Since the tragic New England Compounding Center (NECC) meningitis outbreak in 2012 that resulted in 64 deaths and hundreds of illnesses, the compounding pharmacy industry has undergone quite a big regulatory evolution. The Drug Quality and Security Act of 2013 created new pathways for compounding pharmacies: traditional 503A pharmacies that prepare patient-specific medications, and 503B "outsourcing facilities" that can produce larger batches without prescriptions for individual patients.
Fast-forward to 2025, and the landscape continues to evolve. The FDA has conducted hundreds of inspections, issued numerous warning letters, and refined its approach to enforcement. This year alone, the FDA has issued multiple warning letters to 503B facilities for issues ranging from inadequate aseptic processing environments to failures in product sterility assurance and batch release protocols. (You can read them here, here, here, here, here, and here.) We’ve seen these same issues in our audit and mock inspection work for these facilities.
Meanwhile, compounding pharmacies that operate as outsourcers—many of which were previously operating under state pharmacy board regulations with limited FDA oversight—have been forced to adopt pharmaceutical manufacturing standards that can be challenging to implement both operationally and financially.
The shortage list dynamics for 503B facilities have been particularly volatile recently, with drugs like GLP-1 agonists moving on and off the list as market demands fluctuate wildly. It’s all put significant pressure on compounders who have invested in automation and specialized equipment for specific product lines, only to face regulatory restrictions on their continued production.
As the industry matures in its GMP implementation, we're witnessing a cultural shift from resistance to acceptance, though significant challenges remain—particularly for smaller operations balancing compliance costs against business viability. We’ve worked with several 503B facilities and have observed this struggle firsthand.
We sat down with Jesse Gillikan, President and CEO of cGMP Validation, to discuss the challenges compounding pharmacies face in implementing GMP. With over a decade of experience helping more than 100 compounding pharmacies achieve FDA compliance, Jesse shares insights on the evolving regulatory landscape, cost considerations, and practical approaches to meeting requirements while maintaining business viability.
Need support planning, resourcing, executing, and managing your compliance program? Get in touch with us to start the conversation.
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Summary, Key Points, and Practical Takeaways
This interview has been edited for clarity and length.
Nick Capman: Why is GMP compliance such a challenge for compounding pharmacies?
Jesse Gillikan: It's been a very interesting ride. I would say Nick, and that's one reason I have stayed involved with teaching. I like training and mentoring. Even though 10 to 12 years is a long time, it's a short time in changing an industry's culture. Compounders play a very important role in our society, and I have a great deal of respect and admiration for what they're trying to do, but coming into GMP compliance has been very challenging for them.
The primary challenge in the beginning was accepting the need and the requirement to become GMP compliant—there was a lot of pushback. The next challenge was understanding the GMPs and their implications. Then came the cost for testing of raw materials and finished products and validations.
The advantage to the compounder is that since 2014, when the guidelines came out for 503A and 503B, the compounders can now make non-patient-specific medications and sell them across state lines. So there was an advantage to them for the FDA getting involved.
As for familiarity with current GMP requirements, it's been a constant learning curve. This has been a progression since 2012. Compounders are now accepting the requirements to be GMP compliant, but even after 12+ years, the learning curve is still pretty steep.
Where do compounding pharmacies generally get the information they need about GMP standards and updates?
One thing I've been impressed with is that the compounders basically everybody knows everybody, and they're a very tight group. They are competitors, but they share information readily with each other, and more than any other group I have dealt with. They attend FDA meetings and conferences readily. They are extremely well-read on guidelines. They keep me on my toes.
If that’s the case, where are the challenges stemming from?
I think in 12 years, we've overcome the fact that they must be GMP compliant, especially if they're a 503B and now basically a pharmaceutical manufacturer, if you will. Part of the challenge has been the size of the company, the cost of testing, the cost of validations that they have never had to do before, and in some cases, it's increased their overhead at the same time they're selling units down to the you know, penny can make a difference in selling a unit dose. So that's where I say financially has been, is now becoming more of the issue than the learning curve.
So more of a risk-based approach, meaning, if the investment is X, what's my level of risk in order to determine how to proceed?
That is correct, and I think we've been instrumental in helping them identify what that risk is and also following what the FDA has cited companies for, and of course, making those a priority at the same time keeping all the GMPs in perspective as we coach them through the process.
You mentioned financial constraints as a factor. What about physical or technological limitations?
A lot of the compounders are very small operations—one small clean room with one or maybe two laminar flow hoods or biosafety cabinets. So, becoming a 503B, when I advise clients on space-wise, I say that clean space should be at least, but no more than, 1/3 of your total space. Another 1/3 is for warehousing, because now you're not making just tens of units per batch, you're making thousands. Therefore, you need space to keep them, which also makes it a GMP warehouse, and there are guidelines on how to do that.
Sometimes, they don't have the physical space, which becomes a drawback in becoming compliant with the GMPs. Also, the clean rooms sometimes are not of adequate size to have the current design for airlocks, for gowning in/out, and materials in/out. Fortunately, the FDA is more amenable to accepting things under procedural control. Of course, I like the mechanical and physical controls, but if you can prove to them you're under control, I think they will work with you.
Is there anything from a physical and technological standpoint that is becoming a really big hurdle, and are there any ways that you've seen these limitations be overcome while still maintaining compliance?
There is a lot more work to be GMP compliant, both from a facility and technological standpoint. And of course, the compounders can only make what is on the FDA shortage list, so they're constantly monitoring that. I have several clients that have installed automated filling lines so they can make tens of thousands of units per batch, and all of a sudden, within a few months, they notice that the drug is coming off the shortage list, so they will no longer be able to make that.
Talking about risk-based approaches, it's it... You have to do an evaluation of the cost versus your return on investment. That's just Business 101, and sometimes that becomes a challenge as to what they can and cannot make, as well as what the market needs, which obviously creates the shortage list.
When you talk about the shortage list, the very first thing that pops into my head is GLP-1s. Have you seen any unique challenges pertaining to that?
I would say the biggest impact I have seen has been with the GLP-1 shortage list going away. Two companies I'm familiar with put in automated filling lines precisely for that drug. They will find a way to use the equipment, but there's a halt in their business because this shortage is going away.
We talked about the financial, physical, and technological constraints. What about personnel, training, and systems?
I think, for the most part, compounders have adequate staffing to do what they do. In some cases, additional staffing is needed, primarily in the areas of quality assurance. Environmental monitoring is a big one because compounders at one point had their room certified every six months with a handful of samples taken. Now, anytime you're in production, you have to do environmental monitoring. So some of these compounders have had to add one to two resources to their staffing, which obviously becomes an overhead expense in addition to the supplies and testing it takes to maintain that level of compliance.
You mentioned environmental monitoring. Are there any other processes, procedures, SOPs, or documentation that seem to provide more of a challenge than other areas?
There were two or three major differences in becoming 503B. One is the environmental testing, baseline studies, and routine monitoring that we talked about. Another was media fills. Compounders used to have a test kit per technician that they qualified, and now the media fills are more process-related, not batch-specific but process-related.
Process validation, where once the process is validated through media fills, each product must then be validated, is very new and costly to the compounders. In terms of SOPs and documentation, they really had to learn a new way of developing batch records, doing media fills, and validations. All three of those were foreign to them, but they're coming around.
How are compounders currently managing quality assurance and batch records? Where do gaps exist?
I'd say most, if not all of them, have a person assigned to and/or delegated to quality assurance and review of batch records. As evident in most of the FDA inspections and warning letters, there's still—and this is not just for compounders, it's throughout our industry—often a lack of thorough evaluations of failures and deviations. You can hardly pick up an FDA 483 and not see a citation where there was not adequate evidence for the failure or excursion that happened.
If I'm a compounder listening to this, what are some of the primary cost drivers in becoming GMP compliant?
I'd say some of the biggest costs, other than what we've already spoken about like environmental testing and so forth, is the cost for testing raw materials and finished products. For many years, compounders did sterility testing on their products, and that was all. They did not perform assays. They now do, and they've accepted that, as well as testing their raw materials. And that comes at a large price.
Of course, compounders are in business, and the larger the batches, the more raw materials, because the same amount of testing applies to some degree regardless of the size of the batch. So the larger the batches, the cost per unit with overhead comes down. Whereas for a compounder, a batch of 2,000-3,000 vials or syringes is a typical to large batch size. I mean, they used to be making, you know, 10 vials for Dr. Smith, whereas large pharmaceutical companies make hundreds of thousands or sometimes millions of tablets per batch. So the overhead cost for testing is often a major consideration, to the point that today, some of them still cannot afford to do that testing because they don't have the product line or the volume to do so.
Then what do they do?
They're just waiting for the 483, I guess.
Is there anything they could do to achieve and maintain compliance while still operating profitably and scaling operations?
I've got to admit, they are struggling with that. The GMP bar, as we call it, has a bandwidth, but there is a bottom, and the fact that you just don't test your raw materials is not acceptable. One way around that is to buy more raw materials at once for the expiry period. And the expiry period can be retested and extended. So buying more raw materials, of course, then relates to the need for warehousing space—one thing after another. So it has been a struggle in the last 12 years. You know, that sounds like a long time, but in terms of changing an industry's culture, it's not a long time.
Let's talk about culture. What is the current mindset of compounders, especially as it pertains to compliance with GMPs?
They're becoming GMP compliant. I'd say right now, the biggest issue is the cost. The knowledge gap has closed. I did an audit not long ago where they did stability studies initially on their product, and they haven't since then, and that's been like eight or nine years. When I asked why they haven't maintained this very important quality system, they simply said they couldn't afford it.
What is leadership generally doing with these types of challenges? How are they able to continue business and make attempts to be compliant? Where are you seeing prioritization and de-prioritization?
I'd say I think every pharmacy I have dealt with, some have been as small as three employees, some as many as 300 employees, a lot of the pharmacy owners are still in the day-to-day operations, and they're the ones that had to be convinced that the FDA was here to stay and we must be compliant. The owners make the major decisions, and prior to prioritization is usually based upon cost.
Are there areas of external support that compounders can leverage to give them an advantage?
The compounders are very active in attending FDA meetings and conferences and conferring with each other. They're also very receptive to using consultants and contractors. I will say they're trying to do the right thing. And of all of the clients we have now, they're really not resistant to the fact that they have to comply.
I have a checklist that I go by to educate them and guide them through the process. When I developed that 12 years ago, since then, I've seen citations against each item on the list, as we've come down the list. So the positive is that they're no longer fighting the FDA on being compliant—they've accepted it. Now they're just trying to learn what to do and find a way to pay for it.
What is their overall perception of FDA inspections and warning letters?
That was a little chuckle, because I've always had a great deal of respect for the FDA. I've learned an awful lot from their conferences and inspections that I've been involved in. How they perceive the inspections has changed for the better, with more use of the inspection reports for learning and improvements, versus just thinking that the FDA is picking on them. I've heard that from basically everyone.
I think the main concern they have with the FDA now, and I currently have one, is that responses to the FDA are not always addressed by the FDA, and as much as a year later, a warning letter appears. The fact that they responded in earnest, they felt like they had responded adequately, and didn't get a response from the FDA, and then suddenly this warning letter appears up to a year later. I think this has gotten a little better, but I just heard of a case a couple of weeks ago.
For the audience listening, what's the best piece of advice you can leave them with?
I think the best advice, and I think they're doing it, is to continue to talk among themselves and with the FDA. Compounders very readily pick up the phone and call the FDA, and I think that's very helpful. My experience with the FDA over my 46-year career has been that they want to help you. They want to see you do well.
The first compounder I assisted at a district office in Atlanta in 2013, I didn't realize during my presentation I was sitting next to the district director. When I finished, he gave me his business card and said, "I want to see this pharmacy be successful. We want an icon in the southeast, if you will." So I think they're on the right track. They're just trying to find the business model to stay in business and have the profits to be compliant. There is a cost.
Hopefully, we're able to lead them in that direction. Sometimes they can't afford to make a drug that's a very small volume but needed, because they can't afford the overhead that GMP compliance requires. Therefore, there continues to be a market for the 503As, which are still patient-specific, with less "GMP-ism," if you will, and therefore less cost. I think they're doing the right thing. That's the reason I dedicate the last part of my career to helping them.
Jesse’s key takeaways:
Embrace a collaborative industry approach. Leverage the tight-knit nature of the compounding community. Unlike many other industries, compounders readily share information and best practices despite being competitors. Actively participate in FDA meetings, conferences, and industry groups to stay informed on evolving regulations and interpretations.
Apply a risk-based prioritization strategy. With limited resources, focus first on addressing the compliance areas most frequently cited in FDA inspections. A systematic, prioritized approach to implementing GMP requirements allows compounders to focus resources where they matter most while working toward comprehensive compliance.
Balance space allocation strategically. For 503B facilities, aim for a clean space to occupy approximately one-third of your total facility, with another third dedicated to GMP-compliant warehousing. This balanced approach allows for appropriate inventory management, which becomes critical when scaling up from patient-specific to larger batch production.
Consider procedural controls where physical limitations exist. When facility constraints prevent ideal clean room design with proper airlocks and material/personnel flows, develop robust procedural controls that can demonstrate containment of contamination risks. The FDA has shown a willingness to work with compounders who can prove effective control through procedural means.
Invest in quality assurance staffing. Environmental monitoring requirements alone often necessitate adding dedicated personnel. Rather than viewing this as merely an overhead expense, recognize that proper QA staffing is an investment in preventing costly product failures and compliance issues.
Shift from technician-based to process-based validation. Understand that media fills are no longer about qualifying individual technicians but validating entire manufacturing processes. This fundamental shift requires retraining staff and developing new documentation approaches to support process validation.
Develop batch records that meet GMP standards. Traditional compounding documentation is insufficient for 503B operations. Implement comprehensive batch records that track all critical process parameters, in-process controls, and release testing to demonstrate consistent production of quality products.
Establish thorough deviation management systems. Address one of the most common FDA citations by implementing procedures for thoroughly investigating, documenting, and resolving failures and deviations. Ensure root causes are identified and proper corrective and preventive actions are implemented.
Consider economic scale in batch planning. Testing costs apply regardless of batch size, making larger batches more economically viable. When possible, plan production around larger batch sizes to distribute overhead costs across more units, improving overall profitability while maintaining compliance.
Optimize raw material management. Purchase larger quantities of raw materials when economically feasible, as this allows for amortizing testing costs across more production batches. Implement proper expiry testing and extension protocols to maximize material shelf life.
Maintain stability studies despite financial pressures. Though costly, stability studies are a critical quality system requirement that cannot be neglected. Build these costs into product pricing and consider more efficient study designs that still meet regulatory requirements.
Engage directly with the FDA when questions arise. Don't hesitate to contact the FDA with specific compliance questions. The agency has consistently demonstrated its desire to help compounders succeed in meeting requirements, not just to enforce regulations. When receiving feedback from the FDA following inspections, document responses thoroughly and implement corrective actions quickly. This demonstrates good faith compliance efforts, even if formal FDA acknowledgment is delayed.
Invest in appropriate automation selectively. Before installing automated filling lines or other significant equipment, thoroughly analyze market stability and shortage list trends. Ensure ROI calculations account for the potential that products may come off shortage lists and no longer be eligible for compounding.
Jesse Gillikan is the President and CEO of cGMP Validation, a full-service compliance and validation firm specializing in compounding pharmacies (503A and 503B) since 2012. Under his leadership, the company has helped over 100 compounding pharmacies become compliant with FDA regulations.
With 46 years of experience in the industry, Jesse has developed extensive expertise in GMP compliance, particularly as it relates to the unique challenges faced by compounding pharmacies.
The FDA Group helps 503B compounding facilities bridge the gap between traditional pharmacy practices and pharmaceutical manufacturing requirements.
Is your compounding pharmacy struggling with the financial and operational challenges of GMP compliance? Are you concerned about meeting FDA requirements while maintaining business viability? The transition from traditional compounding to 503B outsourcing facility status demands expertise that bridges both worlds.
The FDA Group specializes in helping compounding pharmacies navigate this complex regulatory landscape with practical, cost-effective solutions tailored to your unique operational constraints.
GMP implementation for compounders: Develop right-sized quality systems that satisfy regulatory requirements without overwhelming your operations or budget. We understand the specific challenges of scaling from patient-specific to batch production.
Environmental monitoring and validation programs: Establish compliant environmental monitoring and media fill programs that address the shift from technician qualification to process validation, a critical compliance area for 503B facilities.
Batch record development and documentation Systems: Create documentation that satisfies GMP requirements while remaining practical for your facility size and staffing levels, addressing one of the most common deficiency areas.
Risk-based compliance strategies: Prioritize your compliance efforts based on FDA enforcement trends specific to compounding pharmacies, focusing resources where they provide the greatest risk reduction.
FDA response management: Navigate the inspection process and develop comprehensive, effective responses to 483 observations and warning letters, an area where many compounders struggle.
Stability programs and testing strategies: Design cost-effective approaches to required testing that balance compliance with financial constraints, including stability and raw material testing programs.
Our flexible engagement models—consulting, staff augmentation, and recruitment—allow us to tailor our support to your specific needs and budget constraints. From small three-person operations to large 300+ employee facilities, we provide practical GMP solutions that respect the unique position of compounding pharmacies in today's regulatory environment.
Contact us today to discuss how our specialized expertise can help your 503B facility achieve and maintain compliance while preserving business viability in a challenging regulatory landscape.
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