What is a 503B outsourcing facility?

Compounding pharmacies are designed to work like the pharmacies of old, formulating bespoke medication on the spot for patients. But, with the growing number of patients whose needs can’t be met with Food and Drug Administration (FDA)-approved drugs, it’s reasonable to think that these pharmacies need to produce bespoke meds in sufficiently large batches to meet demand.

In light of this, when the U.S. government passed the Drug Quality and Security Act (DQSA) in 2013, it brought the existence of so-called “503B outsourcing facilities.” The FDA allows these facilities to produce custom-tailored medication in large volumes for office use (e.g., hospitals, physician offices, ambulances). Here’s an in-depth look into these services:


A Brief About Section 503

One of the defining features of the DQSA is its additional amendments to Section 503 of the FDA Modernization Act (FDAMA) of 1997. As this article published in the Iowa Law Review explained, the FDAMA pre-DQSA suffered from confusing wording on the distinction between compounding pharmacies and drug manufacturers.

Aside from removing the advertising restrictions in Section 503A, the DQSA added the entirely new Section 503B. Under this addition, drug manufacturers can opt to register as an outsourcing facility instead of a compounding pharmacy (still under 503A). The act also offers incentives to manufacturers who consent to regulation under Section 503B.

More Stringent Requirements

The incentives for 503B outsourcing facilities include exemption from regulations that govern conventional drug manufacturing, such as restrictions on making entirely new drugs. However, legal experts believe the most beneficial incentive is that these facilities can continue making non-bespoke medication, albeit with several limitations.

For instance, 503B outsourcing facilities can’t:

  • Create compounded drugs using bulk drugs (though some exceptions apply)
  • Create compounded drugs that are essentially a copy of FDA-approved ones
  • Produce meds under the FDA’s Difficult to Compound List
  • Sell compounded drugs by the bulk (wholesale)
  • Operate without a licensed pharmacist’s direct supervision

The DQSA has the right idea of regulating 503B outsourcing facilities such as Fagron Sterile Services and others under more stringent requirements than 503A compounding pharmacies. After all, the Act being signed into law more or less stems from the fungal meningitis outbreak the year before caused by a lack of oversight on compounding.

To prevent a repeat of similar tragedies, the facilities are required to:

  • Use drugs that comply with Chapters 795 and 797 of the U.S. Pharmacopoeia (USP) and state board regulations
  • Employ good manufacturing practices as stated in 21 CFR Parts 210 and 211, known as Current Good Manufacturing Practices (CGMPs)
  • Perform environmental monitoring every shift in ISO 5-compliant cleanrooms and every week in ISO 7 or ISO 8-compliant cleanrooms
  • Maintain a quality department that’s independent of the company’s interest in sales for conducting inquiries and investigations
  • Register with the FDA, Drug Enforcement Agency, and state boards, and submit the facility’s product list to the FDA twice a year
  • Consent to regular inspections by the FDA

By comparison, compounding pharmacies need to perform environmental monitoring once every half a year and use USP 795 and 797-compliant drugs for compounding. Beyond-use dating may be required depending on whether there are available studies regarding a drug’s stability.

Benefits To The Consumer

503B outsourcing facilities have proven their worth in recent years, namely during the ongoing COVID-19 pandemic. With the virus rapidly mutating and causing a resurge of cases, countries like the U.S. are experiencing a medicine shortage. Notably, the lack of antiviral and antibody drugs has put hospitals and clinics in dire straits in managing the disease.

Allowing 503B outsourcing facilities to manufacture non-patient-specific drug products, namely sterile and select nonsterile ones, has helped cushion the impact of the shortage. For instance, the facilities can produce certain neuromuscular blocking agents like midazolam and fentanyl to be used in intensive care, where many COVID cases end up.

Their approach to inventory management contributes to these facilities fulfilling orders at crucial times. Some employ the “just in time” doctrine, where the manufacturer delivers the drugs while the end-users are actively using them for treatment. Hospitals and other healthcare facilities get their drugs fresh from the manufacturing line instead of weeks or months-old stocks.

Opportunities For Growth

With their significance in health crises well-established, 503B outsourcing facilities are expected to play a more active role in the healthcare system. Today, many up-and-coming companies start by filling the gap in inventories of specific sterile and nonsterile drugs before embarking on drug compounding.

As these manufacturers aren’t limited to bespoke meds, they can also take advantage of growing markets for certain drugs. In one report, experts estimate that demand for heart failure drugs will grow to USD$2.69 billion over three years. While a somewhat delicate market to get involved in, it’s not impossible for the compounded drug industry.


Given their nature, a 503B outsourcing facility may be more akin to a conventional drug manufacturer than an actual compounding pharmacy. Nevertheless, their ability to make both patient and non-patient-specific medication can prove to be helpful in a beleaguered healthcare system. The stringent regulations governing them ensures patient safety.