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Drug compounding is often regarded as the process of combining, mixing, or altering ingredients to create a medication tailored to the needs of an individual patient. Compounding includes the combining of two or more drugs. Compounded drugs are not FDA-approved.

A drug may be compounded for a patient who cannot be treated with an FDA-approved medication, such as a patient who has an allergy to a certain dye and needs a medication to be made without it, or an elderly patient or a child who cannot swallow a tablet or capsule and needs a medicine in a liquid dosage form. Practitioners in hospitals, clinics, and other health care facilities sometimes provide compounded drugs to patients when an FDA-approved drug is not medically appropriate to treat them. In these situations, compounding can serve an important patient need. However, some compounders engage in activities that can put patients at risk and/or undermine the drug approval process. For example, FDA has observed that some compounders have made false and misleading statements that compounded drugs are safe and effective, sometimes for the treatment of serious diseases, by incorrectly suggesting the drugs had met the standard for FDA approval.

Compounded drugs are not FDA-approved. This means that FDA does not verify the safety or effectiveness of compounded drugs. Consumers and health professionals rely on the drug approval process for verification of safety, effectiveness, and quality. Compounded drugs also lack an FDA finding of manufacturing quality before such drugs are marketed.

Compounding commonly occurs in pharmacies, although it may also occur in other settings.
Federal law addresses compounding by a licensed pharmacist in a state-licensed pharmacy, or federal facility, or by a physician, as well as compounding by or under the direct supervision of a licensed pharmacist in an outsourcing facility.
Outsourcing facilities are a category of compounders established in 2013 by the Drug Quality and Security Act. Outsourcing facilities are inspected by FDA according to a risk-based schedule and are subject to increased quality standards.

Various entities may inspect facilities that compound drugs, including state boards of pharmacy and FDA.
Generally, state boards of pharmacy have primary responsibility for the day-to-day oversight of state-licensed pharmacies that are not registered with FDA as outsourcing facilities. FDA does conduct surveillance and for-cause inspections of state-licensed pharmacies that are not registered as outsourcing facilities.
Facilities that register with FDA as outsourcing facilities under section 503B are primarily overseen by FDA and inspected by FDA according to a risk-based schedule.

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