Knockoff weight loss drugs are having a moment. Eli Lilly isn't worried

CEO of Eli Lilly and Company David Ricks speaks at the Economic Club of New York on March 12, 2024 in New York City. - Image: Spencer Platt / Staff (Getty Images)
CEO of Eli Lilly and Company David Ricks speaks at the Economic Club of New York on March 12, 2024 in New York City. - Image: Spencer Platt / Staff (Getty Images)

Eli Lilly (LLY) CEO David Ricks said the sale of cheaper, off-brand versions of the company’s blockbuster weight loss drug isn’t having a “financial impact” on the pharma giant.

Ricks was referring to a practice in the industry known as compounding. When a medication is in shortage, which Eli Lilly’s Zepbound has been for most of the year, the Food and Drug Administration (FDA) allows pharmacies to make compounded, or altered versions of the drug if they meet specific regulatory requirements. This loophole has led several digital health companies, online pharmacies, and wellness spas to produce and sell cheaper versions of brand-name weight loss drugs during recent shortages.

“I wouldn’t characterize compounding as a crisis. It certainly isn’t one for us,” Ricks told investors during a call on Wednesday after the company posted its third-quarter earnings report. “I think as an industry, we should probably be worried that if this grows and is allowed to continue, then it sort of creates us backdoor generic world.”

Eli Lilly’s top leader on weight loss drugs, Patrik Jonsson, noted that these off-brand drugs are paid for primarily in cash and are some times prescribed off-label, for a condition the drug was not officially approved to treat.

“We actually don’t estimate there to be a huge financial impact of compounding on our business.” Jonsson said.

Ozempic and prescription weight loss drugs: How they work, what they cost, side effects, and everything to know

The executives’ comments come as both Eli Lilly and its rival Novo Nordisk (NVO), the maker of competing medications Wegovy and Ozempic, having been working hard to curb the sale of off-brand versions of their popular GLP-1 treatments.

GLP-1 drugs are a class of medications that mimic gut hormones that regulate blood sugar and suppress appetite. They have become highly sought after because of their effectiveness at treating obesity and type 2 diabetes. However, due to their high retail price and skyrocketing demand, many patients have been having difficulty to get their hands on these treatments.

Earlier this month, the FDA marked the shortage of tirzepatide, the active ingredient in Eli Lilly’s Zepbound, as resolved. Eli Lilly quickly started sending cease-and-desist letters to companies selling copycat versions.

In response, the Outsourcing Facilities Association filed a lawsuit in Texas against the FDA, challenging its decision to remove tirzepatide from its shortage list and demanding that the move be reversed.

In its lawsuit, obtained by Ars Technica, the group called the FDA’s decision “reckless and arbitrary” and argued that it would “deprive patients of a vital treatment for type 2 diabetes and obesity.”

In a court filing, the FDA said pharmacists could resume making compounded tirzepatide as it reconsiders its decision to remove the drug from its shortage list.

“I can’t really speculate too much what’s going through the FDA’s mind. But I think other commentators have mentioned that the longer this goes on, the more risk they have to their own regulatory framework,” Ricks said about the FDA’s reversal. “And so my guess is the FDA is concerned about that and they and they want to win this case, they’re putting their ducks in a row to do so.”

Ricks added that the company is working on increasing its production capacity, but that regulatory process to set up new manufacturing facilities itself can take up four years.

The FDA updated its drug shortage database on Wednesday showing that the all doses of Novo Nordisk’s weight loss and diabetes drugs Wegovy and Ozempic are now available. However, the drugs remain on the shortage list for now, as the agency and Novo Nordisk work to ensure a steady supply. This could signal the coming end of the Wegovy shortage, and create uncertainty for companies that sell compounded versions.

For the latest news, Facebook, Twitter and Instagram.