Fifth Circuit Upholds FDA GLP-1 Shortage Decisions, Narrowing Path for Mass-Market Compounding

Two appellate decisions involving semaglutide and tirzepatide uphold the FDA’s determinations that the shortages of Ozempic, Wegovy, Mounjaro, and Zepbound have ended and limit continued reliance on the shortage exception for compounded GLP-1 products.

The U.S. Court of Appeals for the Fifth Circuit upheld the FDA’s decisions removing semaglutide and tirzepatide injection products from the federal drug shortage list. The two cases involved Ozempic and Wegovy, manufactured by Novo Nordisk, and Mounjaro and Zepbound, manufactured by Eli Lilly. In both cases, compounding interests challenged the FDA’s determination that manufacturer supply could meet or exceed projected demand.

Federal law generally restricts compounding of drugs that are essentially copies of commercially available or approved products. Those restrictions are relaxed in important respects while a drug appears on the FDA’s shortage list, allowing compounders that satisfy the applicable statutory requirements to produce compounded versions during a shortage. The FDA’s removal of semaglutide and tirzepatide from the shortage list ended that broader shortage-based pathway.

Why This Matters

Demand for GLP-1 medications created nationwide shortages and a large market for compounded semaglutide and tirzepatide. Compounding pharmacies, telehealth companies, weight-loss businesses, medical practices, med spas, and online platforms developed programs offering compounded products while supplies of FDA-approved GLP-1 drugs remained constrained. Our June GLP-1 alert addressed how those shortages fueled the growth of compounded products marketed through many of these channels.

The FDA later determined that the shortages had been resolved. For semaglutide, the FDA relied heavily on Novo Nordisk’s production, inventory, supply, wholesaler, and projected demand information. For tirzepatide, the FDA reached the same conclusion after reviewing Eli Lilly’s expanded manufacturing capacity and information submitted by manufacturers, compounders, patients, healthcare professionals, telehealth companies, and others. The FDA allowed transition periods before resuming enforcement of restrictions tied to the end of the shortages.

The Fifth Circuit Rejects the Industry’s Challenges

The compounders attacked the FDA’s decisions under the Administrative Procedure Act. They argued that the FDA should have used notice-and-comment rulemaking before removing the drugs from the shortage list and that the agency acted arbitrarily and capriciously in concluding that the manufacturers could meet demand. They also challenged the FDA’s reliance on manufacturer production and inventory information over evidence submitted by compounders, patients, telehealth companies, pharmacies, and others.

The Fifth Circuit rejected those arguments. In the semaglutide case, the court held that any error resulting from the FDA’s failure to use notice-and-comment procedures was harmless because affected parties had actual notice and repeated opportunities to submit information to the agency. The court also concluded that the FDA reasonably relied on manufacturer supply and inventory data and adequately considered contrary evidence in determining whether the statutory definition of a drug shortage continued to be satisfied.

The court also upheld the FDA’s treatment of screenshots, patient reports, surveys, news articles, and other evidence offered to show that shortages persisted. In the tirzepatide case, the FDA discounted information collected through a Hims & Hers website because the submissions did not reliably establish when the reported access problem occurred, where the user was located, why the individual could not obtain the drug, or whether the same individual submitted multiple reports. The Fifth Circuit concluded that the FDA reasonably found manufacturer data more probative than that evidence.

Although unpublished, the decisions apply settled Supreme Court and Fifth Circuit precedent to the compounders’ challenges to the FDA’s semaglutide and tirzepatide shortage determinations. District courts considering materially similar challenges must apply those same governing standards, which should lead to the same result absent materially different facts, a different administrative record, or a different legal theory.

Impact on Compounding Pharmacies, Telehealth Companies, and Prescribers

Compounding pharmacies can no longer rely on the former semaglutide and tirzepatide shortages to support routine large-scale production of essentially copies of the the FDA-approved products. Section 503A pharmacies and Section 503B outsourcing facilities remain subject to different statutory requirements, but both face restrictions once the shortage exception is no longer available. Businesses that expanded GLP-1 operations during the shortages should review whether their current products, production practices, and distribution models satisfy the requirements that now apply.

Telehealth companies and medical practices also should review how compounded GLP-1 products are prescribed and marketed. A patient-specific prescription is an important part of Section 503A compounding, but it does not by itself resolve whether the compounded product is essentially a copy or whether the other statutory conditions are satisfied. Programs built around standardized prescribing, substantially identical formulations, and broad consumer marketing may present different issues from traditional compounding for an identified patient with a documented clinical need.

Owners and investors should evaluate the same issues when assessing existing GLP-1 businesses or proposed transactions. The legal basis for continued compounding can affect pharmacy relationships, physician contracting, telehealth operations, marketing practices, supply arrangements, revenue projections, enterprise value, and regulatory exposure. Businesses that developed around the former shortage exception may require a different legal and operational structure if they intend to continue offering compounded GLP-1 products.

Patient-Specific Compounding Remains Available

The Fifth Circuit decisions do not eliminate legitimate patient-specific compounding. Section 503A continues to permit compounding for an identified individual patient when the applicable statutory requirements are satisfied. Federal law also recognizes circumstances in which a prescriber determines that a compounded product produces a significant difference for a particular patient compared with the commercially available product.

That distinction will depend on what occurs in practice. A compounded formulation developed because an individual patient cannot tolerate an ingredient in the approved drug presents a different situation from a program that routinely directs large numbers of patients to substantially the same compounded product. The FDA can examine the formulation, prescribing documentation, medical justification, pharmacy operations, marketing, and relationships among the telehealth company, prescriber, and pharmacy when determining whether a program satisfies federal compounding requirements.

Key Takeaway

The FDA’s semaglutide and tirzepatide shortage determinations remain in place following the Fifth Circuit’s decisions. Compounding pharmacies, telehealth companies, physicians, medical practices, weight-loss businesses, owners, investors, and other organizations involved in compounded GLP-1 products should review whether their current prescribing, compounding, marketing, and distribution arrangements comply with the federal requirements that apply after the shortages have ended.

Organizations that continue to offer compounded semaglutide or tirzepatide should evaluate the legal basis for those products, including whether the compounding is genuinely patient-specific and whether the underlying clinical, pharmacy, and business arrangements satisfy the remaining statutory requirements. The FDA’s continuing scrutiny of compounded GLP-1 products increases the importance of addressing those issues before existing practices become the subject of regulatory or enforcement activity.

This publication is intended for general informational purposes only and does not constitute legal advice or a solicitation to provide legal services.  The information in this publication is not intended to create, and receipt of it does not constitute a lawyer-client relationship. Readers should not act upon this information without seeking professional legal counsel.  The views and opinions expressed herein represent those of the individual author only and are not necessarily the views of Clark Hill PLC.  Although we attempt to ensure that postings on our website are complete, accurate, and up to date, we assume no responsibility for their completeness, accuracy, or timeliness.