The FDA announced that Eli Lilly's weight loss drug ingredients are no longer in short supply, and compounding pharmacies will stop producing generic drugs

On December 20th, Eastern Time, the U.S. Food and Drug Administration (FDA) announced that the active ingredient tirzepatide in the weight loss drug Zepbound from pharmaceutical giant Eli Lilly is no longer in shortage.

This move means that the FDA will no longer allow compounding pharmacies to produce unapproved, non-branded, cheaper generic versions of tirzepatide. Now, the FDA requires these compounding pharmacies to stop producing generic tirzepatide within the next 60 to 90 days, with the specific deadline depending on the type of dispensing facility. This transition period is intended to provide patients with enough time to switch to the branded drug.

The FDA stated in a letter:

"After a comprehensive analysis, the FDA has determined that the shortage of tirzepatide injection that began in December 2022 has been resolved. The FDA will continue to monitor the supply and demand situation for these products."

This decision undoubtedly strikes a blow to many compounding pharmacies. Many compounding pharmacies claim that the generic versions they produce can help patients who do not have insurance coverage for Zepbound or cannot afford the high monthly cost of about $1,000. Particularly, Zepbound and other weight loss drugs are often not covered by many insurance plans, placing an additional burden on patients.

This is the latest controversy between the FDA and compounding pharmacies regarding the shortage of tirzepatide. The surge in demand for tirzepatide, the active ingredient in Zepbound and Eli Lilly's diabetes treatment drug Mounjaro, has led to supply shortages. To address this shortage, Eli Lilly has invested billions of dollars to expand tirzepatide production capacity. However, despite Eli Lilly's efforts to increase production, it still struggles to meet market demand.

On Thursday, during intraday trading, Eli Lilly's stock fell over 1.6%, and Novo Nordisk's stock dropped over 3%, but both companies' declines narrowed after the news was announced.

Legal Dispute Between Compounding Pharmacies and the FDA

The conflict between the FDA and compounding pharmacies has become increasingly public. On October 8th of this year, the industry organization representing compounding pharmacies, the Outsourcing Facilities Association, filed a lawsuit against the FDA, accusing it of suddenly removing tirzepatide from the shortage list without adequate notice. The organization accused the FDA of taking action without proper notification, ignoring evidence that tirzepatide is still in shortage, and potentially favoring Eli Lilly at the expense of patient interests.

Under pressure from the lawsuit, the FDA stated it would reevaluate this decision and allow compounding pharmacies to continue producing generics during the review period. Generics are customized alternatives to branded drugs designed to meet specific patient needs. Over the past two years, the active ingredient semaglutide in Wegovy and Ozempic has been intermittently in short supply. According to federal law, when a branded drug is in shortage, compounding pharmacies can prepare a generic version under certain requirements In the United States, Zepbound and other weight loss drugs are often not covered by many insurance plans, making generic drugs a more affordable option. Due to the unstable supply and high prices of brand-name drugs like tirzepatide (up to $1,000 per month before insurance and other discounts), many patients are turning to generic medications.

However, the production of compounded drugs does not undergo FDA safety and efficacy reviews, which has led the FDA to urge patients to use officially approved brand-name medications. The FDA does inspect some outsourcing facilities that engage in drug compounding.

In today's pharmaceutical market, patent protection and market supply are closely linked. Taking Wegovy, Ozempic, Zepbound, and Mounjaro as examples, these drugs are protected by patents both in the U.S. and abroad. Drug manufacturers Novo Nordisk and Eli Lilly do not supply the active ingredients of these drugs to external parties, a strategy that not only protects their market share but also raises questions about the illegal imitation of products sold and promoted by certain manufacturers to consumers.

However, with the increase in illegal generic drugs, Eli Lilly and other drug manufacturers have taken legal action. Over the past year, these two companies have filed lawsuits against multiple weight loss clinics, medical spas, and compounding pharmacies within the United States. Illegal generic drugs not only infringe on patent rights but also pose potential threats to consumer health. Last month, the FDA also reported that it had received reports of patients overdosing on compounded semaglutide due to dosing errors