committee requests to issue a guidance

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document clarifying the agency’s position on office use compounding by pharmacists (Hearings.
US Congress, 2018, p. 26). Industry organizations like the Outsourcing Facility Association
(OFA) have also appealed to the FDA to take more definitive measures to enforce CQA in
separating the practices of 503A from 503B compounding (FDA, 2019d). Furthermore, OFA has
voiced its disagreement with the FDA’s characterization that 503B OF compounded products
pose a higher risk to patients than commercial drugs (FDA, 2019d; FDA, 2018b). Hence, the
503B OFs are operating in a new space whose boundaries are blurred on one side by 503A
pharmacies and the other side by pharmaceutical manufacturers.
It is not clear how the CQA implementation has impacted the pharmaceutical
manufacturers. Pharmaceutical companies did provide early feedback prior to the passage of
CQA, voicing their opinion that creating a new category of compounding entity was unnecessary
and could cause regulatory confusion (PhRMA, 2013). The generic drug industry was also vocal
during the legislative hearings to review CQA, raising their concerns about allowing
“compounding manufacturers” to operate under lower quality standards. They insisted that the
new entities should be held to the identical manufacturing and quality standards as the
pharmaceutical manufacturers (Hearings. US Congress, 2014b). The pharmaceutical industry’s
concerns may stem from the potential for OFs to compete in the same space with commercial
manufacturers. However, after providing some limited input during the legislative process, the
pharmaceutical industry has been relatively silent in the years since. For example, feedback on
FDA’s guidance documents and policies have been received primarily from pharmacies and
pharmacy organizations, with little direct input from pharmaceutical companies (FDA, 2016a,
FDA, 2016b). In 2017, however, industry associations representing the pharmaceutical
companies raised concerns that CQA was not achieving its intended objective of protecting

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public safety. In a letter to Congress signed by various pharmaceutical organizations, it was
asserted that “a substantial number of 503A compounding pharmacies should be registered as
503B OFs but have evaded their responsibilities” (Fassbender, M., 2017). In this sense, the
pharmaceutical industry shares the same concerns as the 503B OF industry in that 503A
pharmacies are performing 503B activities without FDA oversight. It is not clear how the CQA
impacts the business decisions of pharmaceutical companies to manufacture a particular product
or even supply a bulk drug substance to compounders.
The CQA was expedited into law in response to a public health threat, and its
implementation has been ongoing for almost seven years, with many elements still incomplete.
The FDA is challenged with balancing the need for availability of clinically necessary
compounded drugs and fairness among all stakeholders who are preparing and supplying
medicines in the U.S. It is unclear if the CQA implementation has progressed as intended and
whether the resulting landscape of human drug compounding is what was envisioned not only by
the FDA but by Congress and the American public. It is also not clear how drug compounders
and pharmaceutical companies view the overall efforts to implement CQA. The views of the
drug compounders and pharmaceutical companies regarding the efforts to improve product
quality, safety, and application of standards to create a level playing field should be further
understood. My research gathered information to evaluate stakeholder views of the compounding
regulations and CQA implementation actions. A research framework was developed and used to
probe some of these questions regarding the adequacy of the CQA compounding regulations to
potentially inform regulatory policy.

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2.5 Research Framework
To explore the experiences and views of the compounding and pharmaceutical industries
on the overall regulatory framework of the CQA, I identified several existing research models
and frameworks whose elements could be used to design a novel framework. According to R.E.
Freeman, stakeholders are defined as any group or individuals who can affect or can be affected
by the achievement of an organization’s objectives (Freeman, 1984). This model was originally
used to define and understand relationships and perspectives of stakeholders of a company or
firm. Subsequently, other scholars have suggested additional elements to the stakeholder. Of
particular interest is the categorization of stakeholders by Fassin into three groups: ‘real’
stakeholders who have a concrete stake, stakewatchers who protect the interests of real
stakeholders, and stakekeepers who impose external control and regulations that impact the real
stakeholders (Fassin, 2009). This categorization could be applied to the various stakeholders
affected by the CQA (Figure 2). For example, pharmacy compounders, outsourcing facilities,
pharmaceutical manufacturers, physicians, and patients could be viewed as the real stakeholders.
Non-governmental organizations (NGOs) like the professional societies and trade groups would
be viewed as stakewatchers and the FDA and the state regulators as stakekeepers. For my thesis
research, I explored the views of three real stakeholders -- the 503A compounding pharmacies,
503B OFs, and pharmaceutical manufacturers -- on the impact of regulatory policies and
oversight associated with CQA. For this last part, a framework developed by Valery Ramsey on
the “three objectives of regulations” was considered to be appropriate (Ramsey, 2013). Ramsey’s
framework suggests that the purpose of medical product regulation has three elements; the first is
to ensure product safety and effectiveness, the second is to equalize requirements and standards
for the industry, and the third is to facilitate efficiencies in research commercialization, and
costs. This framework was applied to understand how respondents in the compounding and

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pharmaceutical industry view the regulatory policies associated with the implementation of CQA
across the three elements.
While Ramsey used the triad model to study the impact of incomplete OTC monographs
on the pharmaceutical industry, my study examined the impact of CQA across three different
stakeholders. I modified the first element of the framework, “ensuring product safety and
effectiveness,” to “ensuring product quality and safety” in consideration of the fact that the
passage of CQA was prompted by safety and quality problems in the compounding industry. As
such, replacing effectiveness with product quality was thought to be appropriate for this study.
The second element of equalizing requirements and standards applies to this study in that all
three stakeholders are in the business of supplying finished drug products and would be of
interest to probe their views regarding this element of the framework. Finally, the third element
of facilitating efficiencies in commercialization, research, and cost from the triad model is also
retained in my framework because, while generally relating to financial matters, it can also be
used to explore how the different stakeholders view CQA in terms of fairness and
competitiveness. My research framework, therefore, combines Ramsey’s triad model with
Fassin’s stakeholder theory to guide the development of a novel survey, as shown in Figure 2.

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Figure 2: Framework for Stakeholder Assessment of the Compounding Quality Act
(CQA)

The modified triad model is shown with the CQA in the center and the stakeholders in the
surrounding boxes. Stakeholders who are actively involved in or impacted by the implementation
of CQA are shown with bidirectional arrows, while those who are passively impacted by the law
are shown with unidirectional arrows. Of the first group, the FDA and the state regulators could
be considered both as stakekeepers and real stakeholders, according to Fassin (2009). While they
have no stake in the compounding and pharmaceutical industry, the FDA and the state regulators
have considerable influence over the industry they regulate, and hence, they can be seen as
stakekeepers. On the other hand, because the regulators are also directly impacted by the passage
of CQA in that they must develop and enforce the regulation and policies to implement the law,
they could be seen as real stakeholders. The licensed pharmaceutical manufacturers, 503B OFs,
and 503A compounding pharmacies that participate in the preparation of drug products are
directly affected by the regulatory actions taken to implement CQA and are deemed as real
stakeholders. These three entities, shown in green shaded boxes in the lower part of the diagram,

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were the focus of my research. The views of other stakeholders, including the regulators
described above, as well as the physicians, patients, and NGOs, were not sought in this research.

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Chapter 3. Methodology
3.1 Introduction
This study used an on-line survey to investigate the views of professionals working in
503A drug compounding pharmacies, 503B outsourcing facilities, and pharmaceutical
manufacturers regarding the regulatory framework for drug compounding. The survey
instrument questions were primarily developed based on information obtained from the literature
review described in Chapter 2. Questions were also developed based on informal discussions
with pharmacists and professionals in the drug compounding business. Finally, questions were
further refined with the guidance of a focus group whose feedback helped to validate the survey
questions and the overall survey instrument to enable appropriate data collection. The survey was
administered to specific individuals identified from each industry group selected for their past or
current experience with drug compounding or pharmaceutical drug manufacturing. The survey
was also made available to general members of several professional associations and groups. The
responses were collected and analyzed, and participants were assured that their personal and
company identities and responses would remain anonymous and private.
3.2 Stakeholder Analysis and Respondent Selection
An assessment was done to select the most appropriate target population for the research,
those that prepare and distribute finished drugs, which include the drug compounders and
pharmaceutical manufacturers. Since drug compounding includes both 503A and 503B
compounding, stakeholders of interest are both 503B OFs and 503A pharmacy compounders.
The licensed pharmaceutical manufacturers are also a key stakeholder and include both innovator
and generic licensed drug manufacturers. This latter target group was refined to include
pharmaceutical professionals working at middle to senior levels (e.g., Managers, Directors, Vice

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Presidents), typically with job functions in quality management, manufacturing operations, and
regulatory affairs.
3.3 Development of the Survey
The survey was created using a web-based survey application tool, Qualtrics
(www.Qualtrics.com). The draft survey included 45 to 50 questions in several formats, such as
matrix, scaled, rank-order, yes/no, and open-text-entry format. The response recorded for some
questions determined which subsequent questions would be displayed in the respondent’s survey
(display logic and skip logic was pre-determined by the researcher but automated through the
Qualtrics survey tool). The initial questions gathered demographic information from respondents
and established their affiliations. Subsequent questions solicited the experience and/or thoughts
on the requirements, regulations, and policies implemented through the CQA. Questions were
based on my framework and categorized to assess stakeholder feedback of the CQA against the
three purposes of regulation as described above: product quality and safety, equalize
requirements and standards for the industry, facilitation of efficiencies of research,
commercialization, and costs.
The detailed literature review outlined in Chapter 2 and informal discussions with
pharmacists, drug compounders, and pharmaceutical manufacturing professionals guided initial
survey development. To further refine and ensure a broad perspective on the survey questions, a
focus group made up of experienced pharmacists and drug compounders, industry, regulatory,
and individuals on the research thesis committee from the USC Department of Regulatory and
Quality Sciences. The focus group was convened to review and provide feedback on the survey
questions to be included in the Qualtrics survey instrument. The purpose of the focus group was
to critique the quality and relevance of the draft survey, including the question content, clarity,

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and digital format. The draft survey was disseminated prior to the meeting. The focus group met
during a 90-minute remote videoconference. The meeting included a short summary of the
proposed research study, followed by the detailed discussion of the survey questions, and
concluded with participant suggestions for survey improvement.
Prior to deployment, the survey instrument was validated by multiple individuals,
students, and faculty, from the USC Regulatory Science doctoral program. Validation confirmed
that email notifications functioned properly, survey flow was as intended, responses were
accurately captured, and data could be analyzed as intended.
3.4 Survey Deployment and Data Analysis
Potential survey participants were primarily selected based on the publicly available
designation of their employer as 503B OFs, 503A compounding businesses, and pharmaceutical
companies who manufacture human drug products. Most individuals were contacted by
telephone or email, inviting them to participate in the survey, screening to confirm they are
appropriate individuals and are interested in participating. Those declining to participate were
not sent survey links nor follow-up emails. A web-based survey was disseminated to 298 specific
individuals who were identified as having suitable credentials to participate through the
researcher’s professional network, through the social media platform “LinkedIn,” and through
two online directories of sterile drug compounders (www.ACHC.org and
www.compoundingpharmacies.org). During participation follow-up using reminder emails and
phone calls, four individuals indicated the original email sent through Qualtrics likely ended up
in their email spam folders or were inadvertently deleted. This was corrected by sending emails
with personalized survey links to those respondents through the researcher’s USC email account.

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Qualtrics Insights Platform software was used to create and send the invitations with a personal
link to the survey.
In addition to identifying specific individuals as mentioned above, five different
professional organizations within the pharmacy and pharmaceutical industry were identified as
having members with relevant experience and/or knowledge of drug compounding and drug
manufacturing regulations. The survey was therefore also disseminated as an open invitation to
participate using the electronic media platform of each organization. The invitation notification,
including an anonymous /reusable survey link, was sent via the following media channels: The
Alliance for Pharmacy Compounding (APC) weekly newsletter; International Journal of
Pharmaceutical Compounding (IJPC) member email distribution list; Regulatory Affairs
Professional Society (RAPS) online Open Forum, Parenteral Drug Association (PDA) Connect
Sterile Drug Interest Group online discussion board, and LinkedIn RA/QA/QC Referral Network
group. All survey recipients could forward an anonymous/reusable survey link to other
individuals with appropriate knowledge and experience in the topic.
The target response rate for this study was 75 total surveys (25 from each of the three
stakeholder groups) in which the respondents answer at least 75% of questions. Qualtrics was
used to facilitate periodic follow-up reminder email messages over an approximate one-month
period requesting survey completion to those individuals who had not yet completed a survey.
Respondents were assured that all identifying data would be anonymized in the survey results
and summary as well as any future publications. All respondents who completed the survey were
offered a summary of survey results as well as entry into a random drawing for a $100 VISA gift
card to incentivize participation. Respondents who initiated the survey were not mandated to
answer all questions nor required to navigate to the final page to confirm their submission. Any

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survey that was started but not completed by the respondent was automatically closed after two
weeks of inactivity, and any data entered was collected by the Qualtrics program.
Survey results were collected and stored electronically. The Qualtrics software program
automatically calculated statistical data such as percentages, counts, minimums, maximums, and
means for all non-open-ended questions. Applicable data was displayed in a tabular or graphical
format. The responses to open-ended questions were analyzed for content, including patterns,
correlations, or trends. Cross tabulation was performed for most questions against respondent
facility type and used to further delineate whether differences or similarities existed between
stakeholder groups. The following abbreviations will be used throughout chapter 4 for the five
different facility types: “503A”, “503B”, “503A&B”, “pharma”, and “other”.

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Chapter 4. Results
4.1 Survey Logistics
The survey was distributed as described in Chapter 3 from early December 2020 through
early February 2021 and was closed on February 14, 2021. Seventy-seven of the 298 personal
survey links to the direct email recipients were opened and started, yielding an overall response
rate of 26% (77/298) for the direct email group. Sixty-one of these respondents completed the
survey, and 16 partially completed the survey. Of the 16 partially completed surveys from this
group, 11 respondents answered between 45%-55% of the questions and were included in the
total count, while 5 respondents answered 10 or fewer questions (between 15%-27%) of which
all but one was demographic in nature and thus excluded. The overall completion rate for the
direct email group was 93% (72/77). The anonymous survey link disseminated through the
various member-only organizations was opened and started by 53 individuals, with 40
completing the survey. However, one completed survey in this group was from a college student
(as written in the free text comments by the respondent), and hence, was excluded from the
count. Of the 13 partially completed surveys from this anonymous group, 4 respondents
completed 55% of the survey questions and were included in the total count, whereas 9 surveys
were excluded from the count since only 10 or fewer questions (between 4%-27%) were
answered. Therefore, the overall completion rate for the anonymous group was 85% (43/52). In
total, one hundred twenty-nine surveys were opened and started from each of the two survey
pools, for a combined response completion rate of 88% (115/1290). The total number of valid
completed surveys plus the partially completed surveys (≥45% of questions answered) inclusive
of both groups was defined to be 115. The numbers of responses received for each question are
provided with the results, as appropriate.

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4.2 Profiles and Backgrounds of Respondents
The survey was developed with three main stakeholder groups in mind. Since each
stakeholder group potentially held different views from each other, the respondents were asked
to select the type of facility that best described where they worked (Figure 3). Most identified
themselves as 503A compounding pharmacies (43%, 50/115), followed by branded or generic
pharmaceutical manufacturers (30%, 34/115), 503B OFs (16%, 19/115), other
facilities/companies (9%, 10/115), and both 503A and 503B facilities (2%, 2/115). The ten
respondents who selected “Other” identified themselves as: contract manufacturer; community
pharmacy no compounding; 503A compounder in a health-system; contract development and
manufacturing organization; 503A, 503B and FDA manufacturing; gene therapy; cosmetic and
OTC manufacturer; researcher; distributor; regulator.
Figure 3: Distribution of Respondents by Facility Type
Which of the following best describes your facility? (N=115)

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For most questions, instead of reporting the data in aggregate of all respondents, data
from most questions were cross tabulated against respondent facility type to present the views of
each of the three main stakeholder groups (503A, 503B, pharmaceutical manufacturer). Data
from the two survey respondents who selected “Both 503A and 503B facility” were grouped
with those of the 503B respondent group in most instances. This approach seems logical since
the Both 503A&B respondents were treated like 503B respondents with regards to the survey
display logic, where all the same questions presented to the 503B survey participants were also
displayed to the 503A&B participants. Finally, in most cases, data from the “other” respondents
was reported in the narrative but not included in the figures because their heterogenous
composition did not lend themselves to be a distinct group.
To characterize the role of respondents within their organization, the respondents were
asked to select the title that best described their current role (Table 4). Since the drug
compounding respondents and pharmaceutical manufacturer respondents were likely to have
different job titles, two different questions with different sets of job title selections were
presented using survey display logic to the respondents. For the 503A, 503B and 503A&B
respondent groups, the selections were President (35%, 25/71), Director (27%, 19/71), Manager
(23%, 16/71), Staff pharmacist (6%, 4/71) and Other (10%, 7/71). Those identifying as “other”
provided their own titles (COO, Operations Manager, Attorney, Owner, Chief Clinical Officer,
Consultant, and Sales rep). For the pharma and “other” respondent group, the selections were
Vice President or higher (43%, 19/44), Director/Sr. Director (43%, 19/44), Manager/Sr. Manager
(9%, 4/44), and Other (5%, 2/44). Those identifying as “other” provided the titles of consultant
and team lead compounding pharmacist.

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Table 4: Distribution of Respondents by Job Title
What title best describes your current role within your organization?

Job Title 503A, 503B, and 503A&B respondents
President 35% (25/71)
Director 27% (19/71)
Manager 23% (16/71)
Staff Pharmacist 6% (4/71)
Other 10% (7/71)
Job Title
Pharmaceutical Manufacturer and
Other respondents
Vice President or higher 43% (19/44)
Director/Sr. Director 43% (19/44)
Manager/Sr. Manager 9% (4/44)
Other 5% (2/44)

To understand the geographical representation of the data, survey respondents were asked
to indicate the US state which their facility was located. The 101 respondents came from 28
different states with 24 from Massachusetts, 13 from California, 8 from North Carolina, 6 each
from New York and Arizona, 4 each from Colorado and Florida, and 3 each from Maryland,
Michigan, Pennsylvania, and South Carolina. The remaining seventeen states not named above
have two or fewer respondents.
To gauge the size of the organizations represented in this study, the respondents were
asked how many employees were in their companies. As the drug compounding facilities were
likely to have fewer employees compared to the pharma companies, the two respondent groups
were presented using survey display logic with different employee number ranges. As can be
seen in Table 5, a majority of 503A respondents were from companies with 1-19 employees

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(58%, 29/50) while 38% (19/50) were from companies with 20-75 employees, and two
respondents (4%, 2/50) were from those with more than 150 employees. In comparison, 37%
(7/19) of the 503B respondents were from companies with 1-19 employees, 32% (6/19) were
from companies with 20-74 employees, and 16% (3/19) were each from companies with 75-150
employees, and greater than 150 employees. One of the 503A&B respondents selected 1-19
employees (50%, 1/2), and the other selected 75-150 employees (50%, 1/2). The respondents
from the pharma category were almost equally distributed across the ranges provided, with 24%
(8/34) selecting 1-199 employees, 26% (9/34) selecting 200-999 employees, 24% (8/34)
selecting 1000-19,999 employees, and 26% (9/34) selecting greater than 20,000 employees.
Respondents in the “other” category included 20% (2/10) from companies with 1-199
employees, 40% (4/10) from companies with 200-999 employees, 40% (4/10) from companies
with between 1,000-19,999 employees (4/10), and none from companies greater than 20,000.
Table 5: Size of Company (as measured by number of employees)
How many employees are in your company? (n=115)
Number of employees 503A 503B 503A&B
1-19 58% (29/50) 37% (7/19) 50% (1/2)
20-74 38% (19/50) 32% (6/19) 0% (0/2)
75-150 0% (0/50) 16% (3/19) 50% (1/2)
>150 4% (2/50) 16% (3/19) 0% (0/2)

Number of employees Pharmaceutical
manufacturer
Other
1-199 24% (8/34) 20% (2/10)
200-999 26% (9/34) 40% (4/10)
1000-19,999 24% (8/34) 40% (4/10)
>20,000 26% (9/34) 0% (0/10)

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Survey respondents were asked if their companies made sterile human drug products.
According to the results, shown in Figure 4, all the 503B respondents (100%, 19/19) responded
that their facilities manufactured sterile drugs, while a little more than half of the 503A
respondents (58%, 29/50) indicated that their facilities manufactured sterile drugs and the
remainder (42%, 21/50) indicated that theirs did not. Similarly, a little more than half of the
respondents in the pharma group indicated yes (56%, 18/32), 41% (13/32) indicated no, and one
respondent selected do not know (3%, 1/32). Of the two 503A&B respondents, one said yes
(50%, 1/2), and the other one said no (50%, 1/2). Finally, of the ten “other” respondents, three
(30%) stated yes, and seven (70%) said no to their companies producing sterile drugs.
Figure 4: Respondent Companies Making Sterile Drug Products
Does your facility produce (compound) or manufacture sterile human drug products? (n=113)

To understand the volume of sterile drug products produced, the seventy respondents
who answered yes to producing sterile products were asked to select the monthly production
output of their company (Figure 5). Slightly less than half of the 503A respondents (45%, 13/29)
indicated that their facilities produced 100-999 sterile units/month followed by 1000-19,999

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units/month (38%, 11/29) and 0-99 units/month (10%, 3/29). Two respondents (7%, 2/29) in this
group indicated that they did not know. In comparison, about one-third each of the 503B
respondents indicated 1000-19,999 units/month (32%, 6/19) and 20,000-70,000 units/month
(32%, 6/19), while 21% (4/19) indicated greater than 70,000 units/month, 11% (2/19) indicated
0-99 units/month, and the remaining respondent (5%, 1/19) indicated 100-999 units per month.
The one 503A&B respondent selected between 1000-19,999 units/month. Slightly less than one-
third of the pharma respondents (28%, 5/18) reported that their facilities produced greater than
70,000 units/month, 17% (3/18) selected 1000-19,999 units/month, 17% (3/18) selected 100-999
units/month, 11% (2/18) selected 20,000-70,000 units/month, and one respondent (6%, 1/18)
selected 0-99 units/month. Almost one-fourth (22%, 4/18) of respondents in this group did not
know. Of the 3 “other” respondents, 2 (67%) selected greater than 70,000 units per month, and
one (33%) selected did not know.

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Figure 5: Quantity of Sterile Human Drugs Produced
How many individual units of sterile human drug products do you produce per month? (n=70)

To determine the prevalence of compounding sterile drugs for office stock by 503A
pharmacies, a question was asked through survey display logic only to those 503A facilities
responding yes to producing sterile drugs. Results show that all except three respondents (90%,
26/29) reported that they did not compound sterile human drugs for office stock.
4.3 Views on 503B facility registration
The next section of the survey included a series of questions regarding 503B OF
registration. When 503B and 503A&B respondents were asked if they intended to renew their
registration with FDA to continue operating as a 503B OF, all except one (95%, 20/21)
responded yes while the remaining one responded no (5%, 1/21) (Figure 6).

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Figure 6: 503B Registration Renewal
Do you intend to renew our registration with FDA to continue operating as a 503B outsourcing
facility? (n=21)

The 503A respondents were asked a series of questions to understand their experiences
and views toward 503B OF registration (see Figure 7). According to the results, 92% (46/50)
responded that they had not previously registered as a 503B OF, while 8% (4/50) responded that
they had. The four 503A respondents who previously registered as a 503B OF were asked if they
would consider registering again to become a 503B OF. Two of the four responded yes (50%),
and the other two responded no (50%). Finally, the two respondents who said they were
considering to register again as a 503B OF were asked about their timeframe for registering. One
respondent indicated within 6-24 months, while the other indicated greater than 24 months from
the date of their answer. The forty-six 503A respondents who had not previously registered as a
503B OF were asked if they were considering becoming a 503B OF. Most of these respondents
indicated that they were not (83%, 38/46), while six (13%, 6/46) indicated that they were, and
two (4%, 2/46) indicated that they did not know.

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Figure 7: 503A Respondent Experience and Views of 503B OF Registration

All participants were asked whether the regulations and FDA guidance are clear about
which organizations must register as a 503B OF (Figure 8). The cross tabulation with this
question by respondent type showed that most of the 503A respondents (76%, 37/49) thought
that the FDA regulations and guidance were clear, with the remainder equally split between not
clear (12%, 6/49) and not knowing (12%, 6/49). Almost all of the 503B respondents (90%,
19/21) thought that the FDA regulations and guidance were clear, while two respondents (10%,
2/21) thought not. In comparison, the pharma respondents were almost equally divided between
those who thought that the regulations and guidance were clear (47%, 16/34) and those who did
not know (44%, 15/34). Three respondents (9%, 3/34) in this group thought that the regulations
and guidance were not clear. Similarly, the “other” respondents were equally divided between

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those who thought that the regulations and guidance were clear (40%, 4/10) and those who did
not know (40%, 4/10). Two in this group (20%, 2/10) thought the information was not clear.
Figure 8: Clarity of Guidance for 503B OF Registration
Are the regulations and guidance clear on who needs to register as a 503B outsourcing facility?

Respondents were invited to enter additional comments after choosing their yes or no
response. Comments were received from nine respondents (8%, 9/114), five from respondents
answering yes, and four from those answering no. The complete comments are displayed below
in Table 6.
Table 6: Affiliated Comments on Clarity of FDA Regulations and Guidance for 503B
OF Registration
Yes (Add optional comments below); No (Add optional comments below)
Additional Comments
YES
I think they are clearer than some compounding pharmacies want to believe they are.
(Respondent 103, 503A)
clear but not always evident. (Respondent 100, 503A)
discusses tile of pharmacists related to compounding. (Respondent 090, 503A)

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Table 6: Affiliated Comments on Clarity of FDA Regulations and Guidance for 503B
OF Registration (continued)
Somewhat. (Respondent 011, 503A&B)
Some additional guidance regarding whether 503(B) registration requirements might be
warranted or helpful, though. (Respondent 022, other)
NO
bulks list uncertainty, “clinical need” definition. (Respondent 077, 503A)
vet products not addressed. (Respondent 018, 503A)
largely driven by state boards of pharmacy. (Respondent 001, 503A)
The FDA guidance seem to conflict with some of the regulations and USP standards.
(Respondent 066, other)
Potential hurdles to entities registering or renewing with FDA as a 503B OF were derived
from my literature review as discussed in 2.4.3.5. All respondents were asked to rank order each
of the four listed potential hurdles from one to four, with one being the highest hurdle and four
being the lowest (Table 7). To understand how the respondents collectively considered the
different hurdles, a weighted mean score was calculated for each choice. First, the top choice was
assigned a weight of 1, the second choice a 2, the third choice a 3, and the bottom choice a 4.
Then, to derive the weighted mean for each item, the weighted rankings were totaled and divided
by the number of respondents. The detailed data used for the calculations are shown in the
parentheses. The weighted mean results of all respondents revealed that the high cost to operate
a 503B facility was ranked as the top hurdle (weighted mean: 2.3; #1: 31/104; #2: 30/104; #3:
27/104; #4: 16/104), followed by regulatory requirements (weighted mean: 2.4; #1: 27/104; #2:
35/104; #3: 20/104; #4: 22/104), administrative requirements (weighted mean: 2.6; #1: 22/104;
#2: 25/104; #3: 29/104; #4: 28/104), and insufficient revenue (weighted mean: 2.8; #1: 24/104;
#2: 14/104; #3: 28/104; #4: 38/104).
A cross tabulation was performed of the four potential hurdles for the two main
compounding stakeholders, the 503As and 503Bs (see Table 7). The results of the 503B
respondents (n=19) were similar to those of the overall respondents in that the high cost to

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operate a 503B facility was ranked as the highest hurdle (weighted mean: 1.8; #1: 10/19; #2:
4/19; #3: 4/19; #4: 1/19) followed by regulatory requirements (weighted mean: 2.6; #1 2/19; #2:
8/19; #3: 4/19; #4: 5/19)), administrative requirements (weighted mean: 2.7 (#1 4/19; #2: 3/19;
#3: 6/19; #4: 6/19)), and insufficient revenue (weighted mean: 2.8 (#1 3/19; #2: 4/19; #3: 5/19;
#4: 7/19)). On the other hand, the 503A respondents (n=48) chose regulatory requirements as the
top hurdle (weighted mean: 2.2; #1: 15/48; #2: 17/48; #3: 6/48; #4: 10/48) followed by
administrative requirements (weighted mean: 2.4; #1: 10/48; #2: 16/48; #3: 14/48; #4: 8/48),
high cost to operate (weighted mean: 2.6; #1: 11/48; #2: 9/48; #3: 15/48; #4: 13/48), and
insufficient revenue (weighted mean: 2.7; #1: 12/48; #2: 6/48; #3: 13/48; #4: 17/48).
Table 7: Ranking of Hurdles Preventing Registration as a 503B OF
What would you consider to be the biggest hurdle that might prevent entities from registering or
renewing their registration as a 503B outsourcing facility? Rank each item by dragging and
dropping (1 being the biggest hurdle).

Hurdles
All respondents
(n=104)
503B
(n=19)
503A
(n=48)

Rank Order (based on
weighted mean)
Rank Order (based on
weighted mean)
Rank Order (based
on weighted mean)
High cost to operate
503B facility
1 (2.3) 1 (1.8) 3 (2.6)
Regulatory
requirements
2 (2.4) 2 (2.6) 1 (2.2)
Administrative
requirements
3 (2.6) 3 (2.7) 2 (2.4)
Insufficient revenue 4 (2.8) 4 (2.8) 4 (2.7)

4.4 Communication
In this section, questions were designed to determine if the FDA and the states were clearly
communicating their regulations for drug compounding.

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Respondents were all asked first to rate the general level of communication between their
industry and the FDA (Figure 9). The 503A compounders rated the level of communication
between FDA as very low (Low: 73%, 30/41; Medium: 12%, 5/41; Do not know: 10%, 4/41;
High: 5%, 2/41). Most commonly, the 503B respondents also rated the level of communication
as low overall (Low: 42%, 8/19; Medium: 37%, 7/19; High: 21%, 4/19; Do not know: 0%, 0/19).
The majority of the “other’ respondents rated the communication level as medium (Medium:
56%, 5/9; Low: 22%, 2/9; High: 11%, 1/9; Do not know: 11%, 1/9); the pharma respondents
gave the most favorable rating for FDA communication with their industry (Medium: 40%,
12/30; High: 33%, 10/30; Low: 17%, 5/30; Do not know: 10%, 3/30).
Figure 9: Communication Level Between Industry and the FDA
What do you think is the level of communication between your industry and the FDA?

The 503A, 503B, and 503A&B participants were also asked to rate the general level of
communication between their own industry and the state regulatory agencies (Figure 10). Most
commonly, 503A respondents rated the overall communication as medium (Medium: 37%,

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15/41; Low: 29%, 12/41; High: 27%, 11/41; Do not know: 7%, 3/41). The 503B respondents had
a similar distribution of rating (Medium: 37%, 7/19; Low: 37%, 7/19; High: 26%, 5/19; Do not
know: 0%, 0/19).
Figure 10: Communication Level Between Industry and the States
What do you think is the level of communication between your industry and the State regulatory
agencies?

4.4.1 Raising Awareness of CQA
Respondents were first asked to rate their familiarity with the Compounding Quality Act (CQA),
which created the 503B OF as a new category of drug compounder. A cross tabulation of results
across respondent types showed that the 503B respondents were most familiar (very familiar:
95%, 20/21; a little familiar: 5%, 1/21) followed by the 503A respondents (very familiar: 64%,
32/50; a little familiar: 34%, 17/50; not familiar: 2%, 1/50), pharma respondents (very familiar:
24%, 8/34; a little familiar: 44%, 15/34; not familiar: 32%, 11/34), and “other” respondents (very
familiar: 20%, 2/10; a little familiar: 60%, 6/10; not familiar: 20%, 2/10) (Figure 11).

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Figure 11: Compounding Quality Act (CQA) Familiarity
The Compounding Quality Act (CQA) was established as part of the Drug Quality Security Act
(DQSA) of 2013. The CQA created the 503B Outsourcing Facility as a new category of drug
compounder to be regulated by the FDA. Please rate your familiarity with the CQA.

4.4.2 Clarifying Regulatory Oversight
Respondents were asked how effective the CQA had been in clarifying the
responsibilities for state regulatory oversight of 503A traditional compounding and the FDA
regulatory oversight of 503B non-traditional compounding. The cross tabulation of the data
against facility type showed differences among the different stakeholders (Figure 12). Of the
503A respondents, 42% (21/50) thought the CQA has not been effective, and a similar
percentage (38%, 19/50) thought it has been somewhat effective, while five respondents (10%,
5/50) thought it has been very effective and another five (10%, 5/50) did not know.
In comparison, about half of the 503B respondents (48%, 10/21) thought that the CQA
has been somewhat effective, followed by 28% (6/21) who thought that it has not been effective,
19% (4/21) that it was very effective, and one respondent (5%, 1/21) who did not know.

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Of the pharma respondents, about one in three indicated that the CQA has been
somewhat effective (35%, 12/34) or did not know (32%, 11/34) while one in five (21%, 7/34)
thought it has not been effective, and one in ten (12%, 4/34) thought it was very effective. Of the
“other” respondents, about half thought that the CQA has not been effective (50%, 5/10) or did
not know (40%, 4/10), while one respondent (10%, 1/10) thought the CQA has been somewhat
effective.
Figure 12: Effectiveness of the CQA Related to Clarifying Responsibilities Between the
States and FDA
The Compounding Quality Act (CQA) separates regulatory oversight of 503A traditional
compounding by the state from regulatory oversight of 503B non-traditional compounding by the
FDA. In your view, how effective has the CQA been in clarifying the responsibilities between the
states and the FDA? (n=115)

4.4.3 Views on Standard MOU
Another research area was to determine if the respondents were familiar with the
Standard "Memorandum of Understanding (MOU)” addressing certain distributions of
compounded human drug products between the states and the FDA. The cross tabulation shown
in Figure 13 revealed that the majority of the 503A respondents were very familiar (60%, 30/50)

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with the MOU while 28% (14/50) were a little familiar and 12% (6/50) were not familiar. The
503B respondents were almost equally split with being very familiar (48%, 10/21) and a little
familiar (52%, 11/21). In comparison, respondents in the pharma group were equally split (47%,
16/34) between those who were not familiar and who were a little familiar. Two in this group
(6%, 2/34) were very familiar with the MOU. Most of the respondents in the “other” group
(60%, 6/10) were not familiar, while two (20%, 2/10) were very familiar, and another two (20%,
2/10) were a little familiar with the MOU.
Figure 13: Familiarity with the MOU Between States and FDA
The Standard "Memorandum of Understanding (MOU) addressing certain distributions of
compounded human drug products between the states and the FDA" has been under discussion
for many years. How familiar are you with this MOU mechanism?

Display logic in the survey tool was used to ask only respondents who were familiar with
the MOU (either very familiar or a little familiar, 85/115) to rate their agreement on impact that a
finalized MOU may have regarding compounding oversight and compounded drugs in general
(Table 8). The seven statements shown were derived from the literature review and the draft

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MOU language and covered regulation and enforcement, quality and safety of compounded
drugs, and operations.
4.4.3.1 Regulation and Enforcement
Most 503B and pharma respondents agreed that the MOU would be effective in
delineating regulatory authority between the state and FDA (503B agree: 71%, 15/21; disagree:
19%, 4/21; do not know: 10%, 2/21), (pharma: agree: 67%, 12/18; disagree: 6%, 1/18; do not
know: 28%, 5/18). In contrast, 503A respondents more commonly disagreed with the statement
(disagree: 45%, 19/42; agree: 36%, 15/42; do not know19%, 8/42) while respondents in the
“other” group were equally split between agree (50%, 2/4) and disagree (50%, 2/4).
Most 503B respondents also agreed that the MOU would facilitate the identification of
503A pharmacies operating out of scope (agree: 72%, 15/21; disagree: 14%, 3/21; do not know:
14%, 3/21), which was similar to the pharma respondents (agree: 78%, 14/18; disagree: 6%,
1/18; do not know: 17%, 3/18). But as with the previous statement, more 503A respondents
disagreed (disagree: 43%, 18/42; agree: 29%, 12/42; do not know 29%, 12/42) while respondents
in the “other” group were split evenly across the three choices (agree: 33%, 1/3; disagree: 33%,
1/3; do not know: 33%, 1/3).
The third statement relating to enforcement asked if the respondents agreed that the MOU
would provide state agencies with more help from the FDA for inspections and enforcement.
While half of the pharma respondents agreed with this statement (agree: 50%, 9/18; disagree:
33%, 6/18; do not know: 17%, 3/18), most 503A respondents disagreed (disagree: 57%, 24/42;
do not know 24%, 10/42; agree: 19%, 8/42), as did the “other” respondents (disagree: 75%, 3/4;
agree: 25%, 1/4;). The 503B respondents were fairly split evenly across the choices (agree: 38%,
8/21; disagree: 33%, 7/21; do not know: 29%, 6/21).

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4.4.3.2 Quality and Safety
When asked if the MOU would improve the quality of compounded drugs, most 503A
respondents disagreed (disagree: 74%, 31/42; agree: 14%, 6/42; do not know 12%, 5/42) as did
the “other” respondents (disagree: 75%, 3/4; agree: 25%, 1/4;). However, most in the pharma
group agreed (agree: 67%, 12/18; disagree: 22%, 4/18; do not know: 11%, 2/18) while the 503Bs
were split equally between agreed (38%, 8/21) and disagreed (38%, 8/21) and the remaining one-
fourth did not know (24%, 5/21).
When asked if the MOU would improve the safety of compounded drugs, the views of
each respondent group (based on percentage of the choices) were very similar to the prior
question on quality of compounded drugs. Most 503A respondents disagreed (disagree: 64%,
27/42; agree: 21%, 9/42; do not know 14%, 6/42) as did the “other” respondents (disagree: 75%,
3/4; agree: 25%, 1/4). Most pharma respondents agreed with this statement (agree: 61%, 11/18;
disagree: 28%, 5/18; do not know: 11%, 2/18) as did the 503B respondents (agree: 48%, 10/21;
disagree: 33%, 7/21; do not know: 19%, 4/21).
4.4.3.3 Operations
Respondents were asked their views on whether the finalized MOU would allow 503A
pharmacies to expand their compounding operations and distribute their products across state
boundaries. Most 503A respondents disagreed (disagree: 60%, 25/42; agree: 29%, 12/42; do not
know 12%, 5/42) as did the 503B respondents (disagree: 52%, 11/21; do not know: 38%, 8/21;
agree: 10%, 2/21). In comparison, the pharma respondents were split more evenly across the
three choices (agree: 39%, 7/18; disagree: 33%, 6/18; do not know: 28%, 5/18) while most of the
“others” disagreed (disagree: 75%, 3/4; do not know: 25%, 1/4; agree: 0%, 0/4).

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Finally, when asked if the number of outsourcing facilities would increase as a result of a
finalized MOU, about half of respondents in the three main groups (503A, 503B, and pharma)
disagreed while one-fourth agreed and the remaining one-fourth did not know: 503A (disagree:
48%, 20/42; agree: 26%, 11/42; do not know 26%, 11/42); 503B (disagree: 48%, 10/21; do not
know: 28%, 6/21; agree: 24%, 5/21); pharma (disagree: 56%, 10/18; agree: 28%, 5/18; do not
know: 17%, 3/18). Of the four respondents in the “other” group, 2 did not know, while one
agreed and the remaining one disagreed (do not know: 50%, 2/4; agree: 25%, 1/4; disagree: 25%,
1/4).
Table 8: Views on a Final Standardized MOU
Please indicate your views on the anticipated impact of a finalized standard MOU.
The MOU would effectively... (n=85)

A finalized standard MOU would… Agree Disagree Do not know
Delineate regulatory jurisdiction between the state and FDA
503A 36%, 15/42 45% 19/42 19% 8/42
503B 71%, 15/21 19% 4/21 10% 2/21
Pharmaceutical manufacturer 67%, 12/18 6% 1/18 28% 5/18
Other 50%, 2/4 50%, 2/4 0%, 0/4

Facilitate identification of 503A pharmacies operating out of scope
503A 29%, 12/42 43%, 18 29%, 12/42
503B 72%, 15/21 14%, 3/21 14%, 3/21
Pharmaceutical manufacturer 78%, 14/18 6%, 1/18 17%, 3/18
Other 33%, 1/3 33%, 1/3 33%, 1/3

Provide state agencies with more help from the FDA for inspections and enforcement
503A 19%, 8/42 57%, 24/42 24%, 10/42
503B 38%, 8/21 33%, 7/21 29%, 6/21
Pharmaceutical manufacturer 50%, 9/18 33%, 6/18 17%, 3/18
Other 25%, 1/3 75%, 3/4 0%, 0/4

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Table 8: Views on a Final Standardized MOU (continued)
A finalized standard MOU would… Agree Disagree Do not know
Improve quality of compounded drugs
503A 14%, 6/42 74%, 31/42 12%, 5/42
503B 38%, 8/21 38%, 8/21 24%, 5/21
Pharmaceutical manufacturer 67%, 12/18 22%, 4/18 11%, 2/18
Other 25%, 1/4 75%, 3/4 0%, 0/4

Improve safety of compounded drugs
503A 21%, 9/42 64%, 27/42 14%, 6/42
503B 48%, 10/21 33%, 7/21 19%, 4/21
Pharmaceutical manufacturer 61%, 11/18 28%, 5/18 11%, 2/18
Other 25%, 1/4 75%, 1/4 0%, 0/4

Allow 503A pharmacies to expand their compounding operations and distribute their
products across state boundaries
503A 29%, 12/42 60%, 25/42 12%, 5/42
503B 10%, 2/21 52%, 11/21 38%, 8/21
Pharmaceutical manufacturer 39%, 7/18 33%, 6/18 28%, 5/18
Other 0%, 0/4 75%, 3/4 35%, 1/4

Increase number of outsourcing facilities
503A 26%, 11/42 48%, 20/42 26%, 11/42
503B 24%, 5/21 48%, 10/21 28%, 6/21
Pharmaceutical manufacturer 28%, 5/18 56%, 10/18 17%, 3/18
Other 25%, 1/4 25%, 1/4 50%, 2/4

4.4.4 Keeping Informed
To understand how respondents keep informed about new or changing drug
compounding regulations, all respondents were asked how frequently they monitor the status of
FDA guidance and policies for drug compounding. The cross tabulation of the data revealed a
large variation depending on the respondent type (Figure 14). The 503B facility respondents
monitored FDA drug compounding guidance most often, with 81% (17/21) monitoring it daily to

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weekly and 19% (4/21) monthly to quarterly. Of the 503A respondents, 44% (22/50) reported
monitoring monthly to quarterly, while 40% (20/50) reported daily to weekly, and 16% (8/50)
rarely to never. In comparison, respondents in the pharma group most commonly monitored
FDA compounding guidance rarely to never (41%, 14/34); the others were divided equally
between daily to weekly (29%, 10/34) and monthly to quarterly (29%, 10/34). Of the ten
respondents in the “other” group, half reported that they monitored FDA regulatory guidance
rarely to never (50%, 5/10), while four reported monthly to quarterly (40%, 4/10) and one
reported daily to weekly (10%, 1/10).
Figure 14: Frequency of Monitoring FDA Guidance for Drug Compounding
How frequently do you monitor the status of FDA guidance and policies for drug compounding
(e.g., FDA website, Federal Register notices, industry organization
websites/notices/newsletters)?

A similar question regarding frequency of monitoring of state guidance and policies on
drug compounding was asked only to the 503A, the 503B, and the 503A&B respondents
(Figure 15). Cross tabulation revealed that nearly half of the 503A respondents reported

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monitoring state guidance for compounding either daily to weekly (48%, 24/50) or monthly to
quarterly (48%, 24/50), while two respondents reported rarely to never (4%, 2/50). In
comparison, most 503B respondents reported monitoring state guidance and policies monthly to
quarterly (58%, 11/19) followed by daily to weekly (26%, 5/19) and rarely or never (16%, 3/19).
One of the two 503A&B respondents monitored daily to weekly (50%, 1/2), while the other
monthly to quarterly (50%, 1/2).
Figure 15: Frequency of Monitoring State Guidance for Drug Compounding
How frequently do you monitor the current status of State guidance and policies for drug
compounding (e.g., State Board of Pharmacy website, industry organization
websites/notices/newsletters)?

4.4.5 Stakeholder Engagement
As part of implementation of the CQA, the FDA developed and issued guidance
documents and bulk lists for drug compounding. Respondents were asked their views on whether
the FDA had sufficiently engaged their own industry in developing the various documents listed
below.

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4.4.5.1 503A Guidance Document
For “Guidance for 503A Compounding”, most 503A respondents acknowledged that they
did not feel engaged by the FDA (no: 71% (29/41); yes: 17% (7/41); do not know: 12% (5/41).
The 503B respondents were split equally between “no” (42%, 8/19) and “do not know” (42%,
8/19), with 16% (3/19) responding “yes”. Most pharma respondents selected “do not know”
(55%, 17/31), followed by 32% (10/31) who responded “no” and 13% (4/31) who responded
“yes”. Likewise, most of the “other” respondents selected “do not know” (56%, 5/9), followed
by 33% (3/9) who responded no, and 11% (1/9) who responded “yes” (Figure 16).
Figure 16: Engaged by FDA on the 503A Guidance Document
Do you think that the FDA has sufficiently engaged your own industry as it developed the
following item?

503B Guidance Documents
Respondents were presented with four guidance documents related to 503B
compounding: 503B compounding, facility registration, CGMPs, and adverse event reporting
(Figure 17).

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The 503A respondents most commonly acknowledged that the FDA did not sufficiently
engage them as they developed any of the four 503B guidance documents (no: 44-56%),
followed by respondents who did not know (29-39%), and those who responded “yes” (12-17%).
In comparison, 503B respondents were split similarly between being engaged (42-47%) and not
engaged (37-42%), followed by those who did not know (11-16%). On the other hand, most
pharma respondents did not know (55-68%), followed by not being engaged (16-32%) and being
engaged (13-19%). Most of the “other” respondents most commonly did not know (50-56%),
with fewer choosing “no” (22-44%) and “yes” (0-22%).

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Figure 17: Engaged by FDA on the 503B Guidance Documents
Do you think that the FDA has sufficiently engaged your own industry as it developed the
following items?

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4.4.5.2 503A Bulks List
To implement the CQA, the FDA also developed lists of substances permitted or
prohibited from compounding. Respondents were asked their opinions on whether the FDA had
sufficiently engaged their own industry as it developed three drug substance lists for
compounding. Cross tabulation of the responses by respondent type for each of the three lists is
reported to examine any differences in stakeholder views. For the 503A Bulks list, most 503A
respondents (73%, 30/41) did not think that the FDA sufficiently engaged them during the
development of this list, while 22% (9/41) did not know, and two respondents (5%, 2/41)
responded “yes”. In comparison, 503B respondents were split nearly in half between “no” (47%,
9/19) and “do not know” (42%, 8/19), while two responded “yes” (11%, 2/19). Most pharma
respondents did not know (68%, 21/31), while the remainder were split equally between “yes”
(16%, 5/31) and “no” (16%, 5/31). Similarly, a little over half of the “other” respondents did not
know if their industry was sufficiently engaged by FDA on the 503A Bulks list (56%, 5/9), while
one-third selected “no” (33%, 3/9) and one respondent selected “yes” (11%, 1/9) (Figure 18).
4.4.5.3 503B Bulks List
For the 503B Bulks list, most 503A respondents (71%, 29/41) did not think that the FDA
sufficiently engaged with their industry during the development of this list, while 17% (7/41)
responded “yes” and 12% (5/41) did not know. Similarly, 503B respondents were nearly equally
split between “no” (47% (9/19) and did not know (42%, 8/19) while two responded “yes” (11%,
2/19). As above, most pharma respondents did not know (68%, 21/31), while the remainder were
equally split between “yes” (16%, 5/31) and “no” (16%, 5/31). Similarly, the majority of the
“other” respondents did not know if their industry was engaged by FDA on the 503B Bulks list

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(56%, 5/9), with one-third (33%, 3/9) selecting no and one of the nine (11%) selecting yes. See
Figure 18.
4.4.5.4 Difficult to Compound Drug List
For the difficult to compound drug list, almost two-thirds of 503A respondents did not
think that the FDA has sufficiently engaged with their industry (no: 71%, 29/41; yes: 17%, 7/41;
do not know: 12%, 5/41). In comparison, about half of 503B respondents did not think that the
FDA has sufficiently engaged with their industry (no: 53%, 10/19; do not know: 37%, 7/19; and
yes: 10%, 2/19). In comparison, most pharma respondents selected did not know (do not know:
61%, 19/31; no: 23%, 7/31; yes: 16%, 5/31). Likewise, the majority of the “other” respondents
did not know if their industry was engaged by FDA on the 503B Bulks list (56%, 5/9), with one
of the nine selecting yes (11%, 1/9) and three selecting no (33%, 3/9) (Figure 18).

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Figure 18: Engagement by FDA for Bulk Drug Substance/Product Lists
Do you think that the FDA has sufficiently engaged your own industry as it developed the
following items?

4.5 Substances to compound
While the above questions probed the adequacy of stakeholder engagement, the questions
in this section solicited the views of respondents on the policies and procedures related to the
substances that are permitted or prohibited for compounding.

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4.5.1 503A Bulks list
4.5.1.1 Views regarding FDA’s Category 1 policy
Although substances in Category 1 of the 503A Bulks list have not been fully evaluated
by FDA, they are allowed to be used for 503A compounding. When asked if the responders
agree with this policy, almost half (47%, 9/19) of the 503Bs agreed compared to about a third of
the respondents in other categories (503As: 34%, 14/41; other: 33%, 3/9; pharma: 31%, 9/29).
About half of the pharma respondents were neutral (52%, 15/29), followed by other (44%, 4/9),
503As (29%, 12/41), and 503Bs (16%, 3/19). About one-third of both the 503Bs (37%, 7/19) and
the 503As 37% (15/41) disagreed with the policy compared to 22% (2/9) of “other” respondents
and 17% (5/29) of the pharma respondents (Figure 19).
Figure 19: Compounding of Category 1 Bulk Substances
503A pharmacies are currently allowed to compound with bulk substances placed on the 503A
Category 1 list. Do you agree with this policy?

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4.5.1.2 Views on 503A Bulks list
A series of three questions were posed only to the 503A and 503A&B respondents to
probe their views on the 503A Bulks list. The results of the 503A respondents are graphically
presented in Figure 20, while those of the two 503A&B respondents are only included in the
narrative portion.
Respondents were first asked if they or their company had nominated substances for the
503A Bulks list. Most 503As responded “no” (83%, 34/41), while 7% (3/41) responded “yes”,
and 10% (4/41) did not know. Both 503A&Bs (100%, 2/2) responded “yes”.
Respondents were next asked if the 503A Bulks list constrained their ability to fulfill
prescription orders. Most 503A respondents indicated yes (70%, 28/40), while 18% (7/40)
indicated no, and 12% (5/40) did not know. Both 503A&B respondents indicated that they were
constrained.
Finally, respondents were asked about their satisfaction with the FDA progress on
finalizing the 503A Bulks list. Three out of four 503A respondents (75%, 30/40) indicated that
they were not satisfied, while the remaining one-fourth (25%, 10/40) indicated that they did not
know. Both 503A&B respondents (100%, 2/2) also indicated that they were not satisfied.

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Figure 20: Views of 503A Respondents Regarding 503A Bulks List
Please answer each question related to the 503A Bulks list.

4.5.2 503B Bulks List
4.5.2.1 Views regarding FDA’s Category 1 policy
The 503B Bulks list is meant to include substances for which there is a clinical need as
determined by FDA, but like the 503A Bulks list, the Category 1 substances in the 503B Bulks
list have not yet been evaluated fully by the FDA for 503B compounding. When asked whether
they agreed with the FDA policy to allow compounding with the 503B Category 1 substances,
the results were similar to responses in the previous section on 503A Bulks list; about half of the
503Bs agreed (53%, 9/17), compared to about a third of those in other respondent groups
(503As: 36%, 14/39; others: 33%, 3/9; and pharma: 30%, 9/30). About half of the pharma
respondents (50%, 15/30) and 503As (49%, 19/39) were neutral, followed by “other” (22%, 2/9)

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and 503Bs (18%, 3/17). About one-third of the 503Bs (29%, 5/17) disagreed, followed by 22%
(2/9) of “other” respondents, 20% (6/30) of the pharma respondents, and 15% (6/39) of the
503As. See Figure 21.
Figure 21: Compounding with Substances on the 503B Category 1 Bulks List
503B Outsourcing Facilities are currently allowed to compound with bulk substances placed on
the 503B Category 1 list. Do you agree with this policy?

4.5.2.2 Views on 503B Bulks list
Similar to the 503A Bulks list, a series of questions were posed only to 503B and
503A&B respondents to probe their views on the 503B Bulks list (Figure 22). Respondents were
first asked if they or their company had nominated substances for the 503B Bulks list. A little
over half responded no (58%, 11/19), while the rest responded yes (42%, 8/19).
The 503B respondents were next asked if the 503B Bulks list constrained their ability to
fulfill customer orders. A little over half responded “yes” (58%, 11/19), while the rest responded
“no” (42%, 8/19).

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Finally, the 503B respondents were asked if they were satisfied with the FDA progress on
finalizing the 503B Bulks list. Most respondents indicated they were not satisfied with the FDA
progress (68%, 13/19), while the rest were equally divided between “yes” (16%, 3/19) and “do
not know” (16%, 3/19).
Figure 22: 503B Respondent Views of the 503B Bulks List
Please answer each question related to the 503B Bulks list.

4.5.3 The Drug Shortage List (DSL)
The FDA allows 503B OFs to compound and distribute products that are in short supply
if they are listed on the FDA Drug Shortage List (DSL). A series of three questions were derived
from my literature review and presented to all respondents.

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4.5.3.1 DSL Process
The first question asked if respondents agreed with each of five statements presented, two
relating to the accuracy and timeliness of the DSL (Figure 23), and three regarding the DSL
mechanism (Figure 24). In general, more than two-thirds of the 503B respondents indicated yes
or no on each of the five statements, whereas one-third to one-half of respondents in the other
three groups indicated that they did not know.
The first of two statements in this area sought agreement on whether the DSL accurately
reflects drugs in shortage. Most 503Bs selected disagree (63%, 12/19), followed by agree (32%,
6/19) and do not know (5%, 1/19). Most 503As also selected disagree (56%, 23/41), but 32%
(13/41) selected do not know, and 12% (5/41) selected agree. In comparison, most pharma
respondents selected do not know (42%, 13/31), followed by agree (32%, 10/31) and disagree
(26%, 8/31). Most in the “other” group selected disagree (44%, 4/9), followed by do not know
(33%, 3/9) and agree (22%, 2/9).
The second statement sought agreement on whether the DSL is updated by the FDA in a
timely manner. Most 503As selected disagree (56%, 23/41), followed by do not know (34%,
14/41) and agree (10%, 4/41). The 503Bs were almost equally divided between disagree (47%,
9/19) and agree (42%, 8/19), with 12% (2/19) indicating that they did not know. More than half
of the pharma respondents (55%, 17/31) indicated that they did not know, with the rest almost
evenly split between disagree (29%, 9/31) and agree (26%, 8/31). In comparison, most of the
“other” respondents selected agree (44%, 4/9), followed by disagree (33%, 3/9) and do not know
(22%, 2/19).

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Figure 23: Agreement with DSL Accuracy and Timeliness
Do you agree with the following statements regarding the DSL process? (n=100)

The first of the three statements relating to the DSL mechanism asked whether the DSL is
an effective business tool for 503B OFs. Most 503Bs selected disagree (58%, 11/19) while the
rest selected agree (42%, 8/19). Similarly, the “other” group most commonly selected do not
know (44%, 4/9), followed by agree (33%, 3/9) and disagree (22%, 2/9). In comparison, 503As
most commonly selected do not know (46%, 19/41), followed by disagree (34%, 14/41) and
agree (20%, 8/41). Most pharma respondents selected agree (42%, 13/31), followed by do not
know (39%, 12/31) and disagree (10%, 6/31).
When asked if the mechanism for pharmaceutical companies to notify FDA of drug
shortages is effective, most 503As selected disagree (46%, 19/41) followed by do not know
(39%, 16/41) and agree (15%, 6/41). Similarly, most 503Bs also selected disagree (42%, 8/19)
followed by do not know (32%, 6/19) and agree (26%, 5/19); as did most of the other
respondents (disagree: 56%, 5/9; do not know: 33%, 3/9; agree: 11%, 1/9). On the other hand,

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the pharma respondents were almost equally split across agree (32%, 10/31), disagree (32%,
10/31), and do not know (35%, 11/31).
Similar patterns emerged when respondents were asked if the mechanism for the FDA to
announce changes to the DSL is effective. 503As most commonly selected disagree (41%,
17/41), followed by do not know (32%, 13/41), and agree (27%, 11/41). On the other hand, most
503Bs selected agree (53%, 10/19), followed by do not know (26%, 5/19) and disagree (21%,
4/19). The pharma respondents were similarly distributed quite evenly between agree (29%,
9/31), disagree (32%, 10/31), and do not know (39%, 12/31). Of the “other” respondents, two-
thirds selected disagree (67%, 6/9) while the remaining one third selected do not know (33%,
3/9) and none selected agree.

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Figure 24: Agreement on the Drug Shortage List Processes
Do you agree with the following statements regarding the DSL process? (n=100)

4.5.3.2 Grace Period to Continue Distributing DSL Products
The second question in this series asked the respondents about their views on the 60-day
grace period during which the 503B OFs are allowed to continue distributing their inventory
after the drug is removed from the DSL (Figure 25). The results show that two out of three
503Bs indicated that the timeframe was too short (68%, 21/38), while the rest (32%, 6/19)
indicated that it was just about right. In comparison, a little over half the 503As indicated that the
timeframe was too short (55%, 21/38), followed by just about right (39%, 15/38) and too long

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(5%, 2/38). A little over half of pharma respondents indicated that the timeframe was just about
right (56%, 15/27), while the rest were equally split between too short (22%, 6/27) and too long
(22%, 6/27). The views of the “other” respondents were almost identical to those of pharma
respondents in that a little over half indicated that the timeframe was just about right (56%, 5/9)
while the rest were equally split between too short (22%, 2/9) and too long (22%, 2/9).
Figure 25: Grace Period to Continue Distribution of Product after Removal from DSL
The current FDA policy allows 503B outsourcing facilities to continue distribution of
compounded drug inventory for up to 60 days after that drug product is removed from the DSL.
What do you think of this timeframe?

Respondents were allowed to enter additional comments after choosing their responses.
Comments were received from seventeen respondents (18%, 17/93), of which thirteen were from
respondents who selected “too short”. Nine comments from this group referred to the need for a
much longer timeframe to clear the stock and recuperate cost. Four comments were from
respondents who selected “just about right”. A complete list of comments is provided below in
Table 9.

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Table 9: Affiliated Comments on Time Allowed for Distribution of 503B
Manufactured Products after Removal from DSL
Too Short (Add optional comments below); Too Long (Add optional comments below); Just
about right (Add optional comments below)
Additional Comments
TOO SHORT
180 days. (Respondent 106, 503A)
for large scale operations, revving up production causes companies to incur large volumes of
stock. 60 days is not sufficient to deplete this stock in most cases. I feel a 6 month time frame
would give facilities ample time to coordinate the removal of a product from their production
without wasting. (Respondent 092, 503A)
This time period does not allow enough time to allow for cost recuperation. (Respondent 080,
503A)
may not be enough time to make it through the distribution channels to the end user.
(Respondent 061, 503A)
typically products are on and off of backorder. If a pharmacy can't get it, we can't dispense it
regardless if it's on the FDA's shortage list. (Respondent 053, 503A)
Some products made may not be depleted fully. (Respondent 034, 503A)
needs to be at least 180 days to be able to recover the development costs required to make a
short-list medication. (Respondent 040, 503B)
Investment is too significant considering the uncertainty of when a drug shortage will resolve.
(Respondent 035, 503B)
WAYYYY too Short to do anyone any good. (Respondent 019, 503B)
3-6 months would be more appropriate to use up our existing stock. (Respondent 014, 503B)
takes 3-6 months to develop/implement. (Respondent 004, 503B)
difficult to forecast demand/supply in 2 months. (Respondent 100, pharma)
longer tail is very important to OSF (outsourcing facility). (Respondent 009, other)
JUST ABOUT RIGHT
Don’t know. (Respondent 076, 503A)
outsourcing facilities can be far more nimble at producing to alleviate a shortage in a manner
that conventional manufacturers cannot; however, outsourcing facilities intending on filling
that void need to ensure their practices don't continue to contribute to the shortage.
(Respondent 094, 503B)
I think 60 days might be sufficient to collect the data. (Respondent 038, Pharma)
depend on timely updates to the DSL and if ALL distribution channels have been replenished.
(Respondent 042, Other)

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4.5.3.3 Copying Approved Drug Products
The third question on the DSL topic asked respondents whether CQA provides an unfair
business advantage for 503B OFs by allowing them to compound copies of approved drug
products (Figure 26). According to the results, all except one of the 503Bs indicated that CQA
did not create an unfair business practice (94%, 17/18), while one respondent indicated that it did
(6%, 1/18). In comparison, about two-thirds of the 503As selected no (66%, 127/41), while 24%
(10/29) selected yes, and 10% (4/29) selected do not know. The pharma respondents were split
almost equally between those who thought that the CQA did not create an unfair business
practice (41%, 12/29) and those who did (38%, 11/29), while 21% (6/29) selected do not know.
Figure 26: Advantage to Compound Copies of Approved Products
Does CQA create an unfair business advantage for 503B facilities by allowing production of
copies of approved drug products?

Respondents were allowed to enter additional comments after choosing their responses.
Comments were received from thirteen respondents (13%, 13/97), of which three were from

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respondents answering “yes” and ten were from respondents answering “no”. Six from the latter
group mentioned the need to fill supply gaps during periods of drug shortages. A complete list of
comments is provided below in Table 10.
Table 10: Affiliated Comments on Whether CQA Allowing Compounding Copies of
Approved Drug Products Creates Unfair Business Advantage
Yes (Add optional comments below); No (Add optional comments below) (n=13)
Additional Comments
YES
suggested a complete cGMP compliance in this case. (Respondent 104, pharma)
Due to much lower overhead for the 503B pharmacy compared to a GMP drug manufacturer.
(Respondent 016, pharma)
If it is an approved drug, it should not be allowed the lesser Quality Assurance of
Compounding. (Respondent 042, other)
NO
No, because the conventional manufacturers have "first crack". (Respondent 080, 503A)
more competition in the marketplace gets the consumer lower prices. (Respondent 073, 503A)
The primary concern is a patient’s continuity of supply. (Respondent 007, 503A)
Just attempts to fill the gap. (Respondent 040, 503B)
The commercial providers are unable to satisfy the shortage. (Respondent 014, 503B)
Difficult due to cGMP standards to quickly bring a drug on board during shortage.
(Respondent 001, 503B)
As long as Shortage status is updated in a timely manner. (Respondent 098, pharma)
Pharmaceutical companies rely on the flexibility that CMOS provide to adjust to inventory
demands and shortages. (Respondent 090, pharma)
cGMP does not allow immediate responsiveness to shortages. (Respondent 009, other)
It depends, if the drug is on the DSL that mean that is a high need to have the product
developed. I don't think it is an "unfair" advantage since this is only for the time the drug is on
the DSL. However, I think that there needs to be increased safety measures to ensure that the
product is safe and effective. Also, regulators want to better support manufacturers to reduce
Drug Shortages. (Respondent 082, other)

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4.6 Inspections
This section of the survey asked respondents about their experiences with facility
inspections conducted by the FDA and the state regulatory agencies.
4.6.1 FDA Inspections
All respondents were asked if their facility had been inspected by the FDA within the
past two years, and the results were cross-tabulated to examine the difference across the
stakeholder groups (Figure 27). The pharma respondents reported the highest rate of inspections
(yes: 71%, 24/34; no: 23%, 8/34; do not know: 6%, 2/34) followed by the 503Bs (yes: 53%,
10/19; no: 47%, 9/19; do not know: 0%, 0/19) and the 503As (yes: 20%, 9/45; no:76%, 34/45; do
not know: 4%, 2/45). Similarly, less than one-third of the “other” respondents had been inspected
by the FDA in the past two years (yes: 30%, 3/10; no: 70%, 7/10; do not know: 0%, 0/10).
Figure 27: FDA Inspection History
Has your facility been inspected by the FDA in the past 2 years?

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4.6.1.1 Frequency of FDA Inspections
The respondents who were inspected by FDA during the past two years were also asked
how many times they were inspected in 2019 and in 2020.
In 2019, pharma respondents were inspected most frequently (twice or more: 8/24; once:
14/24; none: 2/24) followed by 503As (once: 6/7; none: 1/7), 503Bs (once: 6/10; none: 4/10),
and other (twice or more: 1/3; once:2/3) (Table 11).
In 2020, pharma respondents were also inspected most frequently (twice or more: 6/23;
once: 7/23; none: 9/23; do not know:1/23) followed by 503Bs (once: 4/9; none: 5/9), 503As
(twice or more: 1/5; none: 4/5), and other (once: 1/3; none: 2/3) (Table 11).
Table 11: FDA Inspection Frequency
How many times did the FDA conduct an inspection of your facility? (during 2019 and during
2020)

Respondent
Type
Year
FDA Inspection Frequency
Twice or
more
Once None
Do not
know
N=
503A
2019 - 6 1 - 7
2020 1 - 4 - 5
503B
2019 - 6 4 - 10
2020 - 4 5 - 9
Pharmaceutical
manufacturer
2019 8 14 2 - 24
2020 6 7 9 1 23
Other
2019 1 2 - - 3
2020 - 1 2 - 3

4.6.1.2 Views on FDA Inspector Knowledge
The respondents who indicated that they were inspected by the FDA during the past two
years were also asked to rate the level of FDA inspector knowledge of sterile drug production

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and quality standards (Figure 28). According to the results, half of the 503Bs rated the FDA
inspector knowledge as excellent (50%, 5/10) followed by good (30%, 3/10) and poor (20%,
2/10) while most pharma respondents selected good (54%, 13/24) followed by excellent (38%,
9/24) and did not know (8%, 2/24). In comparison, half of the 503As indicated FDA inspector
knowledge as poor (50%, 4/8) followed by good (25%, 2/8), excellent (13%, 1/8), and do not
know (13%, 1/8). Of the “other” respondents, two of the three respondents (67%, 2/3) rated the
FDA inspector knowledge as excellent, and one (33%, 1/3) did not know.
Figure 28: FDA Inspector Knowledge
Think of the last time your facility was inspected by the FDA. What is your opinion
of the inspector's knowledge of sterile drug production and quality standards?

4.6.2 State Inspections
All respondents were asked if their facility had been inspected by a state regulatory
agency within the past two years (Figure 29). Almost all 503As indicated that they were
inspected during that time (yes: 94%, 44/47; no: 6%, 3/47) compared to three-fourth of 503Bs

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(yes: 76%, 16/21; no: 24%, 5/21) and almost half of pharma respondents (yes: 47%, 16/34; no:
41%, 14/34; do not know: 12%, 4/34). Of the respondents in the “other” group, one responded
yes (10%, 1/10), eight responded no (80%, 8/10), and one responded do not know (10%, 1/10).
Figure 29: State Inspection History
Has your facility been inspected by a State regulatory agency (State Board of
Pharmacy, Board of Health, other drug licensing agency, etc.) in the past 2 years?

4.6.2.1 Frequency of State Inspections
The respondents who were inspected by a state regulatory agency during the past two
years were also asked how many times they were inspected in 2019 and in 2020.
In 2019, 503As were inspected most frequently (twice or more: 5/37; once: 27/37; none:
5/37) followed by 503Bs (twice or more: 3/14; once: 10/14; none: 1/14), pharma (twice or more:
2/16; once: 10/16; none: 3/16; do not know: 1/16), and “other” (once:1/1) (Table 12).

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In 2020, 503As were also inspected most frequently (twice or more: 4/34; once: 23/34;
none: 7/34) followed by 503Bs (twice or more: 1/15; once: 11/15; none: 3/15), pharma (twice or
more: 2/15; once: 7/15; none: 5/15; do not know: 1/15), and “other” (once: 1/1) (Table 12).
Table 12: State Inspection Frequency
How many times did a State regulatory agency conduct an inspection of your facility? (During
2019? During 2020?)
Respondent Type Year
State Agency Inspection Frequency
N=
Twice or
more
Once None
Do not
know
503A
2019 5 27 5 - 37
2020 4 23 7 - 34
503B
2019 3 10 1 - 14
2020 1 11 3 - 15
Pharmaceutical
manufacturer
2019 2 10 3 1 16
2020 2 7 5 1 15
Other
2019 - 1 - - 1
2020 - 1 - - 1

4.6.2.2 Views on State Inspector Knowledge
The respondents who indicated that they were inspected by the state agency during the
past two years were also asked to rate the level of the state inspector knowledge of sterile drug
production and quality standards (Figure 30). According to the results, most 503Bs rated the state
inspector knowledge as good (61%, 8/13) followed by excellent (31%, 4/13) and poor (8%,
1/13); the 503As held only slightly less favorable views (good: 42%, 16/38; excellent: 29%,
11/38; poor: 11%, 4/38; do not know: 18%, 7/38). Most pharma respondents also selected good
(56%, 9/16), followed by an equal number who indicated poor (19%, 3/16) and do not know

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(19%, 3/16). One respondent indicated excellent 6% (1/16). The one “other” respondent rated the
state inspector knowledge as excellent (100%, 1/1).
Figure 30: State Inspector Knowledge
Think of the last time your facility was inspected by a State regulatory agency. What is your
opinion of the inspector's knowledge of sterile drug compounding and quality standards?

4.6.2.3 Views on State Inspection Resources
To understand further their views regarding state oversight, the respondents were asked
whether the states were sufficiently resourced with respect to training, funding, and staffing, to
adequately regulate, monitor, and inspect 503A pharmacy drug compounding (Figure 31).
According to the survey results, more than half of the 503A respondents indicated that
the states are sufficiently resourced (yes: 56%, 23/41; no: 39%, 16/41; do not know: 5%, 2/41)
while more than half of the 503B respondents indicated otherwise (no: 53%, 10/19; do not know:
29%, 5/19; yes: 21%, 4/19). Similar to the 503B respondents, most pharma respondents also
indicated the states are not adequately resourced (63%, 19/30) none who indicated “yes” and
37% (11/30) selected “did not know”. Likewise, none of the nine respondents in the “other”

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group thought that the states are adequately resourced, with 78% (7/9) who responded no and
22% (2/9) did not know.
Figure 31: Sufficient Resourcing of States
Do you think the States are sufficiently resourced (i.e. training, funding, staffing) to adequately
regulate, monitor, and inspect 503A pharmacy drug compounding to detect potential problems of
non-compliance?

Respondents were allowed to enter additional comments after entering their selections.
Comments were received from seventeen respondents (17%, 17/99), with six from the “yes”
group and eleven from the “no” group. The complete comments are provided below in Table 13.

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Table 13: Affiliated Comments on Whether States are Sufficiently Resourced to
Regulate 503A Compounding Activities
Yes (Add optional comments below); No (Add optional comments below) (n=17)
Additional Comments
YES
Inspectors are registered pharmacists. FDA uses inspectors unfamiliar with USP 797, state
regulations, or any relevant compounding experience. (Respondent 092, 503A)
Provided the inspector is competent. (Respondent 076, 503A)
with more knowledge. (Respondent 065, 503A)
as much as regular pharmacy. (Respondent 057, 503A)
And TX is currently working with task force of top compounders to help inspectors do an even
better job of identifying bad actors. (Respondent 050, 503A)
Inspectors have different interpretation of same regulation. (Respondent 006, 503A)
NO
We are in MI; they outsource to NABP/VPP. (Respondent 055, 503A)
Underfunded. (Respondent 053, 503A)
They are catching on slowly. (Respondent 034, 503A)
It depends on the State NY, CA, and FL all are very good. (Respondent 084, 503B)
they do not understand cGMP. (Respondent 019, 503B)
Never are. (Respondent 099, pharma)
States typically depend upon FDA for inspection and compliance support. (Respondent 090,
pharma)
I have never been involved in a state inspection. (Respondent 038, pharma)
They are receiving training from a specific company that is focused on cGMP standards and
not USP standards. (Respondent 066, other)
States are barely keeping up with what is legally required and often depend on information
from FDA or from complaints before initiating any actions. (Respondent 027, other)
only CA (they charge for each inspection). (Respondent 009, other)

4.7 Operations and Compliance
This section probed the views of responders on compounding standards and operational
challenges.

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4.7.1 503A Compounding Standards
To understand their views on quality standards for compounding, the respondents were
asked if the USP General Chapter <797> on “Pharmaceutical Compounding – Sterile
Preparations” should be a standard requirement for sterile drug compounding by 503A
pharmacies across all states. A majority (83%, 82/99) of all respondents indicated that the USP
<797> should be a standard across all states; 11% (11/99) disagreed and 6% (6/99) did not know.
The cross tabulation by facility type gave similar results across 503A (yes: 85%, 34/40; no: 12%,
5/40; do not know: 3%, 1/40), 503B (yes: 84%, 16/19; no: 16%, 3/19; do not know: 0%, 0/19),
pharma (yes: 84%, 26/31; no: 6%, 2/31; do not know: 10%, 3/31), and other (yes: 67%, 6/9; no:
11%, 1/9; do not know: 22%, 2/9) (Figure 32).
Figure 32: 503A Adherence to USP General Chapter “Pharmaceutical Compounding –
Sterile Preparations”
Should USP General Chapter <797> be a standard requirement for 503A pharmacies across all
states?

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Additional comments were received from nineteen respondents (19%, 19/99), thirteen
from the “yes” respondents, and six from the “no” respondents. Many comments point to the
inadequacy of the standard. The complete comments are displayed below in Table 14.
Table 14: Affiliated Comments on Requiring 503A Pharmacies to Comply with
USP<797> for Sterile Compounding
Yes (Add optional comments below); No (Add optional comments below) (n=19)
Additional Comments
YES
I was unaware USP 797 was not enforced across all states. FDA insanitary conditions
guidance does not agree on many points with USP 797, and are tailored more to cGMP
requirements, and should not be universally enforced by state boards. (Respondent 092, 503A)
A recent FDA presentation basically invalidated this as guidance in an attempt to write their
own guidance. (Respondent 076, 503A)
As long as there is adequate compounding pharmacist input on the standards and that input is
considered. There shouldn't be a bunch of FDA or ex-FDA and academics on the committee. It
should be made up of a good mix of Compounding pharmacists, Doctors, and Scientists that
make standards that are applicable to the "real world" situations compounders are in.
(Respondent 062, 503A)
Minimum. many hospital 503a facilities are severely non-compliant and should be shut down.
(Respondent 055, 503A)
Then maybe California wouldn't have standards that are so different. (Respondent 053, 503A)
<797 > falls short in protecting the public in many ways, but currently suffices as a minimum
standard. (Respondent 094, 503B)
797 does not go far enough to meet FDA standards. FDA expects Aseptic Processing
Guidance to be used. (Respondent 084, 503B)
But it needs to be updated to include aspects of cGMP. (Respondent 044, 503B)
Sterile Prep should follow cGMP. (Respondent 019, 503B)
Still not enough! (Respondent 099, pharma)
Minimal requirements. (Respondent 042, other)
At minimum this would level the playing field between compounding companies but could
also be used as a way to create safer products for patients with explicit standards. (Respondent
027, other)
BUT, 797 is woefully inadequate. example EM. (Respondent 009, other)

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Table 14: Affiliated Comments on Requiring 503A Pharmacies to Comply with
USP<797> for Sterile Compounding (continued)
NO
Waste of time. (Respondent 051, 503A)
USP is supposed to be an independent entity but has become the mouthpiece of FDA, a
function prohibited by the rules governing USP. (Respondent 050, 503A)
to be determined by each state based off of <797>. (Respondent 040, 503B)
urgent needs exist within hospitals with very short storage. (Respondent 014, 503B)
States should be allowed to regulate compounding activities. FDA requirement will continue
to apply guiding compounding pharmacies in adherence to cGMPs. (Respondent 090, Pharma)
The USP<797> is constantly being revised and it creates issues when required by state laws.
(Respondent 066, other)

4.7.2 Challenges to Operate 503B Facilities
The 503A, 503B, and 503A&B respondents (data grouped with 503Bs) were asked to
rank order four aspects of operating a 503B OF, with 1 being the most challenging and 4 being
the least challenging. The items were derived from my literature review and FDA regulations.
The weighted mean was calculated by assigning a weight of 1 for the first choice, 2 for the
second, 3 for the third, and 4 for the bottom; then, for each item, the weighted rankings were
totaled and divided by the number of respondents. The detailed raw data used for the calculations
are shown in the parenthesis in text.
The biggest challenge for the 503Bs in operating a 503B facility was complying with
section 503B and FDA guidelines (weighted mean: 2.1; #1: 7/19; #2: 4/19; #3: 8/19; #4: 0/19).
Finding qualified staff was a close second (weighted mean: 2.2; #1: 6/19; #2: 7/19; #3: 3/19; #4:
3/19), followed by drug shortage and bulk substance lists (weighted mean: 2.5; #1: 4/19; #2:
7/19; #3: 3/19; #4: 5/19). The least challenging aspect was paying the FDA facility fees
(weighted mean: 3.3; #1: 2/19; #2: 1/19; #3: 5/19; #4: 11/19). See Table 15.
The 503As also viewed the biggest challenge as complying with section 503B and FDA
guidelines (weighted mean: 1.5; #1: 31/47; #2: 9/47; #3: 5/47; #4: 2/47). But the second most

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challenging aspect was the drug shortage and bulk substance lists (weighted mean 2.4; #1: 8/47;
#2: 22/47; #3: 8/47; #4: 9/47) followed by finding qualified staff (weighted mean: 2.9; #1: 5/47;
#2: 7/47; #3: 22/47; #4: 13/47). Like with 503Bs, the least challenging aspect was paying the
FDA facility fees (weighted mean: 3.2; #1: 3/47; #2: 9/47; #3: 12/47; #4: 23/47). See Table 15.
Table 15: Ranked Challenges to Operating a 503B Facility
What would you consider to be the most challenging aspect of operating a 503B outsourcing
facility? Rank each item by dragging and dropping (1 being most challenging).

Rank
Order
503B
(n=19)
503A
(n=47)
1
Complying with section 503B and FDA
guidelines

(Weighted mean: 2.1)
Complying with section 503B and FDA
guidelines

(Weighted mean: 1.5)
2
Finding qualified staff

(Weighted mean: 2.2)
Responding to the transient and restrictive
nature of the drug shortage and bulks
substance lists

(Weighted mean: 2.4)
3
Responding to the transient and restrictive
nature of the drug shortage and bulks
substance lists

(Weighted mean: 2.5)
Finding qualified staff

(Weighted mean: 2.9)
4
Paying the FDA facility registration fees
(Weighted mean: 3.3)
Paying the FDA facility registration fees
(Weighted mean: 3.2)

4.7.3 Complying with CGMP
The respondents who identified themselves as either 503B or 503A&B (grouped together
with 503B) or pharmaceutical manufacturers were asked to gauge the level of difficulty faced in
complying with each of ten listed CGMP elements, derived from FDA Guidance. The responses
were weighted with 1 for “very challenging”, 2 for “somewhat challenging”, and 3 for “not
challenging”. The “do not know responses” were excluded from the weighted mean analysis.

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The weighted means were reported out to the hundredths place value to differentiate the
respondent choices. Most respondents in both groups found almost all of the CGMP elements to
be not challenging. The results are examined more in detail below and presented in Figure 33
and Figure 34.
4.7.3.1 503B Responses
For the 503B group, the most challenging activities were associated with stability testing
to support expiry (weighted mean: 2.21; very challenging: 21%, 4/19; somewhat challenging:
37%, 7/19; not challenging: 42%, 8/19; do not know: 0%, 0/19) and control of materials and
components (weighted mean: 2.21; very challenging: 21%, 4/19; somewhat challenging: 37%,
7/19; not challenging: 42%, 8/19; do not know: 0%, 0/19).
The next level of challenging activities for this group were analytical testing and controls
(weighted mean: 2.26; very challenging: 21%, 4/19; somewhat challenging: 32%, 6/19; not
challenging: 47%, 9/19; do not know: 0%, 0/19) and buildings and facilities (weighted mean:
2.26; very challenging: 32%, 6/19; somewhat challenging: 37%, 8/19; not challenging: 42%,
8/19; do not know: 0%, 0/19), followed by equipment requirements (weighted mean: 2.32; very
challenging: 16%, 3/19; somewhat challenging: 37%, 7/19; not challenging: 47%, 9/19; do not
know: 0%, 0/19) followed by equivalent results for process validation (weighted mean: 2.37;
very challenging: 5%, 1/19; somewhat challenging: 53%, 10/19; not challenging: 42%, 8/19; do
not know: 0%, 0/19), qualified personnel (weighted mean: 2.37; very challenging: 5%, 1/19;
somewhat challenging: 53%, 10/19; not challenging: 42%, 8/19; do not know: 0%, 0/19), and
training program (weighted mean: 2.37; very challenging: 5%, 1/19; somewhat challenging:
53%, 10/19; not challenging: 42%, 8/19; do not know: 0%, 0/19).

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The least challenging activities for this group were aseptic processing (weighted mean:
2.42; very challenging: 16%, 3/19; somewhat challenging: 26%, 5/19; not challenging: 58%,
11/19; do not know: 0%, 0/19), and packaging and labeling controls (weighted mean: 2.47; very
challenging: 10%, 2/19; somewhat challenging: 32%, 6/19; not challenging: 58%, 11/19; do not
know: 0%, 0/19). See Figure 33.

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Figure 33: 503B Respondent Views to Compliance with CGMPs
The current good manufacturing practices (CGMPs) as outlined in 21 CFR 211 are the minimum
expected standards to be followed for the production of drug products. How challenging is it for
your organization to comply with the following CGMP elements? (n=19)

128
4.7.3.2 Pharma Responses
For the pharma group, the most challenging activities were associated with aseptic
processing (weighted mean: 2.32; very challenging: 16%, 5/31; somewhat challenging: 29%,
9/31; not challenging: 45%, 14/31; do not know: 10%, 3/31) and analytical testing and controls
(weighted mean: 2.40; very challenging: 6%, 2/31; somewhat challenging: 45%, 14/31; not
challenging: 45%, 14/31; do not know: 3%, 1/31).
The next level of challenging activities for this group was process validation (weighted
mean: 2.41; very challenging: 12%, 4/31; somewhat challenging: 29%, 9/31; not challenging:
52%, 16/31; do not know: 6%, 2/31), buildings and facilities (weighted mean: 2.50; very
challenging: 3%, 1/31; somewhat challenging: 42%, 13/31; not challenging: 53%, 16/31; do not
know: 3%, 1/31), control of materials and components (weighted mean: 2.52; very challenging:
7%, 2/30; somewhat challenging: 33%, 10/30; not challenging: 57%, 17/30; do not know: 3%,
1/30), packaging and labeling controls (weighted mean: 2.57; very challenging: 6%, 2/31;
somewhat challenging: 29%, 9/31; not challenging: 61%, 19/31 do not know: 3%, 1/31), and
equipment requirements (weighted mean: 2.63; very challenging: 0%, 0/31; somewhat
challenging: 35%, 11/31; not challenging: 61%, 19/31; do not know: 3%, 1/31).
The least challenging activities for this group were stability testing to support expiry
(weighted mean: 2.67; very challenging: 0%, 0/31; somewhat challenging: 32%, 10/31; not
challenging: 65%, 20/31; do not know: 3%, 1/31), qualified personnel (weighted mean: 2.67;
very challenging: 3%, 1/31; somewhat challenging: 26%, 8/31; not challenging: 65%, 20/31; do
not know: 6%, 2/31), and training program (weighted mean: 2.70; very challenging: 6%, 2/31;
somewhat challenging: 16%, 5/31; not challenging: 74%, 23/31; do not know: 3%, 1/31). See
Figure 34.

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Figure 34: Pharmaceutical Manufacturer Views to Compliance with CGMPs
The current good manufacturing practices (CGMPs) as outlined in 21 CFR 211 are the minimum
expected standards to be followed for the production of drug products. How challenging is it for
your organization to comply with the following CGMP elements?

130
4.7.4 FDA’s CGMP Guidance for 503Bs
The FDA developed a draft guidance specifically for 503B OFs regarding expectations
for compliance with CGMPs. In this document, FDA allows exemptions from compliance related
to ten specific requirements for sterile human drug compounding. The questions in this section
asked the respondents if this policy was reasonable. The responses varied across the three main
stakeholder groups (503A, 503B, and Pharma), but most respondents disagreed with the FDA’s
exemption policy (Table 16). The results are examined in further detail below.
4.7.4.1 Exemptions with most agreement
While most pharma respondents disagreed with all ten exemptions, 503A and 503
respondents did agree with some of the exemptions.
Specifically, most 503A respondents agreed with two exemptions, 1) confirming
suppliers’ Certificate of Analysis (agree: 53%, 21/41; neutral: 28%, 11/40; disagree: 20%, 8/40)
and 2) testing all source material (agree: 48%, 19/40; neutral: 35%, 14/40; disagree: 18%, 7/40).
In comparison, most 503B respondents agreed with five exemptions including the two above,
item 1 (agree: 63%, 12/19; neutral: 26%, 5/19; disagree: 11%, 2/19) and item 2 (agree: 74%,
14/19; neutral: 26%, 5/19; disagree: none), in addition to microbial and endotoxin testing (agree:
42%, 8/19; neutral: 42%, 8/19; disagree: 16%, 3/19), testing of containers and closures (agree:
58%, 11/19; neutral: 37%, 7/19; disagree: 5%, 1/19), and identity and strength testing (agree:
42%, 8/19, neutral: 32%, 6/19; disagree: 26%, 5/19).
4.7.4.2 Exemptions with most disagreement
There were two exemptions with which most respondents in all three groups disagreed:
sterility testing of every batch (pharma: 69%, 20/29; 503A: 60%, 24/40; 503B: 53%, 10/19) and
stability program (pharma: 59%, 17/29; 503A: 45%, 18/40; 503B: 36%, 7/19).

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There were six exemptions with which most respondents in two groups, pharma and
503A, disagreed: microbial and endotoxin testing (pharma: 79%, 23/29; 503A: 45%, 18/40),
testing of containers and closures (pharma: 59%, 17/29; 503A: 43%, 17/40), identity and
strength testing (pharma: 66%, 9/29 ; 503A: 43%, 17/40), sterility test received prior to batch
release (pharma: 61%, 17/28; 503A: 60%, 24/40), stability studies to support in-use time
(pharma: 64%, 18/28; 503A: 40%, 16/40), and reserve sample retention (pharma: 45%, 13/29;
503A: 50%, 20/40).
There were two exemptions with which most pharma respondents disagreed while the
other two groups agreed as described above: confirming suppliers’ Certificate of Analysis (agree:
34%, 10/29; neutral: 21%, 6/29; disagree: 45%, 13/29) and testing all source material (agree:
36%, 10/28; neutral: 21%, 6/28; disagree: 43%, 12/28).
Table 16: Agreement with Exemptions from CGMPs for Sterile Human Drug
Compounding
Although section 503B of the Food and Drug Cosmetic Act requires 503B outsourcing facilities to
comply with the CGMPs, the FDA has developed a separate draft guidance to exempt them from
complying to the below listed requirements for sterile human drug compounding. Do you agree that
the exemptions to the following requirements are reasonable?

CGMP Exemptions for 503B Agree Neutral Disagree
Testing to confirm the supplier’s
Certificate of Analysis for materials and
components

503A 53%, 21/40 28% 11/40 20% 8/40
503B 63%, 12/19 26% 5/19 11% 2/19
Pharmaceutical manufacturer 34%, 10/29 21% 6/29 45% 13/29
Other 13% 1/8 25%, 2/8 62%, 5/8

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Table 16: Agreement with Exemptions from CGMPs for Sterile Human Drug
Compounding (continued)
CGMP Exemptions for 503B Agree Neutral Disagree
Testing all source material (even if it is an
FDA approved finished drug product)

503A 48% 19/40 35% 14/40 18% 7/40
503B 74%, 14/19 26% 5/19 0% 0/19
Pharmaceutical manufacturer 36% 10/28 21% 6/28 43% 12/28
Other 25% 2/8 50% 4/8 25% 2/8
Microbial and endotoxin testing for water
used in sterile drug products

503A 23% 9/40 33% 13/40 45% 18/40
503B 42%, 8/19 42% 8/19 16% 3/19
Pharmaceutical manufacturer 3% 1/29 17% 5/29 79% 23/29
Other 13% 1/8 25% 2/8 62% 5/4
Testing of containers and closures used
for primary packaging

503A 30% 12/40 28% 11/40 43% 17/40
503B 58% 11/19 37% 7/19 5% 1/19
Pharmaceutical manufacturer 17% 5/29 24% 7/29 59% 17/29
Other 0% 0/8 38% 3/8 62% 5/8
Identity and strength testing for every
batch released

503A 33% 13/40 25% 10/40 43% 17/40
503B 42%, 8/19 32% 6/19 26% 5/19
Pharmaceutical manufacturer 14% 4/29 21% 6/29 66% 9/29
Other 0% 0/8 25% 2/8 75% 6/8
Sterility testing of every batch

503A 15% 6/40 25% 10/40 60% 24/40
503B 21%, 4/19 26% 5/19 53% 10/19
Pharmaceutical manufacturer 10% 3/29 21% 6/29 69% 20/29
Other 13% 1/8 25% 2/8 62% 5/8
Sterility test results received prior to
batch release

503A 15% 6/40 25% 10/40 60% 24/40
503B 26% 5/19 37% 7/19 37% 7/19
Pharmaceutical manufacturer 11% 3/28 29% 8/28 61% 17/28
Other 13% 1/8 25% 2/8 62% 5/8

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Table 16: Agreement with Exemptions from CGMPs for Sterile Human Drug
Compounding (continued)
CGMP Exemptions for 503B Agree Neutral Disagree
Stability program to determine storage
conditions and expiration dates

503A 18% 7/40 38% 15/40 45% 18/40
503B 32% 6/19 32% 6/19 36% 7/19
Pharmaceutical manufacturer 21% 6/29 21% 6/29 59% 17/29
Other 0% 0/8 62% 5/8 38% 3/8
Stability studies to support stated in-use
time

503A 20% 8/40 40% 16/40 40% 16/40
503B 26% 5/19 48% 9/19 26% 5/19
Pharmaceutical manufacturer 11% 3/28 25% 7/28 64% 18/28
Other 0% 0/8 50% 4/8 50% 4/8
Reserve sample retention and storage
under conditions consistent with product
labeling

503A 20% 8/40 30% 12/40 50% 20/40
503B 32% 6/19 36% 7/19 32% 6/19
Pharmaceutical manufacturer 17% 5/29 38% 11/29 45% 13/29
Other 0% 0/8 38% 3/8 62% 5/8

4.7.5 Safety Reporting for 503Bs
Questions on safety reporting requirements to facilitate monitoring of potential risks for
compounded products were asked of all respondents.
The first question on 503B safety reporting asked whether the requirement to only submit
reports for serious unexpected events but not require submission for serious expected events is
adequate. Most respondents in the 503A and the 503B groups thought that the AE reporting
requirements were adequate. Specifically, two-thirds of the 503As responded “yes” (yes: 67%,
26/39; no: 18%, 7/39; do not know: 15%, 6/39); 503B responses were distributed in a similar
way (yes: 67%, 12/18; no: 22%, 4/18; do not know: 11%, 2/18). In contrast, most pharma
respondents did not think that the AE reporting requirements were adequate (yes: 26%, 8/31; no:

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64%, 20/31; do not know: 10%, 3/31). The responses of the “other” group was similar to the
pharma group (yes: 22%, 2/9; no: 56%, 5/9; do not know: 22%, 2/9) (Figure 35).
Figure 35: Adequacy of AE Reporting for 503B OFs
While pharmaceutical manufacturers must submit adverse event (AE) reports to FDA for both
serious unexpected and serious expected Adverse Drug Experiences (ADE), the Compounding
Quality Act requires 503B outsourcing facilities to only submit reports for serious unexpected
ADEs. Do you think this provision is adequate to monitor potential safety risks?

Respondents were invited to enter additional comments after choosing their yes or no
response. Comments were received from eight respondents (8%, 8/97), five from respondents
answering yes, and three from respondents answering no. The complete comments are displayed
below in Table 17.

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Table 17: Affiliated Comments on Adequacy of 503B AE Reporting
Yes (Add optional comments below); No (Add optional comments below) (n=8)
Additional Comments
YES
Drugs produced by outsourcing facilities have not gone through the drug approval process to
establish which adverse events are expected vs. unexpected, therefore 100% of AE's
experienced on a compounded drug are unexpected. as such, outsourcing facilities are required
to report on all AE's brought to their attention. (Respondent 094, 503B)
all of the APIs used are in FDA approved products. (Respondent 040, 503B)
FDA has said every ADE from and OF is unexpected because we do not have drug
monographs, therefore every ADE must be reported. (Respondent 035, 503B)
No labeling/studies for expected unless used starting active ingredient is used. (Respondent
004, 503B)
The license holder has the final responsibility for compliance and reporting. A contract
manufacturer is an extension of a company’s manufacturing network and is not intended to act
as a sole entity. (Respondent 090, pharma)
NO
All adverse event reports are critical. (Respondent 104, pharma)
Needs to be the same. (Respondent 099, pharma)
This skews the aggregate data on SAEs for a specific drug product. (Respondent 016, pharma)

A second question on safety reporting asked respondents to rank order the difficulty of
four listed aspects of adverse event reporting, with 1 being the most difficult and 4 being the
least difficult. For each item, the weighted mean was calculated as previously described in
section 4.7.2. Of the 71 respondents who provided their responses, almost half ranked assessing
the event for causality as the most difficult (weighted mean: 2.0; #1: 34/71; #2: 14/71; #3: 12/71;
#4: 11/71) followed by assessing the event for seriousness (weighted mean: 2.4; #1: 11/71; #2:
28/71; #3: 23/71; #4: 9/71), assessing the event for expectedness (weighted mean: 2.5; #1: 14/71;
#2: 21/71; #3: 21/71; #4: 15/71), and submitting an AE report to FDA in the required timeframe
(weighted mean: 3.1; #1: 12/71; #2: 8/71; #3: 15/71; #4: 36/71) (Table 18). A cross tabulation of
the respondent type is not shown as the weighted mean scores for each of the three main

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stakeholder groups (503A, 503B, pharma) yielded the same rank order as the overall results as
shown in Table 18.
Table 18: Difficulty Ranking of Adverse Event Reporting
Which of the following presents the greatest difficulty in submitting Adverse Event (AE) reports.
Rank each item from 1 to 4, with 1 being the most difficult. (n=71)

Aspects of Adverse Event reporting
Rank 1 2 3 4 Weighted
Mean
Weight 1 2 3 4
Assessing the event for causality
11 28 23 9 2.0
Assessing the event for seriousness
34 14 12 11 2.4
Assessing the event for
expectedness (reviewing against the
labeled known ADEs)
14 21 21 15 2.5
Submitting an AE report to FDA in
the required timeframe
12 8 15 36 3.1

4.8 CQA
Respondents were asked to indicate their level of agreement with four general statements
regarding compounded drug products.
4.8.1 Importance of compounded drugs to healthcare in the US
The first statement indicated that compounded drugs are important to healthcare in the
United States. Almost all respondents strongly agreed (75%, 73/97) or somewhat agreed (21%,
20/97) with this statement while three respondents selected neither agree nor disagree (3%, 3/97)
and one respondent selected somewhat disagree (1%, 1/97). None of the respondents selected
strongly disagree. Because there seems to be a consensus across the groups, a cross tabulation

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was not performed for this statement. The next statements compared compounded drugs with
drugs manufactured by pharmaceutical companies.
4.8.2 Comparing the quality, safety and efficacy of compounded drugs with drugs
manufactured by pharmaceutical companies
The second statement indicated that compounded drugs have the same level of quality as
drugs manufactured by pharmaceutical companies. Cross tabulation of results showed that
almost all respondents in the 503A and 503B groups agreed with the statement while most in the
pharma group disagreed (Figure 36). Specifically, 95% of the 503A group agreed (strongly
agree: 45%, 18/40; somewhat agree: 50%, 20/40) while one respondent (3%, 1/40) selected
neither agree nor disagree, and the remaining one respondent (3%, 1/40) selected disagree.
Similarly, 42% (8/19) of the 503B group strongly agreed, 47% (9/19) somewhat agreed, and
11% (2/19) somewhat disagreed. In comparison, most of the pharma respondents disagreed
(strongly disagree: 14%, 4/29; somewhat disagree: 55%, 16/29) while 20% agreed (strongly
agree: 10%, 3/29; somewhat agree: 10%, 3/29) with the remaining 10% (3/29) selecting neither
agree nor disagree. The “other” respondents were split between agreement (strongly agree: 22%,
2/9; somewhat agree: 11%, 1/9) and disagreement (strongly disagree: 33%, 3/9; somewhat
disagree: 11%, 1/9) while two respondents (22%, 2/9) selected neither agree nor disagree.

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Figure 36: Quality of Compounded Drugs
Please indicate your level of agreement with the statement: Compounded drugs have the same
level of quality as drugs manufactured by pharmaceutical companies.

The third statement indicated that compounded drugs are as safe as drugs manufactured
by pharmaceutical companies. Almost all respondents in the 503A and 503B groups agreed with
the statement, while most in the pharma group disagreed (Figure 37). Specifically, 93% of the
503A group agreed (strongly agree: 60%, 24/40; somewhat agree: 33%, 13/40) while three
respondents (8%, 3/40) selected neither agree nor disagree. Similarly, 48% (9/19) of the 503B
group strongly agreed, 42% (8/19) somewhat agreed, one respondent (5%, 1/19) somewhat
disagreed, and one respondent (5%, 1/19) strongly disagreed. In comparison, most of the pharma
respondents disagreed (somewhat disagree: 55%, 16/29; strongly disagree: 3%, 1/29) while 20%
agreed (strongly agree: 10%, 3/29; somewhat agree: 10% (3/29). The remaining pharma
respondents (21%, 6/29) selected neither agree nor disagree. Most of the “other” respondents
disagreed (strongly disagree: 33%, 3/9; somewhat disagree: 11%, 1/9), followed by agreed

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(somewhat agree: 11%, 1/9; strongly agree: 22%, 2/9), and neither agreed nor disagreed (22%,
2/9).
Figure 37: Safety of Compounded Drugs
Please indicate your level of agreement with the statement:
Compounded drugs are as safe as drugs manufactured by pharmaceutical companies

The last statement indicated that the compounded drugs are as effective as drugs
manufactured by pharmaceutical companies. The results showed that most respondents in the
503A and 503B groups strongly agreed with the statement while those in the pharma group did
not (Figure 38). Specifically, 75% of the 503A group strongly agreed (30/40), 18% (7/40)
somewhat agreed, and three respondents (7%, 3/40) selected neither agree nor disagree. In
comparison, higher percentage of the 503B respondents strongly agreed (90%, 17/19) while one
respondent somewhat agreed (5%, 1/19) and one respondent strongly disagreed (5%, 1/19). On
the other hand, most in the pharma group were equally split between agree (strongly agree: 14%,
4/29; somewhat agree: 24%, 7/29) and neither agree nor disagree (38%, 11/29) followed by

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disagree (somewhat disagree: 21%, 6/29; strongly disagree: 3%, 1/29). Respondents in the
“other” group were also similarly distributed with about half selecting agree (strongly agree:
33%, 3/9; somewhat agree: 22%, 2/9) followed by neither agree nor disagree (33% (3/9) neither
agreed nor disagreed, and disagree (strongly disagree: 11%, 1/9).
Figure 38: Effectiveness of Compounded Drugs
Please indicate your level of agreement with the statement:
Compounded drugs are as effective as drugs manufactured by pharmaceutical companies

4.8.3 Prevalence of 503As distributing without patient-specific prescriptions
All respondents were asked their opinion on the prevalence of 503A pharmacies that
compound and distribute sterile human drugs without first obtaining a patient-specific written
prescription. The three choices were intended to indicate a relative percent prevalence, denoted
as low (0-10%), moderate (11-50%), or high (50-100%). From the 115 respondents, 39%
(45/115) considered the prevalence low, 30% (34/115) considered it moderate, 6% (7/115)
thought the prevalence was high, and 25% (29/115) responded as do not know.

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According to the results, most 503A respondents considered the prevalence of 503A
dispensing without a prescription to be low (68%, 34/50) followed by moderate (18%, 9/50), do
not know (8%, 4/50), and high (6%, 3/50) (Figure 39). On the other hand, most 503B
respondents were split equally between moderate (38%, 8/21) and do not know (38%, 8/21),
followed by low (14%, 3/21), and high (10%, 2/21). Similarly, pharma responders were also split
equally between moderate (38%, 13/34) and do not know (38%, 13/34), followed by low (14%,
3/34) and high (6%, 2/34).
Figure 39: Views on Prevalence of Distribution of Sterile Drugs Without a Valid
Prescription
What do you think is the current prevalence (in percentage) of 503A pharmacies compounding and
distributing sterile human drugs without first obtaining a patient-specific written prescription?

4.8.4 Impact of 503B outsourcing facilities
The CQA introduced the 503B OFs as an FDA-regulated producer of sterile human
drugs. Respondents were asked if they agreed, disagreed, or did not know whether introducing
503B OFs impacted the four potential outcomes listed (Figure 40). Two of the four statements

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received general agreement while the remaining two did not. Specifically, most respondents
agreed (68%, 68/100) that introducing 503Bs addresses the need for ready-to-use products for
healthcare providers, while 10% (10/100) disagreed and 22% (22/100) did not know. Most
respondents also agreed (60%, 60/100) that 503Bs provides more therapeutic options for
patients, with 18% (18/100) disagreed and 22% (22/100) did not know. When asked whether
503Bs stimulate the pharmaceutical industry to innovate, most respondents (40%, 40/100) did
not know, while 34% (34/100) disagreed and 26% (26/100) agreed. Finally, when asked if 503Bs
lower the price of drugs, most disagreed (42%, 42/100) while the remainder was equally split
between agree (29%, 29/100) and did not know (29%, 29/100).
Figure 40: Views of Introducing 503B Outsourcing Facilities
In your opinion, what has been the impact of introducing 503B outsourcing facilities as a new
producer of human drugs? (n=100)

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4.8.5 Effectiveness of CQA
Several of the CQA provisions were meant to improve the quality of compounded drug
products in the US. Respondents thus were asked their opinion on whether the CQA has been
effective in improving the quality of compounded drugs (Figure 41). According to the results,
three quarters of the 503B respondents agreed (74%, 14/19) while 10% (2/19) disagreed, and
16% (3/19) did not know. About half of the pharma respondents agreed (47%, 14/30), many did
not know (40%, 12/30) and a few disagreed (13%, 4/30). About half of the 503A respondents
also disagreed (54%, 22/41), many agreed (34%, 14/41) and did not know (12%, 5/41). The
“other” respondents were divided more between agreement (44%, 4/9), disagreement (22%, 2/9),
many did not know (33%, 3/9).
Figure 41: Has CQA Improved the Quality of Compounded Drugs

Respondents were invited to enter additional comments. Five of the eleven comments
received were from respondents answering yes, and the remaining six were from respondents
answering no. The complete comments are displayed below in Table 19.

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Table 19: Affiliated Comments on Whether the CQA has been Effective at Improving
Compounded Product Quality
Yes (Add optional comments below); No (Add optional comments below) (n=11)
Additional Comments
YES
Several critical quality attributes were missing in the past. (Respondent 104, pharma)
improved from years past, but more work to do. (Respondent 100, pharma)
Somewhat. (Respondent 078, 503A)
better than it has ever been. (Respondent 042, other)
Gets rid of the bad actors and those that do not understand cGMP. (Respondent 019, 503B)
NO
Not directly. (Respondent 097, 503A)
In my opinion, the purpose of this law is to make special designation of 503B facilities. As
these facilities are exempt from certain cGMP requirements, the quality CSP's can't really be
improved with standards being lowered. I don't however feel that those items exempted would
necessarily cause a decrease in the quality of CSP's either. (Respondent 092, 503A)
If you look at the NECC report, the FDA had cause to shut down NECC prior to 2012, and
never did. The FDA allowed the tragedy to happen in my opinion. (Respondent 076, 503A)
There wasn't a quality issue before the CQA. There were some bad apples that caused
problems. Just like there are for manufactured products. (Respondent 062, 503A)
Seems to have reduced the number of serious violators of standards. (Respondent 047, 503A)
Just looking at recent examples of serious and deadly adverse events from compounded drugs
tells a story of poor quality. (Respondent 027, other)

Respondents were also asked whether the CQA has been effective in improving the
safety of compounded drugs. The results as shown in Figure 42 were nearly identical to those of
the prior question on improving quality of compounded drugs. Three quarters of 503B
respondents agreed (74%, 14/19) while 16% (3/19) disagreed, and 10% (2/19) did not know.
Slightly less than half of the pharma respondents agreed (47%, 14/30) followed by did not know
(37%, 11/30) and disagree (17%, 5/30) disagreed. On the other hand, almost half of 503A
respondents disagreed (48%, 19/40) followed by agree (35%, 14/40) and did not know (17%,

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7/40). Lastly, the “other” respondents were divided equally across agree (33%, 3/9), disagree
(33%, 3/9), and did not know (33%, 3/9).
Figure 42: Has CQA Improved the Safety of Compounded Drugs

Respondents were invited to enter additional comments after choosing their yes or no
response. Of the comments received from ten respondents (10%, 10/98), three were from
respondents answering yes, and seven were from respondents answering no. The complete
comments are displayed below in Table 20.

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Table 20: Affiliated Comments on Whether the CQA has been Effective at Improving
Compounded Product Safety
Yes (Add optional comments below); No (Add optional comments below) (n=10)
Additional Comments
YES
503B products safer. (Respondent 083, 503A)
only in some ways. (Respondent 047, 503A)
Better than it has ever been. (Respondent 042, other)
NO
not directly putting a patient name on the label doesn't change the safety of the drug.
(Respondent 097, 503A)
Same as the answer above. I don't believe that quality or safety have been negatively affected
by this act. It has mainly served to produce more options for consumers. (Respondent 092,
503A)
I think safety is hard to predict since it would require a clinical study unless there is a method
to determine the safe. I think this would be difficult to conclude. (Respondent 082, other)
See above. If the FDA did not enforce policies already in place that would have prevented the
NECC tragedy, how are new/additional policies going to improve safety? (Respondent 076,
503A)
Same reason as above. (Respondent 062, 503A)
Again, with just reviewing warning letters and recent serious adverse events the story is that
safety is a concern for these products. (Respondent 027, other)

4.8.6 Future of CQA
All respondents were asked whether the Compounding Quality Act should remain as is,
be revised, or be repealed. Most respondents indicated that the CQA should be revised (62%,
58/94), with only one quarter of the respondents suggesting it should remain as is (24%, 23/94),
and about one in seven responding that the CQA should be repealed 14% (13/94). To understand
the views of each more closely, a cross tabulation by respondent type was performed (Figure 43).
Most 503A respondents indicated that CQA should be revised (55%, 22/40), while one-
fourth thought it should be repealed (25%, 10/40), and one-fifth thought it should remain as is
(20%, 8/40). A little over half of the 503B respondents also thought CQA should be revised

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(58%, 11/19), the remaining 42% thought it should remain as is (42%, 8/19), and none thought
that the law should be repealed. In comparison, about three-fourths of the pharma respondents
thought CQA should be revised (77%, 20/26), while one-fifth thought it should remain as is
(19%, 5/26), and one respondent thought it should be repealed (4%, 1/26). Finally, about half of
respondents on the “other” group thought CQA should be revised (56%, 5/9), while the
remainder were equally split between revising (22%, 2/9) and repealing the CQA (22%, 2/9).
Figure 43: View of the Compounding Quality Act
In your opinion, the Compounding Quality Act should…? (n=94)

Respondents who selected “Be revised” were asked to identify parts of the CQA that
should be revised. The highest response rates were received for “substances used for 503A
compounding” and “substances used for 503B compounding” each with 64% (34/53), followed
by “information sharing requirements between FDA and the states” and “compounded drugs in
shortage” each with 58% (31/53). In comparison, the “voluntary nature of registration for 503B
outsourcing facilities” and “CGMPs for 503B outsourcing facilities” each received response

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rates of 47% (25/53), followed by “adverse event reporting” (41%, 21/53), “semi-annual product
distribution reporting” (23%, 12/53), “annual facility fees” (19%, 10/53), and “other” (6%, 3/53).
See Table 21.
Table 21: Suggestions for Revising CQA
Which parts of the Compounding Quality Act should be revised? (select all that
apply, and feel free to provide additional details). n=53

CQA Parts Response
Substances used for 503A compounding
64% (34/53)
Substances used for 503B compounding
64% (34/53)
Information sharing requirements between FDA and the states
58% (31/53)
Compounding drugs in shortage
58% (31/53)
Voluntary nature of registration for 503B outsourcing facilities
47% (25/53)
CGMPs for 503B outsourcing facilities
47% (25/53)
Adverse event reporting
40% (21/53)
Semi-annual product distribution reporting
23% (12/53)
Annual facility fee
19% (10/53)
Other (free text entry)
6% (3/53)

Respondents were allowed to enter optional comments with each choice. Fourteen
comments were received for seven of the ten choices. The complete comments are displayed
below in Table 22.

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Table 22: Affiliated Comments on Which Parts of the CQA Should be Revised
Feel free to provide any additional details
Additional Comments
Voluntary nature of registration for 503B outsourcing facilities
FDA says not voluntary. (Respondent 083, 503A)
Should be mandated. (Respondent 027, other)
Substances used for 503A compounding
Compounds are individualized therapies and don't have double blinded, placebo controlled
studies to prove effectiveness. This should not be a criteria for inclusion/exclusion. Only
safety. Docs and Patients should have the right to try a medication as long as it does no harm.
Respondent 062, 503A)
Allow for monographed supplements to be compounded. (Respondent 043, 503A)
Compounding drugs in shortage
Should allow 503A office use during shortage also like during COVID. (Respondent 083,
503A)
CGMPs for 503B outsourcing facilities
Yes. (Respondent 099, pharma)
Update to eliminate most if not all exemptions. (Respondent 027, other)
Esp pharmacist role. (Respondent 004, 503B)
Adverse event reporting
Yes. (Respondent 099, pharma)
Mandate similar reporting requirements to general industry. (Respondent 027, other)
Semi-annual product distribution reporting
It would be helpful if the list wasn’t a year out of date. (Respondent 009, other)
Other
Drug Product release testing and stability study requirements need to be elaborated and
expanded. (Respondent 104, pharma)
Sterility assurance and ingredients list. (Respondent 042, other)
Definition of clinical need for bulk drug substances used by 503Bs. See Outsourcing Facility
Association citizens petition. (Respondent 035, 503B)

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4.9 Other thoughts
The final question was an open invitation for all respondents to provide any other
thoughts on the topic of drug compounding. Comments were received from almost one-fourth of
all respondents (24%, 28/115). Common themes from the comments were grouped and labeled
into four categories: access and choice, regulatory overreach, regulatory burden and fairness, and
other. The complete comments are displayed below in Table 23.
Table 23: Other Thoughts on the Topic of Drug Compounding
Comments Related to: ACCESS and CHOICE
There is a big opportunity to provide greater access and lower prices. FDA has to stop
protecting Pharma on 50 year old drugs. The current direction is squandering 503B investment
and i believe fewer B's will exist in 6 years than do today if changes are not made.
(Respondent 009, other)
The regulation, both state and federal, has harmed patients by limiting availability of
compounded drug products. This consequence of aggressive regulation is never part of the
discussion and absolutely needs to be. (Respondent 043, 503A)
Stop the influence of PHARMA with regards to the FDA. Stop the State (CA) and FDA from
prohibiting the use of bulk chemicals in Animal Compounding. Commercial products make
bad compounded products and puts restrictions on Veterinarian prescribing for their patients.
Stop the FDA from discontinuing the compounding of cBHRT medications for individualized
patients that has been working for more than 25 years. Allow 503A pharmacies to compound
for legitimate office use, its needed very badly. (Respondent 006, 503A)
I shut down a compounding activity at a company due the lack of GMP and sterility assurance,
The regulations and oversight of the activity was almost non-existent, My concern for patient
safety was so significant I discontinued the program. Other compounded drugs allow for
combinations and formulation regular companies may never make due to many reason
(market, cost, regs, etc). There is significant need for compounding to occur. So striking the
balance between regulation and oversight and ability to serve patients needs is very important.
As long as sterility assurance can be preserved I am inclined to give more freedom to operate
here. Compounded drug monographs or formulary, once published or approved, should be a
standard practice and a way to show acceptable risk. State and Federal regs can easily here.
(Respondent 042, other)

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Table 23: Other Thoughts on the Topic of Drug Compounding (continued)
There are many medical practices that require specific medications to effectively treat their
patients. Many of these items are not commercially available so they may be compounded.
However, it is very difficult if not impossible to perform small batch compounding in a 503B
facility due to the restrictive regulations. (Respondent 040, 503B)
Federalization is not the answer. Traditional 503A compounding pharmacies fill a very
important role in patient care in their local areas. Our facility exceeds USP 797 requirements
for 503A pharmacies and holds secondary sterile compounding accreditation though ACHC.
Even with our high standards however, the FDA's guidances of "insanitary conditions" were
not met fully. It is clear that the FDA would like for all 503A facilities to be converted to 503B
facilities to further increase their regulatory oversight and control of our industry. What one
must remember is that 503A facilities following USP 797 standards create custom CSP's that
have very short BUD's relative to those produced by 503B facilities. After 20+ years of
operation, it is clear that if followed, USP 797 requirements are sufficient in producing high
quality sterile products intended with short beyond use dating. If 503A pharmacies are
regulated out of business by ever imposing federal agencies, these vital services will be
replaced by much larger organizations that will be more expensive to offset the high cost of
cGMP compliance with little benefits gained to product quality for short term, custom
solutions. (Respondent 092, 503A)
Comments Related to: REGULATORY OVERREACH
The FDA should leave the regulation and oversight of compounding to state boards of
pharmacy. The terrible conditions and poor sanitation practices of NECC were well known to
the state board and FDA for many years, and yet absolutely nothing was done to stop them. If
additional funding to the state boards is necessary in order to provide additional regulatory
compliance, then the funding used for the FDA can be diverted back to the states in order to
provide state grants for funding. (Respondent 080, 503A)
FDA has an admitted bias against compounding and each new guidance or regulation is
applauded by FDA as “another nail in the coffin of compounders” (verified internal
communication with FDA). If FDA dropped its bias and openly worked with the compounding
industry, real change and industry improvement could be achieved. Current adversarial
relationship (mostly one sided) makes no sense in the common goal of positive patient
outcomes. (Respondent 050, 503A)
Regulators are very full of themselves, they act like lords. And treat compounders like
criminals yet to be caught. (Respondent 051, 503A)
The FDA is trying really hard to shut down most/all pharmacy compounding. The amount of
regulations trying to be put into place is asinine at best. (Respondent 063, 503A)
SHOULD BE OUT OF THE HANDS OF THE FDA. THE FDA HAS AN AX TO GRIND IN
RELATION TO COMPOUNDING PHARMACIES, ALWAYS HAS. I BELIEVE THEY
ARE NOT IMPARTIAL IN THEIR ACTIONS. THEY HAVE ENOUGH TO DO AND DO
IT POORLY SO WHY ARE THEY TRYING TO MANAGE COMPOUNDING
PHARMACIES? (Respondent 070, 503A)

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Table 23: Other Thoughts on the Topic of Drug Compounding (continued)
FDA is getting better at communications with our industry but on a scale of 1-100 (higher is
better) I feel they score no better than 25. They expect my way or the highway. We (FDA) are
the experts and everything we mandate is done without question. Do it or be put out of
business. The hypocrisy on lack of inspections in hospitals is a joke. They would be issuing a
483 to 95% of the hospital 503a pharmacies if they held them to the same standard we are.
This is BS. (Respondent 072, 503A)
The current tool the FDA is using to shutter 503A sterile compounding is by citing "insanitary
conditions" guidance. That legal tool was available to the FDA when they inspected NECC in
2006. (Please refer to the senate HELP committee report) Yet they chose not to use it. People
died because of the FDA's negligence, (and BOP of Mass as well). Never-mind the fact that
99.9% of pharmacies are unable to satisfy that guidance. The FDA then decided to inject itself
into the compounding business by introducing 503b's which were held to cGMP. Then the
FDA realized that the market was not sustainable, so now they are back-peddling to try to
force their idea to work. In addition, they are squeezing 503a's out of business by promulgating
new and arbitrary rules to again force the idea of 503b's to work. The "selective enforcement"
policy has left largely non-compliant hospital pharmacies alone- even to the point of making
special rules for them because they have heard that their policies are not workable for 503a
hospital pharmacies. At the same time outpatient 503a sterile compounders are being squeezed
out, and patients are losing access due to the high cost of 503b produced drugs, if they decide
to make them at all. Patients are ultimately losing access due to the market of 503as shrinking,
as FDA pushes them out and 503b prices reflect the cost of regulation. A cost that neither 503a
pharmacies, nor patients, can afford. (Respondent 076, 503A)
Comments Related to: REGULATORY BURDEN and FAIRNESS
Need to reduce the regulatory burden (cGMP) for 503Bs to better position them between
Pharma and USP 797. Current standards are too burdensome and not financially viable. Also,
need to standardize 503B regulations among the various states. Each regulates differently.
(Respondent 001, 503B)
Despite FDA exemptions on DSL, some organizations still comply better than others when it
comes to Sterility, Endotoxin and Potency testing, and their impact on both Quality and Safety.
(Respondent 034, 503A)
The guidance's are more loose in some areas and just as strict in others. One question in this
survey is incorrect; all lots of sterile compounded product must have sterility testing performed
(it is not excluded in the 503B cGMP guidance). One thing that would be extremely beneficial
is clearly defined expectations of all USP sections the FDA expects to be followed, unless
otherwise justified/validated. (Respondent 085, 503B)

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Table 23: Other Thoughts on the Topic of Drug Compounding (continued)
Revise aseptic rules. (Respondent 090, pharma)
the bar to enter the 503b space should remain high and close to that of manufactured products.
In the end this industry needs to ensure that products compounded/manufactured are safe and
efficacious. Too often in haste we cut corners; this is not an area where we want to cut corners
and I applaud the FDA for its work. We are a 503a who continues to improve on its end
product. We have seen too many 503a providers that do not spend resources to improve and
the products they produce are horrid. It’s time we police ourselves with the help of state and
federal agencies. If we want to expand the products we make and compound we need to ensure
we are the best we can be. (Respondent 055, 503A)
Our facility is primarily a CGMP CMO registered under US-FDA and Tennessee Health
Department for both cGMP operations and 503B compounding. Since the facility is following
full cGMP compliance, it is difficult for us to lower the quality attributes for 503 B
compounding. It is therefore very important to harmonize both 503 Compounding and cGMP
compliance better. Patient safety and drug product integrity is very critical for us. As a cGMP
compliant sterile drug Product Manufacturing Facility, it is only fair to ask a waiver for such
facilities to transport and distribute 503 compounded products across state boundaries without
having state wise licenses. (Respondent 104, pharma)
OTHER COMMENTS
Manufacturers should be as involved in the CQA as much as FDA and compounding facilities.
Manufacturers have expertise, clinical experience, and also capital to innovate to best ensure
patient safety, from manufacture to administration. (Respondent 100, pharma)
Interesting area to assess. Compounding pharmacies is seen as an asset to further R&D and in
getting small quantities of drug to patients. (Respondent 090, pharma)
We should have the ability to bill insurance for our patients because for many people a
compounded product is cost prohibitive. If we are using USP products with NDC numbers, we
should be able to submit to private or govt insurance for payment. (Respondent 074, 503A)
Establishing regulatory body to search and terminate businesses that produce legend drugs and
sell them without prescription on internet. (Respondent 072, Both 503A&B)
My company develops ethical pharmaceuticals and biologics. We have no interest or opinion
on compounded products or the associated regulations. (Respondent 022, pharma)
No thanks. (Respondent 041, pharma)
No. (Respondent 024, pharma)
No. (Respondent 020, 503A)
N/A. (Respondent 088, 503B)

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Chapter 5. Discussion
5.1 Overview
The CQA was enacted following a deadly outbreak in 2012 caused by contaminated
compounded products that lacked adequate quality controls and oversight. The law created the
503B outsourcing facility (503B OF) and was meant to clarify regulatory oversight and
responsibilities to improve the quality and safety of compounded products. The law, however,
has overarching implications in the compounding sector not only for the 503B OFs but also for
pharmacy compounders (503As) and pharmaceutical manufacturers.
This study examined the regulatory framework for drug compounding based on the Triad
Purposes of Regulation. The findings indicate that the 503As, 503Bs, and pharma respondent
groups hold differing views on many aspects of CQA, including whether the law is meeting the
regulatory purposes outlined in the framework: to improve product quality and safety, maintain
equal standards, and promote efficiencies in commercialization and cost.
5.2 Methodological Considerations
Survey participants were delimited to professionals working in 503A compounding
pharmacies, 503B OFs, and licensed pharmaceutical manufacturers. These three groups were
chosen as they are considered “real” stakeholders of drug compounding as described in
Chapter 2. The study was also delimited to the United States because pharmacy practice, drug
compounding, and regulations differ internationally. Although the scope of these three
stakeholder groups could have included thousands of facilities and many thousands of
professionals, it was delimited primarily by personalized requests for participation. However, the
survey link was also posted as an open invitation on several pharmacy and pharmaceutical

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industry organization member-only portals, so several respondents outside the three main
stakeholder groups participated in the survey, identifying their company type as “other”.
The focus of the study was on the experiences and views of the stakeholders on drug
compounding and the implementation of the provisions of the CQA. In addition to 503As and
503Bs, the respondents from pharmaceutical manufacturers were also included even though they
are not in the business of drug compounding nor directly affected by drug compounding
regulations in the same way as the 503A compounders and 503B OFs. The rationale for
including this group was that the pharmaceutical industry and the compounding industry
complement each other to meet the therapeutic needs of the U.S. patients. In addition,
pharmaceutical manufacturers experience similar FDA regulatory and compliance oversight as
the 503B OFs for production of their sterile human drug products.
Because the survey was delimited to the period between mid-December 2020 and mid-
February 2021, the study findings will reflect the views held during that specific timeframe. The
full implementation of the CQA requirements and provisions are continuing, including but not
limited to issuance of final FDA guidance documents for industry and cooperation between the
FDA and the states on compliance oversight (FDA, 2020j; Dunn et al., 2021). It is unclear
whether the same views will be held over time.
A concern for the study was the potential for a low response rate for any one of the three
individual stakeholder groups that could have limited the overall utility for comparing results
across the groups. In particular, an appropriate sample of respondents to represent a stakeholder
group is needed to generalize results for that group (Kelley et al., 2003). The 503B OF group
participation was of greatest concern due to a very low response rate of only 8% (6/74 503B
OFs) in a recent study examining market challenges facing OFs (PEW, 2020a). However, the

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number of 503B OFs responding to this study was 24% (19 of 80 503B OFs registered during
survey window). Obtaining a sufficient response from the pharmaceutical manufacturers was
also of concern since this group is typically not included in discussions related to drug
compounding regulations. As such, it was important for this group to be personally contacted for
participation to increase response rate (Sinclair et al., 2012). The response rate for the direct
invitation pharma group was, in fact, 65% (31/48). Another factor directly correlating to high
respondent numbers and survey response rate is the total number of invitations being sent, use of
personal salutations, and sending reminder notices/emails (Cook et al., 2016). All the above
techniques were used in this research study, yielding a sufficient number of responses from each
stakeholder group to adequately perform cross tabulations across organizational affiliations.
An unforeseen limitation in the design of the survey was including the option of
respondents to select two non-defined stakeholder company types (“Both 503A and 503B” and
“other”). With only two respondents in the “Both 503A and 503B” group, a separate cross
tabulation of results with this small group would not provide meaningful information. Thus, their
responses were grouped, in most cases, with the data from the nineteen 503B respondents, as
discussed in section 4.2. Most respondents who selected the company category of “other” were,
in fact, employed by one of the three real stakeholders. However, since this was a heterogenous
group, a cross tabulation comparison of the data as a separate stakeholder group was not
performed for most of the questions. In hindsight, the facility type of “Both 503A and 503B” and
“other” should not have been offered as choices in the first question. Accurate self-identification
of survey respondents was critical for survey response cross tabulation analysis to accurately
identify differences across the three groups. The sub-stratification of data is also useful to
explore specific topics more deeply in future studies (Trotter, 2012).

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Respondent fatigue leading to a high percentage of incomplete surveys was a concern
since survey respondents would be presented with a large number of questions that probe their
views across a variety of topics. The survey was designed using skip logic and display logic so
that individual respondents were presented with no more than forty-eight questions. A focus
group was convened prior to survey finalization and launch to ensure that the questions were
appropriate and easily understood. The survey mechanics and target maximum time of 20
minutes for survey completion were also tested independently prior to survey launch. Literature
and experiences of previous researchers have suggested long survey length may have a lower
response rate or discourage participation by busy professionals (Jobber and Saunders, 1993;
Tomaskovic-Devey et al., 1994). However, this correlation is not strong as other studies have
found long survey length does not always produce lower response rates (Blumenberg et al.,
2019).
An additional feature to limit the occurrence of incomplete or unsubmitted surveys was to
design the survey instrument to only require an answer in order to progress for two of the fifty-
four questions. Even so, seventeen respondents (of the 129 surveys initiated) stopped answering
questions before they got to its mid-point. However, the fact that most survey respondents
completed the survey to the end (n=100) and provided responses to almost all questions seems to
indicate that the above techniques held the respondents’ interest, and the topic was very engaging
to the participants (Groves et al., 2004; PEW, 2020c). A fair number of respondents entered
comments in those questions with optional free text fields (8%-24% participation, depending on
the question). The extensive comments suggested that the respondents felt free to express their
experiences and opinions (Groves et al., 2000) and share quite detailed information about their
activities, such as the number of compounded products that they produce and the number of

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inspections that they have had (Tourangeau, 2017; Singer et al., 1995). The method of selecting
the survey participants was a potential limitation to ensure that the sampled population
accurately reflects the views of the stakeholder groups. The approach may have introduced bias
due to the possibility that participants asked to participate in the survey were not representative
of the greater stakeholder population and thus overrepresent the viewpoints of the stakeholder
group (Fincham, 2008). In addition, those with greater propensity to share negative opinions may
have skewed the results (Han and Anderson, 2020). However, the fact that respondents were
from a diversity of company affiliations, sizes, and locations across the country helps to allay
potential concerns that the survey results do not reflect adequately the views of the broader U.S.
stakeholder population.
I assumed that all respondents would be truthful in their responses and express their own
opinions and experiences on the subject matter. In addition, I assumed that the participants
possessed a sufficient understanding of the subject matter to provide meaningful answers to the
questions. The responses to the questions, and particularly the comment fields, suggested that
most respondents were anxious to share their views and had no reason to be less than truthful,
under conditions of anonymity
5.3 Consideration of Results
The CQA is the cornerstone of the regulatory framework for defining the roles and
responsibilities of the regulators as well as the requirements for the producers of compounded
drug products. The Triad Purpose of Regulation framework was used as a guide to understand
stakeholder views of the CQA. The views of the 503As, 503Bs, and pharmaceutical
manufacturers were explored in the areas concerning coordination between the FDA and the
states, management of substances used for compounding, and facility operations and compliance.

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The results of this study reveal that CQA is viewed by many as not being as effective as it could
be. In fact, an overwhelming majority would like to see the law revised. The discussion of results
is organized below according to the three areas of the research framework: quality and safety of
products; equal requirements and standards for industry; and efficiencies in commercialization
and costs.
5.3.1 Quality and Safety of Products
One of the most critical missions of the FDA is to ensure the quality and safety of drug
products as part of its mandate to protect public health (FDA, 2018i). The CQA was enacted to
improve regulatory oversight of compounded products to prevent persistent product quality
issues that could lead to outbreaks and illnesses. The findings from this study indicate that
503As, 503Bs, and pharmaceutical manufacturers may have differing views on whether the CQA
has improved product quality and safety.
5.3.1.1 Differing views on CQA’s impact on product quality
Federal regulations have been promulgated over the years to reflect advances in science
and the evolving needs of the industry. However, regulations typically lag innovation. Such has
been the case with the large-scale drug compounding in the U.S. The CQA created the 503B OF,
a new type of entity for large scale sterile compound manufacturing and placed it under the
regulatory watch of the FDA. Since its passage, the FDA has worked to develop policies and
guidance to implement CQA. The findings from this study suggest that while most 503Bs view
CQA as having improved the quality of compounded drugs, most 503As do not. In fact, some
specifically commented that the high-profile outbreaks in the past were due to the failed
enforcement of existing laws and not because more laws were needed: “There wasn't a quality

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issue before the CQA. There were some bad apples that caused problems. Just like there are for
manufactured products” (Respondent 062, 503A).
The above views are also supported by literature, that suggests the fault for the 2012
contaminations should not focus exclusively on the compounder. It points to the fact that the
FDA was fully aware of their activities and failed to take proper enforcement action (USHR,
2013).
Problems with drug product quality may be discovered during physical inspections by the
regulators. Accordingly, the CQA gave the FDA the authority and obligation to inspect 503B
OFs in a manner similar to the inspections of licensed pharmaceutical manufacturers. Further,
the FDA should inspect 503B OFs according to a risk-based schedule that would be frequent
enough to prevent potential risks that can adversely affect product quality (FDA, 2013a). The
findings from this study indicate the 503B OFs are inspected by the FDA less frequently than the
pharmaceutical manufacturers. As the FDA continues to find quality and safety problems during
inspections of 503B OFs, the current inspection approach may not be adequate (FDA, 2020b;
FDA, 2021c). At the state level, the results of this study indicate that the state regulators are not
adequately resourced to conduct its activities. As one respondent commented, “States are barely
keeping up with what is legally required and often depend on information from FDA or from
complaints before initiating any actions” (Respondent 027, other).
5.3.1.2 Differing views on CQA’s impact on product safety
Product quality is thought to be tied closely to product safety. Protecting the consumer
from unsafe medical products is a key mission of the FDA (FDA, 2021b). Regulatory oversight
of safety requires adequate monitoring and tracking of issues that could lead to unsafe products.
But to perform its mission, the FDA must be able to obtain information of potential hazards or

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actual safety incidents. The federal regulatory oversight afforded by the CQA was meant to
enhance the safety of compounded drugs through improving product quality and obtaining early
signs of potential safety risks to patients. The FDA can gain the knowledge of unsafe products in
several ways. One way is through inspections of compounding facilities by the FDA or by
inspections or reports from state regulatory agencies. Another way is though reports of adverse
events from consumers, healthcare providers, manufacturers, and other regulatory agencies. Both
of these routes have associated challenges.
After years of negotiations between the states, the NABP, and the FDA, a full agreement
has yet to be reached between all parties for the standard MOU on distribution of compounded
products (NABP, 2020b). For now, states share data on pharmacy compounding and complaints
with each other and with the FDA through the National Association of Boards of Pharmacy
Information Sharing Network, which was launched in late 2020 to coincide with the eventual
rollout of the standard MOU (NABP, 2020a). However, data entry and use of the system is only
voluntary for states not signing the MOU and, hence, incomplete. While recent literature
suggests there have been fewer infectious outbreaks caused by compounded drugs since 2013,
adverse events and morbidity attributed to poorly compounded drugs persist (Watson et al.,
2021; Barbuto and Burns, 2020).
The industry views on the safety of compounded products were generally found to be in
line with their views on the quality of compounded products. While most 503Bs may think that
CQA has improved the safety of compounded products, the 503As do not agree to the same
extent, and much of pharma is not sure. As one respondent commented, assessing the safety of a
compounded drug without performing clinical trials may be difficult: “I think safety is hard to

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predict since it would require a clinical study unless there is a method to determine the safety. I
think this would be difficult to conclude” (Respondent 082, other).
Since there is no pre-market review or approval process for compounded products, the
main indicator of product safety would be obtained through pharmacovigilance and market
surveillance. Hence, it is imperative to establish a robust reporting system for compounded
drugs. The 503B OFs are required to submit AE reports to the FDA for serious unexpected
adverse events. While the 503A and 503B compounders generally agree that the AE reporting
for 503B OFs is adequate, the pharma industry group disagrees and thinks that all serious AEs,
both expected and unexpected, should be communicated to FDA. It would take time and research
to determine if the current reporting system for compounded drugs is adequate.
5.3.2 Equal Requirements and Standards for Industry
The second element of the Triad Purpose of Regulation framework is the equalization of
requirements and standards for industry. Fair and equitable requirements and expectations are
important to industry when regulators such as the FDA create policies and guidance (Seiguer and
Smith, 2005). Therefore, transparency in rulemaking with adequate explanation and justification
should be provided to entities being regulated to instill a sense of fairness.
The intent of the CQA law was to create rules for the large-scale sterile drug
compounding entities to operate in a space between the traditional pharmacy compounder and
the pharmaceutical drug manufacturers. However, results of the research indicate that the
requirements established by FDA are creating barriers to the drug compounding operations for
both traditional 503A pharmacy compounders and 503B OFs. There is also some disagreement
as to whether equal requirements should, in fact, be applied across the three industry groups.

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5.3.2.1 Bulks List process is viewed as stifling compounding operations
503A pharmacies cannot compound a product simply because they receive a valid written
prescription. They must prepare the drug using substances or products specifically authorized for
compounding, including those on the 503A Bulks List. Although the enactment of the CQA
reinvigorated the FDA to finally establish the 503A Bulks List with substances allowed for 503A
compounding, as of July 2021, only six bulk drug substances are officially on the list
(21CFR§216.23, 2021). Results from the pharmacy compounders indicate they are not satisfied
with the process or progress by FDA because it constrains their ability to fill prescription orders
required for patient care. As one respondent commented: “The regulation, both state and federal,
has harmed patients by limiting availability of compounded drug products. This consequence of
aggressive regulation is never part of the discussion and absolutely needs to be” (Respondent
043, 503A).
In a similar manner, the CQA affords the 503B OF industry the opportunity to compound
with drug substances that the FDA adds to the 503B Bulks list. The 503B OFs must rely upon
active engagement between the FDA and their industry to enable the list to be of value to
healthcare providers and their business. Results indicate that while the 503B OF industry
participates in nominating substances for FDA addition to the list, they are not satisfied with the
progress. And, although FDA provides enforcement discretion to 503B OFs compounding with
Category 1 substances, the results indicate that the 503B OFs do not even agree that this is good
policy. Their views are consistent with literature and are not surprising because no authorized
substances have been officially added to the 503B Bulks list (FDA, 2020d). By not fulfilling its
obligations in a timely manner, the compounders view the FDA as limiting the conduct of their
business.

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5.3.2.2 Differing CGMP requirements create unequal standards
The FDA has the responsibility to set policies based on the federal laws but also has
discretion in their own regulatory enforcement policies. The FDA policies for CGMP
requirements for 503B OFs are designed to be flexible to better accommodate the nature of
compounding operations conducted by 503B OFs (FDA, 2018h). Therefore, while the full
CGMPs as outlined in 21CFR211 are enforced for the licensed pharmaceutical manufacturers, a
lesser standard has been established for the 503B OFs. The majority of the 503A and pharma
industry respondents believe that both the 503B OFs and pharma should be held to the same
quality and production standards for the manufacture of sterile drug products. The study views
align with those previously found in literature as discussed in section 2.3.4.2 and supports the
importance of standardization of regulations for similar activities (Kastango and Douglass,
2014).
Many of the 503B OF compounders, however, view that the general policies being set for
their industry are overly restrictive. The comment below by a 503B respondent illustrates the
challenges that regulators may face in trying to balance regulatory policies and guidance while
treating the 503B OF industry in a fair manner:
There are many medical practices that require specific medications to effectively
treat their patients. Many of these items are not commercially available so they
may be compounded. However, it is very difficult if not impossible to perform
small batch compounding in a 503B facility due to the restrictive regulations.
(Respondent 040, 503B)

While most of the recent guidance and policies issued by FDA on drug compounding
pertains to 503B OFs, 503A entities also rely on the policies and guidance of the FDA in
addition to those of individual states. According to the study findings, many of the 503B and

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pharma respondents think that sterile products made by the 503A compounding pharmacies
should also follow more “GMP-like” requirements.
The 503A pharmacy compounders also indicate that they want some form of
standardization applied to their own industry, although not to the same stringent level applied to
the 503B OF and pharma industry. As one 503A respondent stated:
As long as there is adequate compounding pharmacist input on the standards and
that input is considered. There shouldn't be a bunch of FDA or ex-FDA and
academics on the committee. It should be made up of a good mix of Compounding
pharmacists, Doctors, and Scientists that make standards that are applicable to
the "real world" situations compounders are in. (Respondent 062, 503A)

The expectation of equal standards across all three drug producing stakeholders is
challenging when one of the stakeholder groups lacks production standards within their own
industry. This lack of standardization currently exists within the 503A pharmacy compounding
industry, where a common quality standard is not mandated nor enforced by all state regulators.
However, all three industry stakeholders, inclusive of the 503A compounders, agree that all
states should have a common minimum standard, such as USP <797>, for 503A compounding of
sterile drugs products. The need for harmonization within this industry and a disconnect in
quality standards across states is highlighted by comments: “I was unaware USP 797 was not
enforced across all states” (Respondent 092, 503A). “Then maybe California wouldn't have
standards that are so different” (Respondent 053, 503A).
Having created a three-tiered regulatory framework for the three stakeholders, the FDA
will need to consider the differing views as they develop their policy and guidance. It is also
important for the FDA to understand how their implementation activities affect the three entities,
each having unique operating models but with the common goal of supplying safe medical
products.

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5.3.3 Efficiencies in Commercialization and Costs
The final element of the Triad Purpose of Regulations framework is ensuring efficiencies
in commercialization and costs. An element of efficient business operation is the clarity of the
rules, which equally apply to the regulators and those being regulated (Baldwin et al., 2012). In
addition, laws and policies should be balanced between risk and potential harm of an activity and
the effort and costs to implement and enforce (Baldwin and Veljanovski, 1984). Therefore,
consideration for efficiencies in the policies for the regulators to enforce and for the industry to
operate is warranted.
The three surveyed stakeholders in my research all serve patients by providing
therapeutic drugs and thus should have an equal opportunity to operate in this space with no bias
applied or advantage offered to one industry over the other. The CQA has created a new
paradigm where for the first time, all three stakeholders are subject to the FDCA, albeit under
different provisions of the law. The CQA thus poses business implications for each of the three
groups that would be worth examining individually.
5.3.3.1 503As view CQA as threatening their business
Preparation of drug products by 503A pharmacy compounders is a necessary activity to
meet needs of patients in our complex healthcare ecosystem. Physicians and healthcare provider
organizations have stated that drug compounding, including anticipatory compounding and
limited production of office stock, plays a critical role in patient care (Hearings. US Congress,
2018). However, the FDA asserts that the patient-specific written prescription is the clear line to
demarcate the practice of pharmacy from drug manufacturing, and thus, delineate state versus
federal oversight (Hearings. US Congress, 2018). Hence, the CQA enabled a pivot by the FDA
to have greater oversight of 503A pharmacy compounding activities. Recent literature indicates

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concern by both pharmacy compounding organizations and physician groups that FDA
restrictions can impede the efficiency for traditional compounders by limiting the ingredients that
can be compounded (Dumoff, 2018). Findings from my study indicate that the lack of FDA
progress to add substances to the 503A Bulks list has hindered the ability of some pharmacy
compounders to fulfill prescription orders. The results also indicate that 503A compounders
perceive CQA as constraining their business and encroaching on state’s oversight of traditional
pharmacy compounding. “The FDA is trying really hard to shut down most/all pharmacy
compounding...” (Respondent 063, 503A). “Docs and Patients should have the right to try a
medication as long as it does no harm” Respondent 062, 503A).
Establishing sufficient communication between regulators and industry is important not
only to engage the industry, which must comply with regulation and policies but also to build
trust, which is especially important as new laws are enacted. According to the results of this
study, communication between the 503A compounding industry and the FDA and state
regulatory agencies seems still to be inadequate:
FDA is getting better at communications with our industry but on a scale of 1-100
(higher is better) I feel they score no better than 25. They expect my way or the
highway. We (FDA) are the experts and everything we mandate is done without
question. Do it or be put out of business. (Respondent 072, 503A)

The former FDA Commissioner, Scott Gottlieb, has publicly commented that the
traditional practice of pharmacy should continue to flourish since it provides an important option
for patients (Hearings. US Congress, 2018). However, representatives of the compounding
industry have insinuated that the FDA has intentionally decreased public confidence in
compounded drug products with their policy of choosing to post publicly the inspection results of
drug compounders, but not of licensed pharmaceutical companies (Hearings. US Congress,
2018). The 503As that are new to FDA oversight may view the close interactions between the

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FDA and the pharmaceutical manufacturers as biased against their industry. Without adequate
engagement and outreach, the 503As may continue to think that the FDA does not value their
contribution to healthcare. As one 503A notes:
FDA has an admitted bias against compounding… If FDA dropped its bias and
openly worked with the compounding industry, real change and industry
improvement could be achieved. Current adversarial relationship (mostly one
sided) makes no sense in the common goal of positive patient outcomes.
(Respondent 050, 503A)

The comment above reflects a perception that the FDA is over-reaching its jurisdiction in
ways that could jeopardize the business of 503A compounders. As healthcare continues to move
toward personalized medicines, compounding drugs for individual needs will likely expand
further (Thompson et al., 2017). The 503A compounders operate in the community and typically
have direct contact with the patients that they serve. As such, these entities play an important role
in caring for the diverse needs of individual patients. Perhaps if the FDA was fully aware that the
503A group felt disenfranchised, the agency would make a more concerted effort to engage this
group during policy discussions.
5.3.3.2 503Bs view CQA as discouraging entrepreneurship
The CQA created a new category of large-scale compounder to legitimize those
operations while providing a regulatory framework to ensure adequate oversight. However,
seven years later, the 503B OF industry is still relatively small and experiencing market
challenges. Each year very few new entities register as 503B OFs, while at the same time, a few
that exist may decide to abandon their registration and are dropped from the list. As described in
section 2.4.3.5 and articulated by the FDA, it is not clear why the 503B OF industry has not
grown as expected since enactment of the CQA (FDA, 2020a). In fact, the number of registered
503B OFs has decreased in the past few years, from 76 in 2019 to 73 in 2021 (FDA, 2021g).

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To understand the challenges associated with establishing and operating 503B OFs, the
FDA initiated its research on this subject in 2019 that included surveying the 503B OFs. But to
date, the FDA has not been transparent regarding the progress that it has made to address the
findings of its research (FDA, 2020c). It should be noted that the FDA is only soliciting the
views of the 503B OFs and not including the views of the 503As or the pharmaceutical industry.
Results from my research identified the high cost to operate a facility as the greatest challenge
for 503B OFs. It could be that new registrants are dissuaded by the high operational costs,
discovered after exploring registration and operational feasibility. For existing 503B OFs, the
business model may not be financially viable, forcing struggling facilities to exit the sector.
While my research points to the importance of 503B OFs in providing additional sources for
ready-to-use products, barriers to entry may be ingrained in the drug regulatory system. As
exemplified by the following respondent comment:
There is a big opportunity to provide greater access and lower prices. FDA has to
stop protecting Pharma on 50 year old drugs. The current direction is
squandering 503B investment and I believe fewer 503Bs will exist in 6 years than
do today if changes are not made. (Respondent 009, other)

The regulatory challenges that present business barriers include the requirement for 503B
OFs to comply with CGMP standards. Although the requirements are less rigorous compared to
CGMP standards for the pharmaceutical industry, the requirements for the 503B OFs are more
rigorous than USP<797> standards required for 503A pharmacies. As one 503B respondent
stated, there is a “Need to reduce the regulatory burden (cGMP) for 503Bs to better position
them between Pharma and USP 797. Current standards are too burdensome and not financially
viable…” (Respondent 001, 503B).

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A sustainable business model for 503B OF relies on robust product demand (Harris,
2001). Because 503B compounders can only produce drug products using substances on the
503B Bulks List and products on the FDA Drug Shortage List (DSL), their viability is directly
linked to disposition of those lists, which have been fraught with challenges. For example, the
ambiguity in the creation and maintenance of the 503B Bulks List is still a big concern of the
503B OF industry (FDA, 2019d). The FDA may have thought that allowing 503B OFs to use
substances on the Category 1 503B Bulks list would be sufficient (Hearings. US Congress,
2018). But the OF industry has indicated that it is not reasonable for the companies to invest in
large scale compounding operations with substances that could be disallowed abruptly by the
FDA (FDA, 2020d).
Regarding the DSL, the 503A and 503B compounders both indicate that the DSL process
and policies are not adequately managed by the FDA. In fact, when a product is no longer in
shortage and removed from the list, all three stakeholder groups share the concern that the
60-day grace period for 503B OFs to continue distribution of already made drugs is too short.
Study comments express this sentiment equally by both 503B and 503A compounding
stakeholders: “Investment is too significant considering the uncertainty of when a drug shortage
will resolve” (Respondent 035, 503B).

“For large scale operations, revving up production causes companies to incur
large volumes of stock. 60 days is not sufficient to deplete this stock in most cases.
I feel a 6 month time frame would give facilities ample time to coordinate the
removal of a product from their production without wasting” (Respondent 092,
503A)

Despite potential challenges to the registration and operation as a 503B OF, my results
indicate both the 503A and 503B stakeholders believe the outsourcing facility business model
could be supported by sufficient revenue with an appropriate risk-based approach to regulation.

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However, the lack of allowable products to compound along with the volatility of the DSL seem
to offer limited business incentives for the 503B OFs. The results of my survey indicate that
while the 503B OF stakeholders have engaged in FDA initiatives to implement the requirements
of the CQA, they are not satisfied with the reciprocal FDA engagement to meet needs of their
industry.
5.3.3.3 Pharmaceutical Manufacturers would like to see higher standards for compounded
drugs
This study is likely the first time the pharmaceutical manufacturer industry stakeholders
have been included in research examining the regulatory framework of drug compounding. The
findings from this study reveal that the pharma industry stakeholders have strong opinions of
drug compounding and related regulations. For example, they generally view compounded drugs
as being inferior to the drugs manufactured by their industry. Additionally, they think that
compounding operations should be more strictly regulated in terms of production, quality, and
safety standards. But these views may not be fully informed. As the results of this study indicate,
the pharma respondents have a low level of awareness, knowledge, and interest in compounding
regulations. Most pharma respondents do not review compounding-related guidance, do not keep
informed of FDA policy updates, and are not familiar with the cooperative efforts between the
states and FDA. These findings point to a lack of engagement by the pharma group that may not
view itself as having a stake in this area. However, as one respondent commented,
pharmaceutical manufacturers should be more involved in the CQA implementation process:
“Manufacturers should be as involved in the CQA as much as FDA and compounding facilities.
Manufacturers have expertise, clinical experience, and also capital to innovate to best ensure
patient safety, from manufacture to administration” (Respondent 100, pharma).

172
The pharma industry should, in fact, see itself as a real stakeholder because it is the
pharma’s drug shortages that create opportunities for the 503B OFs relying on this list to plan
their compounding activities. In addition, APIs and finished products manufactured by pharma
are frequently used as starting materials for 503B and 503A products. Hence, there is a close
interplay between the pharma business and compounding operations. Moreover, adverse events
associated with compounded copies of branded products or drugs compounded from pharma
products could directly impact the reputation of a pharmaceutical company. But in contrast to the
comment provided above, some in the pharma industry do not see the linkage between their
activities and those of drug compounding operations. This view is reflected in the comment: “My
company develops ethical pharmaceuticals and biologics. We have no interest or opinion on
compounded products or the associated regulations” (Respondent 022, pharma).
It is clear that the 503A and 503B compounders need to be fully engaged in the
implementation of the CQA as these groups are directly impacted by the law. But the question
remains as to whether the pharma industry should be more engaged. The findings from this
research indicate that most pharma respondents do not view drug compounders as equal
stakeholders in the therapeutic ecosystem. Hence, the pharma group may not see a need to
engage the compounding group or be concerned with the CQA discussions. However, research
by “Mitchell, Agle, and Wood” point to the importance of engagement by stakeholders who
themselves may not be directly involved in a particular activity (Mitchell et al., 1997). The FDA
could, for its part, expand its outreach efforts to include the pharma industry so that all three
stakeholders (503A, 503B, and pharma) can operate on a level playing field to provide patients
in the U.S. with the necessary medicines to meet their needs.

173
5.4 Future Directions and Concluding Thoughts
The Compounding Quality Act introduced a new entity in the form of the 503B OF that
sits at the intersection of community pharmacies and the pharmaceutical industry, creating a
three-tiered regulatory framework designed to meet the needs of the U.S. public. But this new
system may not be working as intended.
The results of the study indicate that CQA in its current form is commonly viewed as
ineffective and should be revised. While 503Bs deem CQA as improving the quality and safety
of compounded drugs, they also see the restrictions of the law as hindering their ability to
succeed commercially. Pharmaceutical manufacturers and 503As, on the other hand, generally
do not think that CQA improves quality or safety of compounded drugs. But further studies to
collect measurable data are needed to understand the full impact of CQA. These could include
collecting and analyzing data from inspections, compliance findings, and adverse events, to
determine if the CQA is improving the conditions of compounding facilities or decreasing the
number of illnesses and outbreaks.
The concerns of 503As and, to some extent, 503Bs that the FDA may not be supportive
of their needs are consistent with the uneasiness that compounding pharmacies have voiced over
the years about the federal government’s encroachment on the practice of pharmacy. These
concerns are exacerbated by the perception that the FDA is closely aligned with the
pharmaceutical industry and is not interested in the concerns of the compounding pharmacies.
The number of the 503B OFs, which has remained extremely low almost eight years following
the passage of CQA, indicates that the current regulatory environment fails to promote the
entrepreneurship required to expand this new business model.
Finally, the findings from this study suggest that the FDA should revisit how it engages
with 503As and 503Bs. The compounding pharmacy sector is a new area of oversight for the

174
agency and, as such, requires careful attention to ensure that the voices of these new stakeholders
are included in the regulatory process. The insights gained from this research should inform the
regulators as they develop new policies to fully implement the CQA.

175
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Creator Gangi, Victor J. (author)

Core Title Examining the regulatory framework for drug compounding: industry views and experiences

School School of Pharmacy

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Degree Conferral Date 2021-12

Publication Date 09/22/2021

Defense Date 08/30/2021

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