Eli Lilly and Novo Want to Shake off Ozempic Copycats: Are They Ready to Meet Demand?

Pharmaceutical giants Eli Lilly and Novo Nordisk are facing an unprecedented challenge as they attempt to maintain their market presence in the rapidly evolving landscape of diabetes and obesity drugs. Known as GLP-1s, medications like Ozempic and Zepbound not only offer groundbreaking treatments but also face an onslaught of cheaper copycat versions. The backdrop for this scenario includes ongoing supply chain constraints, the FDA’s shifting stance on drug shortages, and a growing reliance on compounding pharmacies.

Understanding the GLP-1 Landscape

GLP-1s have emerged as a revolutionary class of medications designed to manage diabetes and obesity, boasting significant market potential. However, the approval of Wegovy for obesity in 2021 created a perfect storm of supply constraints that has yet to be resolved. Under existing regulations, drug compounders can produce copies of medications during recognized shortages, leading to a surge in the availability of cheaper alternatives almost immediately after these drugs hit the market.

Current Situation with FDA and Compounding

Recently, the FDA announced that tirzepatide, the active ingredient in Eli Lilly’s Zepbound and Mounjaro, is no longer considered in short supply. However, this determination is under review following a lawsuit from a compounding trade group, creating uncertainty about the future of mass drug compounding. The implications of an FDA crackdown on compounding pharmacies could benefit Eli Lilly and Novo Nordisk, who would benefit from reduced competition for their drugs.

As the FDA reassesses its earlier decision on tirzepatide, it also recognized that Novo Nordisk’s semaglutide, present in Ozempic and Wegovy, is available on the market. It has yet to formally conclude the shortage status, but any move to restrict mass compounding could significantly impact telehealth companies that have begun to dominate this niche with their own versions of GLP-1 treatments.

A Market Primed for Demand

More than half a million patients may currently be relying on compounding pharmacies for access to GLP-1 medications due to insurance coverage limitations and the cost-effectiveness of compounded alternatives. As Eli Lilly prepares to roll out consumer advertising campaigns shortly, questions loom regarding whether the company can meet the rising demand without falling back into shortages.

UBS analyst Jo Walton has raised concerns, indicating that as Lilly and Novo ramp up advertising efforts, they may quickly face supply limitations again. Eli Lilly’s spokesperson contends that sufficient doses of Mounjaro and Zepbound have been available since August and that their capacity will meet projected national demand, which includes anticipated increases from advertising efforts.

The Compounding Debate

Pharmaceutical compounding serves a critical role, especially during medication shortages. Companies like Hims & Hers and Ro are aggressively marketing these compounded GLP-1s, presenting them as alternatives to the original pharmaceuticals. Lilly and Novo have pushed back against this trend, citing the potential risks posed by unapproved knockoff products and emphasizing the priority of patient health and safety.

However, the underlying business implications cannot be ignored. Lilly and Novo have invested heavily in establishing their market presence, expanding supply chains, and engaging in extensive clinical trials. Meanwhile, compounding pharmacies encroach on their market share, emphasizing the need for these companies to reassert control over their brand and sales potential.

Preparing for a Shift in Supply

Eli Lilly’s recent underperformance in GLP-1 sales may be attributed to strategic decisions meant to ensure a stable supply as they gear up for potentially heavy demand. By stockpiling supply and pausing aggressive consumer advertising, Lilly appears to be taking a cautious approach. This tactic reflects their concern about a possible resurgence of shortages should they oversell their capacity.

The FDA’s Role Moving Forward

The FDA’s intention to limit compounding pharmacies reflects its commitment to overseeing medication quality and availability. Yet, the complex nature of determining what constitutes an end to a shortage complicates the process. Despite declarations of availability, patients may still encounter bottlenecks in access due to supply chain variables and distribution challenges.

In summary, as Eli Lilly and Novo Nordisk face pressure from compounding pharmacies and rising patient demand, their capacity to adapt will be put to the test. The stakes could not be higher for these companies, who must navigate regulatory changes, supply chain complexities, and evolving market dynamics to secure their foothold in this lucrative pharmaceutical domain.