In September 2012, the Centers for Disease Control and Prevention (CDC), the Food and Drug Administration (FDA), the Tennessee Department of Health, and other state health departments began investigating a rare, non-contagious outbreak of fungal meningitis. As of June 3, 2013, 20 states had reported 745 infections (including fungal meningitis and other conditions), and 58 deaths were traced to injections of contaminated, preservative-free methylprednisone acetate produced by the New England Compounding Center (NECC). NECC, which self-identified as a compounding pharmacy – not a manufacturer – and was licensed by the state of Massachusetts, produced large volumes of drugs that were shipped across state lines to health care providers. Unlike traditional pharmacy practices, NECC produced drugs without individual prescriptions and made copies of existing commercially-manufactured drugs. These serious adverse events drew attention to compounded drugs (CDs). Six congressional hearings were held in 2012-2013 to understand the factors that led to these adverse events and ways to prevent future such incidents; these hearings are listed in Appendix B . In these hearings Members of Congress and stakeholders raised questions regarding how best to improve the safety of CDs while maintaining patient access to needed drugs. Issues raised at these hearings include the following: (1) what are CDs; (2) how are CDs made and by whom; (3) what is the role of CDs in health care delivery; (4) what are the federal and state roles in oversight of CDs; (5) how safe are CDs, and (6) what steps could be taken to prevent adverse events from CDs. This report provides background information about these issues that may be used to inform the policy discussion as Congress considers legislation. This report focuses on (1) available background information on CDs and compounding pharmacies; (2) changes in the role of CDs in healthcare delivery; (3) factors leading to an increase of compounding; (4) safety of CDs, including a table of selected publicly available adverse events; and (5) a brief summary of policy issues raised to date. This report includes material on CDs for human patients and does not include a discussion of veterinary drug compounding or the compounding of dietary supplements. Issues of public health and safety of CDs are tied to the regulation and oversight of CDs. This report includes brief information on federal, state, and professional efforts to increase the safety of CDs. Information on the federal regulation of CDs is addressed in other CRS reports: CRS Report R40503, FDA's Authority to Regulate Drug Compounding: A Legal Analysis , by Jennifer Staman, and CRS Report R43038, Federal Authority to Regulate the Compounding of Human Drugs , by [author name scrubbed]. Information on the regulation of commercially manufactured drugs can be found in CRS Report R41983, How FDA Approves Drugs and Regulates Their Safety and Effectiveness , by [author name scrubbed]. Compounding has been traditionally defined as a process where a pharmacist or a physician combines, mixes, or alters ingredients to create a medication tailored to the needs of an individual patient. Traditionally CDs are made in response to an individual prescription from a licensed health provider in the context of a pharmacist's and health care provider's professional relationship with a specific patient. CDs provide alternatives to standard commercially-manufactured drugs when such drugs do not meet the unique medical needs of a patient (e.g., due to a need for an allergen-free drug, weight-based dosing, or alternate modes of delivery), or are unavailable due to discontinuation, unavailability, or shortages. Shortages of sterile generic drugs and hospital outsourcing are cited as causes of increased the reliance of health care providers on CDs. Some have suggested that certain activities not traditionally associated with compounding be considered compounding. Such activities include the large-scale production of drugs to ease certain drug shortages, to meet outsourcing needs of hospitals, and to supply physician-administered drugs. Non-traditional compounding may include (1) the production and shipping of large volume of drugs across state lines; (2) production of drugs that are copies of FDA-approved commercially available drugs; (3) production of drugs outside of a personal relationship with a patient and without a prescription for an individual patient to receive a compounded version; and (4) providing products to third parties, such as hospitals, clinics, physician offices, and home health providers. These activities may be considered more akin to manufacturing than traditional compounding, which is considered part of the traditional practice of pharmacy. In this report, references to these types of activities will be called "non-traditional compounding." This report will be updated as necessary. Adverse events stemming from CDs in 2012 are the starting point for the current policy debate about existing regulatory oversight of CDs. The 2012 fungal meningitis outbreak was triggered by contaminated sterile CDs, injectable methylprednisolone, and was the worst recorded adverse event involving CDs, with news reports indicating that up to 14,000 individuals were exposed to this product. Contaminated sterile drugs pose the most serious threats to human health, and can cause death. Details on this event are listed in the following text box. The safety of CDs has been a concern of Congress for over two decades due to the expansion of non-traditional compounding. Potential safety risks for CDs include problems with potency (i.e., the dosage is inaccurate, either too strong or too weak), purity (e.g., the drug contains other chemicals that could be harmful), and contamination (the drug is contaminated with a bacteria, fungus, or virus). The FDA conducted surveys in 2001 and 2006 to assess identity, strength, quality and purity issues for CDs. In a non-random survey of compounded drugs available over the Internet, about one-third (33%) failed analytic testing, mostly regarding potency or uniformity of dosage. In these surveys, the rates of analytic testing failures for compounded drugs were higher than those for commercially-available drugs, where only 2% of drugs failed analytic testing. There is no specific federal or state requirement that an individual CD be tested for potency, purity, and sterility prior to being sold or administered. The compounder of a product may voluntarily perform such tests along with other quality control processes. Safety issues with CDs also have been found by state pharmacy boards. Certain states have started testing a certain percentage of compounded drugs for non-disciplinary purposes. For example, the State of Missouri Board of Pharmacy initiated a testing program in 2003 for compounded drugs and each year tests a certain number of finished products. Over the course of the testing program, 15% - 25% of the CDs were found to have problems with drug potency, ranging from a sub-potent drug with 0%—no active ingredient present—to a super-potent drug with almost 400% of the prescribed dosage. An inaccurate dose may present a risk of harm to the patient through a risk of toxicity (super-potent) or the risk of ineffective treatment (sub-potency) (see for example, Table C-1 , years 2010, 2007). The lack of resources to carry out testing of CDs appears to be a problem in several states. For example, a newspaper reported that Texas passed a law to provide for inspections of compounding pharmacies, but did not authorize funds for such purposes until 2007; once funded, testing dropped by two-thirds in 2012 compared to 2010 due to state budget cuts. There is no federal requirement for producers of CDs to report adverse events, so the actual number of individuals harmed by CDs is unknown. Policymakers have had concerns with CDs that date back almost two decades; these include reports of contamination of products that should be sterile, sub- or super-potent dosages, and impurities. Table C-1 provides a selected compilation of publicly available reports of adverse events involving CDs and other compounded medical products with details about the date, the number of states affected, the number of people affected, mortality (if any), drug involved, condition treated, and other characteristics, such as whether the product was shipped across state lines or was an off-label use. The vast majority of these adverse events involve sterile compounded products. Sterile compounded products include injectable drugs, IV-delivered drugs and solutions, inhalation drugs, and parenteral nutrition that are administered directly into the body and must be sterile to assure patient safety. There is no specific federal requirement for the reporting of adverse events with CDs; so that this information is by nature selective and cannot be used to draw inferences about the overall risks of CDs. Reports of incidents with CDs that do not rise to adverse events are excluded from the table. Table C-1 also includes other characteristics of CDs, including where it was evident that CDs were shipped across state lines, an element of non-traditional compounding and high-volume facilities, whether CD were prescribed for off-label uses, and whether a drug shortage was in effect. For example, a shortage of generic preservative-free methylprednisolone was reported by some sources prior to the 2012 fungal meningitis outbreak, which was caused by compounded versions of that drug. The 2012 fungal meningitis outbreak led to greater scrutiny by federal and state authorities of sterile CDs. In 2013, FDA and state authorities inspected certain facilities that produce sterile CDs and found a variety of safety concerns. Later, some, but not all, of these compounders issued product recalls due to sterility concerns. The next adverse event linked to a non-traditional compounding pharmacy occurred on May 24, 2013, when the FDA reported infections linked to contaminated sterile injectables; on May 28, 2013, the compounder recalled certain sterile products. Recalls of sterile CDs for 2013 are listed in the following text box. Traditional compounding is a process where a pharmacist or a physician "combines, mixes, or alters ingredients to create a medication tailored to the needs of an individual patient" in response to a prescription from a health care provider.