The United States Food and Drug Administration (FDA) announced on Thursday that it has reassessed the availability of Eli Lilly's (LLY.N) popular weight loss and diabetes medications, concluding that there is no longer a shortage. This determination effectively prevents the widespread distribution of more affordable generic versions of these drugs, which are commonly utilized by many patients.

However, the FDA indicated that it would not enforce compliance against compounding pharmacies that produce these alternatives for 60 to 90 days following the decision. Previously, in October, the FDA had declared a shortage without providing a notice period to compounding pharmacies before later deciding to review its stance. According to U.S. regulations, compounding pharmacies are permitted to replicate brand-name drugs that are in short supply.

A spokesperson for Eli Lilly stated that any entity engaged in the marketing or sale of unauthorized versions of tirzepatide, the chemical name for the company's weight-loss drug Zepbound and diabetes medication Mounjaro, must cease such activities and start transitioning patients to FDA-approved alternatives.

The Alliance for Pharmacy Compounding, which advocates for compounding pharmacists and technicians, remarked that the announcement was anticipated but not necessarily the final chapter. "I am not convinced that the data relied upon by the FDA in reaffirming its shortage resolution decision is comprehensive enough to definitively state that the shortage has ended," said Alliance CEO Scott Brunner.

The FDA also noted that Novo Nordisk’s (NOVOb.CO) competing weight-loss drug, Wegovy, remains in short supply, even though all doses are listed as available. The Alliance had previously submitted survey results to the FDA last month, indicating that hundreds of thousands of patients were using compounded versions of semaglutide, the chemical name for Wegovy, and suggested that the agency should consider their role in easing the supply constraints for obesity medications.

Telehealth company Hims & Hers Health (HIMS.N), which offers compounded versions of Wegovy, declined to comment on the matter. Its stock value, which had nearly tripled this year, was trading 10% lower at $24.74. Eli Lilly's shares have increased by 30% so far this year and were trading down approximately 1% at $758.90. Shares of Danish pharmaceutical company Novo Nordisk (NOVOb.CO) have risen by 10.6% this year and were trading 3.5% lower on Thursday.

Bernstein analyst Courtney Breen commented that the FDA's decision signals that the era of "compounder-spree" is nearing its end, but this is expected to have only a minor impact on the drug's prescription volumes in 2025. An industry group representing larger compounding pharmacies filed a lawsuit against the FDA in October over its decision to remove tirzepatide from its list of drug shortages.

The Outsourcing Facilities Association claimed that the FDA's decision was based solely on Eli Lilly's assertions that it could meet the demand for the drugs, without allowing the public an opportunity to provide input. They argued that the drug was still in short supply. The lawsuit was suspended shortly after when the FDA agreed to reevaluate its decision, which allowed the sale of compounded versions to continue in the interim.

Insurance providers generally cover Eli Lilly's and Novo Nordisk's drugs for diabetes, but many do not cover them for weight loss purposes. This has led many patients to pay out-of-pocket for compounded versions. In August, Eli Lilly began sending cease-and-desist letters to telehealth companies, wellness centers, and medical spas that were selling compounded versions of Zepbound and Mounjaro. The company has also initiated legal action against sellers who falsely claim to offer FDA-approved versions of the drug.

Compounding pharmacies have been a contentious issue in the pharmaceutical industry, particularly when it comes to the production of generic versions of drugs that are in high demand. The FDA's role in regulating these pharmacies is critical, as they must balance the need for patient access to affordable medications with the safety and efficacy of the drugs being distributed. The recent announcement by the FDA regarding the availability of Eli Lilly's drugs has significant implications for both the pharmaceutical company and the compounding pharmacies that have been producing generic versions of these medications.

The decision to not take immediate action against compounding pharmacies gives them a grace period to adjust their operations and comply with the new regulations. This transition periodis essential for pharmacies to ensure that they are not in violation of the law and that they can continue to provide medications to their customers without interruption. However, it also raises questions about the long-term viability of compounding pharmacies, especially if the FDA continues to tighten its regulations on the production of generic drugs.

The debate over the shortage of drugs like tirzepatide and semaglutide highlights the broader challenges faced by the pharmaceutical industry in meeting the needs of patients. With the increasing prevalence of chronic conditions such as obesity and diabetes, the demand for effective treatments is growing. The FDA's role in ensuring that these drugs are available and affordable is more critical than ever. The recent decision to remove Eli Lilly's drugs from the shortage list is a step towards addressing this issue, but it also underscores the need for a more comprehensive approach to drug supply and distribution.

As the pharmaceutical industry continues to evolve, it is essential that regulators, pharmaceutical companies, and healthcare providers work together to find solutions that ensure patient access to the medications they need. This includes not only addressing immediate shortages but also developing long-term strategies to prevent future supply chain disruptions and to make innovative treatments more accessible and affordable for all patients.

The FDA's decision to reassess the shortage of Eli Lilly's drugs is a significant development in the ongoing debate over drug availability and affordability. While it may provide some relief to the company and its shareholders, it also raises important questions about the future of compounding pharmacies and the role they play in the pharmaceutical industry. As the industry continues to grapple with these challenges, it is clear that collaboration and innovation will be key to ensuring that patients have access to the medications they need.