Facility Definition 
Under Section 503B of 
the Federal Food, Drug, 
and Cosmetic Act 
Guidance for Industry 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Department of Health and Human Services 
Food and Drug Administration 
Center for Drug Evaluation and Research (CDER) 
 
May 2018 
Compounding and Related Documents 
 
   
Facility Definition 
Under Section 503B of 
the Federal Food, Drug, 
and Cosmetic Act 
Guidance for Industry 
 
 
 
 
 
Additional copies are available from: 
Office of Communications, Division of Drug Information  
Center for Drug Evaluation and Research 
Food and Drug Administration 
10001 New Hampshire Ave., Hillandale Bldg., 4th Floor  
Silver Spring, MD 20993-0002  
Phone: 855-543-3784 or 301-796-3400; Fax: 301-431-6353 
Email: druginfo@fda.hhs.gov  
https://www.fda.gov/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/default.htm 
 
 
 
 
 
 
 
 
 
 
U.S. Department of Health and Human Services 
Food and Drug Administration 
Center for Drug Evaluation and Research (CDER) 
 
May 2018 
Compounding and Related Documents 
 
  Contains Nonbinding Recommendations 
 
TABLE OF CONTENTS 
 
 
 
I.  INTRODUCTION............................................................................................................. 1 
II.  BACKGROUND ............................................................................................................... 1 
III.  POLICY ............................................................................................................................. 4 
A.  Segregating Compounding of Drug Products Under Section 503A From Compounding of 
Drug Products Under Section 503B ............................................................................................. 4 
B.  Compounding Drug Products Under Section 503B and Conventionally Manufacturing Drug 
Products at the Same Facility ....................................................................................................... 6 
C.  Registering an Outsourcing Facilitys Place of Business ............................................................ 8 
i  Contains Nonbinding Recommendations 
 
Facility Definition Under Section 503B of the Federal Food, Drug, 
and Cosmetic Act 
1
Guidance for Industry  
 
 
This guidance represents the current thinking of the Food and Drug Administration (FDA or Agency) on 
this topic.  It does not establish any rights for any person and is not binding on FDA or the public.  You 
can use an alternative approach if it satisfies the requirements of the applicable statutes and regulations.  
To discuss an alternative approach, contact the FDA office responsible for this guidance as listed on the 
title page.   
 
 
 
I.  INTRODUCTION  
 
This guidance is intended for entities that are registered or are considering registering with FDA 
as an outsourcing facility under section 503B of the Federal Food, Drug, and Cosmetic Act 
(FD&C Act) (21 U.S.C. 353b).2  Section 503B defines an outsourcing facility, in part, as a 
facility at one geographic location or address.  FDA has received questions from outsourcing 
facilities and other stakeholders about the meaning of this term, such as whether multiple suites 
used for compounding human drugs at a single street address constitute one or multiple facilities, 
or whether a single location where human drugs are compounded can be subdivided into separate 
operations compounding under different standards.  FDA is issuing this guidance to provide the 
agencys current thinking on these issues, and related issues regarding how to ensure that the 
compounding of drugs in an outsourcing facility occurs only in accordance with section 503B. 
 
In general, FDAs guidance documents do not establish legally enforceable responsibilities.  
Instead, guidances describe the Agencys current thinking on a topic and should be viewed only 
as recommendations, unless specific regulatory or statutory requirements are cited.  The use of 
the word should in Agency guidances means that something is suggested or recommended, but 
not required.  
 
II.  BACKGROUND 
 
Section 503A, added to the FD&C Act by the Food and Drug Administration Modernization Act 
of 1997, describes the conditions that must be satisfied for human drug products compounded by 
a licensed pharmacist in a State-licensed pharmacy or Federal facility, or by a licensed physician, 
to qualify for exemptions from three sections of the FD&C Act: 
 
                                                 
1 This guidance has been prepared by the Center for Drug Evaluation and Research in cooperation with the Office of 
Regulatory Affairs at the Food and Drug Administration.  
 
2 A new section 503B was added to the FD&C Act by the Drug Quality and Security Act (DQSA). See Pub. L. 
No.113-54,  102(a), 127 Stat. 587, 587-588 (2013). 
  1  Contains Nonbinding Recommendations 
 
  section 501(a)(2)(B) (concerning current good manufacturing practice (CGMP) 
requirements); 
  section 502(f)(1) (concerning the requirement to label drugs with adequate directions for 
use); and 
  section 505 (concerning drug approval requirements). 
 
One of the conditions that must be met for a compounded drug product to qualify for the 
exemptions under section 503A of the FD&C Act is that it must be compounded for an 
identified individual patient based on the receipt of a valid prescription . . . .3 
 
Section 503B, added to the FD&C Act by the DQSA in 2013, created a new category of 
compounders called outsourcing facilities. Section 503B describes the conditions that must be 
satisfied for human drug products compounded by or under the direct supervision of a licensed 
pharmacist in an outsourcing facility to qualify for exemptions from three sections of the FD&C 
Act:  
 
  section 502(f)(1) (concerning the requirement to label drugs with adequate directions for 
use);  
  section 505 (concerning drug approval requirements); and 
  section 582 (concerning Drug Supply Chain Security Act requirements).   
 
Section 503B(d)(4) of the FD&C Act defines an outsourcing facility as a facility at one 
geographic location or address that (i) is engaged in the compounding of sterile drugs; (ii) has 
elected to register as an outsourcing facility; and (iii) complies with all of the requirements of 
this section.  An outsourcing facility is not required to be a licensed pharmacy, and it may or may 
not obtain prescriptions for identified individual patients.4  Because drugs compounded by 
outsourcing facilities are not exempt from section 501(a)(2)(B) of the FD&C Act, outsourcing 
facilities are subject to CGMP requirements.5,6   
 
One of the conditions that must be met for a compounded drug to qualify for the exemptions 
under section 503B is that it must be compounded in an outsourcing facility in which the 
compounding of drugs occurs only in accordance with this section (section 503B(a)(11)).  FDAs 
                                                 
3 See section 503A(a). 
 
4 See section 503B(d)(4)(C). 
 
5 See section 503B(a). 
 
6 FDA has issued a draft guidance entitled, Current Good Manufacturing Practice  Interim Guidance for Human 
Drug Compounding Outsourcing Facilities Under Section 503B of the FD&C Act (Interim CGMP Guidance).  
The Interim CGMP Guidance, when finalized, will describe FDAs current thinking regarding outsourcing facilities 
and the CGMP requirements in 21 Code of Federal Regulations (CFR) 
 parts 210 and 211 until more specific CGMP regulations for outsourcing facilities are promulgated.     
 
We update guidances periodically.  To make sure you have the most recent version of a guidance, be sure to check  
the Agencys guidance website at http://www.fda.gov/ForIndustry/FDABasicsforIndustry/ucm234622.htm.   
  2  Contains Nonbinding Recommendations 
 
guidance document, For Entities Considering Whether to Register As Outsourcing Facilities 
Under Section 503B of the Federal Food, Drug, and Cosmetic Act,7 clarifies that: 
 
If you register a facility as an outsourcing facility, you are indicating your intent for the 
facilitys compounded drugs to be regulated under section 503B of the FD&C Act.  
Under section 503B(a)(11), a compounded drug can only qualify for the exemptions from 
sections 502(f)(1), 505, and 582 of the FD&C Act if all of the facilitys compounded 
drugs are compounded in accordance with section 503B (page 4). 
 
The guidance further states that: 
 
By registering as an outsourcing facility, an entity is electing to have its compounded 
drugs regulated under section 503B of the FD&C Act, not section 503A. Drugs 
compounded at an outsourcing facility are not eligible for the exemptions provided in 
section 503A, even if the conditions in that section are met with respect to the particular 
drug (page 5). 
 
Some outsourcing facilities compound drugs both according to patient-specific prescriptions as 
well as in response to orders that are not patient-specific, as section 503B permits them to do.8  
FDA has been asked whether an outsourcing facility can create a separate area within its facility 
for compounding according to patient specific prescriptions under section 503A, and not follow 
CGMP requirements in that area.  The Agency has also been asked whether drugs can be 
compounded according to patient-specific prescriptions in an adjacent area or room, or in a 
separate suite, but with the same staff and the same materials used in 503B compounding.   
 
The CGMP regulations9 contain requirements for facility design, training and qualified staff, 
control of incoming components, aseptic processing, air quality, environmental monitoring, and 
related requirements designed to ensure the quality of the finished drug product. The application 
of CGMP requirements to only some drugs produced in an outsourcing facility, or application of 
the different conditions in section 503A and 503B to commingled compounding activities, could 
cause confusion about what requirements apply and could lead to the production of substandard 
drugs.   
 
For that reason, and because all drug products compounded in an outsourcing facility must be 
compounded in accordance with section 503B and with CGMP requirements, this guidance 
clarifies FDAs current thinking on what constitutes a facility at one geographic location or 
address as that term is used in section 503B and addresses some related issues. 
 
                                                 
7 See the guidance, For Entities Considering Whether to Register As Outsourcing Facilities Under Section 503B of 
the Federal Food, Drug, and Cosmetic Act.  
8 Section 503B(d)(4). 
9 See CGMP regulations at 21 CFR Parts 210 and 211. 
  3  Contains Nonbinding Recommendations 
 
III.  POLICY 
 
Section 503B(d) defines an outsourcing facility, in part, as a facility at one geographic location or 
address. FDA interprets facility, as used in this section, to mean a business or other entity under 
one management, direct or indirect, engaged in the compounding of human drug products.  The 
Agency considers all activities, equipment, and materials related to human drug compounding that 
are under the supervision of the facilitys management at the geographic location or address to be 
part of the facility, unless they are completely segregated from the facility by clearly identified 
boundaries. For purposes of this interpretation, such boundaries may include permanent physical 
barriers, such as walls, or doors that are locked to effectively exclude other human drug 
compounding.  
 
Under this interpretation, a facility may be comprised of one or multiple suites within a single 
building, or one or multiple buildings at one geographic location or address. Further, a geographic 
location could include two or more addresses, provided that FDA is capable of inspecting the 
addresses within a single inspection.  
 
The boundaries of the outsourcing facility should be clearly identified by management and 
communicated to staff. When the outsourcing facility registers its place of business with FDA to 
comply with section 503B(b)(1)(A)(i) of the Act, it should identify all of the facilitys rooms, suites, 
and buildings. This includes all locations at the geographic location or address used to support the 
outsourcing facilitys compounding operations.  
 
As noted above, all drug products compounded in an outsourcing facility are regulated under 
section 503B10 and subject to CGMP requirements.11  If the outsourcing facility intends to 
compound patient-specific prescriptions, it may do so within the facility subject to CGMP and 
consistent with the conditions of section 503B. If the owner or operator wishes to compound 
patient-specific prescriptions under the different conditions of section 503A, this must be done 
outside the outsourcing facility, in and by a separate establishment. This statutory condition 
cannot be avoided by subdividing the rooms of the outsourcing facility with a temporary barrier 
such as a curtain, or by limiting the compounding of patient-specific prescription compounding 
within the facility to certain periods of time. All compounding within the outsourcing facility is 
subject to regulation under section 503B, and CGMP requirements. 
 
A.  Segregating Compounding of Drug Products Under Section 503A From 
Compounding of Drug Products Under Section 503B 
 
An entity that owns or manages an outsourcing facility may compound drugs under section 503A 
in a separate establishment located outside the boundaries of the outsourcing facility (a section 
503A establishment). The section 503A establishment may be located near the outsourcing 
facility or in the same building, provided the compounding in the outsourcing facility is 
completely segregated from compounding by the section 503A establishment.  
 
                                                 
10 See section 503B(a)(11).   
 
11 See section 503B(a). 
  4  Contains Nonbinding Recommendations 
 
In determining whether a section 503A facility and an outsourcing facility are completely 
segregated, FDA intends to proceed case by case. Indicia of complete segregation include:   
 
  The outsourcing facility and section 503A establishment do not share any rooms. 
 
  The outsourcing facility and section 503A establishment do not share any fixed 
equipment or supplies for use in compounding. 
 
  The outsourcing facility and section 503A establishment have separate entrance(s) and 
exit(s),12 do not share an internal pass-through opening, and are separated by permanent 
physical barriers. For example, it should not be necessary to go through the outsourcing 
facility to reach any part of the section 503A establishment. 
 
 
Furthermore, it is a compounders responsibility to label, promote, and advertise its compounded 
drug products in a manner that does not mislead customers about whether the drug products were 
compounded in an outsourcing facility or a 503A establishment13 (e.g., the labeling should 
clearly identify the compounder who produced the drug product).  
 
For example, the Agency generally intends to view the following as an instance in which 
compounding in an outsourcing facility is completely segregated from compounding under 
section 503A:  
 
A compounder registers with FDA as an outsourcing facility at 1234 Maple Street Suite 
C.  The outsourcing facility compounds its drugs at this address in accordance with the 
conditions of section 503B and CGMP requirements.  The owner of the outsourcing 
facility also owns a facility that compounds drugs in accordance with the conditions of 
section 503A at 1234 Maple Street Suite D.  Suites C and D are located within the same 
building, but each has separate entrances and exits, and they do not share any rooms in 
which compounding is conducted, an internal doorway, or other pass-through (i.e., a 
person cannot reach suite D directly from suite C).  The two facilities do not share 
materials.  The only compounded drugs distributed by the outsourcing facility from Suite 
C are drugs that were compounded within the outsourcing facility. The facilities drug 
product labels clearly identify the compounder who produced the drug product. 
 
However, if an entity purporting to compound drugs under section 503A is located near an 
outsourcing facility and the entitys operations are not completely segregated from the 
outsourcing facility, FDA generally intends to consider that entity to be part of the outsourcing 
facility and subject to the conditions of section 503B and CGMP requirements. For example, if 
an outsourcing facility compounds drugs in room A and a separate entity compounds drugs in an 
                                                 
12 For example, each facility might have a separate entrance and exit within the same building or leading to the same 
hallway. 
   
13 See section 502(a), (bb) (providing that a compounded drug is misbranded if its labeling, advertising, or 
promotion is false or misleading in any particular). 
  5  Contains Nonbinding Recommendations 
 
adjacent room B, and the two rooms share an internal pass-through or window, FDA would 
likely consider the entity to be part of the outsourcing facility. 
 
FDAs interpretation of facility is consistent with the intent of section 503B.  To be eligible for 
the exemptions in section 503B(a), a drug product must be compounded in an outsourcing 
facility in which the compounding of drugs occurs only in accordance with section 503B (see 
section 503B(a)(11)).  Outsourcing facilities may or may not obtain prescriptions for identified 
individual patients, and they are not subject to the interstate distribution conditions in section 
503A.  Therefore, the intent of this provision is to ensure that all drugs compounded in an 
outsourcing facility under section 503B are compounded in accordance with CGMP 
requirements, labeled appropriately, subject to the specific adverse event reporting requirements 
issued under section 503B, and otherwise compounded in accordance with the conditions of 
section 503B.   
 
The statutory requirement that all compounding conducted within the outsourcing facility to be 
in accordance with section 503B prevents commingling of compounding activities under sections 
503A and 503B.  A drug product compounded under section 503A may be visually 
indistinguishable from a drug product compounded under section 503B regardless of the 
conditions under which it is compounded.  It is important to be able to follow the production of 
drug products compounded in an outsourcing facility to ensure that the products are made under 
CGMP requirements from the time the bulk drug substances are received at the facility through 
production of the finished dosage form.  If a firm compounds drug products in one facility under 
different standards, it could be difficult to ensure that all of the products were made under the 
correct standards, particularly if the activities are commingled (e.g., because compounding under 
both standards draws on the same supplies, equipment, storage, or processing areas), or if 
compounded drug products are marketed under the same firm name or from the same facility.  
Further, if drug products are compounded in neighboring suites in the same building that are not 
completely segregated, or in the same suite, it may be impossible to determine whether a 
prescription was obtained for the particular drug product before it was distributed, leading to 
potential circumvention of a condition of section 503A.  The Agencys interpretation also 
provides clarity during inspections regarding which standards apply to the location that is being 
inspected. 
 
A clear separation between 503A and 503B facilities helps ensure that those obtaining the drugs 
will know the standards under which they were compounded.  Furthermore, the public health is 
best served, and an important objective of section 503B is achieved, if all drug products 
compounded in an outsourcing facility, whether patient-specific or non-patient specific, are 
compounded in accordance with CGMP requirements and the requirements in section 503B of 
the FD&C Act. 
 
B.  Compounding Drug Products Under Section 503B and Conventionally 
Manufacturing Drug Products at the Same Facility 
 
 
If a section 510-registered manufacturer registers a facility as an outsourcing facility and makes 
both approved drug products and compounded drug products in the outsourcing facility, the 
  6  Contains Nonbinding Recommendations 
 
compounded drug products would need to meet the conditions of section 503B to qualify for the 
exemptions from sections 502(f)(1), 505, and 582.14 
 
All drug products produced at the facility would be subject to the CGMP requirements in Title 
21, Parts 210 and 211 of the CFR.  As stated above,15 FDA has issued a draft guidance that, 
when finalized, will describe FDAs current thinking regarding outsourcing facilities and these 
CGMP requirements.  When a facility both manufactures conventional drug products and 
compounds drug products under section 503B, the policies described in FDAs CGMP guidance 
would apply to the facilitys compounded drug products, except with respect to CGMP 
requirements that must be implemented throughout a manufacturing facility and cannot be 
applied differently to different drug products in the same facility, such as environmental 
monitoring and pressure differential monitoring requirements.    
 
Under FDAs interpretation, approved drug products and drug products compounded under 
section 503B may be produced in the same facility (e.g., without separation by a permanent 
physical barrier) because this activity does not present the concerns described above.16 For 
example, an outsourcing facility could not commingle its compounded and conventional drug 
products to avoid manufacturing the conventional drug products in accordance with applicable 
CGMP requirements or to avoid compounding drug products in accordance with the conditions 
of section 503B.  An outsourcing facilitys compounded drug products may be more easily 
differentiated from its conventional drug products; the conventional drug products may be the 
subject of approved drug applications and are listed with FDA under section 510 of the FD&C 
Act, while drug products compounded under section 503A are unapproved17 and are generally 
not listed.  Furthermore, outsourcing facilities must label compounded drug products with the 
statement, This is a compounded drug,18 so purchasers of compounded drug products from an 
outsourcing facility that also manufactures conventional drug products will know that the drug 
products that they purchased were compounded.  FDA verifies during inspections that 
outsourcing facilities are producing their compounded and conventional drug products in 
accordance with the applicable standards, including that the drug products are labeled 
appropriately.   
 
                                                 
14 We do not read compounding in section 503B(a)(11) of the FD&C Act to refer to the manufacture of a 
conventional drug product. Therefore, a drug product may be compounded in an outsourcing facility in accordance 
with section 503B even if a conventional drug product is manufactured in that outsourcing facility not in accordance 
with section 503B.   
 
15 See footnote 6. 
 
16 However, CGMP may require segregation of certain drug products or activities in certain circumstances. For 
example, 21 CFR 211(42)(d) requires that operations relating to the manufacture, processing, and packing of 
penicillin shall be performed in facilities separate from those used for other drug products for human use.  
17 Drug products compounded under section 503B are similarly unapproved. 
 
18 See section 503B(a)(10). 
 
  7  Contains Nonbinding Recommendations 
 
C.  Registering an Outsourcing Facilitys Place of Business 
 
When a facility registers with FDA as an outsourcing facility, it is required, among other things, 
to register its place of business. Section 503B(b)(1)(A)(i). The facilitys registration should 
identify as its place of business the address, or the addresses at one geographic location, where 
the outsourcing facilitys compounded drugs are manufactured, processed, packed, or held, 19 
and should identify any and all suites and buildings that are part of the facility.  Examples are 
provided below.    
 
  If the outsourcing facility occupies only one portion of a building, its registration should 
include enough information to identify that portion. For example, if the outsourcing 
facility occupies suites B and C of a building located at 1234 Maple Street, it should 
register 1234 Maple Street, Suites B and C, as its place of business. The outsourcing 
facility can identify both suites B and C in a single registration. 
 
  If the outsourcing facility occupies more than one building, its registration should 
identify each building. For example, if the outsourcing facility has a storage facility for 
bulk drug substances and other supplies at 100 Main Street, prepares finished drugs at 
101 Main Street, and then stores, repackages, and ships the finished drugs from 102 Main 
Street, the outsourcing facility should register 100-102 Main St. as its place of business. 
 
 
 
                                                 
19 The facility may not submit the address of a business office that handles administrative or executive work if this is 
at a separate geographic location.  
  8