DRUG 

COMPOUNDING

FDA Has Taken Steps 

to Implement 

Compounding Law,

but Some States and 

Stakeholders 

Reported Challenges

Report to Congressional Committees

November 2016

GAO-17-64

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-17-64, a report to 

congressional committees

November 2016

DRUG COMPOUNDING

FDA Has Taken Steps to Implement 

Compounding Law, but Some States and 

Stakeholders Reported Challenges

What GAO Found

GAO’s survey of state pharmacy regulatory bodies found that drugs are 

compounded in a variety of health care settings, and some data are collected on 

the number of entities that compound drugs (drug compounders), but not the 

volume of compounded drugs. In addition to pharmacies, drug compounding 

settings include physicians’ offices and outsourcing facilities—a new type of 

facility established by law in 2013, which can compound sterile drugs without 

patient-specific prescriptions and register with and are inspected by the Food 

and Drug Administration (FDA), an agency within the Department of Health and 

Human Services (HHS). While FDA and some states collect data on drug 

compounders, only one state reported collecting data on the number of 

prescriptions or the volume of compounded drugs. In addition, states GAO 

surveyed and stakeholders GAO interviewed did not collect data specific to the 

extent of compounding performed by nonpharmacists, such as physicians.

Nearly all of the states GAO surveyed reported having drug compounding laws, 

regulations, or policies, though few apply to nonpharmacists, and states conduct 

inspections and can take actions to enforce them. Less than 20 percent of states 

reported having laws, regulations, or policies specific to compounding by 

nonpharmacists (e.g., physicians), and these state laws varied. To help ensure 

compliance, most states reported inspecting drug compounders, such as 

pharmacies and outsourcing facilities, and most states can take several types of 

actions against pharmacies, including monetary fines, and suspension and 

revocation of a license or registration.

Most states reported being satisfied with their communication with FDA and 

other states, although some reported challenges. About three quarters of the 

states reported participating in FDA-sponsored activities, such as 

intergovernmental meetings, and obtaining information from FDA’s website. 

Some states reported challenges with this communication, such as getting FDA 

to respond to requests for information. In terms of communication between 

states, most survey respondents reported that they are satisfied with this 

communication, which occurs through conferences and other activities.

FDA has taken steps to implement its regulatory responsibilities to oversee drug 

compounding, but states and stakeholder organizations have cited challenges

and concerns. FDA has issued numerous draft and final guidance documents 

related to drug compounding, and conducted more than 300 inspections of drug

compounders, which resulted in actions such as FDA issuing warning letters and 

voluntary recalls of potentially contaminated compounded drugs. Some 

stakeholder organizations said the amount of time it takes FDA to finalize the 

guidance and other documents—including those required by the 2013 law—is 

challenging. FDA officials noted that reviewing the large number of comments 

received has contributed to the time the agency has taken to finalize them. 

States and stakeholder organizations also cited concerns related to access to 

compounded drugs and differences between states and FDA on the appropriate 

inspection protocols to use when inspecting drug compounders. In August 2016, 

FDA changed its procedures to address concerns about the appropriate 

protocols to use for these inspections.

View GAO-17-64. For more information, 

contact Marcia Crosse at (202) 512-7114 or 

crossem@gao.gov.

Why GAO Did This Study

Drug compounding is the process of 

combining, mixing, or altering

ingredients to create a drug tailored to 

the needs of an individual patient. An 

outbreak of fungal meningitis in 2012 

linked to contaminated compounded 

drugs raised concerns about state and 

federal oversight of drug compounding. 

The Drug Quality and Security Act, 

enacted in 2013, helped clarify FDA's 

authority and included a provision for 

GAO to report on drug compounding.

This report examines (1) the settings in 

which drugs are compounded, and the 

extent of drug compounding; (2) state 

laws and policies governing drug 

compounding, and how they are 

enforced; (3) communication between 

states and FDA, as well as among 

states, regarding drug compounding, 

and the associated challenges; and (4) 

steps FDA has taken to implement its 

responsibilities to oversee drug 

compounding, and challenges that 

have been reported with these efforts.

GAO surveyed state pharmacy

regulatory bodies in the 50 states, the

District of Columbia, Guam, Puerto 

Rico, and the U.S. Virgin Islands (all 

but 4 completed the survey); reviewed 

documents and interviewed officials 

from FDA, 25 stakeholder 

organizations (including national 

pharmacy and medical associations), 

and agencies in 3 states selected for 

having differing laws and policies;

reviewed relevant laws; and examined 

FDA data on drug compounding

inspections and actions taken.

HHS provided general comments on a 

draft of this report, as well as technical 

comments, which were incorporated as 

appropriate.
Page i GAO-17-64 Drug Compounding

Letter 1

Background 5

Drugs Are Compounded in a Variety of Settings; FDA and Some 

States Collect Data on the Number of Drug Compounders, but 

Not the Volume of Compounded Drugs 10

Nearly All States Reported Having Drug Compounding Laws, 

Though Few Apply to Nonpharmacists, and States Conduct 

Inspections and Can Take Actions to Enforce These Laws 19

Most States Are Satisfied With Their Communication with FDA 

and Other States, although Some States Reported Challenges 31

FDA Has Taken Steps to Implement Its Drug Compounding 

Responsibilities, but States and Stakeholder Organizations 

have Cited Challenges and Concerns 38

Agency Comments 50

Appendix I Information for Purchasers Regarding the Safety and Quality of 

Compounded Drugs 52

Appendix II Objectives, Scope, and Methodology 56

Appendix III Comments from the Department of Health and Human Services 61

Appendix IV GAO Contact and Staff Acknowledgments 64

Tables

Table 1: Requirements Applicable to Drug Compounders under 

Sections 503A and 503B of the FDCA 7

Table 2: Types of Entities Authorized to Prepare Sterile 

Compounded Drugs, by Number of Reporting States 12

Table 3: State-Reported Categories of Licenses, Permits, or 

Registrations for Pharmacies and Other Entities, by State 15

Table 4: States That Reported Data on the Number of Licensed or 

Registered Resident and Nonresident Pharmacies That 

Compound Sterile Drugs, Calendar Year 2015 16

Contents
Page ii GAO-17-64 Drug Compounding

Table 5: Laws, Regulations, or Policies Related to Drug 

Compounding, by Number of Reporting States, as of 

January 1, 2016 20

Table 6: Provisions Related to Drug Compounding, by Number of 

Reporting States, as of January 1, 2016 22

Table 7: State Licensing Requirements for FDA-Registered 

Outsourcing Facilities, by Number of Reporting States 23

Table 8: Number of States That Reported Inspecting Resident and 

Nonresident Sterile Compounding Pharmacies, 

Wholesale Distributors, and Outsourcing Facilities 28

Table 9: Frequency of Recurring Inspections, by the Number of 

States That Reported Conducting Them 29

Table 10: Types of Enforcement Actions That Can Be Taken 

Against Licensed or Registered Pharmacists or 

Pharmacies, by the Number of States That Reported They 

May Take this Action 30

Table 11: States That Reported Participating in FDA-Sponsored 

Activities Related to Drug Compounding and How These 

States Rated the Helpfulness of Each Activity 32

Table 12: The Number of States That Reported Obtaining 

Information Related to Drug Compounding from FDA’s 

Website and How These States Rated the Helpfulness of 

This Information 33

Table 13: States Reporting Challenges in Communication or Other 

Interactions with FDA 35

Table 14: Helpfulness of Communication and Interactions with 

Other State Pharmacy Regulatory Bodies, by States That 

Reported Having Communication and Interactions 37

Table 15: Final and Draft Documents Related to FDA’s Drug 

Compounding Regulatory Responsibilities 39

Table 16: Types of Food and Drug Administration (FDA) 

Inspections, and the Number of Inspections of Drug 

Compounders 41

Table 17: The Number and Type of Actions Taken from May 2012 

to June 28, 2016 Related to Food and Drug 

Administration (FDA) Inspections of Drug Compounders 

That are Not Outsourcing Facilities 45

Table 18: The Number and Type of Actions Taken from March 5, 

2014, to June 28, 2016 Related to Food and Drug 

Administration (FDA) Inspections of Outsourcing Facilities 46
Page iii GAO-17-64 Drug Compounding

Figure

Figure 1: Percentage of States Reporting each Level of 

Satisfaction with Food and Drug Administration (FDA) 

Communication Regarding Drug Compounding 34

Abbreviations

CGMP current good manufacturing practice 

DQSA Drug Quality and Security Act

FDA Food and Drug Administration

FDCA Federal Food, Drug, and Cosmetic Act

HHS Department of Health and Human Services

MOU memorandum of understanding

USP U.S. Pharmacopeial Convention

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Page 1 GAO-17-64 Drug Compounding

441 G St. N.W.

Washington, DC 20548

November 17, 2016

The Honorable Lamar Alexander

Chairman

The Honorable Patty Murray

Ranking Member

Committee on Health, Education, Labor, and Pensions

United States Senate

The Honorable Fred Upton

Chairman

The Honorable Frank Pallone, Jr.

Ranking Member

Committee on Energy and Commerce

House of Representatives

Drug compounding is the process of combining, mixing, or altering

ingredients to create a medication tailored to the needs of an individual 

patient. Compounding is typically used to prepare medications that are 

not commercially available, such as medication for a patient who is 

allergic to an ingredient in a mass-produced pharmaceutical product. At 

the state level, drug compounding has traditionally been overseen by 

state pharmacy regulatory bodies (e.g., boards of pharmacy). In addition 

to pharmacists, other health care practitioners, such as physicians, may 

prepare compounded drugs, and these practitioners are generally 

overseen by their respective state licensing agencies (e.g., state medical 

boards). At the federal level, the Food and Drug Administration (FDA), an 

agency within the Department of Health and Human Services (HHS), is 

responsible for overseeing the safety and quality of domestic and 

imported pharmaceutical products under the Federal Food, Drug, and 

Cosmetic Act (FDCA).1

Concerns have been raised that some pharmacies were going beyond 

traditional drug compounding for individual patients by compounding and 

selling large quantities of drugs to facilities in multiple states without 

meeting federal safety and other requirements applicable to new drugs. 

 1

See 21 U.S.C. §§ 301 et seq.

Letter
Page 2 GAO-17-64 Drug Compounding

Further, an outbreak of fungal meningitis in 2012 linked to contaminated 

compounded steroid injections, which resulted in over 60 deaths and 

hundreds of people getting ill, raised questions about the safety and 

quality of compounded drugs and concerns about state and federal

oversight of drug compounding. In July 2013, we reported that FDA’s 

oversight authority was unclear and recommended that Congress 

consider clarifying FDA’s authority to oversee drug compounding.2 The 

Drug Quality and Security Act (DQSA), enacted in November 2013, 

helped clarify FDA’s authority to oversee drug compounding nationally 

and created a new category of compounders called outsourcing 

facilities—facilities that meet certain FDA requirements, including 

compounding sterile drugs, that register with and are inspected by FDA, 

and are allowed to compound drugs without patient-specific prescriptions. 

The act also included a provision for GAO to review drug compounding.3

This report examines

1. the settings in which drugs are compounded, and the extent of drug

compounding in each state;

2. state laws, regulations, and policies governing drug compounding, 

and how they are enforced;

3. how communication is conducted between states and FDA, as well as 

among states, regarding compounding, and any associated 

challenges; and

4. steps FDA has taken to implement its responsibilities to oversee drug 

compounding since enactment of the DQSA, and any challenges that 

have been reported with these efforts.

This report also includes an appendix that describes information about 

the safety and quality of compounded drugs that is available to 

purchasers of these drugs (e.g., hospitals, health systems, and patients). 

(See app. I.)

 2

See GAO, Drug Compounding: Clear Authority and More Reliable Data Needed to 

Strengthen FDA Oversight, GAO-13-702 (Washington, D.C.: July 31, 2013). We also 

reported on drug compounding in 2003; see GAO, Prescription Drugs: State and Federal 

Oversight of Drug Compounding by Pharmacies, GAO-04-195T (Washington, D.C.: Oct. 

23, 2003).

3

Pub. L. No. 113-54, tit. I, 127 Stat. 587 (2013).
Page 3 GAO-17-64 Drug Compounding

To address our objectives, we administered a web-based survey to the 

state pharmacy regulatory bodies in the 50 states, the District of 

Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands.4 We achieved 

a survey response rate of 93 percent: 50 of the 54 states completed the 

survey. The survey collected information from the states on the settings in 

which drug compounding occurs; available data on drug compounding in 

each state; state laws, regulations, and policies related to drug

compounding; activities states have participated in related to drug 

compounding with FDA and other states; states’ perspectives on 

communication with FDA and other states; and their perspectives on 

FDA’s implementation of the DQSA, among other things.5

In addition, we interviewed officials from 25 stakeholder organizations that 

have a stake or an interest in drug compounding to obtain information on 

topics such as state laws, regulations, and policies on drug compounding;

their perspectives on any challenges in communication between FDA and 

states, as well as among states, related to drug compounding; and their 

perspectives on FDA’s implementation of the DQSA. We selected these 

stakeholder organizations to include national organizations representing 

(1) pharmacies and pharmacists, including those that compound drugs; 

(2) physicians, including those in medical specialties identified as 

compounding drugs; and (3) state boards of pharmacy and state medical 

boards; as well as experts in drug compounding, and an organization that 

conducted research related to drug compounding. We reviewed relevant 

documents provided by these stakeholder organizations, including 

comments submitted to FDA regarding FDA’s compounding-related 

activities. In addition to officials from the 25 stakeholder organizations, we 

interviewed state officials, including officials from the boards of pharmacy, 

medical boards, and the agencies that have oversight responsibility for 

outsourcing facilities in three selected states—North Carolina, Minnesota, 

and Texas. We selected these states because they reported differing 

laws, regulations, or policies related to drug compounding (such as 

oversight of outsourcing facilities) in their responses to the survey, among 

other reasons. We obtained information on state laws, regulations, and 

policies related to drug compounding in each selected state, and we 

 4

We refer to all of the state pharmacy regulatory bodies that we surveyed as states in this 

report.

5

Not all of the 50 respondents that completed the survey answered every survey question.
Page 4 GAO-17-64 Drug Compounding

obtained additional details for certain survey responses from the board of 

pharmacy officials. In addition, we interviewed officials from two 

pharmacy benefit managers—third-party administrators of prescription 

drug programs for certain health plans and federal and state government 

employee plans—to obtain information related to drug compounding, 

including how these entities determine the safety and quality of 

compounded drugs. We used information collected from our survey and 

obtained from the interviews and related documents to describe the 

information about the safety and quality of compounded drugs that is 

available to purchasers of these drugs. The perspectives of the officials 

from the 25 stakeholder organizations, three selected states, and two

pharmacy benefit managers are not generalizable, but provided us with 

valuable insight on these issues.

We interviewed FDA officials to obtain information on steps FDA has 

taken to implement its regulatory responsibilities to oversee drug 

compounding since enactment of the DQSA, and we reviewed relevant 

laws and regulations related to drug compounding. In addition, we 

reviewed relevant documents from FDA, including FDA’s draft 

memorandum of understanding (MOU) with states regarding distribution 

of compounded human drug products, and FDA’s draft and final guidance 

related to drug compounding and implementation of the DQSA, such as 

FDA’s final guidance on registration of outsourcing facilities. We also 

analyzed FDA data on inspections of drug compounders, and data on 

actions taken, such as the issuance of warning letters related to drug 

compounding.6 We determined that the data we used from FDA on 

inspections and actions taken related to drug compounding were 

sufficiently reliable for purposes of this study by discussing data collection 

processes and limitations of the data with agency officials, and comparing 

the data against other published sources. See appendix II for more 

detailed information on our objectives, scope, and methodology.

We conducted this performance audit from May 2015 to November 2016 

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

 6

An FDA warning letter is a correspondence that notifies a responsible individual or firm 

that the agency considers one or more products, practices, processes, or other activities 

to be in violation of the FDCA, its implementing regulations, and other federal statutes.
Page 5 GAO-17-64 Drug Compounding

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

Traditionally, drug compounding is the process of combining, mixing, or 

altering ingredients to create a customized medication for an individual 

patient. For example, a pharmacist may tailor a medication for a patient 

who is allergic to an ingredient in a conventionally manufactured drug or 

prepare a liquid formulation for a patient who has difficulty swallowing 

pills. Pharmacies sometimes compound drugs in advance of receiving 

individual patient prescriptions in anticipation of receiving prescriptions 

based on historical prescribing patterns—a practice referred to as 

anticipatory compounding. Drugs are also sometimes compounded to be 

kept in stock by a hospital, clinic, or physician’s office to administer to 

patients, such as patients with an immediate need for the compounded 

drug—a practice referred to as office-use compounding. In addition to 

pharmacists, other health care practitioners, such as physicians, may also 

compound drugs. Compounded drugs include nonsterile preparations—

such as capsules, ointments, creams, gels, and suppositories—and 

sterile preparations, including intravenously administered fluids, 

ophthalmic products, and other injectable drugs. Compounded sterile 

drugs pose special risks of contamination if not made properly, and 

require special safeguards to prevent injury or death to patients receiving 

them. In addition, nonsterile drugs that are compounded improperly (e.g., 

if they contain too much active ingredient) can also cause serious harm.

An outbreak of fungal meningitis in 2012 linked to contaminated 

compounded drugs led to questions about the safety and quality of 

compounded drugs, and raised concerns about state and federal 

oversight of drug compounding. At the time, concerns were raised by 

FDA and others—including members of Congress and public health 

advocates—that some pharmacies were going beyond traditional drug 

compounding by producing large quantities of compounded drugs without 

prescriptions for individual patients, and selling those compounded drugs 

to facilities in multiple states. Many believed that these types of 

pharmacies were engaging in conventional manufacturing under the 

guise of compounding without meeting safety and other requirements with 

which conventional drug manufacturers must comply. In July 2013, we 

Background
Page 6 GAO-17-64 Drug Compounding

found that the authority of FDA to oversee drug compounding was 

unclear and this lack of clarity had resulted in gaps in oversight of drug 

compounding.7 Specifically, two federal circuit court decisions had 

resulted in differing FDA authority in different parts of the country, and 

these inconsistent decisions contributed to challenges in FDA’s ability to 

inspect and take enforcement action against entities engaging in drug 

compounding.

In November 2013, the DQSA was enacted to help clarify FDA’s authority 

to oversee drug compounding. The act established a new type of facility, 

an outsourcing facility, that prepares sterile compounded drugs and which 

may compound drugs without patient-specific prescriptions.8 These 

outsourcing facilities differ from drug compounders operating under 

section 503A of the FDCA, which exempts drugs compounded by a 

licensed pharmacist or licensed physician based on the receipt of a valid 

prescription, for an identified individual patient, and in accordance with 

certain other conditions, from three key provisions of the FDCA that are 

otherwise applicable.9 The DQSA also removed certain provisions from 

section 503A of the FDCA that were found to be unconstitutional by the 

U.S. Supreme Court in 2002, and affirmed the validity of the remaining 

 7

See GAO-13-702.

8

Section 503B of the FDCA, as added by the DQSA, defines an outsourcing facility as a 

facility at one geographic location or address that is engaged in the compounding of sterile 

drugs; has elected to register as an outsourcing facility; and complies with all of the 

requirements of section 503B. Outsourcing facilities must comply with current good 

manufacturing practice (CGMP) requirements and will be inspected by FDA according to a 

risk-based schedule. In addition, outsourcing facilities must meet certain other conditions, 

such as reporting adverse events and providing FDA with certain information about the 

drug products they compound.

9

Compounded drug products meeting the requirements of section 503A are exempt from 

the following three requirements in the FDCA: the requirements to comply with CGMP 

requirements, label drugs with adequate directions for use, and have an FDA-approved 

new drug or abbreviated new drug application. References to sections 503A and 503B in 

this report are to sections 503A and 503B of the FDCA, as codified at 21 U.S.C. §§ 353a, 

353b.
Page 7 GAO-17-64 Drug Compounding

provisions in section 503A.10 Table 1 outlines some of the requirements 

under section 503A, applicable to 503A compounders, and section 503B, 

applicable to outsourcing facilities.11

Table 1: Requirements Applicable to Drug Compounders under Sections 503A and 503B of the FDCA

503A compoundera 503B outsourcing facility

Who may compound Licensed pharmacist in a state-licensed 

pharmacy or federal facility, or licensed 

physician.

Licensed pharmacist or individual under the direct 

supervision of a licensed pharmacist in an outsourcing 

facility.

Type of drugs compounded May compound nonsterile drugs or sterile 

drugs.

Must compound sterile drugs and may also compound 

nonsterile drugs.

Prescriptions Compounding must be based on receipt of 

a valid prescription for an identified 

individual patient.

b

Compounding may or may not be based on receipt of 

prescriptions for identified individual patients.

Registration with the Food 

and Drug Administration 

(FDA)

No registration requirement. Must register with FDA and reregister annually.

Inspections No requirement for FDA to inspect; while 

FDA may choose to inspect, a pharmacy’s 

or physician’s records may be exempt from 

inspection in certain cases.

c

Inspected by FDA according to a risk-based schedule, 

based on the known safety risks of such outsourcing 

facilities.

Quality standards Exempt from current good manufacturing 

practice (CGMP) requirements, but not 

from other quality requirements, such as 

the prohibition on preparing, packing, or 

holding drugs under insanitary conditions.

d

Must comply with CGMP requirements, in addition to 

other quality requirements, such as the prohibition on 

preparing, packing, or holding drugs under insanitary 

conditions.

d

 10In 2001, the United States Court of Appeals for the Ninth Circuit struck down all of the 

advertising, promotion, and solicitation provisions of section 503A of the FDCA because 

those provisions violated the Free Speech Clause of the First Amendment. The court also 

held that, because these provisions could not be severed from the remainder of section 

503A, all of section 503A was invalid. In 2002, the United States Supreme Court struck 

down the law’s advertising, promotion, and solicitation restrictions without addressing 

whether the rest of section 503A remained law. See Thompson v. W. States Med. Ctr., 

535 U.S. 357 (2002). For additional information on the history of FDA’s authority over drug 

compounding and approach to oversight before enactment of the DQSA, see 

GAO-13-702.

11For purposes of this report, we use the term 503A compounder to refer to individuals or 

entities that are not outsourcing facilities that qualify for the exemptions under section 

503A of the FDCA, including pharmacies, physicians, and federal facilities. Drug 

compounders that do not qualify for the exemptions under section 503A, and are not 

outsourcing facilities under section 503B, are regulated as conventional manufacturers 

and are subject to the provisions of the FDCA applicable to such manufacturers. 
Page 8 GAO-17-64 Drug Compounding

503A compoundera 503B outsourcing facility

Labelinge No labeling requirements. Compounded medications must have a label that 

includes, among other things

• the statement, “This is a compounded drug”;

• the date that the drug was compounded and the 

expiration date;

• the statement “Not for resale” and, where applicable,

“Office Use Only”;

• a list of active and inactive ingredients; and

• the name, address, and phone number of the 

outsourcing facility.

Reporting of drugs 

compounded 

No reporting requirements. Must submit a report to FDA upon initial registration and 

twice per year, identifying the drugs compounded by the 

facility during the previous 6 months. For each drug, the 

report must include the following information

• the active ingredient and its source;

• the strength of the active ingredient per unit;

• the dosage form and route of administration;

• the package description;

• the number of units produced; and

• the National Drug Code number of the source drug 

or bulk active ingredient, if available.

Reporting of adverse events No reporting requirements. Must submit adverse event reports to FDA.

Fees No fee requirements. Must pay annual establishment fees and any applicable 

reinspection fees.

Compounded drugs that are 

essentially copies of 

commercial drugs

Must not compound regularly or in 

inordinate amounts drug products that are 

essentially a copy of a commercially 

available drug product.

Compounded drugs must not be essentially a copy of 

one or more approved drugs.

Bulk substances Product is compounded using bulk drug 

substances that are (1) components of 

FDA-approved human drugs; (2) the 

subject of an applicable monograph; or (3) 

appear on a list developed by FDA.

Product is compounded using bulk drug substances that 

either appear on a list developed by FDA or are used to 

compound drugs that appear on FDA’s drug shortage list 

at the time of compounding, distribution, and dispensing.

Drugs that may not be 

compoundedf Must not compound a drug product that (1) appears on a list developed by FDA of drug 

products withdrawn or removed from the 

market for safety or efficacy reasons, or (2) 

appears on a list developed by FDA of drug 

products that present demonstrable 

difficulties for compounding.

Must not compound a drug product that (1) appears on a 

list developed by FDA of drug products withdrawn or 

removed from the market for safety or efficacy reasons or 

(2) appears on a list of drugs or categories of drugs that 

present demonstrable difficulties for compounding.

Source: GAO analysis of the Federal Food, Drug, and Cosmetic Act (FDCA). | GAO-17-64

Notes: Drug compounders may also be subject to additional requirements under the FDCA.

a

503A compounders are individuals or entities that are not outsourcing facilities that qualify for the 

exemptions under section 503A of the FDCA, including pharmacies, physicians, and federal facilities. 

Drug compounders that do not qualify for the exemptions under section 503A, and are not 

outsourcing facilities under section 503B, are regulated as conventional manufacturers and are 

subject to the provisions of the FDCA applicable to such manufacturers.
Page 9 GAO-17-64 Drug Compounding

b

Compounding can take place after the 503A compounder receives the prescription, or in limited 

quantities before the 503A compounder receives a prescription, provided the compounding is based 

on a history of receiving valid prescription orders for the product.

c

A pharmacy’s records are exempt from FDA’s inspection authority if the pharmacy is in compliance 

with any applicable local laws regulating the practice of pharmacy and medicine, regularly engages in 

dispensing drugs upon a prescription from a licensed practitioner, and does not manufacture, prepare 

or compound drugs for sale other than during the regular course of their business of dispensing or 

selling drugs at retail. Even if a pharmacy or physician is exempt from a records inspection, FDA has 

general inspection authority to inspect any facility in which drugs are manufactured, processed, 

packed, or held. 21 U.S.C. § 374.

d

CGMP requirements provide a framework for a manufacturer to follow to produce safe, pure, and 

high-quality drugs. See 21 C.F.R. pts. 210-211.

e

Compounded drugs remain subject to labeling requirements in section 503(b) of the FDCA 

concerning dispensed prescription drugs, regardless of whether they are compounded by 503A 

compounders or 503B outsourcing facilities. 21 U.S.C. § 352(b).

f

FDA is required to establish lists for each of these categories for 503A compounders and 503B 

outsourcing facilities.

While FDA is required to inspect outsourcing facilities, it does not 

routinely inspect 503A compounders, although it may in certain instances 

(e.g., in response to complaints).12 In general, states regulate 

compounding as part of the practice of pharmacy and the state pharmacy 

regulatory bodies (e.g., boards of pharmacy) are responsible for oversight 

of the practice of pharmacy, which may include inspections of pharmacies 

that are 503A compounders. For example, a state board of pharmacy 

 12FDA inspections may result in FDA issuing inspection observation reports, which are 

called FDA form 483 inspection observation reports, and, in some cases, warning letters 

or other regulatory actions. An FDA form 483 inspection observation report is a report that 

is issued at the conclusion of an inspection when FDA investigators have observed 

conditions that, in their judgment, may constitute violations of the FDCA and related acts.
Page 10 GAO-17-64 Drug Compounding

may inspect pharmacies that compound drugs for compliance with the 

U.S. Pharmacopeial Convention’s (USP) compounding standards.13

Our survey of state pharmacy regulatory bodies found that drugs are 

compounded in a variety of pharmacy and other health care settings, 

including outsourcing facilities. While FDA and some states collect data 

on drug compounders, nearly all of the states reported that they did not 

collect data on the volume of compounded drugs.

Our survey of state pharmacy regulatory bodies found that drugs, 

including sterile drugs, are compounded in a variety of pharmacy and 

other health care settings. Respondents in almost all of the states we 

surveyed reported that different types of pharmacies, such as retail and 

hospital pharmacies, were authorized to prepare sterile compounded 

drugs in their state. Respondents in most states also reported that FDAregistered outsourcing facilities were authorized to compound sterile 

drugs in their states; however, respondents in 5 states reported that these 

 13USP is a scientific nonprofit organization that sets standards for the identity, strength, 

quality, and purity of medicines, food ingredients, and dietary supplements. USP’s current 

suite of General Chapters for compounding includes: Chapter <797> Pharmaceutical 

Compounding—Sterile Preparations, which provides procedures and requirements for 

compounding sterile preparations; Chapter <795> Pharmaceutical Compounding—

Nonsterile Preparations, which provides guidance on applying good compounding 

practices in the preparation of nonsterile compounded formulations for dispensing and/or 

administration to humans or animals; and Chapter <1160>—Pharmaceutical Calculations 

in Prescription Compounding, among others. According to USP officials, USP’s 

compounding chapters reference over 40 additional USP chapters. In addition to setting 

standards that affect compounding, USP—through the United States PharmacopeiaNational Formulary, a compendium of public pharmacopeial standards—provides 

monographs for drug articles, including ingredients used in compounded preparations, 

and monographs for the compounded preparations themselves, comprising standards of 

identity, quality, purity, strength, packaging, and labeling.

Drugs Are 

Compounded in a 

Variety of Settings; 

FDA and Some 

States Collect Data 

on the Number of 

Drug Compounders,

but Not the Volume of 

Compounded Drugs

Drugs Are Compounded in 

a Variety of Pharmacy and 

Other Health Care 

Settings
Page 11 GAO-17-64 Drug Compounding

entities were not authorized to do so for reasons including that the state 

was still in the process of developing a state license for these entities. In 

addition, respondents in over half of the states reported that physicians’ 

offices—both general practitioners’ offices and medical specialty offices 

(e.g., dermatologists and pediatricians)—were authorized to prepare 

sterile compounded drugs in their states; however, respondents in several 

other states reported that they did not know if certain medical settings 

were authorized to do so. For example, respondents in 18 states reported 

that they did not know if general practitioners’ offices were authorized. 

See table 2 for information on the types of entities authorized to prepare 

sterile compounded drugs.
Page 12 GAO-17-64 Drug Compounding

Table 2: Types of Entities Authorized to Prepare Sterile Compounded Drugs, by Number of Reporting States

Type of entity

Number of states (%)

Yes, authorized No, not authorized Don’t know No response

Corporate chain pharmacies (e.g., 

Walgreens, CVS) 42 (84) 5 (10) 1 (2) 2 (4)

Retail pharmacies (e.g., independently 

owned pharmacies, community 

pharmacies, and compounding pharmacies 

that fill walk-in patient prescriptions) 45 (90) 2 (4) 0 (0) 3 (6)

Compounding pharmacies (e.g., largescale pharmacies that do not fill walk-in 

patient prescriptions, and licensed in 

multiple states) 46 (92) 1 (2) 1 (2) 2 (4)

FDA-registered outsourcing facilities 39 (78) 5 (10) 4 (8) 2 (4)

Outsourcing facility (licensed or registered 

by state) 29 (58) 9 (18) 8 (16) 4 (8)

Hospital pharmacies 48 (96) 0 (0) 0 (0) 2 (4)

Outpatient clinics 33 (66) 4 (8) 11 (22) 2 (4)

Home infusion pharmacies 46 (92) 0 (0) 2 (4) 2 (4)

General practitioners’ offices 26 (52) 4 (8) 18 (36) 2 (4)

Medical specialty offices (e.g., 

dermatologists, pediatricians) 26 (52) 5 (10) 18 (36) 1 (2)

Home health care agencies 15 (30) 11 (22) 22 (44) 2 (4)

Hospice and palliative care agencies 14 (28) 10 (20) 22 (44) 4 (8)

Source: GAO survey of state pharmacy regulatory bodies. | GAO-17-64

Note: GAO surveyed the state pharmacy regulatory bodies in the 50 states, the District of Columbia, 

Guam, Puerto Rico, and the U.S. Virgin Islands, and all but 4 completed the survey.

Respondents in several states reported that any licensed or registered 

pharmacy could potentially compound nonsterile drugs. For example, 

respondents in two states commented that almost all pharmacies 

compound or have the potential to compound nonsterile drugs, such as 

simple creams. A respondent in one state commented that they are under 

the assumption that any licensed pharmacy can perform nonsterile 

compounding without a special authorization to do so, and a respondent 

in another state reported that nearly all community and hospital 

pharmacies do at least some nonsterile compounding.

In addition, officials from some of the stakeholder organizations we 

interviewed said that certain medical specialists, such as dermatologists, 

pediatricians, and allergists, prepare compound drugs. They explained 

that, for example, some medical specialists mix nonsterile topical creams 
Page 13 GAO-17-64 Drug Compounding

or sterile preparations, such as lidocaine (a local anesthetic agent that 

can be administered by injection), as part of their medical practice. 

However, some of these officials said that whether health care 

practitioners compounded drugs depended on what was considered 

compounding, and that some medical specialists generally use 

compounded drugs provided by a pharmacy or outsourcing facility and do 

not compound the drugs themselves.

According to FDA officials, there is no good source for data on the extent 

of drug compounding and who is doing it except for data on outsourcing 

facilities. Although outsourcing facilities are required to provide FDA with 

a report of the drugs they compounded during the previous 6-month 

period, including the number of units they produced, aggregate data on 

the listed drugs were not available at the time of our review. According to 

FDA officials, not all outsourcing facilities provided these reports and the 

data provided were not yet collected and maintained in a standard format. 

Therefore, the officials said that FDA does not input the data into a single 

database, but instead maintains this information on the individual 

spreadsheets that the outsourcing facilities provided. According to FDA, 

the agency plans to makes necessary modifications to its electronic 

reporting system to accommodate the information outsourcing facilities 

must provide in the future so that outsourcing facilities will be able to 

electronically submit drug product reports into a single standardized 

format.14 In addition, even though the compounded drugs are reported—

and some outsourcing facilities report thousands of compounded drugs—

FDA has not received data on the quantity of each drug listed in the 

reports in some cases, according to the officials. Further, while all 

outsourcing facilities are required to submit drug product reports to FDA, 

the officials we interviewed said that there are some facilities that have 

not provided it. As of April 22, 2016, 40 of the 59 outsourcing facilities had 

not provided some or all required reports. One FDA official said that to 

date, FDA has not taken regulatory action against outsourcing facilities 

 14FDA issued revised draft guidance on drug product reporting for outsourcing facilities in 

November 2014, and when this guidance is finalized it will prescribe the form and manner 

in which outsourcing facilities are required to submit drug reporting information to FDA. 

See Food and Drug Administration, Electronic Drug Product Reporting for Human Drug 

Compounding Outsourcing Facilities Under Section 503B of the Federal Food, Drug, and 

Cosmetic Act (Rockville, Md.: Nov. 2014).

FDA and Some States 

Collect Data on Drug 

Compounders, but Only 

One State Reported 

Collecting Data on the 

Volume of Compounded 

Drugs
Page 14 GAO-17-64 Drug Compounding

that have not provided the reports of the drugs they compounded unless 

FDA was already taking steps to address some other violation of statute 

by the outsourcing facility, including through the issuance of a warning 

letter. According to the FDA officials, this is because addressing all of the 

firm’s violations that FDA has identified in a single action is a more 

effective mechanism to bring the firm into compliance and a more efficient 

use of agency resources than pursuing separate actions for discrete 

violations of the FDCA.

While respondents in almost all of the states we surveyed reported having 

license categories for resident and nonresident pharmacies, respondents 

in some states reported having other license categories, including those 

specific to sterile drug compounding.15 For example, 12 states reported 

having a separate license category for resident pharmacies that 

compound sterile drugs and 12 states reported having a sterile 

compounding license category for nonresident pharmacies. Other 

respondents reported licensing categories for pharmacies that included 

nuclear pharmacies, home infusion pharmacies, and Internet/mail order 

pharmacies; and entities that distribute compounded drugs.16 (See table 

3.) In addition, respondents in some states reported that they do not have 

separate license categories for specific types of practice settings; 

however, they are aware of pharmacies and other entities in their state 

that engage in certain practice areas (e.g., pharmacies that engage in 

sterile compounding).

 15Resident pharmacies are those located within the state. Nonresident pharmacies are 

those located outside of the state.

16For example, a licensed wholesale distributor may distribute compounded drugs.
Page 15 GAO-17-64 Drug Compounding

Table 3: State-Reported Categories of Licenses, Permits, or Registrations for Pharmacies and Other Entities, by State

Category of license, permit, or registration

Number of states (%)

Yes No No response

Resident pharmacies 50 (100) 0 (0) 0 (0)

Nonresident pharmacies 48 (96) 2 (4)a 0 (0)

Resident sterile compounding pharmacies 12 (24) 38 (76) 0 (0)

Nonresident sterile compounding pharmacies 12 (24) 38 (76) 0 (0)

Resident community pharmacy 22 (44) 27 (54) 1 (2)

Resident nuclear pharmacy 17 (34) 30 (60) 3 (6)

Resident long-term-care pharmacy 11 (22) 38 (76) 1 (2)

Resident hospital pharmacy 25 (50) 23 (46) 2 (4)

Resident home infusion pharmacy 7 (14) 41 (82) 2 (4)

Resident specialty pharmacy 8 (16) 40 (80) 2 (4)

Resident Internet or mail-order pharmacy 5 (10) 41 (82) 4 (8)

Nonresident Internet or mail-order pharmacy 11 (22) 35 (70) 4 (8)

Resident wholesale distributorb 41 (82) 7 (14) 2 (4)

Nonresident wholesale distributorb 36 (72) 10 (20) 4 (8)

Resident outsourcing facility 18 (36) 30 (60) 2 (4)

Nonresident outsourcing facility 15 (30) 31 (62) 4 (8)

Source: GAO survey of state pharmacy regulatory bodies. | GAO-17-64

Notes: GAO surveyed the state pharmacy regulatory bodies in the 50 states, the District of Columbia, 

Guam, Puerto Rico, and the U.S. Virgin Islands, and all but 4 completed the survey.

a

Two states reported that they have a pharmacy license, but not separate licenses for resident and 

nonresident pharmacies.

b

Some states reported that they do not differentiate between resident and nonresident wholesale 

distributors, and some states reported that other state agencies, such as the department of health, 

oversee these entities.

In addition, respondents in half of the states we surveyed reported 

collecting data on licensed or registered pharmacies that compound 

sterile drugs, but not all of these states reported data.17 For example, 16

states reported data for 2015, ranging from 31 pharmacies in Nevada to 

 17Thirty-two states reported that they did not differentiate data on pharmacies on drug 

compounding for human use versus drug compounding for animal (i.e., veterinary) use, 15 

states reported they could differentiate some or all of the data, and 3 states did not 

respond to this survey question. Therefore, some of the data reported could include drug 

compounding for human and animal use.
Page 16 GAO-17-64 Drug Compounding

1,024 in California. Respondents in most of the states that reported data 

on pharmacies that compound sterile drugs reported collecting this 

information yearly. (See table 4.)

Table 4: States That Reported Data on the Number of Licensed or Registered Resident and Nonresident Pharmacies That 

Compound Sterile Drugs, Calendar Year 2015

Number of pharmacies that compound sterile drugs

State

All licensed or 

registered 

pharmacies

Resident

pharmacies

Nonresident

pharmacies

Frequency in which

state collects this data

California 1,024 935 89 Continuously updateda

Florida 581 456 125 Yearlyb

Iowa 385 157 228 Yearly

Kansasc 269 109 160 Yearly

Kentucky 354 184 170 Yearly

Minnesotac 140 100 40 Not specified

Nevadac 31 31 —d Not specified

New Jerseyc 376 175 201 Yearly

North Carolina 448 263 185 Continuously updated

Ohio 352 94 258 Yearly

Oklahomac 313 280 33 Yearly

South Carolinac 336 123 213 Yearly

South Dakotac 35 35 —d Yearly

Texas 928 780 148 Yearlye

Virginia 321 162 159 Yearlyf

Wyoming 146 5 141 Yearly

Source: GAO survey of state pharmacy regulatory bodies. | GAO-17-64

Notes: GAO surveyed the state pharmacy regulatory bodies in the 50 states, the District of Columbia, 

Guam, Puerto Rico, and the U.S. Virgin Islands, and all but 4 completed the survey.

a

California requires a special license for sterile compounding and reported the number of pharmacies 

with that license as of January 1, 2015.

b

Florida reported 2015 data for the state’s fiscal year, July 1, 2014, through June 30, 2015.

c

These states reported estimated counts.

d

Nevada and South Dakota reported that their states do not collect these data.

e

Texas reported 2015 data as of September 8, 2015.

f

Virginia reported 2015 data as of July 2, 2015.

National data on the extent of drug compounding, as measured by the 

number of prescriptions or the volume of compounded drugs (e.g., 

number of units), were not available from our survey, as only one state 

reported collecting these data, and its data were limited to sterile 
Page 17 GAO-17-64 Drug Compounding

compounded drugs. That state reported that 658,128 total prescriptions 

for sterile compounded drugs were dispensed by pharmacies in the state 

in 2014, and 708,142 total prescriptions were dispensed in 2015.18 In 

addition, the state reported that close to 2.5 million units of sterile 

compounded drugs were dispensed by pharmacies in the state in 2014, 

and almost 2 million units were dispensed in 2015.19 Staff from the state’s 

board of pharmacy said that the state does not collect data on the total 

number of all prescriptions dispensed by pharmacies; therefore, they 

could not calculate the percentage of prescriptions for sterile 

compounded drugs to all prescription drugs. Board staff also noted that 

the source of the state’s data was based on self-reporting from 

pharmacies; as such, pharmacies’ methods for identifying and reporting 

numbers of prescriptions and units of sterile compounded drugs may 

differ, and the state cannot confirm the validity or accuracy of the data.

When asked if collecting data on the number of prescriptions for 

compounded drugs or the volume of compounded drugs would have any 

effect on their oversight of drug compounding activities, officials from the 

state boards of pharmacy in our three selected states said that collecting 

such data could be burdensome and costly. For example, the official from 

Texas said that because they have thousands of licensed pharmacies in 

their state, the volume of such data would be overwhelming and they do

not know what they would do with all of that data. The official from North 

Carolina said that there would be a significant cost to collecting these 

data and the ultimate benefit is unclear. In addition, the official from 

Minnesota said that it seemed like there could be a sizable amount of 

data to collect, and the pharmacy board would have to work out details, 

including whether the data would be collected in aggregate or much more 

specifically by patient, how the data would be collated and stored (such 

as in a database), and how the board would pay for such data collection 

and management.

 18According to staff from the state’s board of pharmacy, these data only include sterile 

compounded drugs dispensed by a pharmacy, and do not include sterile compounded 

drugs dispensed by other health care practitioners, such as physicians, or nonsterile 

compounded drugs.

19This state defines a unit of compounded drug dispensed as a single dosage vial or 

package.
Page 18 GAO-17-64 Drug Compounding

Officials in almost all of the stakeholder organizations we interviewed had 

not conducted or were not aware of any studies or reviews on the extent 

of drug compounding or the settings in which compounding occurs in 

each state. However, one stakeholder organization, the Pew Charitable 

Trusts, conducted a survey of the state boards of pharmacy in the 50 

states and the District of Columbia (43 of the 51 states responded) on 

state oversight of sterile drug compounding.20 Among its findings, the 

Pew Charitable Trusts reported that from 3 percent to 24 percent of 

pharmacies in the 43 responding states were performing sterile 

compounding. In June 2016, HHS’s Office of Inspector General reviewed 

spending for compounded drugs under Part D, the Medicare program’s 

prescription drug benefit.21 This review found that Medicare Part D 

spending for compounded drugs rose from $70.2 million in 2006 to 

$508.7 million in 2015, particularly for topical compounded drugs which 

include creams and ointments. The HHS Office of Inspector General 

attributed this increase to both an increase in the average cost of 

prescriptions and an increase in the number of beneficiaries receiving 

these compounded drugs.

While respondents in 26 states reported that providers in general 

practitioners’ and medical specialty offices were authorized to compound 

drugs in their state, we did not find any sources of data specific to the 

extent to which this occurs. In one of our selected states, the state 

medical board official said that the extent of drug compounding by 

physicians and nonpharmacist health care practitioners is likely minimal 

because their board has not heard about it; however, because the board 

is complaint driven (i.e., they only inspect or investigate practitioners if a 

complaint has been submitted) it could be that such compounding activity 

has not led to any complaints. Another state’s medical board official told 

us that it is not known whether the scale of compounding by physicians is 

small and specific to certain medical specialties, or whether it is 

widespread. This official speculated that it is not widespread, except 

 20The Pew Charitable Trusts, National Assessment of State Oversight of Sterile Drug 

Compounding (Washington D.C.: February 2016). The Pew Charitable Trusts also 

reported on best practices related to drug compounding; see The Pew Charitable Trusts, 

Best Practices for State Oversight of Drug Compounding (Washington D.C.: March 2016).

21Department of Health and Human Services, Office of Inspector General, High Part D 

Spending on Opioids and Substantial Growth in Compounded Drugs Raise Concerns 

(Washington D.C.: June 2016).
Page 19 GAO-17-64 Drug Compounding

within particular medical specialties. Further, officials from one 

stakeholder organization—a national medical association—said that they 

were not sure how extensive compounding by physicians is or the amount 

of compounding that is being conducted; and officials from another 

stakeholder organization—a different national medical association—told 

us that they would not know how to go about gathering information on the 

extent of compounding by physicians. Finally, an official from another 

stakeholder organization—a national pharmacy association—told us the 

extent of physician compounding varies dramatically depending on the 

practice environment or physician specialty, in that almost every patient 

receives compounded drugs from physicians in outpatient surgery and 

cancer centers, but general practitioners do not usually perform much 

compounding otherwise.

Respondents in almost all of the states we surveyed reported having 

laws, regulations, or policies specific to the practice of drug compounding. 

However, few apply to physicians and other nonpharmacists. To help 

ensure compliance with state laws, regulations, or policies specific to drug 

compounding, respondents in most states reported inspecting 

pharmacies and other drug compounders, and most reported their state 

can take several types of actions against noncompliant pharmacies or 

other drug compounders.

Respondents in 48 of the states we surveyed reported having laws, 

regulations, or policies specific to the practice of drug compounding; 

however, these generally only apply to pharmacies and pharmacists. A 

respondent in one of the remaining states—Pennsylvania—reported that 

its state had proposed rules and regulations governing compounding 

Nearly All States 

Reported Having 

Drug Compounding 

Laws, Though Few 

Apply to 

Nonpharmacists, and 

States Conduct 

Inspections and Can 

Take Actions to 

Enforce These Laws

Almost All States Reported 

Having Laws, Regulations, 

or Policies Specific to 

Drug Compounding
Page 20 GAO-17-64 Drug Compounding

practices.22 The respondent in the other remaining state—New York—

reported that the state did not have any laws specific to compounding; 

however, the state had laws regarding outsourcing facilities operating 

under section 503B of the FDCA. Respondents in over half the states (26) 

reported enacting laws or adopting regulations or policies specific to drug 

compounding in response to the DQSA. Table 5 shows the number of 

states that reported having laws, regulations, or policies specific to drug 

compounding, including pending or proposed laws, regulations, or 

policies, and those specific to nonpharmacist health care practitioners 

and FDA-registered outsourcing facilities.

Table 5: Laws, Regulations, or Policies Related to Drug Compounding, by Number of Reporting States, as of January 1, 2016

State law, regulation, or policy

Number of states with law, regulation, or policy (%)

Yes No Don’t know No response

Laws, regulations, or policies specific to the practice of drug 

compounding 48 (96) 2 (4) 0 (0) 0 (0)

Laws enacted, or regulations or policies adopted, related to 

drug compounding in response to the federal Drug Quality and 

Security Act (Pub. L. No. 113-54) enacted in November 2013 26 (52) 24 (48) 0 (0) 0 (0)

Additional legislation, regulations, or policies related to drug 

compounding under consideration 30 (60) 12 (24) 6 (12) 2 (4)

Laws, regulations, or policies specific to drug compounding by

physicians or other nonpharmacist health care practitioners 9 (18) 23 (46) 17 (34) 1 (2)

Pending or proposed laws, regulations, or policies specific to 

drug compounding by physicians or other nonpharmacist 

health care practitioners 3 (6) 23 (46) 22 (44) 2 (4)

Laws, regulations, or policies specific to Food and Drug 

Administration (FDA) registered outsourcing facilities 17 (34) 27 (54) 4 (8) 2 (4)

Pending or proposed legislation specific to FDA-registered 

outsourcing facilities 13 (26) 28 (56) 7 (14) 2 (4)

Source: GAO survey of state pharmacy regulatory bodies. | GAO-17-64

Note: GAO surveyed the state pharmacy regulatory bodies in the 50 states, the District of Columbia, 

Guam, Puerto Rico, and the U.S. Virgin Islands, and all but 4 completed the survey.

 22The board of pharmacy official in Pennsylvania said that while Pennsylvania did not 

have any laws specific to the practice of drug compounding at the time of our review, the 

state does have a provision in state law regarding pharmacy supplies and preparing 

prescriptions that their inspectors can use when they encounter pharmacies that 

compound drugs, and that their inspectors are trained in USP chapters 795 and 797 

compounding standards.
Page 21 GAO-17-64 Drug Compounding

In addition, respondents in 39 states reported that anticipatory 

compounding for both sterile and nonsterile compounded drugs is 

authorized or allowed in their state, and respondents in 27 states reported 

that compounding for office use is authorized or allowed in their state. 

However, respondents in 4 of the 27 states commented that only FDAregistered outsourcing facilities may compound drugs for office use and a 

respondent in 1 state reported that their state was working on regulations 

to prohibit this practice to align with federal restrictions on pharmacies 

under section 503A.23 In our three selected states, compounding for office 

use is allowed in Texas, but not in North Carolina or Minnesota. The 

Texas board of pharmacy official said that the state enacted legislation to 

allow compounding for office use in 2005, but noted that the volume of 

office-use compounding in pharmacies appears to have dropped 

dramatically because outsourcing facilities registered with FDA are now 

providing this service. The North Carolina board of pharmacy official told 

us that North Carolina revised its laws regarding compounding for office 

use following enactment of the DQSA and this practice is no longer 

allowed in the state. This official said that there is no such thing as officeuse compounding in North Carolina unless a facility is registered with 

FDA as an outsourcing facility. According to the Minnesota board of 

pharmacy official, compounding by licensed pharmacies for office use has 

not been allowed in the state for decades, and an exemption that had 

been provided for some large health care systems and specialty 

pharmacies to compound products to use within their system is no longer 

available.

State laws, regulations, and policies related to licensing for sterile drug 

compounding, labeling and testing of compounded drugs, compounding 

qualifications and standards, and reporting of compounded drug products 

 23Anticipatory compounding is the creation of a drug product prior to receipt of an 

individual patient prescription in anticipation of receiving prescriptions based on historical 

prescribing patterns. Drug compounding for office use is the compounding of a drug 

product, without an individual patient prescription, to be kept as stock in a doctor’s office, 

hospital, or other health care facility. To qualify for exemption from the requirement to 

follow CGMP requirements and other FDCA provisions under section 503A of the FDCA, 

503A compounders may only compound based on (1) the prescription order for an 

individual patient, or (2) in limited quantities before the receipt of a valid prescription order 

for such individual patient, and based on a history of valid prescription orders for the 

compounded drug product. 21 U.S.C. § 353a(a). Under section 503B of the FDCA, 

outsourcing facilities may compound drugs with or without a patient-specific prescription. 

21 U.S.C. § 353b(d)(4)(C).
Page 22 GAO-17-64 Drug Compounding

varied across states. For example, respondents in 12 states reported 

requiring a license or registration for sterile compounding facilities, and 

respondents in 24 states reported requiring labeling for compounded 

drugs, as of January 1, 2016. Table 6 provides a summary of select 

provisions related to drug compounding and the number of states that 

reported having each provision.

Table 6: Provisions Related to Drug Compounding, by Number of Reporting States, as of January 1, 2016

Provisions related to drug compounding Number of states (%)

Licensing for sterile compounding 

License or registration for sterile compounding facilities 12 (24)

License or registration for pharmacists who prepare sterile compounded drugs 5 (10)

License or registration for physicians or other nonpharmacist health care practitioners who prepare sterile 

compounded drugs 3 (6)

Labeling and testing of compounded drugs

Compounded drug products are required to have labeling that indicates that the drug is a compounded drug 24 (48)

Sterile compounded drugs are subject to random or routine sampling for potency, purity, and sterility 25 (50)

Compounding qualifications and standards

Pharmacy staff are required to demonstrate competence in sterile compounding 33 (66)

Compliance with the U.S. Pharmacopeial Convention (USP) Chapter 797 Pharmaceutical CompoundingSterile Preparations (in part or whole) 33 (66)

Sterile compounding continuing education for licensed pharmacists and/or pharmacy technician 12 (24)

State inspectors must have competence in sterile compounding 22 (44)

Reporting of compounded drugs

Adverse drug events are reported to the state pharmacy board or other state entity, or FDA’s MedWatch 

programa 19 (38)

Nonresident states report to resident state board of pharmacy on any actions taken against resident entities 28 (56)

Complaints filed by another state are reported to the state pharmacy board or other state entity 32 (64)

Source: GAO survey of state pharmacy regulatory bodies. | GAO-17-64

Notes: GAO surveyed the state pharmacy regulatory bodies in the 50 states, the District of Columbia, 

Guam, Puerto Rico, and the U.S. Virgin Islands, and all but 4 completed the survey.

a

MedWatch is the Food and Drug Administration’s (FDA) adverse event reporting system.

Further, respondents in 40 states reported that they require FDAregistered outsourcing facilities that conduct business within their state to 

have a license in their state, and some states require more than one 

license type for FDA-registered outsourcing facilities. (See table 7.) For 

example, one state reported that an FDA-registered outsourcing facility is 

required to register with the state as a manufacturer, but if the facility is 

also providing compounded drugs for patient-specific prescriptions the 

facility must also register as a pharmacy.
Page 23 GAO-17-64 Drug Compounding

Table 7: State Licensing Requirements for FDA-Registered Outsourcing Facilities, 

by Number of Reporting States

State licensing requirement Number of statesa

Pharmacy 20

Wholesale distributor 19

Manufacturer 10

Outsourcing facility (licensed or registered by the state) 12

Source: GAO survey of state pharmacy regulatory bodies. | GAO-17-64

Notes: GAO surveyed the state pharmacy regulatory bodies in the 50 states, the District of Columbia, 

Guam, Puerto Rico, and the U.S. Virgin Islands, and all but 4 completed the survey.

In addition, one state reported requiring Food and Drug Administration (FDA) registered outsourcing 

facilities to be licensed as sterile compounding pharmacies.

a

Total numbers exceed 40 because of states that require registration for more than one license type.

Some states also have different licensing categories for resident (in-state) 

and nonresident (out-of-state) FDA-registered outsourcing facilities, and 

oversight of these facilities varies by state. For example, in our three 

selected states:

• Minnesota. The Minnesota Board of Pharmacy has oversight 

responsibility for outsourcing facilities in Minnesota. The board of 

pharmacy official said that under Minnesota law, outsourcing facilities 

are considered to be a subtype of manufacturer and are required to 

follow CGMP requirements.24 This law also specifies that no license 

shall be issued or renewed for an outsourcing facility unless the 

applicant provides proof of registration with FDA as an outsourcing 

facility, according to the official.

• North Carolina. The North Carolina Department of Agriculture and 

Consumer Services, Food and Drug Protection Division, has oversight 

responsibility for outsourcing facilities in North Carolina. According to 

an official from this department, a state statute specifically refers to 

outsourcing facilities and applies the same requirements applicable to 

conventional drug manufacturers to these facilities, including the 

requirement to register with the department.

25 As with conventional 

drug manufacturers, the department has oversight responsibility for 

 24Minn. Stat. § 151.252, subd. 1a.

25N.C. Gen. Stat. § 106-140.1.
Page 24 GAO-17-64 Drug Compounding

the storage and distribution of outsourcing facilities’ finished 

products.

26

• Texas. The Texas Department of State Health Services, Drugs and 

Medical Devices Group, has oversight responsibility for outsourcing 

facilities in Texas. Officials from this department told us that in-state 

facilities are licensed as manufacturers of prescription drugs, and outof-state facilities are licensed as prescription drug distributors. The 

officials said that Texas law does not specifically address outsourcing 

facilities; therefore, they regulate these entities as manufacturers and 

apply federal regulations and FDA guidelines and policies in their 

oversight of these entities, including inspecting them under CGMP 

requirements.

Respondents in less than 20 percent of states (9 states) reported having 

laws, regulations, or policies specific to compounding by physicians or 

other nonpharmacist health care practitioners (e.g., physician assistants), 

and these laws varied by state. For example, one state reported that its 

state statute requires pharmacy board licensure of all entities that 

compound drugs and possess compounded drugs, including physicians;

and another state reported having a law that specifically allows a medical 

practitioner to compound drugs for patients under the practitioner’s care.

Officials in one of our three selected states—Minnesota—reported having 

a law specific to compounding by physicians and other nonpharmacist 

health care practitioners. Officials in the two other states reported that 

they did not have any laws, regulations, or policies specific to such 

compounding.

• Minnesota. Minnesota’s statute on compounding applies to both 

health care practitioners and pharmacies.27 The Minnesota statute 

requires practitioners and pharmacists to comply with USP 

compounding standards, among other things. However, an official 

 26The North Carolina official reported that there were two outsourcing facilities in North 

Carolina. One of these facilities is a dual-purpose facility in that it is a compounding 

pharmacy (compounding drugs for specific patients in accordance with a prescription) and 

an outsourcing facility registered with FDA, and the other facility is also a dual-purpose 

facility licensed as a drug manufacturer and an outsourcing facility registered with FDA.

27Minn. Stat. § 151.253. subd. 2.

Few States Reported 

Having Laws or Policies 

Specific to Drug 

Compounding by 

Physicians and Other 

Nonpharmacist Health 

Care Practitioners
Page 25 GAO-17-64 Drug Compounding

from the Minnesota Board of Pharmacy told us that the pharmacy 

board relies on the state’s Board of Medical Practice to inform 

physicians that compounding by physicians should be compliant with 

the USP chapters related to nonsterile and sterile compounding (USP 

chapters 795 and 797, respectively) depending on what they are 

compounding. This official said that the board of pharmacy does not 

know which physicians may be compounding, and while the pharmacy 

board has the authority to inspect any place in the state in which 

drugs are held to be distributed, they need to give advance notice of 

inspection to physicians. An official from the Minnesota Board of 

Medical Practice said that the medical board has a complaint-driven 

process and that if there are allegations that a physician has violated 

medical or pharmacy statutes that regulate the practice of medicine, 

including compounding, the board has the authority to investigate.

• North Carolina. A state statute in North Carolina requires that a 

physician who dispenses prescription drugs, for a fee or other charge, 

register with the board of pharmacy and comply with relevant laws 

and regulations governing distribution of drugs that apply to 

pharmacists; however, this statute does not specifically address 

compounding by physicians.

28 According to the board of pharmacy 

official we interviewed, disciplinary authority over these physicians lies 

solely with the state’s medical board. The North Carolina Medical 

Board official explained that the board has the authority to discipline a 

physician for violating any law involving the practice of medicine and 

that compounding drugs is included in the practice of medicine. This 

official further explained that the board’s role in overseeing physicians 

has historically been complaint driven and the board had not had any 

complaints or issues brought to its attention related to compounding 

by physicians until a recent case referred to them by the board of 

pharmacy. This official said that the board is currently developing its 

role in overseeing compounding by physicians.

• Texas. The Texas medical board official told us that there was no 

specific mention of compounding by physicians in the Texas state 

statute. The official said, however, that if the medical board received a 

complaint that involved one of their licensees (i.e., practitioner) 

violating the state’s drug compounding laws, then the board could 

take enforcement actions.

 28N.C. Gen. Stat. § 90-85.21(b).
Page 26 GAO-17-64 Drug Compounding

Respondents in 21 states reported that their office had heard concerns 

about the practice of compounding by physicians and other 

nonpharmacists. Some of the concerns respondents in these states 

reported were about a lack of regulation and oversight of compounding by 

physicians and other nonpharmacists, and whether physicians were 

complying with compounding standards, such as USP standards. Further, 

respondents in some states were unsure which entity, if any, in their state 

had oversight responsibility for compounding by physicians and other 

nonpharmacists. For example, respondents in 17 states reported that 

they did not know if their state had any laws, regulations, or policies 

specific to drug compounding by nonpharmacists. A respondent in one 

state commented that they do not believe that the medical, nursing, and 

naturopath practitioners are subject to any laws, regulations, or policies 

related to compounding.

Some of the stakeholder organizations we interviewed also expressed 

concerns about compounding by physicians and other nonpharmacists. 

Officials from one stakeholder organization said that drug compounding 

conducted in standalone physician practices does not generally fall under 

medical licensing requirements of state medical boards; therefore, there 

are gaps in oversight of compounding by physicians. Officials from 

another stakeholder organization told us that there are an increasing 

number of companies that are targeting physicians, offering to establish 

compounding labs within the physicians’ offices. The officials said that the 

market has been responding to DQSA by targeting physicians because 

FDA’s oversight of drug compounding has focused on pharmacists, and 

the market sees an opportunity for physicians to profit off of compounding 

rather than see the prescriptions they write leave their offices. An official 

from another stakeholder organization said that there is an enormous 

amount of compounding in physician offices, but few state boards of 

pharmacy have oversight over this practice. This official said that boards 

of pharmacy oversee pharmacists and pharmacies, but do not oversee 

compounding by physicians. According to this official, the state boards of 

pharmacy have tried to bring physician-compounded drugs under their 

oversight, but it has been difficult. Officials from one stakeholder 

organization, the Federation of State Medical Boards, told us that they 

conducted an informal review of state laws regarding compounding by 

physicians (i.e., state medical practice acts) and found that few states 

have laws specifically regulating compounding by physicians; however, 
Page 27 GAO-17-64 Drug Compounding

most medical boards consider compounding as part of the practice of 

medicine. The officials said that they plan to further study this issue to 

determine whether to develop guidelines for their members.29 In addition, 

FDA officials told us that the agency has not taken a proactive role in 

compounding by physicians and there is not much oversight of physician 

compounding by state medical boards. FDA officials noted that they did 

inspect one physician who was compounding after receiving complaints, 

and that they planned to discuss oversight of physician compounding at 

FDA’s intergovernmental meeting with state officials in September 2016.

To help ensure compliance with state laws, regulations, or policies related 

to drug compounding, respondents in most states reported inspecting 

resident pharmacies and relying on inspections by the home state of 

nonresident pharmacies. Specifically, respondents in 42 states reported 

inspecting all licensed resident pharmacies, respondents in 6 states 

reported inspecting some of these pharmacies, and respondents in 29 

states reported relying on a home state’s inspection report for nonresident 

pharmacy inspections.30 Specific to entities that compound or distribute 

sterile compounded drugs, table 8 shows the number of states that 

 29Officials from the Federation of State Medical Boards told us that they introduced a draft 

position statement to their House of Delegates on the compounding of medications by 

physicians in April 2016; however, after receiving comments from stakeholder 

organizations, the officials said that their Committee on Ethics and Professionalism will 

continue to study the issue of compounding by physicians, and that they are in 

discussions with FDA and USP officials regarding this issue.

30For the 2 remaining states that did not report inspecting all or some licensed resident 

pharmacies, the respondent in 1 state reported that their state does not inspect resident 

pharmacies and the other state did not respond to this question. For the 21 remaining 

states that did not report relying on home state inspections for licensed nonresident 

pharmacies, respondents in 6 states reported inspecting some or all nonresident 

pharmacies, 14 states reported that their states do not inspect nonresident pharmacies, 

and 1 state did not respond to this question.

According to officials from the National Association of Boards of Pharmacy, in most cases, 

states do not have the capacity to inspect pharmacies in other states and, therefore, must 

rely on information from either the pharmacy’s home state, a third party, or both in order to 

make informed licensing decisions. The officials said the association has been working to 

develop and implement an inspection blueprint to achieve consistency, quality, and 

reliability of inspections across states, so that a nonresident state can be comfortable 

accepting an inspection report from a home state that uses the blueprint.

Most States Reported 

Inspecting Resident 

Pharmacies and Can Take 

a Variety of Enforcement 

Actions to Enforce Drug 

Compounding Laws
Page 28 GAO-17-64 Drug Compounding

reported conducting inspections for sterile compounding pharmacies, 

wholesale distributors, and outsourcing facilities.

Table 8: Number of States That Reported Inspecting Resident and Nonresident Sterile Compounding Pharmacies, Wholesale 

Distributors, and Outsourcing Facilities

Type of entity

Number of states (%)

Yes, all Yes, some No

State does

not have this

type of entity

Rely on home

state inspection 

(nonresident only) No response

Resident sterile compounding 

pharmacya 36 (72) 3 (6) 2 (4) 8 (16) N/A 1 (2)

Nonresident sterile compounding 

pharmacya 5 (10) 3 (6) 11 (22) 5 (10) 25 (50) 1 (2)

Resident wholesale distributor 33 (66) 9 (18) 5 (10) 1 (2) N/A 2 (4)

Nonresident wholesale distributor 1 (2) 2 (4) 19 (38) 0 (0) 26 (52) 2 (4)

Resident outsourcing facility 24 (48) 2 (4) 11 (22) 12 (24) N/A 1 (2)

Nonresident outsourcing facility 3 (6) 2 (4) 17 (34) 8 (16) 19 (38) 1 (2)

Source: GAO survey of state pharmacy regulatory bodies. | GAO-17-64

Notes: GAO surveyed the state pharmacy regulatory bodies in the 50 states, the District of Columbia, 

Guam, Puerto Rico, and the U.S. Virgin Islands, and all but 4 completed the survey.

a

Twelve states reported having a separate state license category for resident sterile compounding 

pharmacies, and 12 states reported having a category for nonresident sterile compounding 

pharmacies; however, some states reported that they inspect pharmacies they know are 

compounding sterile drugs even if their state does not have a specific license category for these 

entities.

Types of state inspections include prelicensure, for cause (e.g., in 

response to a complaint), and recurring (e.g., every 1 to 2 years). 

Respondents in most states reported conducting these types of 

inspections for resident pharmacies, resident sterile compounding 

pharmacies, and resident wholesale distributors; however, few states 

reported conducting any of these types of inspections for nonresident 

entities. In addition, the number of full-time equivalent pharmacy 

inspectors authorized to inspect either resident or nonresident 

pharmacies, or both, ranged from zero to 138. A respondent in one state 

that did not have any pharmacy inspectors reported that the five 

pharmacy board members conducted these inspections.

Survey respondents also reported their states required certain 

qualifications for pharmacy inspectors. For example, most respondents 

reported that their state required inspectors to have a current 

pharmacist’s license and almost half the states required inspectors to 

have practiced pharmacy for a minimum number of years. Specific to 
Page 29 GAO-17-64 Drug Compounding

inspections of compounding facilities, respondents in 21 states reported 

requiring inspectors to complete a specialized training program in sterile 

compounding, respondents in 15 states reported requiring inspectors to 

complete a specialized training program in nonsterile compounding, and 

respondents in 4 states reported requiring inspectors to have prior 

experience in compounding.

Time frames for recurring inspections of pharmacies and other drug 

compounders, as well as entities that distribute compounded drugs, vary 

by state, and respondents in some states reported challenges in meeting 

their inspection time frames. Respondents reported state inspection time 

frames ranging from at least once a year to every 5 years or more, and 

they also varied by type of entity being inspected. (See table 9.) 

Respondents in 21 states reported that they have challenges in meeting 

their state’s required inspection time frames, citing reasons such as 

limited resources and the time required to conduct inspections. For 

example, a respondent in one state commented that there are over 1,000 

sterile compounding pharmacies in their state that are supposed to be 

inspected each year, which is challenging for the 46 inspectors who 

conduct these inspections. A respondent in another state commented that 

they have a small staff responsible for inspections and investigations, so 

the priority goes to sterile compounding facilities.

Table 9: Frequency of Recurring Inspections, by the Number of States That Reported Conducting Them

Type of entity inspected

Number of states

At least

once a year

1 – up

to 2 years

2 – up

to 3 years

3 – up

to 5 years

5 or

more years

Resident pharmacy 13 16 9 2 1

Nonresident pharmacy 0 2 0 0 0

Resident sterile compounding 

pharmacya 21 11 4 2 0

Nonresident sterile compounding 

pharmacya 1 3 0 0 0

Resident wholesale distributor 5 13 4 4 1

Nonresident wholesale distributor 0 1 0 0 0

Resident outsourcing facility 11 9 1 2 0

Nonresident outsourcing facility 1 2 0 0 0

Source: GAO survey of state pharmacy regulatory bodies. | GAO-17-64

Notes: GAO surveyed the state pharmacy regulatory bodies in the 50 states, the District of Columbia, 

Guam, Puerto Rico, and the U.S. Virgin Islands, and all but 4 completed the survey.

a

Twelve states reported having a separate state license category for resident sterile compounding 

pharmacies, and 12 states reported having a category for nonresident sterile compounding 
Page 30 GAO-17-64 Drug Compounding

pharmacies; how ever, some states reported that they inspect pharmacies they know are 

compounding sterile drugs even if their state does not have a specific license category for these 

entities.

To enforce drug compounding laws, regulations, or policies, respondents 

in most states reported they can take several types of actions against 

pharmacies or other compounding entities, including suspension and 

revocation of a license or registration, monetary fines, or a cease and 

desist order. For example, respondents in 45 states reported they can 

suspend a pharmacy or pharmacist’s license and respondents in 41 

states reported they can impose monetary fines. (See table 10.) Other 

types of actions that respondents reported included nondisciplinary 

administrative letters of warning, restricting a license (e.g., restricting a 

pharmacist from engaging in sterile compounding), and reprimands.

Table 10: Types of Enforcement Actions That Can Be Taken Against Licensed or 

Registered Pharmacists or Pharmacies, by the Number of States That Reported 

They May Take this Action

Type of enforcement action Number of states

Suspension of pharmacist/pharmacy license 45

Voluntary relinquishment or surrender of pharmacist/pharmacy 

license 42

Probation of licensed pharmacist/pharmacy 42

Revocation of pharmacist/pharmacy license 41

Monetary fine 41

Cease and desist order 34

Prosecution under state or federal law 25

Mandatory recall of compounded drugs 19

Source: GAO survey of state pharmacy regulatory bodies. | GAO-17-64

Note: GAO surveyed the state pharmacy regulatory bodies in the 50 states, the District of Columbia, 

Guam, Puerto Rico, and the U.S. Virgin Islands, and all but 4 completed the survey.

While respondents in several states reported data on the number of 

actions taken against pharmacies for cases involving compounded drugs, 

respondents in some states reported that they do not track such data 

specific to cases involving compounded drugs. Of the respondents in the 

41 states that reported they can impose a monetary fine, 13 states 

reported imposing monetary fines on pharmacies or pharmacists for 

cases involving compounded drugs in 2014, and 12 states reported taking 

this action in 2015. The number of pharmacies or pharmacists that states 

reported receiving these fines in 2015 ranged from 1 pharmacy or 

pharmacist in 1 state to 73 in another state. In addition, respondents in 8 

states reported suspending pharmacy or pharmacist licenses in 2014 and 
Page 31 GAO-17-64 Drug Compounding

respondents in 6 states reported taking this action in 2015. Of the 

respondents in the 19 states that reported they can conduct a mandatory 

recall of compounded drugs, 2 states reported taking this action in 2014 

and 3 states reported doing so in 2015. Respondents in 4 states reported 

revoking 1 or 2 pharmacy or pharmacist licenses in 2015 for cases 

involving compounded drugs.

Most states reported overall satisfaction with their communication with 

FDA on compounding issues through events such as FDA-sponsored 

activities, but some states reported challenges with this communication. 

Similarly, most states reported overall satisfaction with communication 

among states at conferences and meetings, but some states noted 

challenges.

FDA has communicated with states on compounding issues in a variety of 

ways, including FDA-sponsored activities, such as intergovernmental 

meetings; most states reported this communication was helpful. In 2014 

and 2015, FDA held three intergovernmental working meetings on 

pharmacy compounding with pharmacy board representatives from states 

and U.S. territories.31 Survey respondents in about three quarters of the 

states reported participating in FDA’s intergovernmental meetings on drug 

compounding, and most participating states reported these activities were 

very or moderately helpful; however, a number of participating states 

reported that the activities were slightly or not at all helpful. For example, 

respondents in 41 states reported participating in FDA’s March 2014 

Intergovernmental Working Meeting on Pharmacy Compounding, and of 

those states that reported participating in this meeting, respondents in 33

states, or about 80 percent, reported that the meeting was very or 

moderately helpful. However, respondents in 4 states that reported 

participating in the March 2014 meeting reported that the meeting was 

 31FDA held its fourth intergovernmental working meeting on pharmacy compounding since 

enactment of the DQSA on September 20 and 21, 2016.

Most States Are 

Satisfied With Their 

Communication with 

FDA and Other 

States, although 

Some States 

Reported Challenges

About Three Quarters of 

States Reported 

Participating in FDASponsored Activities and 

Obtaining FDA Drug 

Compounding Information; 

Some States Reported 

Challenges with This 

Communication
Page 32 GAO-17-64 Drug Compounding

slightly or not at all helpful. See table 11 for the number of states that 

reported participating in FDA-sponsored activities and how the 

participating states rated the helpfulness of the activities.

Table 11: States That Reported Participating in FDA-Sponsored Activities Related to Drug Compounding and How These 

States Rated the Helpfulness of Each Activity

Number of states that reported participating 

in activity (%)

How states that reported

participating in FDA-sponsored activities

rated the helpfulness of each activity

Food and Drug 

Administration (FDA) 

sponsored activity Yes No Don’t know

No 

response

Very or

moderately 

helpful

Slightly or

not at all 

helpful

Don’t 

know

No 

response

FDA’s March 2014 

Intergovernmental 

Working Meeting on 

Pharmacy Compounding 41 (82) 2 (4) 4 (8) 3 (6) 33 4 2 2

FDA’s March 2015 

Intergovernmental 

Working Meeting on 

Pharmacy Compounding 37 (74) 7 (14) 4 (8) 2 (4) 28 5 3 1

FDA’s November 2015 

Intergovernmental 

Working Meeting on 

Pharmacy Compounding 35 (70) 11 (22) 1 (2) 3 (6) 25 6 2 2

FDA’s Pharmacy 

Compounding Advisory 

Committee meeting, 

February 2015a 8 (16) 31 (62) 9 (18) 2 (4) 6 2 0 0

FDA’s Pharmacy 

Compounding Advisory 

Committee meeting, 

June 2015a 7 (14) 34 (68) 5 (10) 4 (8) 5 2 0 0

Source: GAO survey of state pharmacy regulatory bodies. | GAO-17-64

Notes: GAO surveyed the state pharmacy regulatory bodies in the 50 states, the District of Columbia, 

Guam, Puerto Rico, and the U.S. Virgin Islands, and all but 4 completed the survey.

a

The Drug Quality and Security Act, enacted in November 2013, required FDA to convene and 

consult with a Pharmacy Compounding Advisory Committee before issuing certain regulations.

Respondents from most states reported obtaining compounding-related 

information from FDA’s website, and in general, states found this 

information helpful. For example, respondents in 38 states reported 

obtaining a list of FDA-registered outsourcing facilities from FDA’s 

website, and 32 of them found the information very or moderately helpful. 

See table 12 for the number of states that reported obtaining information 

related to drug compounding from FDA’s website and how these states 

rated the helpfulness of the information.
Page 33 GAO-17-64 Drug Compounding

Table 12: The Number of States That Reported Obtaining Information Related to Drug Compounding from FDA’s Website and 

How These States Rated the Helpfulness of This Information

Number of states that reported

obtaining the information (%)

How states that reported obtaining the information 

rated the helpfulness of the information

Information on the Food 

and Drug Administration’s 

(FDA) website Yes No

No 

response

Very or

moderately 

helpful

Slightly or

not at all 

helpful

Don’t 

know

No 

response

List of FDA-registered 

outsourcing facilities 38 (76) 10 (20) 2 (4) 32 3 0 3

Names of compounding 

pharmacies that were 

inspected by FDA 33 (66) 15 (30) 2 (4) 29 3 0 1

FDA Form 483 inspection 

observation reports to 

determine violations found 

during inspections of 

compounding pharmacies 35 (70) 13 (26) 2 (4) 25 7 1 2

FDA Form 483 inspection 

observation reports to 

determine violations found 

during inspections of FDAregistered outsourcing 

facilities 33 (66) 15 (30) 2 (4) 23 6 1 3

FDA warning letters issued to 

compounding pharmacies 35 (70) 13 (26) 2 (4) 27 6 1 1

FDA warning letters issued to 

FDA-registered outsourcing 

facilities 32 (64) 16 (32) 2 (4) 26 4 1 1

Information on recalls of 

compounded drugs 36 (72) 12 (24) 2 (4) 30 3 1 2

Source: GAO survey of state pharmacy regulatory bodies. | GAO-17-64

Note: GAO surveyed the state pharmacy regulatory bodies in the 50 states, the District of Columbia, 

Guam, Puerto Rico, and the U.S. Virgin Islands, and all but 4 completed the survey.

Of the respondents in the 40 states that reported having had 

communication with FDA regarding drug compounding issues, 24 states 

(60 percent) reported that, overall, they were very or somewhat satisfied 

with this communication; however, 9 states (23 percent) reported they 

were very or somewhat dissatisfied. (See fig. 1.) The respondent in one 

state that reported being satisfied with their communication with FDA said 

“It has been very helpful to have ongoing meetings and discussion with 

FDA at FDA-sponsored events and other meetings. The emphasis on 

state communication is noted and appreciated.” However, the respondent 

in another state that indicated dissatisfaction with their communication 

with FDA commented that “there seems to be no real progress in 
Page 34 GAO-17-64 Drug Compounding

providing guidance as to what regulatory approaches FDA intends to 

take—it seems like FDA is burdened by red tape that prevents it from 

sharing information with the states on common issues.”

Figure 1: Percentage of States Reporting each Level of Satisfaction with Food and 

Drug Administration (FDA) Communication Regarding Drug Compounding

Forty states that reported having had communication or interactions with FDA related to 

drug compounding issues were asked about their overall satisfaction with that 

communication or interaction.

Notes: GAO surveyed the state pharmacy regulatory bodies in the 50 states, the District of Columbia, 

Guam, Puerto Rico, and the U.S. Virgin Islands, and all but 4 completed the survey.

Percentages exceed 100 percent because of rounding.

Respondents in 25 states reported that they have not experienced 

specific challenges in their communication or interactions with FDA 

related to drug compounding issues, but respondents in 15 states 

reported experiencing one or more communication challenge with FDA. 

Fourteen of them reported that getting FDA to respond to their requests 

for information was very or moderately challenging; and 10 of them 

reported that getting FDA to provide responses to their questions related 

to oversight of drug compounding was very or moderately challenging. 

Finally, respondents in several states elaborated on their states’ 

communication or interactions with FDA. For example, one respondent 

reported that “it has taken years for the FDA to respond or even 

acknowledge the Board’s communication in some instances. Timeliness 
Page 35 GAO-17-64 Drug Compounding

is a significant issue.” Another respondent reported that when they work 

with FDA, FDA requests a variety of information from the board, but will 

not provide any information to the board. See table 13 for how 15 

states—the states that reported experiencing one or more communication 

challenges with FDA—rated these challenges.

Table 13: States Reporting Challenges in Communication or Other Interactions with FDA 

Significance of challenges in communication or other interactions with 

FDA reported by 15 states reporting challenges

Types of communication

or interactions with the Food and Drug

Administration (FDA) that posed a challenge

Number of states

Very 

challenging

Moderately 

challenging

Slightly 

challenging

Not at all 

challenging

Not 

applicable

Getting FDA to respond to our requests for 

information 7 7 1 0 0

Scheduling an individual meeting with FDA 2 2 5 3 3

Getting FDA to provide responses to our questions 

related to oversight of drug compounding 4 6 3 0 2

Getting notification of pharmacy inspections 

conducted by FDA in our state 2 4 2 6 1

Getting complete information from FDA in Form 483 

inspection observation reports on pharmacy 

inspections conducted by FDA in our state 5 2 3 3 2

Getting FDA approval of our requests for joint 

inspections of licensed or registered pharmacies in 

our statea 2 1 3 1 7

Getting notification from FDA when FDA determines 

a licensed or registered pharmacy in our state is 

acting contrary to section 503A of the Federal Food, 

Drug, and Cosmetic Act 5 3 0 3 4

Getting notification from FDA of FDA enforcement 

actions taken against licensed or registered 

pharmacies in our state 3 5 0 3 4

Source: GAO survey of state pharmacy regulatory bodies. | GAO-17-64

Notes: GAO surveyed the state pharmacy regulatory bodies in the 50 states, the District of Columbia, 

Guam, Puerto Rico, and the U.S. Virgin Islands, and all but 4 completed the survey.

a

One of the 15 states did not indicate a significance of the challenge related to this type of 

communication or interaction with FDA.

FDA officials noted that federal law prohibits FDA from sharing certain 

nonpublic information with state officials that have not provided 
Page 36 GAO-17-64 Drug Compounding

confidentiality commitments to FDA. According to FDA officials, the 

agency has encouraged and worked with states and individual state 

officials to provide such commitments through FDA commissioning or 

information sharing agreements.32 Survey respondents in 27 states 

reported having commissioned officers with FDA; 16 of them reported that 

having commissioned officers for sharing information and conducting 

activities related to drug compounding was very or somewhat effective, 

and 5 of them reported having commissioned officers was very or 

somewhat ineffective.33 A respondent in one state reported that having 

commissioned officers “has expedited the sharing of information,” while a 

respondent in another state reported “the inability to share information 

with other staff, the board, or to use the information obtained through 

commissioner status in disciplinary actions against the subject licensee 

makes this process ineffective and inefficient.” In addition, 11 states 

reported having an information sharing agreement with FDA; 8 of them 

reported this agreement was very or somewhat effective for sharing 

information related to drug compounding, and 2 of them reported the 

agreement was neither effective nor ineffective.34 A respondent in one 

state reported “information sharing [with FDA] has improved greatly in the 

past two years.” However, a respondent in another state reported “the 

process still feels like the state needs to pry information from the FDA.”

We also asked the stakeholder organizations about FDA’s communication 

with the states related to drug compounding. Seven of the 25 stakeholder 

organizations we interviewed said that, overall, communication between 

the states and FDA has improved since the DQSA was enacted; 

 32A state official may be commissioned as an officer of FDA and, by virtue of this status, 

be eligible to receive FDA-owned nonpublic information. 21 U.S.C. § 372. FDA may also 

share certain nonpublic information, such as deliberative and confidential commercial 

information, with state officials under a written confidentiality agreement. 21 C.F.R. § 

20.88. For example, FDA created a 5-year, single signature “Long-Term Drug 

Compounding Information Sharing Agreement” to improve communications and facilitate 

oversight of compounding pharmacies. 

33For the six remaining states, respondents in five states reported that they did not know 

how effective having commissioned officers was for sharing information related to drug 

compounding and one state did not provide a response.

34The remaining state did not respond to the effectiveness of the information sharing 

agreement.
Page 37 GAO-17-64 Drug Compounding

however, 2 stakeholder organizations commented that FDA only has oneway communication with states.

Respondents in 42 states reported communicating with other states 

regarding issues related to drug compounding using venues such as 

national association meetings, e-mails, phone calls, and informal 

networking at FDA-sponsored events. Respondents in 35 states reported 

that they were very or somewhat satisfied with their communication and 

interactions with other state pharmacy regulatory bodies related to drug 

compounding issues. See table 14 for the number of states reporting 

having various types of communications or interactions with other state 

regulatory bodies, and how these states rated the helpfulness of the 

communication or interaction.

Table 14: Helpfulness of Communication and Interactions with Other State Pharmacy Regulatory Bodies, by States That

Reported Having Communication and Interactions

Type of communication or interaction with 

other state pharmacy regulatory bodies

Number of states

States reporting 

having 

communication or 

interaction

Helpfulness of communication or interaction

Very or

moderately helpful

Slightly or

not at all helpful Don’t know

National associations (e.g., National Association 

of Boards of Pharmacy conferences, annual 

national association meetings) 39a 34 3 1

Regional associations (e.g., conferences or 

regional meetings) 26 22 4 0

State-to-state direct communication (e.g., inperson meetings, phone calls and/or emails with 

other state boards of pharmacy) 34 33 1 0

Conduct joint inspections with other state boards 

of pharmacy or other state pharmacy regulatory 

bodies 9 8 1 0

Informal networking with other states that takes 

place at events sponsored by the Food and Drug 

Administration or industry 33 32 1 0

Other types of interactions (e.g., meetings with 

state boards of pharmacy and state 

associations) 6 6 0 0

Source: GAO survey of state pharmacy regulatory bodies. | GAO-17-64

Notes: GAO surveyed the state pharmacy regulatory bodies in the 50 states, the District of Columbia, 

Guam, Puerto Rico, and the U.S. Virgin Islands, and all but 4 completed the survey.

a

One of the 39 states did not indicate a level of helpfulness of national association meetings.

Communication among 

States Occurs through 

Several Venues and 

Activities; Most States are 

Satisfied with this 

Communication, but Some 

Reported Challenges
Page 38 GAO-17-64 Drug Compounding

Respondents in 35 states reported that they had not experienced 

challenges regarding their communication or interactions with other state 

pharmacy regulatory bodies related to drug compounding issues, but 

respondents in 5 states did report challenges. One of the 5 that reported 

challenges commented that some states do not return phone calls, and 

other states have little or no resources. Another respondent that reported 

challenges commented that there needs to be a single national model 

regarding the regulation and licensure of compounding pharmacies.

FDA has taken steps to implement its drug compounding responsibilities 

since enactment of the DQSA, but states and stakeholder organizations 

have cited a number of challenges and concerns. FDA has issued 

numerous guidance documents related to drug compounding, and 

conducted more than 300 inspections of drug compounders. However, 

some stakeholder organizations said the amount of time it takes FDA to 

finalize guidance and other key documents is challenging. States and 

stakeholder organizations also cited concerns regarding FDA’s 

implementation of its drug compounding responsibilities.

FDA has issued numerous documents related to compounding since the 

DQSA was enacted; most of these are draft documents. FDA has 

released final guidance on adverse event reporting requirements, the 

process and fees related to registering with FDA as an outsourcing 

facility, and pharmacy compounding under section 503A, among others. 

The remaining guidance and other documents that are still in draft include 

documents that, according to many stakeholder organizations we 

interviewed, are key to FDA’s implementation of its drug compounding 

responsibilities. See table 15 for final guidance, draft guidance, and other 

draft documents issued by FDA.

FDA Has Taken Steps 

to Implement Its Drug 

Compounding 

Responsibilities, but 

States and 

Stakeholder 

Organizations have 

Cited Challenges and 

Concerns

FDA Has Released Final 

and Draft Documents 

Related to Drug 

Compounding, and 

Conducted More than 300 

Inspections of Drug 

Compounders
Page 39 GAO-17-64 Drug Compounding

Table 15: Final and Draft Documents Related to FDA’s Drug Compounding Regulatory Responsibilities 

Date issued Type Title

Documents issued in final

11/24/2014 Final guidance Fees for Human Drug Compounding Outsourcing Facilities Under Sections 

503B and 744K of the FD&C Acta

11/24/2014 Final guidance Registration of Human Drug Compounding Outsourcing Facilities Under 

Section 503B of the FD&C Acta

8/12/2015 Final guidance Guidance For Entities Considering Whether to Register As Outsourcing 

Facilities Under Section 503B of the Federal Food, Drug, and Cosmetic Act

10/8/2015 Final guidance Adverse Event Reporting for Outsourcing Facilities Under Section 503B of the 

Federal Food, Drug, and Cosmetic Act

7/2/2014 (amended 

10/26/2015 and 6/9/2016)

Final guidance Pharmacy Compounding of Human Drug Products Under Section 503A of the 

Federal Food, Drug, and Cosmetic Act

6/9/2016 Final guidance Interim Policy on Compounding Using Bulk Drug Substances Under Section 

503A of the Federal Food, Drug, and Cosmetic Act

6/9/2016 Final guidance Interim Policy on Compounding Using Bulk Drug Substances Under Section 

503B of the Federal Food, Drug, and Cosmetic Act

10/7/2016 Final rule Additions and Modifications to the List of Drug Products That Have Been 

Withdrawn or Removed From the Market for Reasons of Safety or 

Effectiveness

Documents issued in draft

7/2/2014 Draft guidance Current Good Manufacturing Practice—Interim Guidance for Human Drug 

Compounding Outsourcing Facilities Under Section 503B of the FD&C Acta

11/24/2014 Draft guidance Electronic Drug Product Reporting for Human Drug Compounding Outsourcing 

Facilities Under Section 503B of the Federal Food, Drug, and Cosmetic Act

2/13/2015 Draft guidance Repackaging of Certain Human Drug Products by Pharmacies and 

Outsourcing Facilities

2/13/2015 Draft guidance Mixing, Diluting, or Repackaging Biological Products Outside the Scope of an 

Approved Biologics License Application

2/13/2015 Draft memorandum of 

understandingb Draft Memorandum of Understanding Addressing Certain Distributions of Compounded Human Drug Products Between the State of [insert STATE] and 

the U.S. Food and Drug Administration

4/15/2016 Draft guidance Prescription Requirement Under Section 503A of the Federal Food, Drug, and 

Cosmetic Act

4/15/2016 Draft guidance Hospital and Health System Compounding Under the Federal Food, Drug, and 

Cosmetic Act

4/15/2016 Draft guidance Facility Definition Under Section 503B of the Federal Food, Drug, and 

Cosmetic Act

7/7/2016 Draft guidance Compounded Drug Products That Are Essentially Copies of a Commercially 

Available Drug Product Under Section 503A of the Federal Food, Drug, and 

Cosmetic Act

7/7/2016 Draft guidance Compounded Drug Products That Are Essentially Copies of Approved Drug 

Products Under Section 503B of the Federal Food, Drug, and Cosmetic Act

8/3/2016 Draft guidance Insanitary Conditions at Compounding Facilities
Page 40 GAO-17-64 Drug Compounding

Date issued Type Title

10/18/2016 Proposed rule Amendments to the Regulation Regarding the List of Drug Products That Have 

Been Withdrawn or Removed From the Market for Reasons of Safety or 

Effectiveness

Source: GAO analysis of Food and Drug Administration (FDA) information. | GAO-17-64

a

The FD&C Act is an alternative abbreviation for the Federal Food, Drug, and Cosmetic Act.

b

Under section 503A, FDA is required to develop, in consultation with the National Association of 

Boards of Pharmacy, a standard memorandum of understanding between states and FDA that 

addresses distribution of inordinate amounts of compounded drug products interstate and provides 

for appropriate investigation by a state agency of complaints relating to drug products compounded in 

that state that are distributed outside the state.

According to our review of FDA data, FDA has also inspected drug 

compounders, including outsourcing facilities, and issued FDA form 483 

inspection observation reports. FDA has also taken action, including 

issuing warning letters, when issues have been identified in these 

inspections. From May 2012 through April 22, 2016, FDA completed 265 

inspections of 503A compounders and other drug compounders that were 

not outsourcing facilities. As of April 22, 2016, FDA had completed 75 

inspections of outsourcing facilities. These 75 inspections were at 59 of 

the 91 facilities that had registered with FDA as an outsourcing facility. 

FDA officials noted that many of the entities that registered as 

outsourcing facilities withdrew their outsourcing facility registration 

submission before the agency scheduled an inspection, and others were 

not yet operating when the agency attempted to inspect them.

In general, FDA conducts three types of inspections: for-cause, follow-up, 

and surveillance. See table 16 for a description of FDA inspection types 

and the number of each type of inspection conducted by FDA for drug 

compounders as of April 22, 2016.
Page 41 GAO-17-64 Drug Compounding

Table 16: Types of Food and Drug Administration (FDA) Inspections, and the Number of Inspections of Drug Compounders

Inspection type Description

FDA inspections

of 503A compounders

(from May 2012

through April 22, 2016)a

FDA inspections of 503B 

outsourcing facilities 

(through April 22, 2016)b

For cause FDA conducts for-cause inspections usually in response 

to a complaint, such as a report of a serious adverse 

event or product quality problem (e.g., contamination). 121 6

Follow-up FDA conducts inspections to follow up on earlier 

inspection findings and/or FDA regulatory actions. For 

example, if FDA inspected the drug compounder in the 

past and found concerning practices or if FDA took 

regulatory action, such as issuing a warning letter, FDA 

conducts a follow-up inspection to check whether the 

drug compounder has implemented adequate corrective 

actions. 40 15

Surveillance FDA conducts surveillance inspections of some drug 

compounders that are not outsourcing facilities, 

including 503A compounders. These inspections are 

not in response to an immediate adverse event or 

complaint, but instead are meant to check on drug 

compounders of which FDA is aware (e.g., because of 

prior inspections or complaints).

FDA is required to inspect outsourcing facilities on a 

risk-based schedule. According to agency officials, the 

agency’s goal is to inspect outsourcing facilities within 2 

months of their initial registration with FDA if they had 

not been recently inspected prior to registration, and 

then every 12-18 months thereafter. 104 54

Total 265 75

Source: GAO analysis of FDA information. | GAO-17-64

a

This includes inspections of 503A compounders and other drug compounders that are not 

outsourcing facilities. The 503A compounders are individuals or entities that are not outsourcing 

facilities that qualify for the exemptions under section 503A of the Federal Food, Drug, and Cosmetic 

Act (FDCA), including pharmacies, physicians, and federal facilities. Drug compounders that do not 

qualify for the exemptions under section 503A, and are not outsourcing facilities under section 503B,

are regulated as conventional manufacturers and are subject to the provisions of the FDCA 

applicable to such manufacturers.

b

The Drug Quality and Security Act, enacted in November 2013, created the category of outsourcing 

facility, and FDA conducted its first inspection of an outsourcing facility on March 5, 2014.

According to agency officials, FDA’s Center for Drug Evaluation and 

Research issues all inspection assignments for 503A compounders and 

outsourcing facilities. FDA officials told us that, in an effort to focus the
Page 42 GAO-17-64 Drug Compounding

agency’s resources efficiently, the center and the agency’s Office of 

Regulatory Affairs approach the coordination and scheduling of drugcompounding-related inspection assignments from a national 

perspective.35 Unlike outsourcing facilities or conventional manufacturers, 

503A compounders are not required to register with FDA. As such, FDA 

is only aware of a small percentage of the thousands of pharmacies that 

compound drugs, and FDA does not inspect all 503A compounders, 

according to FDA officials.36 For outsourcing facilities, which register with 

FDA, the agency is required to inspect them on a risk-based schedule.37

As of May 23, 2016, 91 facilities had registered with FDA as outsourcing 

facilities at some point in time, and as of July 2016, FDA had inspected 

46 of the 60 establishments with active outsourcing facility registrations at 

least once.38

According to agency officials, FDA’s risk models—which are used to 

determine which facilities to inspect—use information from a number of 

sources, including FDA’s Field Accomplishment and Compliance Tracking 

System. However, as we reported in 2013, this database does not 

consistently indicate the final inspection classification—that is, it does not 

always include accurate information about whether the agency’s final 

determination was that an official action was indicated, voluntary action 

was indicated, or if no action was indicated from the results of the 

 35According to the officials, certain geographic areas seem to have a higher concentration 

of drug compounders that the agency has reason to inspect. Therefore, the officials said 

the center works closely with FDA’s Office of Regulatory Affairs to assist FDA district 

offices that may become overwhelmed with the volume of compounding inspections. For 

example, FDA may order an inspection of a pharmacy in one district, but assign it to 

investigators from another district that has a lower inspection workload at that time.

36According to FDA officials, FDA uses a risk-based model, using factors such as prior 

regulatory actions, recall history, adverse event history, the history of complaints, and 

findings from prior inspections, to prioritize and make inspection assignments for 503A 

compounders and other drug compounders that are not outsourcing facilities.

37See 21 U.S.C. § 353b(b)(4).

38According to agency officials, FDA’s goal is to conduct the initial inspections of 

outsourcing facilities within 2 months of the facility’s registration, and to conduct 

surveillance inspections on each outsourcing facility every 12 to 18 months thereafter. 

Agency officials reported that in some cases, a facility may have registered as an 

outsourcing facility before the facility was operational; in these circumstances FDA would 

wait to inspect the facility until it is operational. 
Page 43 GAO-17-64 Drug Compounding

inspection.39 We recommended that FDA address this shortcoming by 

taking steps to consistently collect reliable and timely information in FDA’s 

databases on inspections and enforcement actions associated with 

compounded drugs; however, as of June 2016, FDA officials reported the 

agency’s database did not consistently include final inspection

classifications. According to FDA officials, the agency’s database includes 

recommendations from the district office, which may differ from the final 

inspection classifications after the case has undergone further review by 

officials in the Center for Drug Evaluation and Research and the Office of 

Regulatory Affairs. FDA officials told us that the agency took steps in 

June 2016 to make sure the final inspection classifications in its database 

are accurate by (1) including a section on data entry—including updating 

the inspection classification in the database—in a June 2016 training on 

compounding for center and Office of Regulatory Affairs staff, and (2) 

discussing the inspection classification during the joint assessment call 

for compounding inspections in order to decide on a final inspection 

classification and to make sure this classification is updated in the 

database. The officials said that FDA plans to update the final 

classifications for inspections FDA has already conducted and for all 

inspections moving forward.40

According to agency officials, FDA invites the relevant state regulatory 

authority (generally the state board of pharmacy, state department of 

health, or both) to accompany FDA on inspections of drug compounders. 

During the inspection, FDA investigators collect evidence relating to 

 39See GAO-13-702. FDA classifies an inspection as “official action indicated” if 

objectionable conditions were found that warrant regulatory action by the agency. A 

classification of “voluntary action indicated” means that objectionable conditions that do 

not meet the threshold for regulatory action were identified and any corrective actions are 

left to the establishment to take voluntarily. A classification of “no action indicated” means 

that no objectionable conditions or practices were found during the inspection (i.e., 

conditions or practices that violate CGMP requirements), or if the significance of the 

documented objectionable conditions found does not justify further FDA action.

40For each inspection of a drug compounder, FDA conducts a joint assessment call 

involving officials from the Center for Drug Evaluation and Research and Office of 

Regulatory Affairs to conduct a more formal evaluation of the inspection results, including 

any violations, according to agency officials. At the conclusion of this call, the officials 

produce a document of findings and a recommended action with respect to that case. 

Recommended actions could include issuing a warning letter, pursuing an injunction, or 

sending a state referral letter. FDA could also recommend closing the case with no further 

actions as a result of the joint assessment call.
Page 44 GAO-17-64 Drug Compounding

whether the drug compounder meets certain conditions of sections 503A 

or 503B, as applicable, and to conditions and practices that, if deficient, 

raise safety concerns for public health. The inspections typically focus on 

identifying any insanitary conditions that could cause a drug product to be 

contaminated with filth or rendered injurious to health in violation of the 

FDCA, and review practices that, if deficient, could lead to potency 

problems or labeling mix ups.41

From May 11, 2012, through April 22, 2016, FDA conducted 265 

inspections of 210 different establishments of drug compounders that are 

not outsourcing facilities, including 503A compounders. As a result of 

these inspections, the agency issued 228 FDA form 483 inspection 

observation reports (finding problems such as dead insects in ceilings 

and other insanitary conditions), and has taken a number of actions.42

(See table 17.)

 41See 21 U.S.C. § 351(a)(2)(A).

42An FDA form 483 inspection observation report is issued to firm management at the 

conclusion of an inspection when FDA investigators have observed conditions that, in their 

judgment, may constitute violations of the FDCA and related acts.

While FDA provided data on inspections of 503A compounders and other drug 

compounders that are not outsourcing facilities from May 2012 through April 22, 2016, the 

agency provided data on the actions taken related to these inspections through June 28, 

2016.
Page 45 GAO-17-64 Drug Compounding

Table 17: The Number and Type of Actions Taken from May 2012 to June 28, 2016 Related to Food and Drug Administration 

(FDA) Inspections of Drug Compounders That are Not Outsourcing Facilities 

Action Number

Warning letter (to notify the compounder of significant violations of FDA regulations) 81a

Voluntary recall 72b

State referral letter (refers inspection findings to the applicable state regulatory agency) 31

Regulatory meeting (requested by FDA management to inform responsible individuals or firms about one 

or more practices, products, or other activities considered to be in violation of the law, and to discuss 

violations that would not be handled by other means) 

1

Source: GAO analysis of FDA data. | GAO-17-64

Notes: This table includes actions related to inspections of 503A compounders and other drug 

compounders that are not outsourcing facilities. The 503A compounders are individuals or entities 

that are not outsourcing facilities that qualify for the exemptions under section 503A of the Federal 

Food, Drug, and Cosmetic Act (FDCA), including pharmacies, physicians, and federal facilities. Drug 

compounders that do not qualify for the exemptions under section 503A, and are not outsourcing 

facilities under section 503B, are regulated as conventional manufacturers and are subject to the 

provisions of the FDCA applicable to such manufacturers.

The actions are related to inspections conducted from May 2012 through April 22, 2016.

In addition, the agency sought and obtained two warrants to inspect pharmacies that refused 

inspection during this time period and obtained nine injunctions against drug compounders that were 

not outsourcing facilities. FDA also took criminal enforcement actions against three drug 

compounders that were not outsourcing facilities related to inspections during this time period.

a

This number represents the number of drug compounders that are not outsourcing facilities that 

received warning letters; a drug compounder may have had more than one inspection associated with 

a warning letter.

b

In addition, two inspections resulted in FDA requests for recalls but no recalls occurred.

As of April 2016, FDA had conducted 75 inspections of 59 different 

outsourcing facilities. Actions related to its inspections of outsourcing 

facilities included 24 FDA warning letters and 15 voluntary recalls.43 (See 

table 18.)

 43While FDA provided data on inspections of outsourcing facilities from March 5, 2014, 

through April 22, 2016, the agency provided data on the actions taken related to these 

inspections through June 28, 2016.
Page 46 GAO-17-64 Drug Compounding

Table 18: The Number and Type of Actions Taken from March 5, 2014, to June 28, 2016 Related to Food and Drug 

Administration (FDA) Inspections of Outsourcing Facilities

Source: GAO analysis of FDA data. | GAO-17-64

Notes: The Drug Quality and Security Act, enacted in November 2013, created the category of 

outsourcing facility, and FDA conducted its first inspection of an outsourcing facility on March 5, 2014.

The actions are related to inspections conducted from March 5, 2014, through April 22, 2016.

In addition, the agency also obtained two injunctions against outsourcing facilities during this time 

period.

a

This number represents the number of outsourcing facilities that received warning letters; an 

outsourcing facility may have had more than one inspection associated with a warning letter.

Officials from 6 of the 25 stakeholder organizations we interviewed said 

the amount of time it takes FDA to finalize guidance and other relevant 

documents, including the list of drugs that are difficult to compound, is 

challenging. For example, officials from one of these stakeholder 

organizations told us that, as a result, they were uncertain regarding how 

to move forward under the DQSA; they did not know how to advise their 

members without final guidance from FDA regarding the list of drugs that 

are difficult to compound.

In addition, FDA has not finalized the standard memorandum of 

understanding (MOU) under section 503A between FDA and states that 

choose to sign it. Under section 503A, unless a drug is compounded in a 

state that has entered into an MOU with FDA, a pharmacist, pharmacy, or 

physician cannot distribute, or cause to be distributed, compounded drug 

products outside the state in which they are compounded in quantities 

that exceed 5 percent of the total prescription orders dispensed or 

distributed by that pharmacy or physician. These restrictions and the 

terms of the MOU will apply, once the standard MOU is finalized and 

made available to the states for their consideration and signature, to 

drugs compounded under section 503A, and will not apply to drugs 

compounded by outsourcing facilities. The law requires the standard 

MOU, which FDA is to develop in consultation with the National 

Association of Boards of Pharmacy, to address the interstate distribution 

of inordinate amounts of compounded drug products and to provide for 

appropriate investigation by a state of complaints related to compounded 

Action Number

Warning letter (to notify an outsourcing facility of significant violations of FDA regulations) 24a

Voluntary recall 15

Untitled letter (to notify an outsourcing facility of violations that do not meet the threshold of regulatory 

significance of a warning letter) 1

Some Stakeholder 

Organizations said the 

Amount of Time it Takes 

FDA to Finalize Draft 

Documents Related to 

Drug Compounding is 

Challenging
Page 47 GAO-17-64 Drug Compounding

drug products distributed outside of the state.44 Officials from two 

stakeholder organizations we talked to expressed concern regarding the 

time it is taking FDA to finalize the standard MOU. Specifically, they are 

concerned with the potential implications that the MOU may have on how 

they do business.

In particular, the draft MOU that FDA published for comment in February 

2015, would restrict interstate distribution of compounded products under 

section 503A to less than 30 percent of the number of compounded and 

noncompounded drug products that a pharmacy, pharmacist, or physician 

in a state that has entered into the MOU distributes or dispenses both 

intrastate and interstate in a calendar month. Pharmacists, pharmacies, 

and physicians in states that have not entered into the MOU would be 

limited to distributing compounded drug products in quantities that do not 

exceed 5 percent of all prescription orders they dispense or distribute.45

Officials from five stakeholder organizations that we talked to said they 

were concerned that, in the draft MOU, FDA’s proposed definition of 

distribution includes dispensing. Representatives from one pharmacist 

stakeholder organization stated that, if the MOU defines distribution 

interchangeably with dispensing, compounded drugs dispensed will be 

included in the 30 percent calculation for interstate distribution of 

compounded drugs. As a result, they are concerned that pharmacies that 

regularly dispense compounded drugs across state lines, such as 

pharmacies in the metropolitan Washington D.C. area, where the borders 

of the District of Columbia, Maryland, and Virginia are in close proximity, 

will be limited in the number of compounded drugs they can dispense to 

patients, even though some of these patients may only live a short 

distance from the pharmacy.46

 4421 U.S.C. § 353a(b)(3)(B).

45Food and Drug Administration, Addressing Certain Distributions of Compounded Human 

Drug Products Between the State of [insert STATE] and the Food and Drug 

Administration, Draft Memorandum of Understanding, 80 Fed. Reg. 8874 (Feb. 19, 2015). 

46The draft MOU includes a statement that FDA does not intend to include “prescriptions 

dispensed to a patient (or patient’s agent), if the patient (or patient’s agent) to whom the 

drug is dispensed carries the drug across State lines after it has been dispensed to the 

patients (or patient’s agent) at the facility in which the drug was compounded” in the 

percentage of compounded drug products that a drug compounder may distribute 

interstate.
Page 48 GAO-17-64 Drug Compounding

FDA officials cited a number of reasons for the time it has taken the 

agency to finalize the agency’s draft drug compounding documents, 

including the time and steps required to solicit and evaluate comments 

and issue guidance. For example, FDA officials attributed the time it has 

taken to finalize the draft MOU and other documents to a number of 

factors, including the time needed to review public comments and to 

conduct public meetings with state boards of pharmacy; FDA has 

received over 3,000 comments on the agency’s draft MOU alone, many of 

which raise complex policy issues that need to be resolved, according to 

agency officials. In addition, according to the officials, these documents 

must go through FDA’s internal clearance process along with numerous 

other requirements before being finalized.

States and stakeholder organizations reported a number of concerns 

related to FDA’s implementation of its drug compounding responsibilities. 

These concerns included the availability of compounded drugs for use in 

physicians’ offices, a potential loss in patient access to needed 

medications, and conflicting federal and state inspection protocols.

In response to our survey of state pharmacy regulatory bodies, 

respondents from 30 states reported that they had heard concerns that 

FDA’s implementation of DQSA would affect the availability of 

compounded drugs for use in physicians’ offices, generally referred to as 

office-use compounding. FDA’s April 15, 2016, draft guidance on the 

prescription requirement for drugs compounded under section 503A 

states that the agency interprets section 503A to require a valid 

prescription for an individual patient before a pharmacy may provide a 

compounded drug to a provider.47 Therefore, the draft guidance indicates 

that compounding of a drug product to be kept as stock in a doctor’s 

office, hospital, or other health care facilities without an individual patient 

prescription is not permitted by any pharmacy that is not an outsourcing 

facility. Officials from some of the stakeholder organizations we talked to 

have raised concerns that FDA’s draft guidance is inconsistent with laws 

 47Department of Health and Human Services, Food and Drug Administration, Prescription 

Requirement Under Section 503A of the Federal Food, Drug, and Cosmetic Act, Guidance 

for Industry, Draft Guidance, (Silver Spring, Md.: April 2016). See 

http://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidanc

es/UCM496286.pdf, accessed April 18, 2016.

States and Stakeholder 

Organizations Cited 

Concerns Regarding 

FDA’s Implementation of 

Its Drug Compounding 

Responsibilities
Page 49 GAO-17-64 Drug Compounding

in states that allow compounding for office use, and respondents in 27 

states reported that their state laws currently allow office-use 

compounding.48

FDA officials noted that the agency’s policies with respect to the 

prescription requirement in section 503A are intended to protect patients 

from poor quality compounded drugs that could cause serious harm while 

preserving access to drugs compounded for office-use for patients who 

need them. They stated that the prescription requirement in section 503A 

is critical to differentiate compounding by pharmacies and physicians 

under section 503A from conventional manufacturing and compounding 

by outsourcing facilities, which are subject to routine FDA oversight. FDA 

officials also said that stakeholders should advise the agency if instances 

arise in which a health care facility that orders compounded drugs for 

office use to meet patients’ medical needs is unable to obtain these drugs 

from outsourcing facilities.

Respondents in 23 states reported concerns about access to certain 

compounded drugs for patients with a medical need for these drugs. For 

example, for compounded drugs for which there is not a great demand, 

there is concern that outsourcing facilities would choose not to compound 

these drugs. Therefore, according to these respondents, there is a 

concern that if 503A compounders are not allowed to compound these 

drugs for office use, patients could lose access to needed medications.

Some states and stakeholder organizations reported differences between 

the protocols that some states and FDA use when inspecting pharmacies 

engaged in drug compounding that are not outsourcing facilities. 

Specifically, officials in the states noted that their states inspect 

pharmacies to assess their compliance with state pharmacy practice 

rules, which are often based on the standards in USP chapters 795 

(nonsterile compounding) and 797 (sterile compounding). These officials 

said that although pharmacies meeting the requirements of section 503A 

are exempt from FDA’s CGMP requirements, FDA’s publicly available 

form 483 inspection observation reports have included observations 

related to CGMP requirements, even for those 503A compounders. FDA 

 48Respondents in 4 of the 27 states commented that only outsourcing facilities registered 

with FDA may compound drugs for office use.
Page 50 GAO-17-64 Drug Compounding

officials indicated they were aware of concerns about this practice, and on 

July 13, 2016, FDA announced a change in the agency’s procedures that 

took effect on August 1, 2016. Under the new procedures, FDA 

investigators first make a preliminary assessment of whether a 

compounder’s drugs are exempt from CGMP requirements under section 

503A. If the preliminary assessment is that the compounder’s drugs are 

exempt, the investigator will not issue an inspection observation report 

showing observations solely related to noncompliance with CGMP 

requirements. Instead, the FDA form 483 inspection observation report 

will only include observations that do not relate solely to CGMP 

requirements. However, if the preliminary assessment is that the 

compounder’s drugs are not exempt under section 503A, the agency may 

cite CGMP-related observations in the inspection observation report.49

We provided a draft of this report to the Secretary of Health and Human 

Services. HHS provided written comments, which are reproduced in 

appendix III. HHS also provided technical comments, which we 

incorporated as appropriate.

In its comments, HHS stated that FDA has prioritized efforts to increase 

collaboration between FDA and states regarding oversight of drug 

compounding, and cited examples of FDA’s efforts to do so. HHS also 

stated that FDA is committed to working with states to further improve 

communication, noting FDA’s efforts to improve communications while 

 49According to agency officials, when FDA’s post-inspection review differs from the FDA 

investigators’ preliminary assessment and reveals that a facility does not produce drugs in 

accordance with the conditions of section 503A, FDA intends to consider citing CGMP 

violations in any regulatory action it decides to pursue. FDA’s notice indicates that, 

although drug products compounded in accordance with the conditions of section 503A 

are exempt from certain requirements in the FDCA, they remain subject to all other 

provisions of the FDCA that apply to conventional drug manufacturers, including, but not 

limited to, the prohibition on preparing, packing, or holding drugs under insanitary 

conditions. FDA will continue to include observations on FDA form 483 inspection 

observation report that appear to constitute insanitary conditions or to violate other 

requirements from which 503A does not provide an exemption without regard to the 

investigator’s preliminary assessment of a firm’s status under section 503A. Department of 

Health and Human Services, Food and Drug Administration, Insanitary Conditions at 

Compounding Facilities, Guidance for Industry, Draft Guidance, (Silver Spring, Md.: 

August 2016). See 

http://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidanc

es/UCM514666.pdf, accessed August 26, 2016.

Agency Comments
Page 51 GAO-17-64 Drug Compounding

commenting that, in some cases, federal law prohibits the agency from 

sharing certain information. HHS also acknowledged some of the 

concerns of states and stakeholders that we noted in our report, including 

compounding by physicians and access to compounded drugs, and 

provided information on steps FDA has taken or plans to take regarding 

these issues.

We are sending copies of this report to the Secretary of Health and 

Human Services, appropriate congressional committees, and other 

interested parties. In addition, the report will be available at no charge on 

the GAO Web site at http://www.gao.gov.

If you or your staff have any questions about this report, please contact 

me at (202) 512-7114 or crossem@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs are on the last page 

of this report. GAO staff who made major contributions to this report are 

listed in appendix IV.

Marcia Crosse

Director, Health Care
Appendix I: Information for Purchasers 

Regarding the Safety and Quality of 

Compounded Drugs

Page 52 GAO-17-64 Drug Compounding

Representatives of stakeholder organizations we interviewed and states 

we surveyed identified a number of tools available to purchasers of 

compounded drugs, including institutional purchasers (e.g., hospitals), 

health care practitioners (e.g., physicians), and individual patients, that 

are available for use to determine whether drug compounders are 

maintaining the appropriate standards for the safety and quality of these 

drugs.

Examples of tools identified include the following:

• Food and Drug Administration’s (FDA) compounding website:

Purchasers can review FDA’s compounding website, which includes 

information on FDA inspections and actions taken by FDA related to 

deficiencies found during an inspection. In response to our survey of 

state pharmacy regulatory bodies, respondents in 13 states reported 

that they would direct purchasers of compounded drugs to use FDA’s 

compounding website, or other FDA information, in order to determine 

the safety and quality of compounded drugs.

• State board of pharmacy websites: Purchasers can contact their 

state board of pharmacy or search their state board of pharmacy’s 

website to determine whether the state has inspected a pharmacy, 

and if so, whether the state had found shortcomings in its 

compounding operations (for those states that make this information 

available on their website). Fourteen states reported that they would 

direct purchasers of compounded drugs to state websites.

• Pharmacy accreditation organizations: Purchasers can determine 

whether a pharmacy was accredited for compounding by an 

organization, such as the Accreditation Commission for Health Care’s 

Pharmacy Compounding Accreditation Board, or identify whether a 

pharmacy has met the requirements of other national associations’ 

programs, such as the National Association of Boards of Pharmacy’s 

Verified Pharmacy Program.1 Six of the 25 stakeholder organizations 

we talked to indicated that pharmacy accreditation for compounding 

 1

As of August 2016, the Accreditation Commission for Health Care’s Pharmacy 

Compounding Accreditation Board had accredited 445 pharmacies. According to officials 

from the National Association of Boards of Pharmacy, as of August 2016, users from at 

least 44 jurisdictions utilized information from the Verified Pharmacy Program database, 

which was developed to enable states to make decisions regarding licensing nonresident 

pharmacies. 

Appendix I: Information for Purchasers 

Regarding the Safety and Quality of 

Compounded Drugs
Appendix I: Information for Purchasers 

Regarding the Safety and Quality of 

Compounded Drugs

Page 53 GAO-17-64 Drug Compounding

by an organization, such as the Accreditation Commission for Health 

Care’s accreditation board, is a tool that purchasers of compounded 

drugs can use to assess the safety and quality of compounded drugs.

However, our review found that there were few drug compounders with 

clean inspections, and relatively few compounders were accredited.2

Therefore, many purchasers of compounded drugs may rely on 

information from state and federal regulatory bodies on the safety and 

quality of compounded drugs, including deficiencies found during 

inspections.

Institutional purchasers and health care practitioners have additional tools 

available to identify and evaluate drug compounders as they seek 

sources to provide compounded drugs for their operations.

• The American Society of Health-System Pharmacists’ 

assessment tool: Nine of the 25 stakeholder organizations we talked 

to referenced the American Society of Health-System Pharmacists’ 

assessment tool, which is intended to help purchasers that choose to 

outsource the preparation of compounded drugs to evaluate 

proposals in order to select a drug compounder to supply those drugs.

• The International Academy of Compounding Pharmacists’ 

Compounding Pharmacy Assessment Questionnaire: Three of the 

25 stakeholder organizations we talked to referenced the International 

Academy of Compounding Pharmacists’ compounding pharmacy 

assessment questionnaire checklist. This tool was developed based 

on the U.S. Pharmacopeial Convention’s compounding standards, to 

provide purchasers with a checklist of what to look for in a pharmacy 

compounding practice.

Other organizations involved in the purchase of prescription drugs—

specifically pharmacy benefit managers—may utilize their own tools to 

help determine whether drug compounders are maintaining the 

 2

Of the 75 inspections of outsourcing facilities that FDA conducted from March 5, 2014, 

through April 22, 2016, FDA issued FDA form 483 inspection observation reports to 85 

percent of them. An FDA form 483 inspection observation report is issued to firm 

management at the conclusion of an inspection when FDA investigators have observed 

conditions that, in their judgment, may constitute violations of the FDCA and related acts. 

Of the inspections that did not result in FDA issuing an FDA form 483 inspection 

observation report, one facility was not yet operational at the time of the inspection.
Appendix I: Information for Purchasers 

Regarding the Safety and Quality of 

Compounded Drugs

Page 54 GAO-17-64 Drug Compounding

appropriate standards for the safety and quality of these drugs.3 For 

example, officials from one pharmacy benefit manager told us that their 

organization has developed a credentialing process to evaluate 

compounding pharmacies for inclusion in their network and to determine 

the type of compounded drugs these pharmacies may sell in the 

pharmacy benefit manager’s network. The officials said that this process 

consists of a questionnaire that covers items such as the pharmacy’s 

quality procedures for each compounded dosage form (i.e., it determines 

whether the pharmacy is capable of accurately making capsules, complex 

suspensions, and other dosage forms), and the pharmacy’s quality 

practices and procedures. In addition, the officials said they also review 

the findings from inspections conducted by a state or FDA. At the end of 

the credentialing process, the organization will establish an agreement 

with the pharmacy that allows it conduct either “complex nonsterile 

compounding” or “limited scope nonsterile compounding.”4

Ten of the 25 stakeholder organizations we talked to indicated that the 

drug’s label is also a tool for patients to use to determine whether the 

drug is a compounded drug. Outsourcing facilities are required to include 

a statement on compounded drugs indicating that it is a compounded 

drug, as well as the drug’s expiration date and ingredients.5 In addition, 

24 states reported requiring labeling for compounded drugs, as of 

January 1, 2016. Therefore, for drugs with such labeling, the patient (if 

the drug is dispensed directly to a patient) or the provider (if administered 

in the office or medical facility) could know it was a compounded drug and 

the expiration date and the ingredients. Section 503A of the Federal 

Food, Drug, and Cosmetic Act does not require 503A compounders to 

include a statement that it is a compounded drug on the drugs they 

 3

A pharmacy benefit manager is a third-party administrator of prescription drug programs 

for certain health plans and federal and state government employee plans responsible for 

developing and maintaining the drug formulary, contracting with pharmacies, negotiating 

discounts and rebates with drug manufacturers, and processing and paying prescription 

drug claims. 

4

A complex nonsterile compounding agreement would allow the pharmacy to compound 

drugs, such as creams with multiple ingredients, and the limited scope nonsterile 

compounding agreement would allow the pharmacy to compound drugs such as shake 

lotions (i.e., a lotion that separates into parts with time so it needs to be shaken before 

use).

5

21 U.S.C. § 353b(a)(10).
Appendix I: Information for Purchasers 

Regarding the Safety and Quality of 

Compounded Drugs

Page 55 GAO-17-64 Drug Compounding

compound. One stakeholder organization pointed out that most labeling is 

not consistent and that certain drugs may not have a label, such as 

compounded drugs for hospital patients, or compounded drugs in nuclear 

pharmacies; another stakeholder organization stated that unless a state 

requires pharmacies to label compounded drugs as such, patients likely 

won’t know whether the drug was compounded. FDA officials also noted 

that the agency has heard from stakeholders that physicians and patients 

may not be aware that the drugs that they are administering or receiving 

were compounded, or that they are not approved by FDA.
Appendix II: Objectives, Scope, and 

Methodology

Page 56 GAO-17-64 Drug Compounding

The Drug Quality and Security Act (DQSA), enacted in November 2013, 

included a provision for GAO to review drug compounding. We examined 

(1) the settings in which drugs are compounded, and the extent of drug 

compounding in each state; (2) state laws, regulations, and policies 

governing drug compounding, and how they are enforced; (3) how 

communication is conducted between states and FDA, as well as among 

states, regarding compounding, and any associated challenges; and (4) 

steps FDA has taken to implement its responsibilities to oversee drug 

compounding since enactment of the DQSA, and any challenges that 

have been reported with these efforts. We also examined available 

information for purchasers of compounded drugs (e.g., hospitals, health 

systems, and patients) to determine the safety and quality of those drugs.

To address our reporting objectives and obtain information about 

purchasers of compounded drugs, we administered a web-based survey 

to the state pharmacy regulatory bodies (e.g., boards of pharmacy) in the 

50 states, the District of Columbia, Guam, Puerto Rico, and the U.S. 

Virgin Islands. We interviewed officials at 25 national associations and 

other stakeholder organizations, government officials in 3 states 

(Minnesota, North Carolina, and Texas), officials at two pharmacy benefit 

manager organizations, and officials from the Food and Drug 

Administration (FDA); and we reviewed relevant documents from FDA 

and the organizations we interviewed. Finally, to address steps FDA has 

taken to implement its regulatory responsibilities to oversee drug 

compounding and related challenges, we reviewed relevant laws and 

analyzed FDA data on inspections of drug compounders and actions 

taken related to its inspections of these entities.

We administered a web-based survey to the state pharmacy regulatory 

bodies in the 50 states, the District of Columbia, Guam, Puerto Rico, and 

the U.S. Virgin Islands. We surveyed state pharmacy regulatory bodies 

(states) because these are the entities that regulate pharmacy practice, 

including drug compounding activities, through state laws and regulations. 

To collect information on drug compounding across the country, we 

surveyed all 50 states and the District of Columbia. We also included 

selected U.S. territories in our survey population—Guam, Puerto Rico, 

and the U.S. Virgin Islands—because these are the three most populous 

territories, all have boards of pharmacy, and all are members of the 

Appendix II: Objectives, Scope, and 

Methodology

2016 Survey of State 

Pharmacy Regulatory 

Bodies on Drug 

Compounding
Appendix II: Objectives, Scope, and 

Methodology

Page 57 GAO-17-64 Drug Compounding

National Association of Boards of Pharmacy.1 We primarily obtained 

contact information for the states from information on boards of pharmacy 

on the National Association of Boards of Pharmacy’s website, and we 

tested the survey by conducting three pretests of draft versions with 

officials from a state board of pharmacy in a rural state, officials from a 

state board of pharmacy in a populous state, and a national pharmacy 

association.

Our survey was administered from February 8, 2016, through April 15, 

2016. We collected information from survey respondents on the settings 

in which drug compounding occurs and data on drug compounding in 

each state, state laws, regulations, and policies related to drug 

compounding, activities states have participated in related to drug 

compounding with FDA and other states, states’ perspectives on 

communication with FDA and other states, states’ perspectives on FDA’s 

implementation of the DQSA, and information on how states would notify 

purchasers of compounded drugs that a compounded drug was found to 

be of questionable safety or quality, among other things.

We had a survey response rate of 93 percent; 50 of the 54 states 

completed the survey. Two states, Alaska and Indiana, responded to 

some of the survey questions but did not complete the survey; therefore, 

their responses were not included in our survey analyses. Two of the 

territories, Puerto Rico and the U.S. Virgin Islands, did not respond to any 

of the survey questions.

We analyzed the survey responses from the 50 completed surveys and 

conducted follow up with respondents, as needed, to clarify certain survey 

responses or obtain additional information.2 We conducted data checks 

on the survey responses, including checking for skip patterns and invalid 

responses, to ensure the reliability of the data.

 1

We refer to all of the state pharmacy regulatory bodies that we surveyed as states in this 

report.

2

We relied on state reporting of, and did not independently review, all 50 states’ laws, 

regulations, and policies applicable to drug compounding.
Appendix II: Objectives, Scope, and 

Methodology

Page 58 GAO-17-64 Drug Compounding

To further address our objectives, we interviewed officials from 25 

stakeholder organizations that have a stake or an interest in drug 

compounding to obtain information such as reviews on the extent of drug 

compounding; reviews of state laws, regulations, and policies on drug 

compounding; their perspectives on any challenges in communication 

between FDA and states, as well as among states, related to drug 

compounding; and their perspectives on FDA’s implementation of the 

DQSA. We selected these stakeholder organizations to include national 

organizations representing (1) pharmacies and pharmacists, including 

those that compound drugs; (2) physicians, including those in medical 

specialties identified as compounding drugs; and (3) state boards of 

pharmacy, state medical boards, and state health officials; as well as 

experts in drug compounding, and an organization that conducted 

research related to drug compounding.3 We reviewed relevant documents 

provided by these stakeholder organizations, including comments 

submitted to FDA regarding FDA’s compounding-related activities.

We also interviewed state agency officials from the boards of pharmacy, 

medical boards, and the state agencies that have oversight responsibility 

for outsourcing facilities, in three selected states—North Carolina, 

Minnesota, and Texas.4 We selected these states because they reported 

differing laws, regulations, or policies related to drug compounding in their 

responses to the survey, which included having different types of state 

 3

We interviewed officials from the following 25 national associations and other stakeholder 

organizations: the Accreditation Commission for Health Care, American Academy of 

Dermatology, American Academy of Ophthalmology, American Hospital Association, 

American Medical Association, American Pharmacists Association, American Society of 

Clinical Oncology, American Society of Consultant Pharmacists, American Society of 

Health-System Pharmacists, Association of State and Territorial Health Officials, Clinical 

IQ, Dr. Loyd Allen Jr., Federation of State Medical Boards, Institute for Safe Medication 

Practices, International Academy of Compounding Pharmacists, the Joint Commission, 

National Alliance of State Pharmacy Associations, National Association of Boards of 

Pharmacy, National Association of Chain Drug Stores, National Community Pharmacists 

Association, National Conference of State Legislatures, National Home Infusion 

Association, Pew Charitable Trusts, Professional Compounding Centers of America, and 

the U.S. Pharmacopeial Convention.

4

Licensed outsourcing facilities are overseen by the North Carolina Department of 

Agriculture and Consumer Services, Food and Drug Protection Division, in North Carolina, 

and by the Texas Department of State Health Services, Drugs and Medical Devices 

Group, in Texas. The Minnesota Board of Pharmacy has oversight responsibilities for 

licensed outsourcing facilities in Minnesota.

Interviews with Officials in 

Stakeholder 

Organizations, State 

Government Agencies, 

and FDA
Appendix II: Objectives, Scope, and 

Methodology

Page 59 GAO-17-64 Drug Compounding

agencies or departments with oversight responsibilities for outsourcing 

facilities, and variation in their oversight responsibilities of physicians or 

other nonpharmacists. Through the interviews with the board of pharmacy 

officials, we obtained additional information on state laws and policies 

related to drug compounding, as well as additional details for certain 

survey responses. In our interviews with state medical board officials, we 

obtained information on the medical board’s role in the oversight of drug 

compounding and other information, as available, related to compounding 

by physicians in each state. Two of our three selected states—North 

Carolina and Texas—had a separate state agency responsible for 

overseeing FDA-registered outsourcing facilities licensed in the state; 

therefore, we obtained information in these interviews specific to their 

oversight responsibilities for these facilities. In addition, we interviewed 

officials from two pharmacy benefit managers—third-party administrators 

of prescription drug programs for certain health plans and federal and 

state government employee plans—to obtain information related to drug 

compounding, including how these entities determine the safety and 

quality of compounded drugs.

5 The perspectives of the officials from the 

25 stakeholder organizations, three selected states, and two pharmacy 

benefit managers are not generalizable, but provided us with valuable 

insight on these issues.

We reviewed relevant documents from FDA, including FDA’s draft 

memorandum of understanding (MOU) for use with states regarding 

distribution of compounded human drug products, and FDA’s draft and 

final guidance related to drug compounding, such as FDA’s final guidance 

on registration of outsourcing facilities. We also reviewed relevant federal 

laws and regulations related to drug compounding, including sections 

503A and 503B of the Federal Food, Drug, and Cosmetic Act. In addition, 

we interviewed FDA officials and reviewed information on FDA’s 

compounding website to determine steps FDA has taken to implement its 

regulatory responsibilities to oversee drug compounding since enactment 

of the DQSA.

 5

The two pharmacy benefit manager organizations that we interviewed were Express 

Scripts and CVS Caremark. We selected these organizations because they were two of 

the largest pharmacy benefit managers in the country.
Appendix II: Objectives, Scope, and 

Methodology

Page 60 GAO-17-64 Drug Compounding

To further address our objective on steps FDA has taken to implement its 

regulatory responsibilities to oversee drug compounding since enactment 

of the DQSA, we analyzed FDA data from May 2012 through April 22, 

2016, on the number of inspections that FDA has conducted on drug 

compounders, and data on actions that FDA has taken related to these 

inspections from May 2012 through June 28, 2016.6 Actions included 

FDA issuing an FDA form 483 inspection observation report or a warning 

letter to an entity.7 We also obtained FDA data on outsourcing facilities 

that were currently registered with FDA or have ever been registered with 

FDA (i.e., facilities that were registered as an outsourcing facility at some 

point with FDA but are no longer registered) as of April 22, 2016. We 

determined that the data we used from FDA on inspections and actions 

related to drug compounding were sufficiently reliable for our purposes by 

discussing data collection processes and limitations of the data with 

agency officials, and comparing the data against other published sources.

We conducted this performance audit from May 2015 to November 2016 

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

 6

FDA provided inspection data for 503A compounders and outsourcing facilities from May 

2012 through April 22, 2016, and data on actions taken from May 2012 through June 28, 

2016. We requested FDA inspection data starting in May 2012 because our prior report on 

drug compounding analyzed this data on 503A compounders up to May 2012, see 

GAO-13-702. The inspection data we examined on outsourcing facilities started in March 

2014 because outsourcing facilities were not created until enactment of the Drug Quality 

and Security Act in November 2013, and FDA conducted its first inspection in March 2014. 

7

An FDA form 483 is an inspection observation report that is issued at the conclusion of 

an inspection when FDA investigators have observed conditions that, in their judgment, 

may constitute violations of the FDCA and related acts. An FDA warning letter is a 

correspondence that notifies a responsible individual or firm that the agency considers one 

or more products, practices, processes, or other activities to be in violation of the FDCA, 

its implementing regulations, and other federal statutes.

Analysis of FDA 

Inspections Data
Appendix III: Comments from the Department 

of Health and Human Services

Page 61 GAO-17-64 Drug Compounding

Appendix III: Comments from the 

Department of Health and Human Services
Appendix III: Comments from the Department 

of Health and Human Services

Page 62 GAO-17-64 Drug Compounding
Appendix III: Comments from the Department 

of Health and Human Services

Page 63 GAO-17-64 Drug Compounding
Appendix IV: GAO Contact and Staff 

Acknowledgments

Page 64 GAO-17-64 Drug Compounding

Marcia Crosse (202) 512-7114 or crossem@gao.gov

In addition to the contact above, Kim Yamane (Assistant Director), Lisa A. 

Lusk (Analyst-in-Charge), Matthew Byer, Julie Flowers, Sandra George,

and Drew Long made key contributions to this report.

Appendix IV: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(100104)
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