Generic drugs by another name?
A lack of enforcement is backing us into a new pathway for drug manufacturing
I keep writing about this (sorry!) but what’s happening with compounded drugs is crazy and isn’t being covered enough.
DTC companies are being propped up by GLP-1s
To recap: major DTC healthcare companies (think Thirty Madison, Hims, Ro) seem to be struggling to continue to justify their Covid-era valuations. These valuations were based on a future which has not come to pass; namely, the idea that people would continue to use virtual care startups for a large portion of their healthcare needs, rather than grab-and-go options for hair loss and erectile dysfunction.
The more successful of these companies pivoted early to GLP-1s, a category which includes weight loss injections like Ozempic and Wegovy, and which are both very popular and very expensive.
However, GLP-1s are largely still on-patent, meaning that the companies who own the patent (Novo Nordisk for Ozempic, Eli Lilly for Mounjaro) have the exclusive right to manufacture, distribute, sell, etc. those drugs. Ozempic will be on patent in the U.S. until 2032, although Novo Nordisk’s patents will expire sooner in other countries.
Setting aside the intricacies of the patent process (abuses of the patent system are common), this means that companies like Hims should not be able to sell Ozempic or Wegovy without a partnership or permission from companies like Novo Nordisk. And so Hims turned to compounding the drug through compounding pharmacies (the company also briefly had a partnership with Novo Nordisk which flamed out after Hims continued compounding on the side).
FDA begins enforcement…slowly
Compounding the drug was not illegal as long as GLP-1s were technically in shortage. But they are no longer in shortage as of spring 2025. And according to the newsletter GLP-1 Digest, companies like Novo Nordisk seem to be relying on the FDA to police the compounding. But the FDA hasn’t seemed particularly interested in or able to do so.
Then, this month, the FDA sent letters to compounders, warning them of specific infractions. At the same time, Dr. Marty Makary, who leads the FDA, wrote an op-ed in the New York Times calling out false advertising in the drug industry. This seemed like a crack-down!
But as STAT News pointed out, the content of the letters was far softer than the language that Makary used in his op-ed. While Makary talked about false advertising by drug companies — i.e. not showing full risk and side effect information, either in traditional pharma commercials, the Hims and Hers Super Bowl ad that included no side effect information at all, or in social media advertising, which often just has a link to more information — the letters pointed out very specific language issues that are, in many cases, on companies’ websites.
In other words, the FDA did not institute a broad crackdown but played up a very simple website wording issue that many companies will be able to alter in a few seconds without changing anything else about their advertising campaigns.
And, while some of the letters did go out to compounding pharmacies, they didn’t make any claims about compounding itself. Instead, the letters asked compounders to more clearly label their products as compounded. The letters indirectly opened the door to compounding industry pushback — before, compounders were breaking FDA regulations. Now, they can righteously point out that the FDA is trying to beat them down with some imprecise requirements. As STAT reported:
Many of the warning letters cite claims that say a compounded drug uses the same “active ingredient” as an FDA-approved product. “FDA says such statements are deceptive and misleading,” wrote Scott Brunner, CEO of the trade group Alliance for Pharmacy Compounding, in a LinkedIn post on Thursday. “Which is odd, because those particular statements happen to be true, as FDA has rather clearly established.”
Being an active ingredient of an FDA-approved drug, Brunner pointed out, is one of three criteria that allows for a drug to be compounded. The compounding trade group recommends its members, which include Hims & Hers, avoid invoking FDA-approved comparisons in their marketing. “But that’s to avoid the possibility of a trademark lawsuit from the drugmaker, not because such statements are inherently deceptive or illegal,” wrote Brunner.
This mess seems like it’s clearing a path for more compounding of on-patent drugs in the future. GLP-1s are no longer in shortage, but compounding pharmacies are compounding away without much consequence. The FDA tried to rein it in, but in so indirect and weak a fashion that the compounding industry essentially got a green light.
To me, this seems like the beginning of a whole new consideration for manufacturers of on-patent blockbuster drugs. Will they have to build excess capacity into their supply chains to prevent their new drugs from ever going into shortage, which would open the door for compounders to legally begin compounding? (This would probably be good.) Will compounders go after blockbuster drugs anyway? Once these compounding pharmacies have experience with producing compounded drugs in bulk (rather than the small-volume instances they were traditional used for), will they use that experience to produce other drugs in bulk?
One of my side interests is in pharmaceutical supply chains and domestic production of drugs. But in all my writings, I never considered that the path to having a more robust U.S. manufacturing base was the development of a blockbuster drug in shortage, incentivizing U.S.-based compounders to take off!
(It’s worth noting that one of the big concerns of largely Chinese-based pharmaceutical supply chains is quality control. Compounders still source their active ingredients (API) from abroad and Novo Nordisk in particular has made API quality a central feature of their campaign to get compounders to stop producing semaglutide. So, despite my janky meme, increased compounding wouldn’t necessarily lead to a more robust domestic manufacturing base — the biggest problem isn’t with U.S. fill and finish, it’s with reliable sources of active ingredients.)
I think the wave of compounding kicked off by GLP-1s and largely unpoliced by the FDA will have ongoing downstream effects on the pharmaceutical industry. They may make their supply chains more robust, keep drugs more closely held, or add manufacturing steps that are beyond the abilities of compounding pharmacies. They may lobby harder for future FDA commissioners to have the funding, manpower, and legislative/regulatory mandate to crack down on compounding. Compounders may stretch their luck and try bulk compounding of other expensive drugs.
But more broadly: isn’t it a problem that the FDA is so weak that it’s letting compounders run rampant over existing regulations?