Pharmacy compounding involves the preparation of customized medications that are not commercially available for individual patients with specialized medical needs. Traditional pharmacy compounding is appropriate when done on a small scale by pharmacists who prepare the medication based on an individual prescription. However, the regulatory oversight of pharmacy compounding is significantly less rigorous than that required for Food and Drug Administration (FDA)-approved drugs; as such, compounded drugs may pose additional risks to patients. FDA-approved drugs are made and tested in accordance with good manufacturing practice regulations (GMPs), which are federal statutes that govern the production and testing of pharmaceutical products. In contrast, compounded drugs are exempt from GMPs, and testing to assess product quality is inconsistent. Unlike FDA-approved drugs, pharmacy-compounded products are not clinically evaluated for safety or efficacy. In addition, compounded preparations do not have standard product labeling or prescribing information with instructions for safe use. Compounding pharmacies are not required to report adverse events to the FDA, which is mandatory for manufacturers of FDA-regulated medications. Some pharmacies engage in activities that extend beyond the boundaries of traditional pharmacy compounding, such as large-scale production of compounded medications without individual patient prescriptions, compounding drugs that have not been approved for use in the US, and creating copies of FDA-approved drugs. Compounding drugs in the absence of GMPs increases the potential for preparation errors. When compounding is performed on a large scale, such errors may adversely affect many patients. Published reports of independent testing by the FDA, state agencies, and others consistently show that compounded drugs fail to meet specifications at a considerably higher rate than FDA-approved drugs. Compounded sterile preparations pose the additional risk of microbial contamination to patients. In the last 11 years, three separate meningitis outbreaks have been traced to purportedly 'sterile' steroid injections contaminated with fungus or bacteria, which were made by compounding pharmacies. The most recent 2012 outbreak has resulted in intense scrutiny of pharmacy compounding practices and increased recognition of the need to ensure that compounding is limited to appropriate circumstances. Patients and healthcare practitioners need to be aware that compounded drugs are not the same as generic drugs, which are approved by the FDA. The risk-benefit ratio of using traditionally compounded medicines is favorable for patients who require specialized medications that are not commercially available, as they would otherwise not have access to suitable treatment. However, if an FDA-approved drug is commercially available, the use of an unapproved compounded drug confers additional risk with no commensurate benefit.