State Compounding Legislation: Federal Preemption, State Limits and Patient Impact

Executive Summary

• What’s new: Several states have introduced novel and stringent legislation to regulate compounded medications (including those specific to weight loss), which may directly conflict with the federal regulatory framework established by the Federal Food, Drug, and Cosmetic Act. 
• Why it matters: These state-level measures (which would increase and often duplicate enforcement penalties, inspection authority, documentation obligations, product testing, and requirements for drug labels and advertising disclosures) may be subject to challenge as preempted by federal law and could result in a patchwork of standards, impacting pharmacies and manufacturers involved in drug compounding. 
• What to do next: Companies and organizations should closely monitor state legislative developments, assess potential compliance challenges, and prepare for possible preemption battles or increased administrative burdens resulting from duplicative or conflicting requirements.

__________

Legislative sessions are underway in most states, and some have introduced novel legislation to regulate compounded medications, including those specific to weight loss. As we discuss below, these bills intersect with areas of the Food and Drug Administration (FDA) oversight and propose new ways to regulate compounding that may be preempted by federal law.

Although the GLP-1 shortage that drove the rapid and ubiquitous rise of compounding has been resolved (see our December 2024 client alert on that), compounded drugs continue to be clinically necessary for certain patients. Branded drug manufacturers have vociferously fought against compounded versions of their products by pressuring FDA to take more regulatory and enforcement action, petitioning state boards of pharmacy and now pressing states to introduce legislation that would impose additional, stringent regulatory requirements on compounders. However, many of the proposed state-level measures directly conflict with the federal regulatory framework established by the Federal Food, Drug, and Cosmetic Act (FDCA), and may be subject to challenge.

Common Issues Across State Compounding Bills

Several recent state bills seek to impose new requirements and oversight mechanisms on the importation and use of active pharmaceutical ingredients (APIs) in compounded drugs. Across these states, the common themes include:

• Requiring that imported APIs be sourced from FDA-registered and recently inspected facilities.
• Mandating state-level documentation and certification of compliance with these requirements.
• Imposing independent quality-control testing and recordkeeping obligations on pharmacies and practitioners using imported APIs.
• Authorizing state boards of pharmacy to inspect, enforce and penalize noncompliance, even when the APIs have already met federal import requirements.

These legislative proposals reflect a clear intent to regulate not just the use of APIs in compounding, but also the conditions under which APIs, especially those imported from foreign manufacturers, may be lawfully used within the state.

Overlapping Regulation

The state legislative proposals would impose additional or alternative requirements for API approval and state oversight in addition to FDA’s regulation. Some legislation would require compounded drugs for weight loss to use APIs identical to those in FDA-approved drugs, sourced from FDA-registered facilities inspected within the last two years, and accompanied by independent quality-control testing. Other bills would stop 503B compounding facilities from compounding drugs in shortage and would require detailed recordkeeping and reporting not required under federal law.

More specifically, common features of these bills surround state inspection authority, requirements for certificates of analysis (COAs), quality testing, labeling requirements and advertising prohibitions.

• Increased enforcement and inspection authority: Many bills would grant state boards of pharmacy broad new powers to inspect, discipline — including through revocation of licenses and permits — and penalize compounders for alleged violations of state-imposed standards that duplicate or conflict with federal law. Some proposals institute penalties of up to $1,000 per “illegally” compounded dose.
• COAs and documentation requirements: Several states propose requiring pharmacies and practitioners to obtain and submit COAs for APIs, including proof of FDA inspection and compliance. These requirements would be in addition to FDA’s existing requirements for API manufacturers to provide COAs and subject themselves to federal inspection and oversight.
• Purity percentages and quality testing: Some bills would mandate specific purity percentages or independent quality-control testing for APIs and compounded drugs. State-imposed purity standards risk conflicting with federal definitions and could result in products that are legal federally but illegal at the state level, or vice versa.
• Requirements for warnings and disclosures on labels: Some bills may require additional language on labels for compounded weight-loss medications, including listing all active and inactive ingredients, the quantity of those ingredients and the ingredients’ country of origin. The bills would also require a warning on the label stating that the compounded weight-loss medication has not been FDA-approved, has inadequate evidence of safety or efficacy, and has known and unknown side effects.
• Advertising disclosures: Some bills would establish specific mandatory disclosure requirements regarding advertising claims. These include requirements to disclose the following:
  • Potential side effects, adverse reactions or other warnings associated with active ingredients in the compounded medication.
  • A summary of specified risk information for any active ingredient that appears in an FDA-approved drug, based on the labeling of that FDA-approved drug.
  • A clear, conspicuous statement that the product is a compounded medication that has not been approved by the FDA, has inadequate evidence of safety and efficacy and has potential unknown side effects.
  •  The specific entities, such as pharmacies and outsourcing facilities, used to compound the medication.

Many of these standards are quite stringent and, given the limitations they impose, may effectively make these bills a de facto ban on compounding drugs in the relevant states. As noted above, some of these requirements also duplicate or contradict federal standards and thus set up a potential preemption battle with the states.

Federal Preemption and the Limits of State Authority

Compounders operating under Section 503A of the FDCA are already required to:

• Compound drugs only pursuant to a valid prescription for an identified individual patient.
• Use bulk drug substances that (i) are a component of an FDA-approved drug, (ii) appear on the FDA’s approved list or (iii) comply with United States Pharmacopeia (USP) standards.
• Maintain detailed records and ensure product quality in accordance with federal law.

The FDCA grants FDA exclusive authority over the regulation of drug manufacturing, including the approval and oversight of APIs and the control of what substances may enter the United States.

Specifically, FDA is vested with exclusive authority to determine which APIs are safe, effective and suitable for use in drug products, including those used in compounding. The FDA sets standards for API identity, strength, quality and purity, and it inspects and registers API manufacturers, both domestic and foreign. The agency also enforces compliance with USP monographs, or, where no monograph exists, with other FDA-approved standards. Pursuant to these authorities, FDA already addressed the issue of which APIs can be used to compound GLP-1s when the agency issued its green list in September 2025. The green list includes GLP-1 APIs from facilities FDA has inspected or evaluated that appear to be in compliance with the FDA’s standards.

The FDCA also has specific provisions aimed at allowing 503B compounding facilities to compound drugs in shortage. Congress created these provisions to allow compounding facilities to help maintain supply of critical drugs when those drugs become unavailable due to manufacturing or other issues.

The importation of APIs and other drug substances into the United States is strictly regulated by the FDA and U.S. Customs and Border Protection (CBP). FDA determines which substances may be lawfully imported, under what conditions and from which sources. The agency inspects shipments, enforces import alerts and can detain or refuse to admit substances that do not meet federal standards.

State efforts to restrict or expand the substances that may be used in compounding beyond what FDA permits are likely to directly conflict with federal law. For example, if a state law prohibits the use of a bulk substance that is permitted by FDA, or allows a substance that FDA has excluded, the state law undermines the uniformity and authority of the federal law. State action in this area would create a patchwork of standards and frustrate the federal objective of nationwide consistency in drug safety and compounding practices.

State advertising restrictions similarly may conflict with or be preempted by the FDCA (and the First Amendment) given the comprehensive federal regulatory framework governing drug advertising and labeling. The FDCA, through Section 503A (21 U.S.C. § 353a), establishes specific conditions under which compounded medications may be exempted from certain FDA labeling requirements; therefore, requirements that advertisements include specific disclosures about FDA approval status, safety and efficacy evidence, and risk information may potentially create a conflict where state law requires affirmative statements that go beyond federal requirements.

In addition to this type of direct conflict, state laws that attempt to regulate or restrict the importation of APIs may interfere with federal enforcement, disrupt interstate and international commerce, and undermine FDA’s ability to ensure a safe and consistent drug supply. These types of indirect conflicts may arise from requiring state-level approval of foreign manufacturers, mandating additional documentation for imported substances or imposing state-specific inspection requirements (e.g., to check that products are not compounded in a facility that has received an FDA warning letter or that has not been recently inspected).

State Regulation of Food Additives and Cosmetics: A Different Legal Landscape

States seeking to defend their proposed legislation may point to recent examples of states intervening in situations where FDA has not done so, to increase regulation of products under FDA’s jurisdiction. This occurred recently in the contexts of food and cosmetics. The critical difference is that, while the FDCA does regulate foods and cosmetics, it does not preclude states from imposing additional restrictions on what can be sold within their borders, provided those restrictions do not directly conflict with federal law.

States can, and often do, enact laws that ban or restrict certain food additives or cosmetic ingredients within their borders. For example, California has enacted bans on specific chemicals in cosmetics and food products. Other state laws impose additional restrictions on what can be sold within the state, for example, limiting foods that can be used in school lunches or requiring registration for cosmetics that contain specific ingredients. These are generally viewed as the appropriate place for states to regulate products that are also under FDA’s purview. That is because the state laws do not attempt to regulate the manufacturing process or federal approval of ingredients; rather, they simply restrict what can be sold within the state. As long as these state laws do not directly conflict with federal requirements (for example, by requiring something that federal law prohibits, or prohibiting something that federal law allows), the state regulations are not preempted.

California’s Proposition 65 is an example of state law and FDA requirements coming head-to-head. Prop 65 requires warnings for products containing chemicals known to cause cancer or reproductive harm. However, Prop 65 cannot be applied to drugs approved by FDA via a New Drug Application or Biologics License Application because federal law preempts state requirements that would conflict with FDA labeling and approval decisions. Courts have consistently held that states cannot impose additional warning or labeling requirements on FDA-approved drugs because this would undermine the uniformity and authority of the federal regulatory system. The current state compounding bills would likely be viewed similarly to Prop 65 (as opposed to the regulation of food and cosmetics by states).

Conclusion

Ultimately, overly restrictive state compounding laws may limit patient access to necessary compounded medications, especially for those with unique medical needs not met by commercially available products.

• Duplicative documentation and testing requirements increase costs for pharmacies, which are passed on to patients, and delays in compounding and dispensing can result from additional state-imposed administrative burdens.
• Patients and providers may face challenges navigating conflicting state and federal requirements, which, in turn, may interfere with patients’ receiving needed compounded medications.
• Excessive state regulation may also discourage pharmacies from offering compounded medications, reducing options for patients who rely on these therapies.

While branded drug manufacturers may be unhappy with the federal legislative scheme and/or FDA’s regulation, the FDCA vests FDA with specific authorities that cannot be overridden by state legislators. If these state bills succeed, they could set up a costly preemption battle in which FDA will likely prevail.

This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws.