By Josh Nathan-Kazis

The Food and Drug Administration said Thursday that the longstanding shortage of Eli Lilly's weight-loss drug Zepbound and its Type 2 diabetes medicine Mounjaro is officially over.

The determination will have a sweeping impact on the sometimes murky industry of telehealth websites and compounding pharmacies selling legal knockoff GLP-1 weight-loss medicines that have exploded over the past year.

The shortages of Zepbound and competing Novo Nordisk drug Wegovy had triggered legal protections that allow compounders to make knockoff versions of both medicines. With the end of the Zepbound shortage, the compounding of that drug will now need to stop.

That could cause serious complications for patients relying on compounded tirzepatide, the generic name for Zepbound and Mounjaro. Cut off from the injections, GLP-1 users are likely to regain lost weight unless they are able to secure a prescription for another GLP-1.

Tirzepatide has been on the FDA's shortage list since late 2022, just months after the launch of Mounjaro and before the launch of Zepbound. Supply issues have hampered the drug's uptake, and Lilly has invested heavily in increasing its manufacturing output.

Meanwhile, the ability to compound GLP-1 drugs and sell them for cash at far lower prices than the branded drugs has sparked a gold rush.

The number of patients taking compounded GLP-1 medicines is unknown, though one industry group estimated that stands at 2 million in the U.S. Most of those patients are likely taking compounded semaglutide, the copycat version of Novo's Wegovy, which is cheaper and more widely available than compounded tirzepatide.

In an announcement on Thursday, the FDA laid out a gradual approach to ending the sale of compounded tirzepatide.

The agency said that federally regulated compounding pharmacies will be allowed to keep making compounded tirzepatide for 90 days, until March 19. State-regulated compounding pharmacies, which under the law can only make drugs in small quantities, can continue compounding tirzepatide for 60 days, until Feb. 18.

That grace period is significantly longer than the one required by federal law, which only gives the federally regulated compounders 60 days after a shortage ends and makes state-regulated compounders stop immediately.

The longer grace period appears to be an attempt by the FDA to ease patients relying on compounded tirzepatide onto the branded product and lays the groundwork for the eventual end of the semaglutide shortage, which will be far more disruptive.

In a memo issued Thursday, the FDA said the grace period "will allow patients a reasonable amount of time to transfer their prescriptions, as needed, to different pharmacies to obtain the FDA-approved drug," and would give pharmacies to adjust their ordering patterns to meet demand.

After the grace period expires, however, the compounders won't be able to continue. "An indefinite or overly long period of enforcement discretion," the agency said, "would not be appropriate."

Leading telehealth providers didn't immediately respond to a request for comment. In September, the telehealth company Noom, which offers compounded semaglutide to patients, called for a "lengthy grace period" for federally regulated outsourcing pharmacies.

Shares of Hims & Hers Health, an online telemedicine company that sells compounded semaglutide, were down 10.5% following the news. Though Hims doesn't sell compounded tirzepatide, it is virtually alone among its peers to be publicly listed and trades as a proxy for the online telehealth industry.

Thursday's official determination on the tirzepatide shortage comes two months after the FDA first removed the drug from its shortage list. The agency faced an immediate legal challenge to its initial decision and agreed to reconsider. After punting on the decision in late November, the FDA said Thursday that its reconsideration is now over and it stands by its initial decision that the drug is no longer in shortage.

The agency acknowledged in its Thursday memo that the re-evaluation of the shortage "may have caused some uncertainty about whether or when compounded copies would leave the market, slowing market transition."

Lilly shares were down 1.2% Thursday, while Novo's American depositary receipts were down 2.4%.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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December 19, 2024 12:16 ET (17:16 GMT)

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