U.S. flag

An official website of the United States government

NCBI Bookshelf. A service of the National Library of Medicine, National Institutes of Health.

National Academies of Sciences, Engineering, and Medicine; Health and Medicine Division; Board on Health Sciences Policy; Committee on the Clinical Utility of Treating Patients with Compounded Bioidentical Hormone Replacement Therapy; Jackson LM, Parker RM, Mattison DR, editors. The Clinical Utility of Compounded Bioidentical Hormone Therapy: A Review of Safety, Effectiveness, and Use. Washington (DC): National Academies Press (US); 2020 Jul 1.

Cover of The Clinical Utility of Compounded Bioidentical Hormone Therapy

The Clinical Utility of Compounded Bioidentical Hormone Therapy: A Review of Safety, Effectiveness, and Use.

Show details

2An Overview of Compounding

Compounding is the process of combining, mixing, or altering ingredients to create a medication tailored to the needs of a patient (FDA, 2017).1 Compounding is most often practiced by a licensed pharmacist, a licensed physician, or a person under the supervision of a licensed pharmacist (FDA, 2017).2 The traditional compounding process begins with a prescription created by the prescriber responding to a patient need. The prescriber customarily chooses the active ingredient(s), dosage form, dose, dosing intervals, and route of administration when writing the prescription. The prescriber may also choose inactive ingredients, especially in cases where a patient has a documented allergy to an inactive ingredient, such as peanut oil. This is followed by the compounding pharmacist preparing (e.g., formulating) and dispensing the medication to the patient.

Compounded medications may offer therapeutic alternatives for patients with unique medical needs that cannot be met by U.S. Food and Drug Administration (FDA)-approved drugs (FDA, 2018; Gudeman et al., 2013; USP, 2017). For example, compounding can provide customized formulations to (1) create alternate dosage strengths or forms, and (2) omit components of FDA-approved drugs to which a patient has an allergy. Compounding can also fill gaps in cases of shortages and discontinuations of FDA-approved drug products (Glassgold, 2013; USP, 2017).

Patient populations that have traditionally benefited from customized compounded formulations include pediatric patients, people at the end of life who may have difficulty swallowing pills or capsules, or people with certain specific medical conditions for which a current FDA-approved medication does not exist (Kochanowska-Karamyan, 2016; USP, 2017). Compounding differs from pharmaceutical industry drug manufacturing in that the volume of drugs prepared and prescriptions dispensed is small in relation to FDA-approved medications. See the section “The Compounding Market: Supply and Demand” in this chapter for insights on the recent growth of the compounding market.


Currently, the regulation of compounding—including rules related to the allowance and prohibition of compounding—is addressed at the federal level under the Federal Food, Drug, and Cosmetic Act (FDCA).3 Compounding can use FDA-approved drug products as a starting point, and alter them in some way, such as combining or diluting them. Compounding can also start with bulk substances (active pharmaceutical ingredients [APIs]) and combine them with excipients (inactive ingredients) to produce the final compounded preparation. In addition, compounded drugs are prepared either as sterile or nonsterile preparations. In sterile compounding, drug formulations are prepared in a clean-room environment using aseptic techniques to ensure preparations are free of microorganisms. Sterile compounding is used primarily for injectable, implant, and ophthalmic preparations. In nonsterile compounding, drug formulations are prepared in a clean environment but without aseptic techniques required. Nonsterile compounding is used primarily to prepare oral and topical (skin) formulations: capsules, solutions, suspensions, ointments, creams, and suppositories. Both sterile and nonsterile drug formulations are produced within a wide range of pharmaceutical and medical settings.

Compounding can occur in community pharmacies, physicians' offices, and hospital pharmacies; these are referred to in this report as 503A compounding pharmacies. Compounding, particularly in smaller, independent community pharmacies, remains an important component of pharmacy practice (McPherson et al., 2006). In fact, studies suggest that the preparation of compounded formulations at community pharmacies may strengthen the patient–pharmacist relationship, improve pharmacists' professional satisfaction and perceived quality of patient care, and imbue pharmacists with a greater responsibility to provide patient-centered care (McPherson and Fontane, 2010; Yancey et al., 2008).

Public testimony to the committee provided additional insights into the expanding compounding market. Based on submitted testimony, certain 503A compounding pharmacies no longer function primarily as community pharmacies but rather as large corporations that dispense compounded preparations to thousands of patients across state lines.4

In 2013, Congress created a new category for compounding drugs in larger amounts at specialized compounding facilities, referred to in this report as 503B outsourcing facilities. Given that certain requirements are met, these compounding facilities can produce and ship large volumes of drugs across state lines and produce compounded preparations for third parties, such as hospitals, clinics, and physician offices without a prescription (Glassgold, 2013).5

In either compounding setting (503A compounding pharmacy or 503B outsourcing facility), the United States Pharmacopeia (USP) provides environmental guidelines, suggesting that compounded drugs should be developed in designated areas that are adequately designed to support the sterile or nonsterile processes, including providing proper storage for those preparations and the appropriate conditions (e.g., designated temperature, light, moisture, ventilation, and security) (USP, 2017). Box 2-1 provides details about the regulations for allowable compounding under the FDCA.

Box Icon

BOX 2-1

Allowable Compounding Under the Federal Food, Drug, and Cosmetic Act.


There is a unique art and science behind compounding drugs. It is the compounder's responsibility to prepare the compounded drug preparation with the proper dose of the API and the appropriate quality and purity of all ingredients while maintaining sanitary, and if necessary, aseptic conditions when preparing a compounded drug preparation. The compounder must also provide the patients and their families with the proper instructions through clear labeling or face-to-face consultation (USP, 2014). See Box 2-2 for an overview of the importance of a Master Formulation Record as a component of quality control during the formulation of a drug.

Box Icon

BOX 2-2

Master Formulation Record According to USP <795> for Compounded Nonsterile Preparations.

For the development of more complex compounded formulations, a professional specializing in formulation science may be needed. Formulation science is critical in the development, manufacturing, and testing of chemical (including pharmaceutical) products and preparations. Such formulation experts apply established science and are able to guide decisions about quantities and combinations of active and inactive ingredients, incorporate quality procedures, and test for stability. This level of expertise is especially essential for the development of complex medications (e.g., sustained released medications, pellets). Of critical importance, a compounding pharmacist often does not have the same training or experience as a formulation scientist, nor access to the same data for evaluation and determination of quality, stability, and effectiveness.

Seemingly small variations in compounding processes, such as the order in which ingredients are added, the temperature at which the formulation is prepared, or the time allotted to mixing ingredients, can lead to significant differences in the performance of the resulting drug preparation (Chang et al., 2013). Unlike manufacturing protocols for drugs that FDA approves to reliably ensure that a safe and effective product results every time, compounding procedures are not standardized nor tested for their ability to produce safe and effective drug preparations. For example, delivery of active ingredient doses above the desired therapeutic level could result from miscalculation, including too much API in the formulation, or from poor-quality formulation resulting in an erratic and unpredictable release rate; the latter has been observed with compounded pellet formulations (Jiang, 2019).

Polypharmacy, when a single patient is simultaneously taking multiple medications to treat one or more medical condition, as well as potential drug–drug interactions, add to the considerations pertinent to the compounding process. While concerns for drug–drug interactions are not unique to compounding, the combination of multiple drugs into a single dosage form without prior testing for safety and effectiveness is of concern, particularly for formulations that include multiple drugs within a similar therapeutic class. For example, compounders should account for the fact that testosterone can be directly metabolized to estradiol, and that patients receiving a combination of testosterone and estradiol may inadvertently receive a higher dose of estradiol than intended (Ishikawa et al., 2006).

Training and Oversight for Compounders

While standard pharmacy school curricula generally include some basic training in compounding, additional training and certification are needed to become skilled at compounding, particularly for formulations that are complex or contain multiple active ingredients. Compounding pharmacists would also benefit from education that extends beyond the basic skills, but relatively few have specialized training or higher certification (Schommer et al., 2008). Organizations such as the Professional Compounding Centers of America and the American College of Apothecaries offer classes, both live and online, and certification programs. Starting in the fall of 2019, the Board of Pharmacy Specialties began offering an exam for pharmacists to become accredited in Compounded Sterile Preparations, though the specialty has yet to receive official recognition (Board of Pharmacy Specialties, 2020).

Many states expect compounders to adhere to standards of practice established by USP (The Pew Charitable Trusts and NABP, 2018):

to minimize harm, including death, to human … patients that could result from (1) excessive microbial contamination, (2) variability from the intended strength of correct ingredients …, (3) physical and chemical incompatibilities, (4) chemical and physical contaminants, and/or (5) use of ingredients of inappropriate quality. (USP, 2014)

However, because USP has no power to enforce practice compliance, it is up to the state legislature or state pharmacy boards to adopt, oversee, and enforce the quality standards for compounding set by USP. Such oversight varies significantly from state to state.

Statements from pharmacy associations, including the American College of Clinical Pharmacy, American Society of Health-System Pharmacists, and National Association of Boards of Pharmacy, echo the considerations outlined earlier in this chapter. While all of these organizations recognize the importance of drug compounding, they also express concern regarding the lack of standardized, well-studied formulas; the scarce education and information on compounding provided to patients, prescribers, compounders, and regulators; the lack of evidence on the safety or effectiveness of compounded bioidentical hormone therapy (cBHT); and the increasing exposure of patients to compounded preparations that pose greater risk than FDA-approved drug products. (See Chapters 6 and 7 for a discussion on the available evidence on the bioavailability, safety, and effectiveness of compounded hormone preparations.)


Compounding was the primary route by which medications were produced until early in the twentieth century, when the advent of large-scale pharmaceutical manufacturing led to a decreased reliance on compounding (Newton, 2003; Sundberg, 1997). However, over the past few decades, the increasing demand for personalized medical care—coupled with the lack of regulations and oversight for the development of compounded medications—has catalyzed a resurgence in compounding and engaged a much broader patient population than traditionally intended (Gameiro et al., 2018; Gudeman et al., 2013; Oroszlan, 2016).6

The growing demand for compounded drugs is also reflected in their use to treat a wide spectrum of conditions across a range of therapeutic areas, including men's and women's health, pain management, sports medicine, dental care, veterinary care, pediatrics, hospice care, and in their use in the fields of allergy, dermatology, immunology, otolaryngology, oncology, ophthalmology, neurology, and rheumatology (Glassgold, 2013; McPherson et al., 2016; NABP, 2017).7 Public health officials have become concerned about this expansion of the compounding market because it increases the number of patients with the potential to be exposed to drugs that have not undergone the same rigorous production processes and quality controls as FDA-approved drugs (FDA, 2017).8

Compounding Services and Data on General Use

Given its rise in popularity over the past two decades, compounding has become an increasingly lucrative industry. Unfortunately, it is difficult to identify publicly available, evidence-based estimates of the number of drugs compounded, the types of drugs compounded, the number of pharmacists and physicians who compound, or the size of the compounding market (Glassgold, 2013). This lack of data likely results from the lack of federal reporting requirements and centralized data collection, as well as variable insurance coverage for a broad range of compounded medications (NASEM, 2019). Specifically, there is no requirement for 503A compounding pharmacies to report or publicly advertise the presence and/or extent of their compounding capabilities (e.g., nonsterile or sterile; small focus versus primary specialty). Although outsourcing facilities must report their 6-month compounding totals to FDA, only some 70 facilities have registered voluntarily and identified themselves as outsourcing facilities, and it is likely that other nonregistered facilities exist and are operating in violation of Section 503A without appropriate oversight for the compounding they perform.9 The resulting data shortage poses challenges for risk–benefit assessment and public health policy related to compounded drug preparations.

With this context in mind, the National Council for Prescription Drug Programs estimates that there are more than 32,000 pharmacies nationwide that broadly describe some compounding activities under their offered services (The Pew Charitable Trusts, 2016). In terms of specialization, the American Pharmacists Association estimates that only around 7,500 of the approximately 56,000 community-based U.S. pharmacies specialize in providing compounding services, meaning the pharmacists in those facilities spend most or all of their time compounding special preparations for patients (American Pharmacists Association, 2019). The Alliance for Pharmacy Compounding reports that 1 to 3 percent of prescriptions in the United States are for compounded drugs (APC, n.d.). Additionally, a 2019 Letco Medical survey of more than 4,000 pharmacy compounders found that nearly 40 percent of those surveyed worked in pharmacies solely dedicated to compounding (APC, n.d.).

Other data provide additional insights into the scope of the compounding world. From 2005 to 2016, the number of Medicare patients receiving a compounded drug increased 281 percent (HHS OIG, 2016). Similarly, a study of individuals with private insurance found an increase of 27 percent in compounded drug use between 2012 and 2013 (McPherson et al., 2016). A 2019 survey of 494 patients found that almost 80 percent of people who received compounded prescriptions did so through mail-order pharmacies, and that among those surveyed, compounded prescriptions were being used to replace rather than supplement other drug(s) (McPherson et al., 2019).

Data on compounded drugs are also available from national workers' compensation claims. Compounding is a growing trend in workers' compensation programs; prescriptions for compounded drugs increased almost five-fold between 2007 and 2012, from 6,416 to 30,669 (Walls et al., 2014). Several surveys of pharmacists and prescribers have sought to elicit information about the use of compounded drugs, but the information obtained has been limited because of low response rates (McPherson et al., 2019; Ness et al., 2002; Warner and Tuder, 2014).

Insurance claims data also show that the number of beneficiaries receiving compounded drugs increased by 281 percent, from 73,368 in 2006 to 279,873 in 2015 (HHS OIG, 2016). A retrospective analysis of prescription claims data found that the prevalence of eligible members using compounded drugs increased by some 27 percent between 2012 and 2013, with 1.4 percent of eligible members using compounded drugs in 2013. The number of claims for compounded drugs also increased by some 34 percent (from 486,886 to 653,360) during the same period (McPherson et al., 2016).

Market Reports

Several private marketing reports have estimated the global market revenue for compounded preparations to fall between $2 and $9 billion. Those analyses all predict growth in the next few years, ranging from 3 to 7 percent. A caveat is that these estimates come from private marketing reports and are based on data sources that are publicly unverifiable (e.g., Bourne Partners, 2018; Global Market Insights, 2018; Market Research Engine, 2018; Ugalmugale and Mupid, 2018a,b; Zion Market Research, 2018). Other unverifiable analyses have estimated the global market for compounding pharmacies in 2017 to be $8.5 to $9 billion, with the 503B market estimated at $1.5 billion (Bourne Partners, 2018; Global Market Insights, 2018; Zion Market Research, 2018). These analyses project that by 2022 to 2024, the global compounding market will reach $10 to $14 billion, with a compounded annual growth rate of 4 to 6 percent (Bourne Partners, 2018; Global Market Insights, 2018; Market Research Engine, 2018; ReportsnReports, 2018; Zion Market Research, 2018).

Given the evidence for the substantial use of compounded drugs and the minimal federal and state oversight and protection for patients, there is cause for serious concern that an increasing number of drugs used in the United States are consumed without assurance for their quality, safety, and effectiveness. Chapter 3 reviews the current federal and state-level regulatory framework to minimize risks related to the use of compounded preparations, and Chapter 7 discusses the scientific evidence on the safety and effectiveness of compounded bioidentical hormone preparations, and related adverse events.

Box Icon


Conclusion 2-1.




In an effort to provide additional guidance, the United States Pharmacopeia (USP) offers a more detailed definition of compounding: “the preparation, mixing, assembling, altering, packaging, and labeling of a drug, drug-delivery device, or device in accordance with a licensed practitioner's prescription, medication order, or initiative based on the practitioner–patient–pharmacist–compounder relationship in the course of professional practice” (USP, 2017).


At times throughout the report, the terms compounder and pharmacist are used interchangeably to describe certain professional practices related to compounding.


See Chapter 3 for an overview of the federal and state-level regulations and oversight for compounding preparations.


Open session testimony, November 2019.


Under federal law, 503B outsourcing facilities may also compound for patient-specific prescriptions. See the Federal Food, Drug, and Cosmetic Act. 21 U.S. Code Chapter 9.


See Chapter 3 for an overview of the federal and state-level law, regulations, and oversight for compounding preparations.


A discussion on the trends in the marketing of cBHT preparations can be found in Chapter 8.


Chapter 3 provides an overview of how policies and regulations have dealt with marketing for compounded drugs.


These points are discussed in greater detail in Chapter 3 of this report.

Copyright 2020 by the National Academy of Sciences. All rights reserved.
Bookshelf ID: NBK562881


  • PubReader
  • Print View
  • Cite this Page
  • PDF version of this title (5.0M)

Related information

  • PMC
    PubMed Central citations
  • PubMed
    Links to PubMed

Recent Activity

Your browsing activity is empty.

Activity recording is turned off.

Turn recording back on

See more...