Fagron Sterile Services

As new innovations in pharmaceutical science continue to increase exponentially; so does the challenge of formulating those pharmaceuticals to effectively serve an increasingly diverse patient population. Patients may be beset by rare diseases and need specific requirements regarding dosing. Those with limited drug tolerances (such as allergies) often require specialized preparations and doses. (1)

503A Compounding pharmacies and 503B outsourcing facilities are a vital resource for patients and prescribing physicians alike. These specialized facilities compound patient-specific drug preparations that are not otherwise commercially available. They either do so based upon prescription orders placed by properly licensed practitioners (503A compounding pharmacies) or by larger scale production for subsequent use in a health care facility (503B outsource facilities) . Millions of lives, including quality of life, are helped daily through the use of sterile medications. This article focuses on two different types of sterile compounding operations: 503b outsourcing facilities and in-house compounding pharmacies.

Compounding Pharmacies in Brief

Many 503A compounding pharmacies are located within hospitals or other healthcare facilities and are referred to as 'in-house.' 503B outsourcing facilities are allowed to compound drugs in much larger "batch" quantities without patient-specific prescriptions. They were established  as a result of the Drug Quality and Security Act (DQSA) under Section 503b. Currently, there are at least 75 503b outsourcing facilities registered with the Federal Food and Drug Administration. (2)

A compounded drug product contains one or more active ingredient and can be sterile (i.e., an injectable product) or non-sterile (i.e., a capsule or tablet). Compounded sterile products may be prepared in-house (within a health system or hospital pharmacy). Alternatively, the drug preparation can be outsourced to a 503b outsourcing facility that is outside of the health system.

The Office of the Inspector General (OIG) of the United States Department of Health and Human Services places a high value on the benefits of outsourcing. The results of an in-depth study found that most hospitals obtain their non-patient-specific (NPS) compound drugs from 503b outsourcing facilities. Most notably, the OIG report emphasized that "the FDA should further communicate to hospitals the importance of obtaining NPS compounded drugs from outsourcing facilities." (p 12) (3)

Patient Safety and Quality Standards

As health system CEOs and other industry leaders make decisions regarding in-house compounding vs outsourcing, analyses of safety requirements are critical. Multiple types of pharmaceutical preparations absolutely must be sterile. This includes medications given through injections into the eye (intraocular), via intravenous infusion, or into the spine (intrathecal) (4)

The tragic consequences of poor safety practices are illustrated in the case of a New England compounding center in 2012. Sub-standard compounding practices led to a fungal meningitis outbreak. (5) Although pharmacy compounding had been around for decades, the crisis spurred a nationwide discussion among compounding industry leaders, policymakers, and government officials. In 2013 the DQSA was enacted, making an addition to Section 503a for traditional compounding pharmacies: The 503b compounding facility. (6)

Although both 503a and 503b preparations fall under the Federal Food, Drug, and Cosmetic Act (aka FD&C Act), 503b outsourcing facilities must follow strict regulations regarding quality assurance and the mass production of bulk drug substances. In addition FDA regulations 21CFR 210 and 211 for Current Good Manufacturing Practices (cGMP) must be followed, which far exceed the guidelines of 795 and 797. They must also comply with state law and be registered as determined by individual state boards of pharmacy. (7)

“When using an outsourcing facility, most likely they are producing thousands of the same units daily or weekly. Therefore, they know intimately how to maintain the necessary critical process parameters to ensure each batch is produced the same way with the highest quality control.” — Jason McGuire, Global Quality Director, Fagron

If health system leaders choose to pursue in-house compounding, they must be prepared to comply with the stringent functional requirements of maintaining a clean physical environment in which to compound medications. The USP outlines specific directives that put limits on the particulate matter detected in certain preparation areas within compounding laboratories. These range from ISO Class 3 to ISO Class 8. (8) Any deviation from these strict environmental standards can lead to warning letters, enforcement actions, and penalties. Most important, however, is the risk that potential contamination of drug products can lead to serious illness and/or death.

Partnering with a reliable outsourcing facility can provide hospitals, health systems, and their leadership the ability to deliver cost-effective, high-quality sterile injectables and enhanced patient safety.

Resource Management

Hospitals and health care facilities are always looking for better ways to manage their limited resources. Many organizations opt to partner with outsourcing facilities to improve resource utilization by reducing or eliminating medication preparation and compounding steps for hospital and ASC staff.

They can also devote more resources to training and managing their existing health care workforce rather than being responsible for additional licensed pharmacists and PharmDs.

“Partnering with outsourcing facilities improves the safety and reliability of medication use and optimizes the use of health system, hospital and ASC resources.” — Carl Woetzel, President, Fagron Sterile Services

Potential drug shortages can be a major driver for outsourcing, particularly when pharmaceuticals require sterile compounding. 503b outsourcing facilities essentially function as pharmaceutical product manufacturers. Because compounding is their only specialty, they dedicate all available resources to assuring availability for their customers. 

The ability to safely mass-produce sterile drugs may lead to cost-effective results that can be passed on to the partnering health system, and ultimately the patients they serve. On the other hand, smaller to mid-sized organizations that choose in-house compounding as their resource will undoubtedly be challenged by the difficulty in negotiating optimum pricing. In the long run, this increased cost and decreased availability has a negative impact on patient care.

Ambulatory surgery centers (ASC) in particular can be severely disadvantaged in the event of drug shortages or other supply chain disruptions. A well-operated, large-scale 503b facility has qualified staff, validated processes and efficient resources to have necessary preparations (with correct dosage form) ready to be shipped as needed.

Taking on direct oversight of an in-house compounding pharmacy is complicated. It requires additional responsibility for recruitment, training, and testing of all compounders and other personnel. In-house compounding also necessitates appropriate expertise to oversee pharmacy compounded sterile product (CSP) production processes. Facilities that wish to perform on-site compounding must validate stability and establish or outsource beyond-use dating (BUD). In-house pharmacies must also show proof that they are compliant with various state and federal regulations, and that personnel are appropriately qualified and trained.


Admittedly, there are many issues to consider when determining the best course of action regarding in-house compounding vs outsourcing. Although there may be some cost benefits resulting from in-house compounding, hospital and health system administrators must consider potential risks of draining other health system resources. The reader may wish to access the OIG report that strongly supports the advantages of the 503b outsourcing facility for compounded medications.

If there are concerns whether the 503b outsourcing facility is complying with cGMP, state law, and other regulations, administrators can perform site inspections or other types of audits to validate processes. An honest, transparent and collaborative process with the right 503b compounding facility can lower the organization's risk profile, expand overall resources, and provide a consistent and reliable supply of safe and effective compounded medications.


1 United States Pharmacopeia. (n.d.) General Chapter 797 Pharmaceutical Compounding – Sterile Preparations. United States Pharmacopeia. Retrieved from: https:// www.usp.org/compounding/general-chapter-797.
2 Facilities Registered As Human Drug Compounding Outsourcing Facilities Under Section 503B of the Federal Food, Drug, and Cosmetic Act (FD&C Act) [Updated as of 5/8/2020] Retrieved from: https://www.fda.gov/drugs/human-drug-compounding/registered-outsourcing-facilities3 Murrin, S. Deputy Inspector General for Evaluation and Inspections. (2019, June). Most hospitals obtain compounded drugs from outsourcing facilities, which must meet FDA quality standards. Office of Inspector General (OIG). Retrieved from: https://oig.hhs.gov/oei/reports/oei-01-17-00090.pdf
4 United States Pharmacopeia. (n.d.) General Chapter 797 Pharmaceutical Compounding – Sterile Preparations. United States Pharmacopeia. Retrieved from: https:// www.usp.org/compounding/general-chapter-797.
5 PEW Charitable Trust (2014, May 21). Ensuring the safety of compounded drugs: Study highlights key quality standard. Retrieved from: https://www.pewtrusts.org/en/research-and-analysis/articles/2014/05/21/ensuring-the-safety-of-compounded-drugs
6 Kastango, E., Douglas, K. (2014). Quality standards for large scale sterile compounding facilities. PEW Charitable Trust. Retrieved from: http://www.clinicaliq.com/wp-content/uploads/2015/06/clinicaliq_compounding-quality-standards.pdf
7 Ibid.
8 Buchanan, E.C. (n.d.) Chapter 21: Secondary engineering controls. Compounding Sterile Preparations. American Society of Health System Pharmacists [ASHP]. Retrieved from: https://www.ashp.org/-/media/store-files/p1794-sample-chapter-21

Sean Jones, MBA
Senior Director of Marketing at Fagron North America, with more than a decade of experience in the pharmaceutical and healthcare industries.