Eli Lilly and Novo Nordisk have scored big wins from the FDA in recent months, as the agency cracks down on copycat versions of their GLP-1 blockbusters. Now, as the battle with compound GLP-1s comes to an end, both pharma giants are ramping up their direct-to-consumer offerings in the obesity space.
The FDA declared last month that the shortage of semaglutide, the active ingredient for Novo’s Wegovy and Ozempic, has been resolved — a decision that restricts pharmacies from manufacturing compounded versions of the drugs. The agency did the same for Lilly’s tirzepatide, found in its obesity and diabetes meds Zepbound and Mounjaro, late last year.
Compounded GLP-1s have been a source of contention for Lilly and Novo, which have both waged a legal war to prohibit copycats. Until recently, these versions were widely available through online pharmacies and telehealth providers at lower list prices than the brand names, eating into Lilly and Novo’s obesity market share.
Amid the latest blow to the cheaper compounded market, Lilly and Novo are bringing down prices to attract more patients.
Compounders on their way out
The FDA’s decisions will have a significant impact on the market for weight loss drugs. As many as 1 in 8 U.S. adults said they had tried a GLP-1 in a KFF poll last year, including many who turned to compounded versions. Direct-to-consumer wellness companies such as Ro, WeightWatchers and Hims & Hers added weight loss programs to their businesses, offering compounded GLP-1s for a fraction of the $1,000 monthly list price for Novo and Lilly’s drugs. The on-and-off availability of compounded tirzepatide and semaglutide drugs has also impacted the stock market, triggering significant fluctuations in shares for Hims & Hers in particular. When the company first announced its weight loss program, its share price soared. But the recent FDA decisions have deeply cut into its value.
Despite their widespread use, the clock has always been ticking on the availability of the compounded drugs, which the FDA only allows on the market when brand-name, agency-approved versions are in shortage.
“They're just meeting a short-term need in the marketplace,” said Kevin Shortsle, partner at law firm Howard & Howard.
The FDA ordered production of compounded tirzepatide to come to a halt on March 19. Now, manufacturers of compounded semaglutide will have to cease production by April 22.
Novo and Lilly have both bulked up manufacturing capacity over the last few years to meet soaring demand. In February, Lilly announced plans to bolster its U.S.-based manufacturing with a $27 billion investment in four new sites, tacking on to the $23 billion it pumped into production capacity between 2020 and 2024.
Novo closed its $16.5 billion takeover of drug manufacturer Catalent to help ramp up its GLP-1 production in December.
“The pharma companies have seen [compounders] as a threat to their business, and what they've done is not only increase their production, but try to prevent it going forward so if another shortage arises they'll have the ability … to capture that market they were losing,” Shortsle said.
But compound pharmacies aren’t taking the FDA’s shortage decision lying down. The Outsourcing Facilities Association, which represents compound manufacturers and pharmacies, is challenging both the tirzepatide and semaglutide decisions. The OFA called the FDA’s delisting action on tirzepatide “arbitrary, without basis and contrary to law” and argued the agency will “deprive much of the public access to a needed medicine.”
So far, their lawsuits haven’t overturned the decisions.
“I don't think that the compounders ultimately will be successful [in court], [but] they [may] drag on for some time,” Shortsle said of the lawsuits.
Expanding DTC reach
While the compound fight winds down, Lilly and Novo are directing patients to their DTC channels — and competing more directly on out-of-pocket prices. Lilly made moves in the DTC arena first, launching its platform LillyDirect last year with a self-pay option for single-dose vials of Zepbound. The vials were priced at about 50% less than the list price for the pen injectors of Zepbound, the company said.
Lilly has since lowered the price for four-week supplies of its various Zepbound doses. The lowest-dose of Zepbound is now available for $349 per month, the company said.
Earlier this month, Novo followed suit and began offering vial versions of Wegovy for an at-home delivery price of $499 per month through a platform called NovoCare.
Because the drugs are often not covered by insurance, the vials could improve access and fill the void left by compounded versions.
“Any way for [Novo and Lilly] to increase their market share through alternate channels is something they're going to look to do,” Shortsle said.
These channels, however, aren’t a sure bet. A group of senators began looking into LillyDirect and Pfizer’s PfizerForAll platforms last year, aiming to find out more about the pharmas’ relationships with contract telehealth prescribers. Earlier this month, the lawmakers expanded the probe to include another set of telehealth providers, and raised concerns about potential kickback violations and potential inappropriate prescribing.
