Mar 25, 2025
On March 11, The Capitol Forum held a conference call with Shweta Kumar to discuss legal considerations for companies that compound GLP-1 weight-loss drugs as these blockbuster products start to come off shortage. The full transcript, which has been modified slightly for accuracy, can be found below.
ALICE TRACEY: Okay, great. Good morning, everybody, and welcome to our conference call today with Shweta Kumar. I’m Alice Tracey. I’m a Healthcare Correspondent with The Capitol Forum.
Before going over housekeeping, I’d like to introduce our speaker. Shweta is a Clinical Teaching Fellow in the Intellectual Property and Information Policy Clinic at Georgetown. She studies topics including pharmaceutical law, patent law, and FDA law, as well as health privacy and patient access. And she has published research on the patent litigation risk faced by drug compounders and the intersection of FDA and patent law when it comes to drug compounding. So, we are delighted to have you here with us today.
A quick note for those listening in, we will address audience questions as time permits. To submit questions, type them into the questions pane of the control panel, and we’ll do some Q&A at the end of the conversation. Okay, thank you, everybody, and let’s kick things off.
So, as you all know, there’s been a lot of news recently because the FDA took semaglutide, which is the active ingredient in the blockbuster GLP-1 weight-loss drugs, Ozempic and Wegovy, off the shortage list. So, that has a lot of ramifications for companies like Hims and Hers Health that were previously selling discounted versions of those drugs through a carveout in FDA law that allows for the compounding of in-shortage drugs.
But now that the shortage is over, Hims has stated that it plans to take advantage of another legal carve-out by selling personalized versions of compounded drugs. And this strategy, as The Capitol Forum has reported, raises some legal questions that we will address today.
So, first, Shweta, thank you again for being here. I’d love to hear you kind of introduce yourself and describe how you became interested in this issue of drug compounding.
SHWETA KUMAR: Of course. Thank you, Alice. So, I’m Shweta Kumar. I’m a Clinical Teaching Fellow at the Intellectual Property and Information Policy Clinic at Georgetown Law, and I’m an incoming Assistant Professor of Law at the University of Kentucky.
So, my background is in patent litigation, but I also have quite an interest in access to medicine, FDA law, and other areas of health law, hence my interest in drug compounding. So, I kind of became interested in this issue of drug compounding back in 2023 when the U.S. was experiencing its worst drug shortage in over a decade. More than 300 drugs were in shortage, including lots of important antibiotics, cancer drugs, injectable estrogen, and also the new class of GLP-1 drugs, including Ozempic and Wegovy.
And so, because of this drug shortage, hospitals and doctors were increasingly relying on compounded drugs to meet the needs of patients. And we now know that this was the backdrop in which certain large compounding pharmacies began offering GLP-1 drugs.
And so, I was really quite interested in how FDA and IP law were interacting in this space. And I wrote about it in an article that’s now out in the Washington University Law Review called “Compounding Inequities Through Drug IP and Unfair Competition”.
ALICE TRACEY: Fantastic. So, I’d love to first kind of start with the question of FDA law and discuss what the FDA says about drug compounding. So, I’m wondering if you can speak to when compounding is allowed, and specifically what does personalization mean in the FDA’s eyes?
SHWETA KUMAR: Yes. So, I’m very glad you asked this question because I think this might be the most misunderstood aspect of FDA regulation of compounding, just based on kind of the general discussions about it. So, FDA regulations on compounding actually don’t use the word personalized, and personalization is not the legal standard by which FDA determines whether compounded drugs are exempt from review.
So, to zoom out a bit, normally drugs have to be reviewed and approved by the FDA before they can be marketed and sold to the public. But there are exceptions for compounded drugs, and there are standards defining exactly when compounded drugs are exempt from FDA review.
And drugs that don’t fall within those exemptions are technically unapproved drugs that are subject to all of FDA’s enforcement authority over such drugs, including warning letters, product seizures, injunctions, and sometimes even criminal prosecution. So, I think it’s really important that compounders understand what those standards are and how to avoid violating FDA law.
So, the statute on point is Section 503A and 503B of the Food, Drug, and Cosmetics Act. So, Section 503A governs so-called traditional compounding pharmacies which engage in drug compounding in response to specific prescriptions for individual patients, and on a smaller scale generally. And 503B pharmacies, which are also called outsourcing facilities or bulk compounders, they can compound larger batches of drugs with or without individual patient prescriptions, and they can then sell the compounded formulations to healthcare facilities and also across state lines.
And the bigger players in the GLP-1 compounding space, like Hims and Hers, are obtaining their products from 503B facilities. So, I’ll kind of focus on the 503B standard for now.
So, here’s the standard according to FDA. 503B pharmacies can compound drugs so long as they’re not essentially copies of one or more FDA-approved drugs that are in active shortage.
ALICE TRACEY: Great. And can you elaborate on what essentially a copy of an approved drug means?
SHWETA KUMAR: Yes. So, according to a 2018 FDA guidance document, it can be one of two things.
So, first, it could be a drug that’s identical or nearly identical to an approved drug as determined by a list of five characteristics that are listed in the guidance. And if you’re following along at home, you can look up the 2018 FDA guidance document. So, FDA will consider whether the compounded drug and the FDA-approved product have the same active ingredient. So, for Ozempic, that’s semaglutide.
Two, the same route of administration. For Ozempic, that’s subcutaneous injection.
Three, the same dosage form.
Four, the same dosage strength.
And five, the same excipients or inactive ingredients.
And I think this is where this confusion lies. There’s this misconception that 503Bs can continue compounding long after the shortage so long as the doses are personalized. And I think there’s this misunderstanding that you can change up the dosage form or add some inactive ingredients like vitamins. But the 2018 FDA guidance already suggests that minor changes may not be enough to get around this first list of characteristics.
So, the guidance document says that if an approved drug is labeled for intramuscular use, for instance, but it can be administered subcutaneously, the fact that a compounded version is prescribed and labeled for subcutaneous use would be considered the administration.
And similarly, the FDA says that if the inactive ingredients of an approved drug aren’t publicly known, any differences in the inactive ingredient of the compounded version won’t be taken into consideration. So, there’s some flexibility built into this first prong alone.
But there’s also a second way in which a drug can be essentially a copy of an approved drug. And that’s if a component of the compounded drug is a bulk drug substance—also known as the active pharmaceutical ingredient for the purposes of the 503B—that’s a component of an approved drug. And if that’s the case, compounding is permitted only if there’s a change in the drug that produces a clinical difference for the individual patient as compared to the FDA approved drug as determined by the prescribing practitioner.
So, taking Ozempic, for instance, semaglutide base is in both the compounded version and the FDA approved version. So therefore, to escape from this second prong, a 503B pharmacy would have to have a prescribing practitioner note on the prescription for the compounded version, the requested modifications to the drug that they have determined would produce a clinical difference in individual patients.
ALICE TRACEY: Okay. And given that Hims and other companies like it are both prescriber and compounder, I’m wondering if you can sort of speak to the viability of their personalized dosing strategy in light of that statute. So, in other words, can Hims providers continue to write prescriptions for these modified compounded GLP-1s where they’ve determined certain changes would produce a clinical difference for an individual patient?
SHWETA KUMAR: Yeah, good question. I personally don’t think so. So, if the prescriber is ordering in bulk—so in other words, if they’re putting in an order that’s not specific to an individual patient—they have to, in that prescription, provide assurances that they’ll only be providing that modified drug to patients for whom a clinical difference would exist.
So, that seems practically a little difficult to accomplish. It’s almost like asking Hims to run many clinical trials. And if a healthcare provider that’s associated or works for the Hims and Hers platform, or any other telehealth provider, is inclined to provide such assurances without really doing deep research or investigation into patient records and how individual patients might respond to a modified version of the approved product, I think it raises a whole host of questions about liability for a medical malpractice and other practice of medicine issues.
ALICE TRACEY: Interesting. So, kind of staying on this topic of FDA law, I know that nobody here has a crystal ball into the current administration. But do you think if there are certain legal questions that arise from continued compounding that the FDA will be likely to pursue enforcement after the grace period that’s offered to semaglutide compounders like Hims and Hers ends in May?
SHWETA KUMAR: Yes, great question. And I think you’ve kind of preempted my initial disclaimer, which is that this administration is indeed a bit of a wild card. So, this is just my prediction. I think it’s not only possible, but also likely that FDA would pursue enforcement after the grace period ends. So, the grace period for 503B compounders making tirzepatide is set to end on March 19th, less than a week. We may even see enforcement action from FDA with regard to tirzepatide before May, which is when the semaglutide grace period ends.
And the rationale for the grace period, by the way, is also articulated in that same 2018 FDA guidance document. FDA recognizes that a facility might have orders for a compounded drug that were in progress or in the process of being manufactured when the drug was removed from the shortage list. So, the grace period permits the facility to fill orders that were received while the drug was in shortage.
But the guidance document also explicitly states that FDA can take regulatory action if an outsourcing facility continues to fill new orders for the compounded drug after the drug is removed from the shortage list, or if it continues to fill orders more than 60 days after the drug was removed from the shortage list.
So, in short, it was expressly contemplated by FDA, even back in 2018, that the agency could and might take such enforcement action.
And also, from a policy perspective, according to FDA, the existing restrictions on compounding are designed to protect patients from unsafe, ineffective, or poor-quality drugs by protecting incentives for sponsors to seek drug approval through the ANDA (Abbreviated New Drug Application) process for generic drugs. So, FDA choosing not to take enforcement action to deter the proliferation of unapproved drugs is not really a viable outcome, in my opinion.
And finally, I don’t want to read the tea leaves too much, but Trump’s FDA nominee, Marty Makary, is widely acknowledged to be a relatively moderate pick, and is expected to be relatively industry friendly. So, I would expect him to not shake things up too much with regard to how FDA regulates compounders, but we’ll see how this plays out.
ALICE TRACEY: Yeah, I think we all have our eyes on that in the next couple months. So, I know that not everybody is happy with the FDA’s decision to take GLP-1s—tirzepatide, semaglutide—off the shortage list. I think there are others probably to come. Could you speak to some of the litigation that the Outsourcing Facilities Association has launched against the FDA?
SHWETA KUMAR: Yes, absolutely. So, on October 8th—this was shortly after FDA’s decision to remove tirzepatide from the shortage list—the Outsourcing Facilities Association, which is a trade group representing 503B compounding pharmacies, they sued FDA in the Northern District of Texas, alleging that FDA’s decision was reckless and arbitrary in violation of the Administrative Procedures Act.
So, they argued in that lawsuit that FDA’s decision to remove tirzepatide was rulemaking rather than adjudication by the agency. And agency rulemaking requires agencies to engage with the public in a notice and comment period, which FDA did not provide in this case. But as FDA argued, courts have historically afforded agencies considerable discretion in determining whether their own actions are adjudication or rulemaking. So, the mere fact that the decision to remove tirzepatide from the shortage list affects more than one compounder doesn’t mean that the decision is automatically substantive rulemaking. The most recent update was on March 5th. Judge Pittman, who was presiding over the case, denied the Outsourcing Facilities Association’s requests for a preliminary injunction.
In addition to the tirzepatide litigation, a separate lawsuit was recently filed by the Outsourcing Facilities Association related to FDA’s February decision to remove semaglutide from the shortage list. And in that case, which is also, funnily enough, pending before the same judge, the Outsourcing Facilities Association is similarly seeking a preliminary injunction to prevent enforcement of the shortage declaration. And I think given the similarities between the claims and the timing in both of those cases, it’s very possible that Judge Pittman will deny that application for an injunction application as well.
So, I guess I think in light of this ruling, it’s also possible that brand name companies, particularly Lilly and Novo Nordisk, will refer compounders to the FDA and state boards of pharmacy for potential enforcement.
ALICE TRACEY: Yeah, that’s a good segue into my next sort of vein of questioning. I want to pivot from the FDA side of things to the possibility for private litigation and more generally how brand name drug makers—you mentioned Novo Nordisk, which makes Ozempic and Wegovy, and then Eli Lilly, which makes other blockbuster GLP-1s—how those companies might react to continued compounding by companies like Hims and Hers.
So, we’ve already seen, for example, Novo Nordisk has sent out cease and desist letters to compounders that are making off-brand Ozempic and Wegovy. I’m wondering if you can speak to the threat of private patent litigation posed by the decision to continue compounding post-shortage.
SHWETA KUMAR: Yeah, so there’s been some confusion on this front as well because two different spheres of law that govern this, FDA law and the Patent Act. So, because drugs that are in shortage can be compounded under FDA law, FDA permits this compounding, but the Patent Act does not. And the Alliance for Compounding Pharmacies, which is a trade organization for compounding pharmacies similar to the Outsourcing Facilities Association, has actually argued that pharmacies compounding drugs on the drug shortage list cannot be liable for patent infringement because the FDA guidance on compounding doesn’t make a distinction for patented drugs.
But this is incorrect, in my view, and I point this out in my paper, as FDA has no jurisdiction over patent law and also no power to protect compounding pharmacies from liability for patent infringement. The Patent Act grants patentees a private right to enforce their patents and a remedy for infringement. So, in other words, the mere fact that FDA says it won’t take enforcement action against a pharmacy compounding drugs doesn’t mean that the compounder is immune from suit by the patent owner.
And now that the shortage has ended, compounding semaglutide by 503B pharmacies after the grace period ends would violate both FDA and patent law. So, speaking of patents—taking Ozempic’s patent portfolio as an example—there are currently 20 unexpired patents by my count listed in the Orange Book for Ozempic. So, there are some core semaglutide patents that protect the actual chemical compound for semaglutide, and these core patents are set to expire in 2026 next year.
But there’s also a number of secondary patents that protect various aspects of Ozempic and its use, including different formulations of semaglutide, different methods of manufacturing and preparing semaglutide, and also different dosing regimes, as well as a number of patents on the injectable syringe that is used by Novo Nordisk. And these secondary patents are set to expire as late as 2033.
So, it seems like patent experts, at least online, are predicting that generic entry of Ozempic in the U.S. will occur in 2032 or 2033. So, it seems pretty cut and dry that any compounded semaglutide would infringe on the core patents until they expire in 2026. But unfortunately, even in the best-case scenario, if a creative compounding pharmacy finds a way to design around the secondary patents, that would unfortunately still violate FDA law, as we discussed before.
ALICE TRACEY: Okay, so kind of two different spheres of law that interact but are not the same. So, I know you’ve written a little bit about, or a lot about, patent infringement risk and compounding pharmacies before. Do you have some examples of notable cases related to patent infringement brought by brand-name drug makers against compounding pharmacies and what the outcome was?
SHWETA KUMAR: Yeah. So, this question, I think, raises how unusual this GLP-1 boom is and also how unusual the patent battle will be. So, in terms of cases on point, when I began looking into this, I couldn’t find any examples of patent infringement lawsuits brought by drug manufacturers against compounding pharmacies that reached trial or substantive judgments by courts. The three examples I did find were all from 2004, 2005, and 2009.
They had all settled or had default judgments entered, which does kind of track with what I expected, because traditionally, compounding pharmacies have served smaller groups of patients and thus are less capable of withstanding the cost of litigation. So, I would expect such cases to settle whenever they have come up.
And I think this financial power differential between the compounding industry and pharmaceutical industry, or traditional pharmaceutical industry, is pretty evident when you look at the amount of money involved in lobbying.
Just out of curiosity, I looked into what these various trade groups are spending on lobbying. And the Outsourcing Facilities Association, that we discussed earlier, they spent $180,000 on lobbying in 2024 and in the years prior, about $240,000. The Alliance for Pharmacy Compounding, another trade group, spent $150,000 in 2024 and $250,000 in the previous years. Hims and Hers, which again is one of the biggest players in the space, spent about $200,000 on lobbying in 2024, compared to $20,000 the year before. And this explosion in lobbying expenditures, I think, really demonstrates that increased interest in shaping drug regulation policy.
However, all these numbers, as you might expect, compared to pharma and bio, the trade groups for the pharmaceutical industry and the biologics industry, we know kind of pale in comparison. So, pharma in 2024 spent nearly $24 million on lobbying and over $27 million in 2023. And that was only second to the National Association of Realtors in the U.S. Chamber of Commerce. So, in terms of financial power differential, I think it’s huge. And we’ll definitely see that play out in the patent litigation, if any comes to be.
ALICE TRACEY: Yeah, that’s interesting. So, I do want to talk a little bit about what patent litigation might look like and potential outcomes. I’m wondering, kind of as the first part of this question, what a compounder like Hims would have to do to survive patent litigation, if, for example, they’re using this personalized dosing strategy?
And then as a second part of that question, if a brand name drug maker like Lilly or Novo were to sue, would they be likely to get an injunction? Would that be the preferred outcome? And how would damages be calculated in a lawsuit like that?
SHWETA KUMAR: Yeah. So, I’ll take your last question first about injunctions. And the answer is yes, absolutely. The brand companies can seek preliminary and then permanent injunctions. And courts in patent cases generally award injunctions based on the eBay factors, so-called after a 2006 Supreme Court case. And according to the eBay factors, the patentee has to show that it’s suffered an irreparable injury, that damages are inadequate to compensate for the injury, that an equitable remedy is warranted considering the balance of hardships between the parties, and that the public interest would not be disturbed by a permanent injunction.
And there’s been some discussion about that last factor in particular, that the public interest would not be disturbed. I mean, I think you can see that you can make an argument that it’s really important to preserve access to these drugs by permitting the continuation of compounding. But the federal circuit has said that last factor about public interest requires weighing the interests of the patentee with the patent as well.
And as for what a compounder would have to do to survive patent litigation, I mean, I imagine that a compounding pharmacy infringing on the core GLP-1 patents, which again are set to expire in 2026, probably can’t do much to survive. I mean, settling out of court might even be the best-case scenario.
As for the secondary patents, particularly the ones on the injection devices, I think it’s possible that there could be a way to design around those patents. In particular, we’ve seen that a lot of these compounding pharmacies are offering GLP-1s in vials and with syringes, which don’t necessarily infringe on the auto-injector devices that Lilly and Novo Nordisk use.
So, separate and aside from the question of compounders, a generic company could actually seek to enter the market. And if they can successfully argue that their generic product doesn’t infringe or that the patents covering Ozempic are invalid or unenforceable, that could be a pathway to increasing access to semaglutide that complies with both FDA and patent laws.
And just yesterday, the Financial Times reported that Hikma Pharmaceuticals is in talks with partners around the world to prepare to sell a generic version of Ozempic and Wegovy in global markets where all the patents are set to expire in 2026. So, that’s Canada, China, India, and Brazil. And we also know that Mylan and Natco, which is an Indian pharmaceutical manufacturer, reached a confidential settlement agreement with Novo back in the fall of 2024 when Mylan filed for a generic version of Ozempic.
And I think generic semaglutide would be wonderful in terms of patient access. When it comes to price, Ozempic is $1,000 a month without insurance. And most of these compounding pharmacies, as we know, are offering semaglutide for anywhere between $100 and $165 a month.
So, compounding aside, I think the full price of brand name GLP-1 drugs imposes an enormous cost on the healthcare system that actually artificially suppresses uptake of the drug. And we saw that many state health insurance plans withdrew coverage of the GLP-1 drugs for patients without diabetes.
ALICE TRACEY: Yeah, I think the pricing question is always important, and it’s good to kind of think about this from a big picture perspective. So, we’ve got lots of great audience questions. So, I want to get to those too. But sort of to tie it all together, what does everything we’ve discussed today mean for the future of compounding for GLP-1s and for other drugs?
SHWETA KUMAR: Yeah, so I think it’s undeniable that GLP-1 compounding has been and is controversial. Most recently, we saw with the ad that Hims and Hers ran during the Super Bowl, there were a lot of industry voices asking the FDA to take action on that ad. Some were saying that the risks of compounded drugs were far too high for FDA to be permissive with regulations.
The New England Compounding Center tragedy, where a number of people died due to fungal meningitis that was in drugs that were made with unsafe compounding practices, I think is still fresh in a lot of our memories. But I think overall, we have to remember that compounding pharmacies do play a critical role in ensuring that patients have access to vital medication during drug shortages, and also for patients who require customized drugs that aren’t commercially available. So, any reform to compounding regulations would affect patients broadly, not just patients seeking GLP-1 drugs.
And in recent years, but before the GLP-1 boom, compounding pharmaceuticals were only estimated to comprise between one to three percent of all prescriptions. Now, that number has probably risen significantly during the GLP-1 shortage. But for Hims and other compounding pharmacies, I think the end of the shortage kind of spells the end of the road for GLP-1 compounding for now, which is perhaps unfortunate news for investors. But semaglutide and tirzepatide aren’t the only products in these compounding pharmacies’ portfolios. And I think it’s totally possible that we’ll see them pivot to other drugs, and perhaps they’ll find success with other products.
ALICE TRACEY: Yeah, I think we’ve already seen Hims pushing liraglutide, I think, is their next venture in the GLP-1 space. So, lots of things about that. So, we’ve got a lot of great questions from the audience that I want to get to.
I think first, maybe I can address some of these questions on personalized dosing. So, one question is how would Hims, via 503A, be able to advocate for dosages to help with side effects? So, we’ve already seen patients getting prescribed personalized GLP-1s with a 0.1 mg difference from the commercial doses in order to help with the side effects when titrating. So, kind of a question, again, about the legality of personalized dosing.
SHWETA KUMAR: Yeah, so I think the question asked about 503A pharmacies, which the standard for 503A pharmacies is slightly different. And Hims currently, I believe, according to their information online, obtains its drugs from a 503B pharmacy. But the standard for 503A pharmacies, which are much smaller, and patients that theoretically obtain their drugs from 503A pharmacies as well, if they meet the standard.
So, the standard is a little bit different, and it’s that a compounded drug is essentially a copy of a commercially available drug product if the compounded drug has the same active pharmaceutical ingredient. The active pharmaceutical ingredients have the same or easily substitutable dosage strength. This is really important.
We’ll come back to it. The commercially available drug product can be used by the same route of administration. The compounded drug has the same characteristics.
So, kind of similar to the 503B standard. But an important difference is that the API, the Active Pharmaceutical Ingredients, have similar or easily substitutable dosage strengths. This is kind of an issue I keep coming back to when thinking about this question about compounding pharmacies.
Novo and Lilly—often, I think, their products are generally offered in auto-injectors. But the compounding pharmacies are offering these drugs in vials with syringes. So, it’s really up to the patient to take out the correct dose.
And if you think about the spirit of what these compounding regulations and restrictions are intended to do, the regulations are intended to preserve the ability of compounding pharmacies to make dosages for patients that aren’t commercially available, that patients can’t access. And if compounding pharmacies are providing these specialized dosages in vials and the patient is responsible for taking out the correct dosage, it’s kind of hard to see how that would fit within the spirit of FDA regulations.
ALICE TRACEY: That makes sense. Another good question here. Are there any other non-GLP-1 drugs where there has been a fair amount of legal compounding that’s taken place with some form of personalization, like we’re discussing, that gives us some insight into what’s going to happen with GLP-1s that could be used to set a precedent here?
SHWETA KUMAR: Not that I’m aware of. Sorry, was the question about patenting?
ALICE TRACEY: No, I think just compounding with personalization, whether that’s something we’ve seen in any significant way with other drugs before.
SHWETA KUMAR: Got it. I’m not aware of any legal action, again, because I think for the same reasons that there’s no patent precedent. It’s that when there are lawsuits filed against these small compounding pharmacies, 503A pharmacies in particular, there is a huge pressure on these pharmacies to settle or somehow find a way to get out of this litigation. They simply can’t withstand the same risks as a generic drug company or another large pharmaceutical company.
So, I’m not aware of any precedent. But I am aware that there are a number of other telehealth platforms that are offering personalized doses, but in those cases, I think there are no patents at play. And those personalized doses are of drugs either in shortage or they comply with the FDA regulations in some other way.
ALICE TRACEY: Got it. We have a couple of questions about enforcement. I’m going to combine two of them here. So, one about enforcement on the FDA side. What would enforcement look like if the FDA were to take action, for example, when the grace period is up? And then as a follow on, do you have any sense of whether RFK will adhere to the FDA guidance or if he has a willingness to deviate from it?
SHWETA KUMAR: So, I think I’ll take the last question first, which is about RFK. I think, again, we’ve already seen a little bit of Marty Makary pushing back to some extent against RFK’s anti-vaccine stances and other positions. I think for FDA to choose, again, not to take enforcement action would be profoundly anti-industry, which again, historically, FDA has been relatively industry friendly as far as agencies go. They want drugs to be approved. They want successful safety and efficacy data. It’s a huge success when drugs go through the normal FDA approval process.
So, I think for FDA to choose to go against what they’ve long said in their guidance and regulations on compounding, which by the way, exists to preserve the incentive for drug manufacturers to seek regular approval through the ANDA process, right? For FDA to say, forget that. We’re just going to let compounding happen. I think would raise a whole host of issues related to how other generic drugs get approved, right? If you remove this enforcement piece, there’s really no incentive for generic companies to seek the normal ANDA approval process when compounding pharmacies could fill that gap. So, I think a failure to enforce would be very unusual. And then the second part of the question was about what the enforcement actions are?
ALICE TRACEY: Yeah, what the action would actually look like? Would it be a lawsuit? Would it be a letter? What form would that take?
SHWETA KUMAR: Yeah, I think all of the above. FDA has a section that relates to inspections and investigations. It’s their Office of Inspections and Investigations. And they can do everything from inspecting, visiting these facilities, checking to see if they comply with the good manufacturing practices regulations. They could also seize the drugs, particularly because they would be unapproved drugs as they don’t fit into the exemptions that are carved out for compounding and shortages.
ALICE TRACEY: Okay, that makes sense. Let’s see what other questions we have here. So, FDA enforcement, let’s see, this is a good question. At what point does personalizing at 503A level constitute mass prescribing, which no longer means that it’s unique? And if it’s really unique, at what point are too many people unique when it comes to personalized dosing? Maybe that’s a question about essentially a copy. Yeah, I want to hear your thoughts about how that fits into the regulation.
SHWETA KUMAR: Yeah, that’s a good question. So, the 503A standard also involves the amount of compounding. So, the standard is that pharmacies can compound drugs as long as they’re not compounding essentially copies of commercially available drugs regularly or in inordinate amounts.
So, if the question is what regularly or inordinate amounts means, I think it’s the same 2018 FDA guidance that has a list of factors that describes what regularly or inordinate amounts means. And some of those factors are whether the compounded drug is more than a small number of prescriptions or more than a small percentage of the total compounded drug products that the compounder is preparing, whether the compounder is routinely substituting compounded drugs upon receiving prescriptions for the patients, whether the compounder has pre-printed prescription pads. That also suggests that they’re doing it regularly or in inordinate amounts. And then also if they’re compounding that drug not on an as-needed basis in response to prescriptions, but on a routine or preset schedule. So, I think these factors and the FDA standards kind of preempt or kind of block off this loophole for large-scale compounding through the 503A process.
ALICE TRACEY: Got it. Okay, so kind of two more main points I want to hit here. We’ve got a couple of questions about who decides if a personalized dosage counts as a minor change that can’t be sold—which I think is sort of part of this other larger question of who ultimately makes the decision if a personalized GLP-1 compound via a unique dosage or adding something like vitamins—is legally okay to sell or is just a minor change? And is it just a personalized script with changes from a doctor? Or can the FDA pursue enforcement on its own without one of the branded companies first complaining or taking legal action? So, I think this question kind of gets at who’s ultimately making the decision of what’s okay.
SHWETA KUMAR: Yeah, so first of all, FDA can absolutely take enforcement action without the branded companies. And in fact, they usually do. It’s pretty unusual that branded companies are taking enforcement or trying to take monitoring into their own hands.
And, in fact, early on in the saga, a lot of the branded companies, Novo and Lily, were bringing suits alleging violations of the Food, Drug, and Cosmetics Act. And a lot of those suits were actually thrown out because there’s no private right of enforcement for the FDCA. FDA alone has the authority to enforce the provisions of the FDCA. So, basically all Novo and Lily can do is monitor the market and refer certain companies to FDA for enforcement. But yes, it’s totally possible that FDA can take enforcement on its own.
And then the other question was about who determines what’s legal? So, the answer is FDA, with the caveat that the second prong for 503B that I talked about, whether the individual prescribing practitioner has to determine that the drug produces a clinical difference for the individual patient. And another important note, I think, is to note that any prescription for compounded drugs has to specify that it is for a compounded version.
So, that kind of shifts the burden onto the prescriber. And so, if the prescriber determines that there is a clinical difference, FDA might follow up by investigating those prescriptions and ensuring that there’s not one particular practitioner that’s writing a lot of prescriptions for individualized or modified doses that aren’t warranted or supported by any evidence.
ALICE TRACEY: Okay, that makes sense. A couple questions on the private-side patent litigation. Somebody asked, at what point would Novo Nordisk go after compounders after they’ve rolled off from the 503B bulk compounding to the 503A personalized compounding? So, I think that’s maybe a question about timing. And then somebody else asked for some more specifics on how damages would be calculated. They noted, my understanding is that damages are treble calculated on the branded drugmaker’s price. So, a couple points on the patent litigation side.
SHWETA KUMAR: Yeah, so the first question is, at what point would Novo go after these compounders? I think that’s a good question. My prediction is that they’re going to wait to see if the compounding stops in response to the FDA regulations or updates.
You know, patent litigation is very expensive. And I think that’s why we saw that Novo could have gone after these compounding pharmacies at any point in this process, right? The funny thing about FDA and patent law interacting here is that even though FDA allows drugs to be compounded in shortage, the Patent Act doesn’t create that immunity, right? So, even as early as 2022, Novo and Lilly could have been suing these compounding pharmacies for patent infringement.
But aside from sending cease and desist letters, they never actually filed any litigation, right? And I think part of the reason for that is that patent litigation is just really expensive. And so, for them to commit to pursuing patent infringement suits after the cease and desist letters have been sent, I think they would probably wait a little bit to see if these compounders would actually be complying with FDA law first and stopping their compounding after the grace period has ended.
And then I think the second question was about damages. In patent law, damages are relatively well defined, including by statute in Section 284. So, either reasonable royalties or lost profits. And reasonable royalties are like different approaches. There’s a market approach where you can compare two comparable licensing transactions. And there’s also the Georgia Pacific factory, which are a number of factors that can be used to calculate reasonable royalties.
I think the question also mentioned trouble damages, which could be applicable if there’s finding a willful infringement. And arguably, I think if the companies have sent cease and desist letters to these compounders and they’ve continued to compound after the fact, I think that would definitely support finding a willful infringement.
ALICE TRACEY: Thank you. We’ve got a couple more questions that have trickled in here. So, one is a follow‑up to the 503A question. So, if there are rules for prescribing compounded drugs as a percentage of total compounded drugs, is that a percentage of total compounded drugs writ large or total compounded GLP-1s?
SHWETA KUMAR: So, there’s no specific percentage that’s listed in the FDA guidance, but based on my reading, it’s a percentage of the total drugs that are being compounded, not just GLP-1s.
ALICE TRACEY: Thank you. We have a question—this is a great question, I think, because we mentioned liraglutide at the end of our discussion there, which is on shortage, but I believe does have an approved generic already. So, somebody asked, do ANDA holders—so that’s generic drug applicants who have an approved generic drug—do ANDA holders have any standing to bring action against compounders?
SHWETA KUMAR: That’s a really good question. I think not, unless—so they can’t bring suit for patent infringement, obviously, because by definition, there are no patents on generic drugs. If they’re a first filer, they might have—that means the first to file an ANDA and get it approved by FDA—they would have six months of exclusivity.
So, in that situation, either FDA could go after the compounders if they’re making drugs in violation of the FDA regulations, or the generic drug companies might have standing to bring suit for violating their six-month exclusivity period.
ALICE TRACEY: Okay. And then a follow-up question on the damages front. So, somebody’s asked for some more specifics on the price on which damages are based.
So, the example they provided is if Hims sells a month of Ozempic for $200, would they owe Novo’s gross profit calculated from the $200 price or from Novo Nordisk’s $1,200 price point? So, what would the losses or the damages be based on?
SHWETA KUMAR: That’s a good question. So, I talked about the two different options for damaged cinder patent law. So, lost profits are generally higher. I believe the lost profits would be based on Novo or Lilly’s lost profits. A reasonable royalty could be less than that. I mean, the Georgia Pacific factors also enable some flexibility in calculating damages.
So, you can imagine if this plays out, the compounders would be arguing—let’s say this plays out and then there’s a finding of infringement and there’s a question about what the damages owed are. The compounders would probably be arguing for reasonable royalties. Whereas the branded drug companies would be arguing for lost profits. Although, I think the lost profits would probably be cut off from the point at which the shortage ended. Because the question is, were they profits that Novo or Lilly could actually have earned? Because during the shortage, Novo and Lilly were not able to fill that gap in the market demand, right? So, I think they would have some trouble. I mean, it depends on how the numbers shake out. But the lost profits would be calculated from the time that Lilly was able to actually fill that gap in the market.
ALICE TRACEY: Thank you. We have had someone weigh in on the ANDA question. So, somebody noted that approved ANDA holders cannot sue the compounders on FDA law, but ANDA filers could sue compounders for trademark infringement or unfair competition if the compounders say their products are generic. So, a little more color on that question. And I believe the same patent lawyer mentioned that the lack of patent infringement suits historically against compounders is because most compounded drugs are off-patent, which I think you mentioned as well. So, I just wanted to raise those points.
Another question we got is, what is a clinical difference and how is that determined?
SHWETA KUMAR: Yeah, that’s a good question. So, first of all, I think, thank you for the correction. I think that’s a really good point. The ANDA filer could ask FDA or could—I think there is some precedent for ANDA filers bringing suit against FDA for not enforcing their exclusivities. So, that’s a really good point. And the question is the question about clinical difference?
ALICE TRACEY: Yeah, what is the clinical difference that decides what that is?
SHWETA KUMAR: Yeah, so the FDA guidance—or there aren’t any FDA guidances that specify what that actually looks like. But I think that would be left to the discretion of the individual prescriber. FDA has traditionally taken the position that they’re not engaged in the practice of medicine. So, I think the guidelines are intentionally defined to allow some discretion on the prescribing practitioner’s end. I think that’s why to some extent the second prong that requires prescribers to determine what a clinical difference is does shift some of the burden back to the prescriber. And also, I think that puts more onus on the prescriber to ensure that they’re in compliance with their state regulations as providers are licensed under their state boards.
ALICE TRACEY: And as we mentioned during the beginning of the call, a company like Hims and Hers is both prescriber and compounder. They’ve got people prescribing the drugs, and then they are also making them.
Okay, and then we also have somebody asked who would win—with an exclamation point. But I think that’s a reference to the patent suits. So, I know you don’t have a crystal ball, but any insight into whether a Lilly or a Novo would prevail if they were to sue a company like Hims?
SHWETA KUMAR: Yeah, I think in these cases, I mean, analogizing to brand versus generic cases, I think it’s generally pretty hard to argue non-infringement when the patents are the core patent. So, they relate to the actual compound itself. So, at least if the case is based on those core group of patents, which cover semaglutide, I think it’s a pretty clear win for the branded companies.
The secondary patents, I think, present a more interesting question. So, perhaps there’s a wily patent lawyer out there who would like to conduct an analysis of the secondary patents, which relate to dosages, the injector device, and perhaps there’s a way to design around those patents. So, we’ll see what that looks like. And given that Mylan has actually settled with Novo and Lilly, Mylan might actually be the first entrant.
Unfortunately, the details of that settlement agreement were confidential. So, we’re not exactly sure what it entails. But we know that the FTC reviews settlement agreements and patent infringement cases like this to make sure that they’re not paid for delay agreements.
ALICE TRACEY: Understood. Okay, I think we’ve got time for a couple more questions here. We’ve got this question. How could so much personalization happen if they’re effectively creating a new drug each time they’re writing these personalized scripts?
SHWETA KUMAR: So, I think that’s part of the issue, right? I think Hims, I think, has statements to the effect of we plan to personalize these doses. And therefore, we’re getting around FDA law. But in effect, they’re not really doing so. It still has the same active ingredient. And for the safety of the consumer, the drug should match the profile of the approved drug to a large extent. So, I would say that’s part of the problem, right? They’re not making new drugs they’re making copies of these drugs and finding minor ways to tweak them to get around FDA regulations.
ALICE TRACEY: Great. And then another follow-up on the private litigation side. Would or could Eli Lilly and Novo Nordisk still sue if the patent suit extends beyond that 2026 expiration of the core patents we’ve been talking about?
SHWETA KUMAR: Yes, if they allege that the compounded drugs being made violate their secondary patents, which relate to methods of use and dosage, certainly they can go after the compounders after 2026 in the U.S. But I believe the generic versions of Ozempic and Wegovy are being launched in global markets after 2026. And actually, you might have seen that FTC has written a warning letter to Novo for its patents on Ozempic, arguing that the patents on the injection devices are improperly listed, as they don’t actually cover the active pharmaceutical ingredient. So, I’m not sure where that FTC investigation is at or what stage it’s at. But certainly, if Novo ends up delisting those injection device patents, I think that will make it much easier for generic market entry.
ALICE TRACEY: Yeah, my understanding on the Orange Book stuff is we’re really waiting to see – or, the industry has its eyes on this case with Teva and a generic drugmaker called Amneal. That’s sort of setting the precedent for how the FTC’s Orange Book patent challenges play out. So, I think that’ll probably offer a lot of clarity into what happens with the other companies with challenged patents, including Novo Nordisk for Ozempic. So, lots to explore there.
I think we’re all caught up on questions, unless I’m missing anything. So, I will thank you again for your time. This has been super helpful, and obviously lots of interest and lots to keep in mind, and I think we’ll have our eyes on the end of that grace period to see what happens next.
So, thank you so much for all of your time and for your insight into this topic.
SHWETA KUMAR: Thanks for having me. It’s been a pleasure.
