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Memorandum of Understanding Addressing Certain Distributions of Compounded Drugs

Update: February 2022: FDA intends to undertake notice-and-comment rulemaking related to statutory provisions regarding certain distributions of compounded human drug products and a standard memorandum of understanding (MOU) between FDA and states. The standard MOU is an agreement that is intended to address interstate distribution of inordinate amounts of compounded drugs and complaint investigation by a state regulator relating to compounded drugs distributed outside the state.

Background: In October 2020, FDA made a standard MOU available for signature by states. The standard MOU was developed in consultation with the National Association of Boards of Pharmacy (NABP) as described in section 503A of the Federal Food, Drug, and Cosmetic Act (FD&C Act) and was the product of more than 20 years of collaborative dialogue and stakeholder input. The MOU is a key public health protection in the law and is anticipated to help enhance communication and maximize federal and state resources for oversight of compounded drugs produced by traditional pharmacies.

Soon after issuing the standard MOU, FDA was sued by several compounding pharmacies in the U.S. District Court for the District of Columbia. In September 2021, the court remanded the standard MOU to FDA to either certify that it will not have a significant economic effect on small businesses or prepare a regulatory flexibility analysis.

To undertake this analysis more fully and ensure a robust framework for these important public health protections, the agency intends to engage in notice-and-comment rulemaking regarding the statutory provisions on certain distributions of compounded human drug products, including the MOU.

FDA plans to provide updates, as appropriate, on the rulemaking and standard MOU.

‘5 percent limit’ on interstate distribution

Under section 503A of the Food, Drug and Cosmetic (FD&C) Act, if certain conditions are met, drug products compounded by a licensed pharmacist in a state-licensed pharmacy or federal facility or by a licensed physician can qualify for exemptions from key provisions of the FD&C Act. One of those conditions is that a compounder located in a state that has not entered into a standard MOU with FDA does not distribute compounded drugs out of the state in which they are compounded in an amount that exceeds 5 percent of the compounder’s total prescription orders dispensed or distributed.

Before the court’s decision, FDA had already extended the period before FDA intends to begin enforcing the statutory 5 percent limit on distribution of compounded human drug products out of the state in which they are compounded in states that do not sign the standard MOU, from October 27, 2021 (as provided in the October 2020 Federal Register Notice announcing the availability of the standard MOU) to October 27, 2022.

FDA plans to further extend the period during which FDA does not intend to enforce the statutory 5 percent limit during the rulemaking process.

Status of standard MOU published in October 2020

FDA considers the standard MOU published in October 2020 to be suspended. This means that during the rulemaking process, FDA will not enter into new agreements with states based on this standard MOU. FDA does not expect states that have signed the standard MOU to carry out the activities described in the MOU. In addition, the standard MOU will be updated based on the content of a final rule, and FDA intends to announce a new opportunity for all states to consider and sign the updated standard MOU.

Reducing the risks associated with compounded drugs

Implementing these statutory provisions remains an important public health priority. States, along with FDA, play a vital role in helping to reduce the risks associated with compounded drugs, while preserving appropriate patient access. For example, if a compounder distributes compounded drugs to multiple states, it can be difficult to gather information about adverse drug experiences and quality issues associated with those drugs, connect them to the compounder, and take coordinated action to address a potentially serious public health problem. Close collaboration among states, and between states and the federal government may help prevent serious and widespread problems by helping to better identify adverse drug experiences and drug quality concerns across the country. Toward that end, the Agency encourages pharmacies, consumers, and state regulators to submit information on serious adverse events and serious product quality issues related to compounded drug products.


Please direct any questions to compounding@fda.hhs.gov.

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