Compounding plays a vital role in providing patients with safe and effective drugs, including medicines for rare diseases and conditions not available through pharmaceutical manufacturers. Drug compounding, or compounding, is the process by which a licensed pharmacy produces medicine to meet the individual needs of a patient. This can involve combining, mixing, and altering ingredients to create a custom medication that addresses a specific need that might otherwise not be met by existing products. For example, a child may not be able to swallow pills and require a liquid version. A patient may be allergic to one of the inactive ingredients commonly found in certain medication and need it compounded without the allergen. Hospitals and clinics will often keep a supply of compounded medication to fit the needs of the specific population they serve. At other times, compounding pharmacies are called upon to fill a gap in the market arising due to drug shortages.    

Although the rise of drug compounding is seen as a recent change in the pharmaceutical market, this is not entirely accurate. Traditionally, compounding is how patient needs have been met. At the start of the last century, most pharmaceuticals were compounded by local pharmacies. By the end of that century, the needs of the patients and pharmacists had changed dramatically, resulting in changes to the regulatory environment. 

A compounding pharmacy, although they produce various drugs, is not regulated under the same legal framework as a pharmaceutical manufacturer. Instead, compounding pharmacies are regulated by federal laws that apply specifically to compounding pharmacies. In addition, state boards of pharmacy play a dominant role in ensuring that compounding pharmacies adhere to appropriate levels of sterility and quality control. Finally, the United States Pharmacopeia sets the standards for preparations manufactured through compounding.