Due Diligence Drives 503B Compounder Selection

February 2019 - Vol.16 No. 2 - Page #2
Category: Outsourced Compounding Services (503B)

Utilizing the services of an outsourced compounder has become increasingly common in hospital pharmacy practice. According to Pharmacy Purchasing & Products’ 2018 State of Pharmacy Compounding survey, three-quarters of all facilities outsource at least some portion of their compounded preparations.1 In recent years, the severity and persistence of drug shortages has been one factor driving this trend. When choosing a 503B outsourcing partner, performing the requisite due diligence is critical to ensuring the chosen vendor operates safely and in compliance with all regulations and requirements. Thus, hospital pharmacies must develop and implement vendor selection guidelines for procuring outsourced compounded sterile preparations (CSPs).

The 2018 PP&P survey reported encouraging news: Two-thirds (67%) of hospital pharmacies use formalized internal guidelines to select a 503B vendor, and an additional 12% are in the process of developing such guidelines.1 Several reliable tools, including regulatory, quality, and medication safety information and references, are available to assist organizations in this pursuit. To ensure the safety and quality of CSPs purchased from an outsourced partner, pharmacists must have a clear understanding of the current regulatory environment, maximize the effectiveness of the available tools, and dedicate sufficient time and resources to evaluating potential 503B providers.

Regulatory Landscape

The Food and Drug Administration (FDA) provides more than 30 regulatory policy documents and related materials regarding compounding drugs for human use on its website.2 Although not all of these documents directly address outsourced compounding, each does contain valuable direction pertaining to compounding practices in general. The nine documents that specifically address 503B-specific topics should be carefully reviewed (see TABLE 1).

Once pharmacy leadership has developed a comfort level with the relevant regulatory and operational issues, which should be reflected in the vendor selection tool, the next step is to dedicate adequate time to reviewing the publicly available resources addressing the outsourcing provider(s) under consideration. Begin by examining registration information on the FDA website, which lists the federally registered outsourcing facilities and provides access to publicly released inspection documents.3 Before the possibility of entering into a relationship with a 503B provider can be discussed, the entity must be registered and listed with FDA, and if locally required, must also obtain and maintain state licensure in the jurisdiction in which it is located, as well as licensure allowing it to ship to the hospital’s locale.

It is critical to note that outsourcing CSPs does not release the organization from its responsibilities under USP and state board of pharmacy statutes, rules, and regulations. Therefore, it is critical to review each potential outsourcing vendor using a formal review tool and an organizationally developed request for proposal (RFP) document. This will also ensure that each potential vendor is evaluated equally and fairly and that all of the health system’s needs are addressed. Developing a checklist of questions to ask potential 503B partners is crucial to this process; specific questions to ask when evaluating a vendor are included in TABLE 2.4

Vendor Selection Process

Evaluate Vendor Offerings

Before entering into a business relationship with any vendor, health system leadership must carefully examine a potential vendor’s CSP portfolio, quality standards, service capabilities, customization opportunities, delivery methods, and pricing. Furthermore, assess the vendor’s willingness to provide comprehensive and meaningful data.

Ensure that a 503B vendor is following or exceeding the QC and QA standards required by FDA, USP General Chapter <797>, current pharmacy practice standards, and prevailing state board of pharmacy statutes, rules, and regulations. Organizations must hold outsourcing partners accountable for the safety and quality of the medications they provide.

Review Form 483s

An FDA Form 483 is issued when an inspection has identified objectionable conditions at an outsourcing facility. As noted in previous PP&P articles, the simple existence of an FDA-issued Form 483 inspection document should not be used to exclude an outsourced compounder; rather, it should trigger a more in-depth review. (See the September 2018 article, FDA’s Regulatory Actions for 503B Compounders [available at: www.pppmag.com/FDAActions], for further detail on FDA Form 483s and inspections of 503B facilities.) Thorough review of the information included in any FDA Form 483s is crucial to ensuring proper due diligence when evaluating a 503B vendor. Be sure to gather and review all recent inspection documents relating to each vendor being evaluated.

Utilize a Multidisciplinary Team

A multidisciplinary team should assist in the vendor evaluation. Nurses, technicians, administrators, and pharmacists can have strikingly different perspectives on the materials and services proposed by vendors. For example, dosage forms (syringe versus vial) and final containers will be viewed differently by nurses than pharmacists. Administrators may be heavily focused on contractual limits, terms, and pricing, and less focused on other operational concerns impacting the pharmacy team.

Additionally, it is wise to utilize this team to conduct both announced and unannounced site visits to verify the accuracy of the information and services offered by the outsourcing provider. Interestingly, the 2018 PP&P compounding survey noted that only one-third of health systems using outsourced compounding have conducted onsite visits to their outsourcing partners.1 Nonetheless, investing time and resources to verify the quality of a vendor via site visits is a worthwhile pursuit. Articulate clearly to leadership that because there is a shared responsibility and liability surrounding the compounding, transport, and use of outsourced compounded preparations, actual site visits to verify key performance indicators are not a luxury, but a necessity, to ensure that the outsourcing partner is providing safe, effective medications. 503Bs may have multiple compounding methodologies for providing these medications; be sure none of these methodologies (eg, use of bulk powders or non-USP active pharmaceutical ingredients) are an unacceptable risk to your organization.

Contract Considerations

Involving the legal department or a legal resource throughout the vendor review process, especially in the contracting deliberations, is an invaluable component of a thorough assessment of a compounder’s operation. Information beyond simple pricing and payment terms can be most telling about the level of quality and overall control an outsourcer exerts over its operation; omitted information can also be revealing. Does the prospective outsourcing provider exclude any responsibilities for assisting you in withdrawing/recalling CSPs they have provided? Can the prospective outsourcing provider provide meaningful customer references (eg, clients of similar size, in the immediate area), or do they choose to provide limited business references? Are they forthcoming with information that can illustrate their business solvency? All documents, client references, and pending or in-process regulatory actions should be investigated.

If the provider has open investigations by its local board of pharmacy, FDA, DEA, or other agency, request not only an unredacted copy of these documents, but also a copy of the provider’s complete response to these agencies. Do not limit your due diligence to documents that are publicly available. Note that it is not unusual to be required to sign a confidentiality agreement with the provider, as some of these inspection documents or their corresponding responses may contain proprietary information.

Specific contracting questions to consider include the following:

  • Reporting. What responsibilities are contractually outlined with respect to the outsourcer’s reporting to the hospital?
    • What regular written reports will be provided?
    • What notices will be provided if there is an adverse drug reaction or claim by another client/customer of this outsourcer?
    • Will you hear about a state or FDA inspection from the outsourcer before it is in the public domain?
  • Addressing Inquiries and Disputes. How will inquires or disputes be resolved, and within what time frame? Will pharmacy have direct access to the operational team who actually compounds its preparations?
  • Determining the Role of the GPO. What are the responsibilities of the hospital’s GPO?
    • Will the GPO conduct regular, onsite QA checks and audits to supplement the facility’s?
    • Will the hospital promptly receive this information/audit results?


With increasing numbers of pharmacies purchasing medications from 503B outsourcers, ensuring the safety and quality of the drugs compounded in these establishments is essential. The decision to purchase CSPs from offsite 503B vendors can only be made after conducting the appropriate due diligence. Evaluating the outsourcer’s offerings, 483s, asking key questions, and site visits are critical steps in identifying an appropriate outsourcing partner.


  1. Outsourced Compounding. Pharm Purch Prod. 2018;15(4):S40,S42,S46.
  2. United States Department of Health and Human Services. Food and Drug Administration. Compounding: Regulatory Policy Information. www.fda.gov/Drugs/GuidanceComplianceRegulatoryInformation/PharmacyCompounding/ucm166743.htm. Accessed January 16, 2019.
  3. United States Department of Health and Human Services. Food and Drug Administration. Registered Outpatient Facilities. www.fda.gov/drugs/guidancecomplianceregulatoryinformation/pharmacycompounding/ucm378645.htm. Accessed January 16, 2019.
  4. Diorio L, Thomas D. Maximizing Outsourcing Options for Compounded Preparations. Pharm Purch Prod. 2009;6(7):6,8,9.
  5. United States Pharmacopeia. USP General Chapter <797> Pharmaceutical Compounding—Sterile Preparations.

Lou Diorio, RPh, FAPhA, is a principal of LDT Health Solutions, Inc, an international medication safety and quality management consulting company celebrating its 13th year of practice. Lou is a graduate of Long Island University’s Schwartz College of Pharmacy, where he is also an adjunct professor of pharmacy practice, a member of the college’s Alumni Board, and preceptor of pharmacy students. He serves as a member of the New York State Council of Health-System Pharmacists’ Research and Education Committee and also is a member of the New Jersey Society of Health-System Pharmacists’ Industry Relations Committee.

David Thomas, RPh, MBA, is a principal of LDT Health Solutions. He previously served as the director of information technology operations for SoluNet, LLC, and as a manager of implementation and technology development for Baxter Healthcare. Prior to his 15-year tenure with Baxter, Dave held hospital practice and management positions for 5 years. He is a graduate of St. Louis College of Pharmacy.



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