In the field of pharmacy, compounding (performed in compounding pharmacies) is preparation of a custom formulation of a medication to fit a unique need of a patient that cannot be met with commercially available products. This may be done for medical reasons, such as administration in a different format (ex: tablet to liquid), to avoid a non-active ingredient the patient is allergic to, or to provide an exact dose that isn't commercially available. Medically necessary compounding is referred to as "traditional" compounding. It may also be done for medically optional reasons, such as preference of flavor or texture, or dietary restrictions.

Hospital pharmacies typically engage in compounding medications for intravenous administration, whereas outpatient or community pharmacies typically engage in compounding medications for oral or topical administration. Due to the rising cost of compounding and drug shortages, some hospitals outsource their compounding needs to large-scale compounding pharmacies, particularly of sterile-injectable medications.

Compounding preparations of a given formulation, as opposed to preparation for a specific patient, is known as "non-traditional" compounding. Jurisdictions have varying regulations that apply to drug manufacturers and pharmacies that do bulk compounding.