503B Outsourcing

Published: April 7, 2020

503B oursourcing 500

In the midst of the coronavirus pandemic, it’s understandable that there is an increased focus on all aspects of our healthcare system – including patient care, providers, healthcare facilities, medicines, and supplies.

A key component of healthcare in the U.S. is 503B Outsourcing, which many people outside of the medical community probably have not heard of.  Chances are, however, if you have had surgery, or been a hospital patient, then you have been treated with a medicine that was compounded in a 503B facility. There are currently about 60 of these facilities registered with the FDA. 

Compounding is usually defined as the combining, mixing, or altering of a prescription drug or drugs to meet the needs of a patient. Examples provided by the U.S. Department of Health and Human Services include “a pharmacist compounding a drug without a certain dye to which a patient may be allergic, or creating a liquid form of a drug for a patient unable to swallow a pill.”  The FDA does not review or approve compounded drugs, but the FDA does provide and enforce strict regulations for facilities creating compounded drugs. 

While 503B facilities do not develop new drugs, they can combine or alter an existing prescription drug to meet the needs of an individual patient. They also produce large quantities of prescription drugs that are distributed to healthcare facilities. 

The term 503B comes from a section in the FDA’s Drug Quality and Security Act, which was signed into law in 2013. The law states that outsourcing facilities, engaged in compounding sterile drugs, must comply with Current Good Manufacturing Practice, are subject to regular inspections by the FDA, and also must meet other conditions, such as reporting adverse events and providing the FDA with information about drugs compounded. 

Of the over 6,100 hospitals in the United States, approximately 75 percent use sterile compounding preparations from 503B facilities, according to Pharma Technology Focus magazine. 

“Hospitals reported that quality considerations – including FDA registration; State and Federal enforcement actions; product recalls; and quality assurance documentation – drive their decisions on where to obtain non-specific compounded drugs,” according to a report issued in June 2019 by the U.S. Department of Health and Human Services. 

One of the largest impacts 503B Outsourcing can have within the framework of U.S. healthcare is the rapid development and deployment of new combinations of existing drugs, or the ability to repurpose existing drugs into different forms or packaging. Outsourcing facilities also have the ability to fill gaps within medicine by producing drugs where the market size is too small for a traditional manufacturer to justify the time and cost associated with going through the FDA approval process. In this case, 503B Outsourcing may fill a critical need in the supply chain, for example where there are issues compounding drugs from bulk chemicals in hospitals or handling hazardous drugs.