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Compounded drug market needs transparency, more regulatory certainty, says Pew

Providers, compounders, individual states and the FDA all have roles to play in stemming drug shortages during the pandemic.

Jeff Lagasse, Associate Editor

Even before the COVID-19 pandemic began to grip the country, many health system administrators found it difficult to procure specific drugs from outsourcing facilities, the FDA-registered compounders authorized to make office stock medications under federal law. 

While the pandemic has made drug shortages worse across the U.S., pre-existing supply chain issues were already both prevalent and deep-rooted.

Before the coronavirus fundamentally affected American life and the healthcare system, Pew Charitable Trusts conducted interviews with representatives from six outsourcing facilities to understand what might be causing these challenges. Four themes emerged.

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For one, challenges specific to certain drugs can ramp up their manufacturing costs, which make them less attractive investments for compounders. A lack of transparency is also an issue, as it can lead to access challenges for office stock purchasers, even when adequate supplies are available from outsourcing facilities.

Meanwhile, regulatory uncertainty may deter companies from compounding certain products. And lastly, the sometimes short-term, unpredictable nature of FDA-declared drug shortages can disincentivize the compounding of office stock to help health systems manage these situations.


Providers can write prescriptions for compounded products that can be filled at pharmacies, but clinics and hospitals can also snag larger amounts of certain compounded medications, or "office stock," directly from compounders to keep on-site and administer to patients as needed. Only businesses registered with FDA as outsourcing facilities may compound office stock; these facilities can also compound products that are listed on FDA's Drug Shortages List.

Compounders can make liquid formulations of products for people unable to swallow pills; combine pharmaceuticals to simplify their use in trauma care; or dilute medications to strengths not offered by commercial manufacturers. These compounded drugs can pose some significant risks, as they haven't been subject to the same kinds of quality standards and safety reviews as typical drugs. But they're essential for some patients.

Based on the interviews, Pew pinpointed a number of interventions to address the supply problems. Some of these interventions are already underway, while some have been previously proposed.

The FDA, said Pew, could stand to revamp its drug shortages process in such a way that outsourcing facilities are more certain about the expected duration and severity of shortages. This would help compounders assess the business feasibility of producing drugs during such times.

To enhance transparency, outsourcing facilities and trade groups can provide additional outreach to providers about their products and capacity. Hospitals could also take part in group purchasing organizations that negotiate collective agreements between medical suppliers and multiple collaborating health systems, including smaller hospitals that may have a more difficult time than their resource-rich peers in securing office stock products.

Healthcare systems and providers can also standardize their orders of office stock formulations rather than ordering multiple forumations. This would incentivize outsourcing facilities to increase supply.

To support the development of a strong compounding market, the FDA can finalize its guidelines for the industry and continue its regular inspections of outsourcing facilities, according to Pew. And states, for their part, can ensure that their laws and regulations for compounds are clear and consistent with federal law -- meaning the 11 states that allow compounders other than outsourcing facilities to make office stock products should change their laws to reflect FDA regulations.


Drug shortages have been a problem nationally for some time now, and the COVID-19 situation is only making matters worse. Some of the main issues are related to supply chain and the anticipated increase in ICU needs during the pandemic.

As of June 12, the American Society of Health-system Pharmacists said there were 214 drug shortages in the U.S., which affects all patients. One medication that exemplifies this is Erwinia asparaginase, a chemotherapeutic agent for both children and adults with cancer.

Among medical specialties severely affected are oncology, critical care and infectious disease.

Twitter: @JELagasse
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