Before the era of mass production, pharmacies created medications for patients from scratch, be it for body pain or more severe illnesses. That hasn’t changed even as over-the-counter drugs became available, as some people have unique health needs. Pharmacies continue the tradition, though under a different term known as compounding pharmacies.

Initially, compounding pharmacies could only make bespoke medication in limited quantities. But when the Drug Quality and Security Act (DQSA) became law in 2013, these facilities were split in two. One is the conventional compounding pharmacy known as a 503A, while the other is a compounding pharmacy that can produce bespoke meds in bulk, called a 503B.

Section 503B

The term ‘503B’ refers to the provision added to the Federal Food, Drug, and Cosmetic (FD&C) Act by the DQSA. Simply put, it allows a compounding pharmacy to be categorized as an outsourcing facility. If it meets federal standards and submits to oversight, a 503B outsourcing facility like the one at Fagron Sterile and others can mass-produce meds and medical supplies.

Anything that a 503B outsourcing service makes doesn’t have to seek approval from the Food and Drug Administration (FDA). But to be granted his privilege, the facility must meet all the requirements from three sections of the FD&C Act, specifically:

    • Section 502(f)(1) – labeling drugs with directions for use, assuming they’re already well-known to ordinary consumers.
    • Section 505 – submitting complete reports of a drug’s effectiveness and safety to the FDA, which includes 505(b)(1), 505(b)(2), and 505(j).
    • Section 582 – informing the FDA and other partners of counterfeit or illegally diverted products in their possession within 24 hours of finding out.

Submitting to monitoring by government agencies is optional for 503B outsourcing facilities, but the FDA offers incentives to those that do. Most of these include additional exemptions, such as requirements for getting approval for newly formulated drugs. 

What Is A 503B Outsourcing Service?

Too Much Leeway?

It isn’t unusual to think that this much leeway for 503B outsourcing facilities can be a cause for concern. After all, why would such facilities appear to be subject to less scrutiny than traditional drug manufacturers? However, that isn’t the case for several reasons.

First, it’s essential to understand the reason the DQSA became law. It was introduced following a fungal meningitis outbreak in 2012 that killed around 100 and afflicted hundreds more. In this case, the outbreak originated from a compounding facility, which federal and state regulators couldn’t monitor effectively due to the lack of a concrete framework.

Second, the relative abundance of exemptions doesn’t mean that 503B outsourcing services are exempted from the law. The FDA strictly requires them to create meds and medical supplies as per Current Good Manufacturing Practices (CGMP) outlined in 21 CFR 210 and 211. These services comply with much more CGMPs than you might think, lest they risk another deadly plague.

Lastly, and which has arguably put these facilities in the limelight as of late, is that the U.S. healthcare system is under immense pressure due to the pandemic. Recent drug and medical supply shortages have all but stopped the treatment of many illnesses, with the bulk of the supply going to the country’s COVID response.

As drug manufacturers struggle to meet demand, hospitals and clinics turn to 503B outsourcing facilities to augment their supplies. The FDA can allow them to produce certain drugs, provided they’re on the FDA’s drug shortage list and isn’t a copy of an FDA-approved drug. Their timely help in pandemics and other health crises can save countless lives.

Coming Full Circle

The existence of compounding pharmacies, let alone 503B outsourcing services, exemplifies how history has come full circle. The decades-old practice of creating medication on the spot slowly returns to the modern healthcare scene. And according to recent statistics, such a trend is unlikely to abate anytime soon.

Market analysts project that the 503B compounding pharmacy market will grow by 7.3% between 2021 and 2028, breaching the USD$1.5 billion mark. The FDA and the Centers for Disease Control and Prevention cite the drug shortage and the rise in the elderly population as the main drivers for the market growth. New medical approvals are also expected to skyrocket over this period.

More importantly, technological advances will complement traditional compounding practices. The facilities already have access to state-of-the-art equipment like automated assembly lines and ISO-compliant cleanrooms. There’s even a lot of talk about blockchain’s role in enhancing the quality of drugs and medical supplies.


As a timeless adage goes: The more things change, the more they stay the same. Pharmacies may continue to dispense manufactured medication, but the tradition of making bespoke meds remains alive among their compounding counterparts. The amount of leeway the law grants them shouldn’t be a concern, as they strive to be as compliant as licensed drug manufacturers.

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