In September 2012, the Centers for Disease Control and Prevention began investigating a cluster of fungal meningitis cases among patients who had received steroid injections in the spine and joints. The drug was preservative-free methylprednisolone acetate, made by a single compounding pharmacy in Massachusetts and shipped to clinics around the country. When CDC stopped updating its count in October 2015, it had recorded 753 cases and 64 deaths in 20 states, according to the agency's outbreak page1.
FDA later called it "the largest healthcare-related outbreak in recent history" and attributed its scale to "large-scale, multistate distribution of an injectable drug intended to be sterile that had been prepared under inappropriate conditions," in 2018 testimony to Congress3.
Congress answered 14 months after the investigation began. The Drug Quality and Security Act created a second federal category of compounder and repaired the first. Those two categories, sections 503A and 503B of the Federal Food, Drug, and Cosmetic Act, now decide who may compound, for whom, under what quality rules and who inspects. They also decided much of what happened during the GLP-1 shortages and the 2024 IV fluid shortage.
How compounded drugs differ from approved generics
Compounding is the preparation of a drug tailored to a patient whose needs an approved product does not meet. FDA's examples include a patient allergic to a dye in the commercial version, or a child or older adult who needs a liquid instead of a tablet, according to its compounding Q&A5.
Compounded drugs are not FDA-approved. FDA "does not verify the safety, effectiveness or quality of compounded drugs before they are marketed." A generic drug, by contrast, is approved under section 505(j) and must show it is therapeutically equivalent to the brand, a process described in our explainer on how a generic drug gets approved. A compounded copy of a generic is a different legal product.
From the 1997 law to the 2013 law
Section 503A dates to 1997, FDA's 2018 testimony notes3. It set conditions under which a pharmacist or physician could compound without FDA approval. It also included restrictions on advertising and soliciting prescriptions for compounded drugs, and courts found those restrictions unconstitutional. That left the rest of section 503A in legal doubt for years.
Signed on Nov. 27, 2013, the DQSA fixed that. Its Title I, the Compounding Quality Act, removed the unconstitutional provisions so FDA could "fully implement and enforce the remaining provisions of section 503A," FDA told Congress3. It also created section 503B and a new category, the outsourcing facility. Title II of the same law, the Drug Supply Chain Security Act, set up drug tracing, covered in our DSCSA explainer. The full text is in Public Law 113-542.
Section 503A and section 503B compared
The two sections trade flexibility for oversight. A 503A pharmacy works prescription by prescription under state supervision. A 503B facility can make stock without patient names and ship it nationwide, but in exchange it registers with FDA and meets manufacturing-grade quality rules. The comparison below follows FDA's side-by-side summary of the statute4.
| Provision | Section 503A | Section 503B |
|---|---|---|
| Who compounds | Licensed pharmacist in a state-licensed pharmacy or federal facility, or a licensed physician | Outsourcing facility, under direct supervision of a licensed pharmacist; need not be a licensed pharmacy |
| Patient-specific prescriptions | Required (limited advance compounding allowed) | Not required |
| Current good manufacturing practice (CGMP) | Exempt | Required |
| Exempt from FDA approval and "adequate directions for use" labeling | Yes | Yes |
| Bulk active ingredients | USP or NF monograph, component of an approved drug, or on FDA's 503A bulks list | On FDA's 503B bulks list, or the finished drug is on FDA's shortage list |
| Copies of approved drugs | Not "regularly or in inordinate amounts" | Not allowed unless the approved drug is on the shortage list |
| Interstate distribution | Limited to 5%, or more under a state MOU with FDA | No explicit limit |
| FDA registration and product reporting | No | Yes |
| Adverse event reporting to FDA | No explicit requirement | Required |
| Label must say "This is a compounded drug" | No explicit requirement | Yes |
| Primary day-to-day oversight | State boards of pharmacy | FDA, on a risk-based schedule |
That 5 percent figure has a long tail. FDA published a final memorandum of understanding for states in October 2020 and in August 2021 updated when it intended to start enforcing the limit, its summary notes4.
Who inspects, and what the registry shows
State boards of pharmacy have "primary responsibility for the day-to-day oversight" of pharmacies that are not outsourcing facilities, FDA says5, though FDA also runs surveillance and for-cause inspections of them. Outsourcing facilities are "primarily overseen by FDA" and inspected on a risk-based schedule. In 2016, FDA said it would stop listing CGMP observations on inspection reports for pharmacies that meet the conditions of section 503A, since those rules do not apply to them, the agency told Congress3.
FDA's early enforcement numbers were large. Between the DQSA's passage and the end of fiscal 2017, the agency said it conducted "close to 500 inspections of 503A and 503B facilities," oversaw more than 150 recalls of compounded drugs, issued more than 180 warning letters and sent more than 70 referral letters to state regulators. It observed "problematic conditions during the vast majority" of those inspections, according to the testimony3. Our explainer on FDA inspections, Form 483s and warning letters describes those tools.
GxRadar counted the entries on FDA's list of registered outsourcing facilities6, updated Oct. 29, 2026. It lists 100 facilities. Of those, 43 are marked "Not yet inspected," 56 had an FDA Form 483 issued at their last inspection, and 94 say they intend to compound sterile drugs from bulk substances.
| Year of initial registration | Facilities on the October 2026 list |
|---|---|
| 2013 to 2016 | 22 |
| 2017 to 2020 | 21 |
| 2021 to 2023 | 14 |
| 2024 | 15 |
| 2025 | 14 |
| 2026 (through Oct. 29) | 14 |
Source: GxRadar count of FDA's registered outsourcing facilities table. The table shows only facilities registered today, so it understates how many registered in early years and later dropped off. Even so, 43 of the 100, or 43 percent, first registered in 2024 or later, which helps explain why so many have not yet been inspected.
Where shortages come in
Both sections give FDA's drug shortage list legal weight. Under 503A, FDA does not treat a drug on the shortage list as commercially available, so the limit on copying it falls away, as FDA explained in an October 2024 guidance7. Under 503B, a facility may compound from a bulk ingredient that is not on the 503B bulks list if the finished drug is on the shortage list "at the time of compounding, distribution and dispensing," FDA has said8.
Neither section covers biological products. FDA says5 biologics "are not eligible for the exemptions for compounded drugs under sections 503A and 503B," which is why, for example, our explainer on biosimilars and generics treats them on a separate track.
Patients who are unsure whether a product is compounded, or where it was made, can ask the dispensing pharmacist. For GLP-1 drugs, FDA's compounding policy page8, last updated April 1, 2026, says the agency does not intend to act against a 503A compounder over copies of a commercially available drug if it fills four or fewer prescriptions of that product in a calendar month.
Sources and notes
- CDC (2015). Multistate Outbreak of Fungal Meningitis and Other Infections (archived)
archive.cdc.gov/www_cdc_gov/hai/outbreaks/meningitis.html - US Congress (2013). Public Law 113-54, Drug Quality and Security Act
www.govinfo.gov/content/pkg/PLAW-113publ54/html/PLAW-113publ54.htm - FDA (2018). Examining Implementation of the Compounding Quality Act, congressional testimony
www.fda.gov/news-events/congressional-testimony/examining-implementation-compounding-quali - FDA (2021). FD&C Act Provisions that Apply to Human Drug Compounding
www.fda.gov/drugs/human-drug-compounding/fdc-act-provisions-apply-human-drug-compounding - FDA (2025). Compounding and the FDA: Questions and Answers
www.fda.gov/drugs/human-drug-compounding/compounding-and-fda-questions-and-answers - FDA (2026). Registered Outsourcing Facilities (updated October 29, 2026)
www.fda.gov/drugs/human-drug-compounding/registered-outsourcing-facilities - FDA (2024). Temporary Policies for Compounding Certain Parenteral Drug Products, guidance for industry
www.fda.gov/media/182632/download - FDA (2026). FDA clarifies policies for compounders as national GLP-1 supply begins to stabilize
www.fda.gov/drugs/drug-alerts-and-statements/fda-clarifies-policies-compounders-national-g
Superscript numbers in the text link to these sources. GxRadar data (NADAC histories, recall and shortage counts) come from CMS and FDA files described on the sources page. Researched and drafted with AI assistance and checked against the sources above. Information current as of Nov 3, 2026 and may change. Spot an error? It will be corrected once confirmed.
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Pill imprint codes and the 1993 rule behind themThe 2024 IV fluid shortageThe amoxicillin shortage of 2022 and 2023The GLP-1 shortages and what they meant for compoundingWhat FDA's Class II drug recall records showWhich kinds of drug products get recalled mostFDA drug establishment registration and listing, explainedHow hospitals buy drugsNot health advice. GxRadar is for general information only. Nothing here is medical, pharmacy, legal or financial advice. Do not start, stop or change any medicine based on this site. Talk to your pharmacist or prescriber about your own situation. Laws, prices and program rules described here can change; confirm current details with the official source.