Compound Interest: HHS’ New Peptide Policy, the China Supply Chain, and a Blue-Wave Congress

Under an interim enforcement discretion policy, HHS states that it does not intend to take action against state-licensed pharmacies, federal facilities, or licensed physicians that compound BPC-157, Epitalon, KPV, MOTS-c, Semax, or TB-500 under Section 503A of the Federal Food, Drug, and Cosmetic Act (FD&C Act). The policy, signed by Secretary Robert F. Kennedy, Jr., was announced in a notice of availability published in the Federal Register on October 30 (91 FR 68526). Notably, the policy comes from the HHS Office of the Secretary, not from the US Food and Drug Administration (FDA).

Background

Under Section 503A, a bulk drug substance qualifies only if a United States Pharmacopeia (USP) or National Formulary (NF) monograph applies to it, it is a component of an FDA-approved drug, or it appears on the 503A bulks list. None of the six peptides meet those criteria. All six sat in Category 2, the FDA’s designation for bulk substances that may present significant safety risks, from September 2023 until April 22, 2026, as we previously wrote about and monitored. Their removal from Category 2 did not make them eligible for compounding. In July, the FDA’s Pharmacy Compounding Advisory Committee (PCAC) reviewed seven peptides for the bulks list and narrowly voted to recommend six, each case over the contrary recommendation of the FDA’s Center for Drug Evaluation and Research (CDER). The policy covers those six and omits the seventh, emideltide, which the PCAC rejected.

Enforcement Discretion and Who Is Exercising It

The FD&C Act vests authority in the secretary of HHS, who has long delegated its day-to-day administration to the FDA. Agencies have broad latitude to decide which violations to pursue, and courts generally treat a decision not to enforce as committed to agency discretion. What makes this policy unusual is its messenger: the HHS secretary, not the FDA, is exercising that discretion despite CDER’s contrary scientific recommendation. Press reports indicate that HHS first sought a regulation adding the peptides to the bulks list, shifted to enforcement discretion after FDA staff raised safety objections, and ultimately incorporated guardrails that FDA staff helped draft.

Temporary allowances for compounding are not new. The FDA’s interim policy on 503A bulk drug substances, issued in 2017 and revised in January 2025, has long permitted compounding with nominated substances in “Category 1” while the FDA evaluates them. That is the same framework under which these peptides were placed in Category 2 in 2023. During the COVID-19 public health emergency, the FDA issued temporary policies relaxing certain compounding conditions for hospitalized patients. And when the tirzepatide and semaglutide shortages ended, the FDA gave 503A pharmacies and outsourcing facilities wind-down periods that extended through spring 2025.

Those precedents generally rested on the FDA’s own scientific judgment or a supply emergency. This policy does not, which may draw scrutiny. Before the PCAC meeting, industry commenters argued that the FDA cannot lawfully authorize compounding through an interim policy while rulemaking is pending, and that market demand is not among the bulks list criteria in the FDA’s regulations (21 C.F.R. § 216.23). The 10 conditions are framed as circumstances in which HHS will forgo enforcement, not as new legal mandates, so a compounder that misses any one of them simply loses the policy’s protection. Because HHS can also narrow or withdraw the policy without rulemaking, compounders should treat it as a revocable accommodation rather than a safe harbor.

The Conditions

For each peptide, the policy lasts until a final rule either adds the peptide to the bulks list or excludes it, and HHS may revisit the policy if safety or quality problems emerge. To qualify, compounders must:

1. Use a peptide listed in Appendix A to the policy.
2. Match the identity and route limits in Appendix B to the policy.
3. Source the bulk substance from a Section 510-registered facility, backed by a certificate of analysis (COA) whose results satisfy Appendix B.
4. Confirm that the original manufacturer (except for a later packer, repacker, labeler, or distributor) is FDA-registered and CGMP-compliant, with its physical address on the COA. If the material comes through a registered repacker or reseller, that entity must have documented its own validation of the manufacturer and the manufacturer’s COA.
5. Report each compounded product (including active ingredient and strength, the original manufacturer and its facility identifier, and dosage form and route), along with any serious adverse event or quality issue, to the FDA and to every state where the product is made or shipped. Adverse events and quality issues go to the FDA’s MedWatch Safety Information and Adverse Event Reporting Program, and the reporting procedure must appear on the patient labeling. 
6. Label each product “This is a compounded drug product. Not for resale.”
7. Compound one active ingredient per product.
8. Maintain records showing adequate oral bioavailability in humans for any oral formulation.
9. Co-package with, or place the product in, no delivery device other than an FDA 510(k)-cleared syringe.
10. Follow the rest of federal drug law, including the bar on insanitary conditions and the need for a prescription written for an individual patient.

Appendix B also limits each peptide to specific routes. Injection (subcutaneous or intramuscular) is the only route for TB-500, MOTS-c, and Epitalon, and Epitalon must be dispensed in intermittent courses. BPC-157 may be injected or used orally or topically, KPV is limited to oral and topical use, and Semax is limited to intranasal use. All are covered only as the acetate salt, except Semax, which is covered as the free base. A compounder that prepares a covered peptide in a different salt form or for a different route, such as injectable KPV or BPC-157 free base, falls outside the policy, even though the PCAC recommended listing both the free base and acetate forms.

Testing Requirements

HHS gives the same three reasons for including each peptide despite CDER’s recommendation: newer lot-specific testing that addresses gaps CDER identified, better data on how widely the peptide is used, and the safeguards built into the policy’s conditions. For four of the six, the agency also notes that CDER’s safety concerns rested on inference, mechanism, or missing data, rather than on observed harm in people. Under Appendix B, the active pharmaceutical ingredient (API) manufacturer must confirm the peptide’s identity using at least two orthogonal methods and test for residual trifluoroacetic acid, elemental impurities, residual solvents, and, where relevant, nitrosamines, plus endotoxin and bioburden for injectables. The compounder, in turn, must obtain a COA that reports those results. The manufacturer’s COA must also list its FDA Establishment Identifier number and facility address, state that the material is “intended for human drug compounding,” and bear the quality unit’s signature. A compounder that relies on a COA that does not contain the required elements, such as a basic “research grade” COA, falls outside the policy.

What the Policy Does Not Do

In the Federal Register notice, HHS refers to the document as a draft that creates no legal rights and binds neither the agency nor the public. The policy covers only state-licensed pharmacies, licensed physicians, and federal facilities, not 503B outsourcing facilities. One of HHS’s stated aims is to draw patients away from foreign-made peptides sold for research use, so research-use-only sellers should expect no relief. The policy also does not displace state pharmacy or medical board requirements, which may be stricter. And on May 1, the FDA proposed excluding semaglutide, tirzepatide, and liraglutide from the 503B bulks list, so the policy does not signal a broader softening toward compounding.

The China Supply Chain Backdrop

HHS’s goal of steering patients away from foreign “research use only” (RUO) peptides comes amid heavy press attention on where those products originate. In June, a blockchain analytics firm reported that crypto payments to peptide vendors had surged and that some of the largest vendors were Chinese chemical companies that had supplied fentanyl and amphetamine precursors to drug cartels. In October, another analytics firm reported that of the more than 150 Chinese chemical manufacturers it tracked accepting cryptocurrency, roughly 75% listed both fentanyl precursors and peptides on their websites, with US buyers the largest identifiable source of payments. As we noted in our September alert, on peptide vendor warning letters, an RUO label imposes legal risk, and these reports may add reputational and financial crime concerns to the legal risks already associated with RUO peptide supply chains.

The FDA’s inspection record points the same way. In April, the FDA warned Hangzhou Yiqi Biotechnology, a Chinese API maker supplying sterile drug manufacturers and compounders, for basic CGMP failures, including unvalidated processes and test methods, no stability program, and an unqualified water system. In May, the FDA warned Harbin Jixianglong Biotech, a peptide API maker on the FDA’s GLP-1 “Green List,” for relabeling semaglutide from a non-Green-List facility under its own name before shipping it to the United States. In October, press reports described FDA inspection records showing black mold and insects at Chengdu Shengnuo Biopharm, a Chinese GLP-1 API supplier, along with staff hiding documents and pouring out samples during the inspection. The same records showed a second supplier, Nanjing Chengong Pharmaceutical, applying its own approval seal to third-party API. The FDA placed both on Import Alert 66-40. Meanwhile, the share of FDA inspections in China that were unannounced rose from 19% in fiscal year 2025 to 61% in fiscal year 2026.

These findings explain why conditions three and four focus on the original manufacturer rather than the distributor. A COA is only as reliable as the facility behind it, and the Harbin and Nanjing episodes demonstrate the risk that the name on a COA may not be the true source. Compounders relying on the policy should confirm that the original site is registered, check the FDA import alerts, and consider independent identity and purity testing.

What the 2026 Midterm Elections May Mean

HHS released the policy days before the November 3 midterm elections, in which Democrats won control of both the House and the Senate by staggering majorities. The results do not change the policy, but they do change the environment surrounding it. Beginning in January 2027, Democratic committee chairs will be in charge of their committee’s agendas and hold subpoena power. With the policy’s departure from CDER’s recommendation, reported the FDA staff opposition, and conflict-of-interest questions about the reconstituted PCAC, it is a natural oversight target, especially because Congressional Democrats have largely been at odds with the Trump Administration over policies his agency leaders have pursued. 

The appropriations process offers another lever for Democrats: the FDA is operating under a continuing resolution through December 11, and the fiscal year 2027 Agriculture-FDA bill could carry report language or policy riders addressing peptide compounding. The Senate Appropriations Committee fiscal year 2027 Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Bill, which was released on Tuesday, November 10, largely mirrors the House Appropriations Committee’s FDA funding bill level of just above $7 billion. The Senate’s bill text does not mention peptides or this policy specifically, but the compromise version to which House and Senate leaders will need to agree for longer term funding may include a specific policy. A more consequential vehicle may be the FDA user fee reauthorization, which Congress must enact by September 30, 2027, and to which it has historically attached FDA policy changes. One proposal is the bipartisan SAFE Drugs Act, which cleared the Senate Health, Education, Labor, and Pensions Committee in July and would require 503A pharmacies to report serious adverse events and label compounded drugs. 

For businesses, the more immediate issue may be the policy’s durability. Adding these peptides to the bulks list still requires the FDA to propose and finalize a rule, and a second PCAC meeting on five more peptides is not expected until early 2027. Until then, a future HHS Secretary can withdraw the policy without notice and comment, and a rule finalized late in this Administration could face review under the Congressional Review Act. Businesses building around the policy should plan for that durability gap.

Standalone legislation reversing the policy is unlikely because the President retains the veto and Democrats lack filibuster-proof House and Senate majorities. Additionally, the Trump Administration and federal agencies still retain broad authority and discretion to pursue policy goals. Stephen Miller, the recently promoted White House Chief of Staff, is a vocal Make America Healthy Again (MAHA) advocate and is largely aligned with Secretary Kennedy on his priorities. While the previous White House Chief of Staff, Susie Wiles, was known to be a barrier to various MAHA-aligned policies, Stephen Miller’s appointment to the role will reduce internal opposition to such priorities and likely give the movement more input.

Next Steps

Comments are open on regulations.gov (Docket No. HHS-OASH-2026-0496) through 11:59 PM ET on November 13. We will continue to monitor HHS’s response to comments, the FDA’s bulks list rulemaking, and oversight in the new Congress.