What the end of Eli Lilly's weight loss drug shortage means for the competition

The US Food and Drug Administration confirmed on Thursday that Eli Lilly (LLY) has increased production of its blockbuster weight-loss drug Zepbound and type 2 diabetes drug Mounjaro, meaning the company is now supplying enough doses can to meet current demand.

The metrics used to determine current need are not specified by the FDA—and the drug shortages website offers an important caveat: “Even when a drug is available, patients may not always be able to fill their prescription immediately at a particular pharmacy.” The FDA said on its website that it was looking into listing Mounjaro and Zepbound.

Eli Lilly first notified the agency in August that there was no longer a shortage of its drugs, which led to both drugs being initially removed from the agency's drug shortage list. The FDA then verified this through its own assessment, which led to Thursday's notification.

The move is important for two main reasons: It gives Lilly an advantage over rival Novo Nordisk (NVO), which is still short of doses, and it starts the countdown for prescription pharmacies to stop producing copycats of Lilly's drugs, like you know formula name tirzepatide.

Novo still has some doses of its type 2 diabetes drug Ozempic and weight-loss drug Wegovy on the FDA's drug shortage list. And the company has lost market share slightly to Lilly in recent weeks, despite being the first to bring both products to market.

Analysts at Jefferies noted a shift in the weight loss category, with sales of Lilly's Zepbound increasing 1.1% to 43.4% of the market for all prescriptions filled in the week of September 27, compared to 42.3% the week before. Meanwhile, Wegovy is losing significant ground, with a loss of 1.2% over the same period and an increase from 56.9% of total prescriptions on the market to 55.7% in a week. Wegovy's starter doses, 0.25 milligrams, saw the biggest market share loss, with a decline of 37% week-on-week, according to a study by Jefferies.

The second major concern is drug pharmacies supplying copycats to medispas, clinics and online healthcare platforms. Compounders have taken advantage of the market's outsized demand, knowing full well that, as both brands acknowledged, demand will outstrip supply for years to come.

The addition of the drugs to the FDA's shortage list gave compounders a free hand to produce copycat products. But that is now coming to a standstill. The FDA said these companies had about 60 days to stop mass production, although they could still produce small quantities.

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Whether they will comply or not worries Lilly. In a call with its new CFO, Lucas Montarce, analysts at Jefferies said the company is “taking strong action and wants to ensure that FDA/government agencies take action as well, as compounded formulations could pose a risk to patient safety.”

Lilly had previously launched vials of its drugs through its own platform, LillyDirect, in a bid to snatch market share from compounders. There is no exact data on how much market share compounders have taken from pharmaceutical companies, but Novo estimates that up to 20% of patients use compounded medications.

Lilly hasn't disclosed details of how much it will earn from sales on its website – which is specifically available to cash-paying patients – but details are expected in its next earnings report at the end of the month.

Anjalee Khemlani is the senior healthcare reporter at Yahoo Finance, covering all things pharma, insurance, care services, digital health, PBMs, and healthcare politics and policy. Of course, this also includes GLP-1. Follow Anjalee on most social media platforms @AnjKhem.

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