The compounding industry has changed in two key ways, by: (1) complementing the customized and personal care offered via telehealth platforms and (2) adapting to the entry of large name-brand tech companies. These trends will undoubtedly continue into the next year and beyond.

However, many of these new entrants to the compounding industry may not appreciate the rules and regulations that apply to compounded medication. Compounded medication occupies a unique space in the human and animal health care market and in the drug supply chain by satisfying patient treatment needs when a commercially available drug is unavailable or inappropriate for treatment. That unique space, however, comes with unique regulatory requirements.

Compounding pharmacies must comply with multiple layers of regulations, including portions of the federal Food, Drug & Cosmetic Act (FDCA), state statutes and regulations governing the practice of pharmacy, controlled substance regulations, and compounding standards developed by organizations like the U.S. Pharmacopeia (USP). Regulation is even more nuanced when it comes to compounding medication for animals. As new entrants try to make the most of rapidly changing technology and ever-evolving ways to deliver medical care to patients, it becomes increasingly important to stay apprised of state and federal regulations governing compounding.

Telehealth expansion

Over the last several years, telehealth companies like Roman, Curology, Hims & Hers Health, and Dermacare, among many others, that offer prescription and over-the-counter medications typically through a subscription or membership program have rapidly expanded their presence in the compounding industry. Typically, these companies do so either by partnering with existing compounding pharmacies to prepare medications, or building their own in-house compounding pharmacies to meet patient need. This trend accelerated in 2020 as many telehealth companies capitalized on increased consumer demand during the COVID-19 pandemic not only for telehealth visits with medical professionals but also for tailored treatments comprising everything from skin creams, to erectile dysfunction treatments, acne medication, and hair loss treatments.

These tailored treatments are not possible without prescriptions for compounded medication from licensed medical professionals, and, as a result, telehealth companies have turned to the compounding industry to provide a conduit to meet patient need. However, even if these telehealth companies are not preparing the compounded medication themselves, they must be aware of the rules and regulations governing the practice of pharmacy and of compounding regulations. Failure to understand the industry could cause disruptions in service and scrutiny from regulators.

Big Tech enters the pharmacy space

Several national and multinational e-commerce and technology businesses that had no prior involvement with human or animal health care have recently entered the pharmacy space with the goal of becoming big players in the industry. For example, a leading online pet store, Chewy, recently opened its own licensed compounding pharmacy. Likewise, Amazon recently launched its own digital pharmacy, Amazon Pharmacy, and Walmart has expanded its online pharmacy presence into specialty pharmacy services and pet health pharmacy services. It is likely only a matter of time before other e-commerce businesses enter the pharmacy and compounding spaces.

Many of these Big Tech entrants that operate on a national scale will need to ensure that they comply with federal law and state regulations governing the practice of pharmacy. They will need to navigate, among other things, online pharmacy laws, controlled substance regulations, and laws governing practitioner-patient relationships. Without a solid foundation in regulatory compliance, Big Tech will find itself at the mercy of state or federal regulators, which could result in significant damage to their pharmacy businesses.