On December 20th, Thursday, Eastern Time, the US Food and Drug Administration (FDA) announced that the active ingredient of Eli Lilly and Co's weight loss drug Zepbound, tirzepatide, is no longer in short supply.

This move means that the FDA will no longer allow compounding pharmacies to produce unapproved, generic, and cheaper versions of tirzepatide. The FDA now requires these compounding pharmacies to cease the production of generic tirzepatide within the next 60 to 90 days, depending on the type of pharmacy facility. This transition period is intended to give patients enough time to switch to the branded medication.

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 of these products."

This decision undoubtedly strikes a blow to many compounding pharmacies. Many compounding pharmacies claim that the generic versions they produce can assist patients who do not have Insurance coverage for Zepbound or cannot afford the monthly cost of approximately $1,000 due to High Stock Price. Particularly, Zepbound and other weight loss medications are often not covered by many Insurance plans, adding extra financial burden to patients.

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

During Regular Trading Hours on Thursday, Eli Lilly and Co's stock fell over 1.6%, and Novo-Nordisk A/S's stock dropped over 3%, but following the announcement, both companies' declines narrowed.

The compounding pharmacy is embroiled in a legal dispute with the FDA.

The conflict between the FDA and compounding pharmacies has become increasingly public. On October 8th of this year, the Outsourcing Facilities Association, an industry organization representing compounding pharmacies, filed a lawsuit in court, accusing the FDA of suddenly removing tirzepatide from the shortage list without sufficient notification. The organization alleges that the FDA acted without proper notice, disregarded evidence that tirzepatide was still in short supply, and may have favored Eli Lilly and Co, thereby harming patient interests.

Under the pressure of the lawsuit, the FDA stated that it would reassess the decision and allow compounding pharmacies to continue producing generic drugs during the review period. Generic drugs are brand-name drug alternatives customized 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 brand-name drugs are in short supply, compounding pharmacies can prepare the generic version under certain conditions.

In the USA, Zepbound and other weight loss medications are often not covered by many insurance plans, making generics a more affordable option. Due to the unstable supply and high prices (up to $1,000 per month before insurance and other discounts) of brand-name drugs like tirzepatide, many patients have turned to generics.

However, the production of compounding pharmacies does not undergo FDA safety and efficacy reviews, which is why the FDA has been urging patients to use officially approved brand-name medications. Nonetheless, the FDA does inspect some outsourcing facilities engaged 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 in the USA and overseas. Drug manufacturers Novo-Nordisk A/S and Eli Lilly and Co 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 legality of certain manufacturers selling and promoting products to consumers.

However, with the increase in illegal generics, Eli Lilly and Co and other drug manufacturers have taken legal action. Over the past year, these two companies have filed lawsuits against several weight loss clinics, medical spas, and compounding pharmacies within the USA. Illegal generics not only infringe on patent rights but also potentially threaten consumer health. Last month, the FDA also reported that it had received complaints from patients who overdosed on compounded semaglutide due to dosing errors.