How Ozempic Exposed the Limits of the FDCA’s § 503A Compounding Framework

[1]

Semaglutide drugs, sold under the brand names Ozempic and Wegovy, saw a substantial increase in use for treating diabetes and obesity, driving nationwide shortages.[2] During the shortage, the FDA’s drug-shortage-list policies allowed compounding to expand as a practical substitute for the approved products. [3] 

Background

Pharmacies compound patient-specific drugs when a suitable commercial product is unavailable.[4] Under § 503A of the Food, Drug, and Cosmetic Act (“FDCA”), qualifying pharmacies get exemption from approval, labeling, and current Good Manufacturing Practices (“cGMP”) if they compound pursuant to patient-specific prescriptions and avoid regularly making “essentially copies” of commercially available drugs.[5] This framework works well in ordinary times, but its purpose is strained when demand turns exemptions designed for individualized care into an opportunity to create a scalable commercial substitute. [6]

Novo Nordisk has marketed semaglutide under several brand names, the most recognizable being Ozempic and Wegovy.[7] The surge in demand for these products stressed pharmaceutical supply chains, leaving supply unable to keep pace with demand.[8] As a result, in 2022, the FDA listed these two products on the drug-shortage list, which means they were not “commercially available” for purposes of § 503A, and the “essentially copies” restriction no longer applied, allowing § 503A compounding for products that replaced Ozempic and Wegovy.[9] 

Despite Novo Nordisk’s related patents on the product, the shortage allowed their products to be virtually replaced across the United States by pharmaceutical compounders.[10] The FDA declared the shortages resolved in February 2025, but compounded semaglutide had become widely become available and some entities continued compounding with no legal basis to do so.[11] With compounders continuing to offer a similar drug at a lower price, Novo Nordisk’s product faced opposition wrestling back market control.[12] 

Looking at the behavior of compounding pharmacies during and after the recent semaglutide shortage, the question is whether the compounding exception has turned from a limited safety valve to an exclusivity workaround.[13] The failure here stems from institutional design—when a shortage is declared and enforcement is split between federal and state actors who have different incentives and tools, exclusivity is weakened despite both actors properly following their own directives.[14] However, shortage-driven compounding introduces functional generic-like competition—eroding exclusivity that patentees are intended to have.[15] 

Enforcement 

State boards of pharmacy regulate the practice and facilities, while the FDA regulates products and the § 503A exemptions.[16] So, in the compounding drug context, the FDA focuses on whether the compounded drugs qualify for §§ 503A or 503B exemptions.[17] If those conditions are not met, the compounded drugs will be treated as unapproved products.[18] Given resources, information, and jurisdictional limits, FDA enforcement often begins with warning letters—fast, but weak, especially when some actors see the letters as the cost of doing business.[19] 

The FDCA has previously introduced the “5% of sales rule.”[20] This provision states that if a pharmacy is taking advantage of the exemptions offered by § 503A, and their state refuses to sign a Memorandum of Understanding (“MOU”), then that pharmacy is not allowed distribute compounded drugs out of state in amounts that exceeded 5% of the compounder’s total prescription orders.[21] To exceed that 5% cap, states could sign onto the MOU.[22] Signing onto an MOU meant that § 503A pharmacies would submit to records review, FDA reporting, and certain data submissions, so that the FDA could regulate interstate commerce of compounded drugs.[23] 

Theoretically, if a pharmacy exceeded the 5% cap, they would lose access to their § 503A exemption.[24] However, the FDA had repeatedly extended the period before it will enforce this rule, then in 2022 considered it “suspended” following litigation that challenged the agency’s MOU implementation under the Regulatory Flexibility Act.[25] As a result, there are no caps on interstate distribution, and during the semaglutide shortage this allowed § 503A pharmacies to ship substantial quantities of semaglutide outside of their home state without any oversight.[26] 

Safety Concerns

Compounding can be clinically valuable, but presents distinctive safety risks because compounded products are not FDA-approved, are not reviewed for labeling clarity before distribution, and may vary meaningfully in composition across sources even when sold under the same name.[27] In July 2024, the FDA warned the public about dosing errors in semaglutide products.[28] Health providers have been incorrectly instructing patients on the dosage of compounded drugs intended to replace Ozempic and Wegovy, which has led to hospitalization and other “adverse events.”[29] For example, patients may receive multidose vials rather than prefilled pens, or instructed to measure doses in “units” rather than milligrams.[30] In the branded product, the delivery system and clear labeling are part of the FDA-approval process.[31] The FDA’s conclusion on this issue was to simply encourage reporting among the compounders, health care providers, and patients regarding these adverse events, highlighting their limited power over many § 503 actors.[32]

Among dosage and other issues like improper storage and illegally compounded semaglutide products, a particularly concerning health and legal issue is the use of semaglutide “salt” forms (e.g., semaglutide sodium or semaglutide acetate) in these compounded drugs, rather than semaglutide base used in FDA-approved products like Ozempic and Wegovy.[33] Some compounders may market salt-based products as “semaglutide” and contend that their products work the same as the FDA-approved drug, but are chemically different than the semaglutide base used in FDA-approved products, raising both regulatory and potential patent questions depending on claim scope.[34] Doing this results in a different product. While similar in name, the salts are different active ingredients and are not legally approved for use in compounding these drugs. [35] The FDA has warned the public of these facts and cites concerns that there is a lack of information whether the salts have the same chemical and pharmacologic properties as the active ingredient in the approved drug.[36] 

Litigation

Various lawsuits have spawned from this matter: on the one side, the Outsourcing Facility Association, a compounding group, sued the FDA simply for their decision in ending the shortage of semaglutide, calling the reasoning “arbitrary and capricious.”[37] The plaintiffs sued for a preliminary injunction to allow them to keep producing the compounded drug, which was denied by the United States District Court of N.D. Texas.[38] 

On the side of the patentee, procedural limits force Novo Nordisk to pursue indirect legal theories, because there is no private cause of action to sue for violation of the FDCA.[39] Novo Nordisk has filed multiple lawsuits against telehealth firms, compounding pharmacies, and medical spas, alleging that these entities are violating state laws by improperly influencing healthcare entities to prescribe the compounded product instead of their own.[40]

Novo Nordisk can file trademark claims to compounders using the terms “Ozempic” or “Wegovy” in their advertising—for example if a compounder advertises their product as a “generic Ozempic” or “same as Ozempic.”[41] The patent holder could go after individuals for patent infringement, but these compounders are increasingly using semaglutide salts to try and reduce the risk of litigation.[42] Patent litigation is a heavy hammer to use both in terms of cost and time, so it is not feasible to sue every potential infringer across the United States.[43] 

The best thing Novo Nordisk can do is petition to the FDA to employ their enforcement options: warning letters, petition to Congress, inspect reported offenders.[44] The warnings the FDA has already sent out are done in the hopes that patients and providers will be pushed towards preferring approved products and not take risks with local manufacturers.[45]

Solution

Congress could tie a portion of pharmacy-board funding or targeted public-health grants to MOU adoption and require minimum inspections for high-volume compounders plus automated interstate-distribution reporting to give the FDA the data it currently lacks.[46]

Another solution would be to simply give the FDA more power and funding.[47] Rather than forcing the agency to rely on warning letters that come only after scarce reporting, Congress could authorize the FDA to subject § 503A pharmacies to registration for compounding products that are similar to patented products and not in shortage.[48] A specific solution to the semaglutide issue would be to authorize the FDA to treat semaglutide salts as non-qualifying active ingredients for purposes of §503A, clarifying that only the FDA-approved active ingredient form satisfies the compounding exemptions. However, rules on paper do not mean anything without proper enforcement implementations: an increase in the FDA’s scope this substantially would likely require a significant allocation of resources and priorities, which can be uncertain considering shifting administration agendas.[49]

A narrower and temporary solution, but an easier one to garner support for, would be for Congress to simply deem that for purposes of § 503A, compounding of GLP-1 drugs must use an active ingredient that matches the FDA-approved active ingredient form. The goal would be to eliminate the safety and consumer-deception problems that have resulted from a patient receiving a chemically distinct active ingredient but advertised and sold under the same or similar name as the branded drug. Civil and monetary penalties for violations would help compounding pharmacies take this solution seriously.

Conclusion

The central policy question is whether compounding will remain a patient-specific safety valve or continue operating as a de facto national substitute during prolonged shortages. The semaglutide episode shows how shortage-driven compounding—combined with fragmented federal and state enforcement—can weaken exclusivity and increase patient risk even when each regulator is acting within its assigned lane. Clear statutory triggers, defined sunsets, and enforceable limits on interstate distribution and non-equivalent active ingredients would better preserve access for patients while protecting the innovation incentives reflected in our patent system.

This blog post is excerpted from a scholarly paper written for a law school course. The full paper is available upon request from the author.

References

[1] Photo by Dennis Sylvester Hurd, Saturdays, Flickr (Aug. 3, 2024) (CC0).

[2] The FDCA defines “drug” to include article intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease, as well as articles other than food intended to affect the structure or function of the body or other animals. See 21 U.S.C. § 321(g)(1); see also Yearslong Shortage of Popular Weight-Loss and Diabetes Drugs Is Resolved, FDA Says, AP News (Dec. 3, 2025), https://apnews.com/article/wegovy-ozempic-obesity-diabetes-treatment-shortage-a5f94b1dd7449e15a17922f5503354d6; U.S. Food & Drug Admin., FDA Clarifies Policies for Compounders as National GLP-1 Supply Begins to Stabilize (Apr. 28, 2025), https://www.fda.gov/drugs/drug-safety-and-availability/fda-clarifies-policies-compounders-national-glp-1-supply-begins-stabilize.

[3] See Yearslong Shortage of Popular Weight-Loss and Diabetes Drugs Is Resolved, FDA Says, supra note 2.

[4] See FDA Clarifies Policies for Compounders as National GLP-1 Supply Begins to Stabilize, supra note 2.

[5] See 21 U.S.C. § 353(a); see also U.S. Food & Drug Admin., Human Drug Compounding Laws (last updated Dec. 17, 2024), https://www.fda.gov/drugs/human-drug-compounding/human-drug-compounding-laws; 21 U.S.C. § 353(a).

[6] See U.S. Food & Drug Admin., Compounding and the FDA: Questions and Answers (explaining that traditional compounding is intended to meet the needs of individual patients).

[7] See Novo Nordisk A/S, Our Medicines, https://www.novonordisk.com/our-products/our-medicines.html (last visited Dec. 20, 2025).

[8] See id.

[9] See U.S. Food & Drug Admin., Declaratory Order: Resolution of Shortages of Semaglutide Injection Products (Ozempic and Wegovy) (Feb. 21, 2025) (on file with U.S. Food & Drug Admin.).

[10] See U.S. Food & Drug Admin., Approved Drug Products with Therapeutic Equivalence Evaluations (Orange Book), Semaglutide Listings, https://www.fda.gov/drugs/drug-approvals-and-databases/approved-drug-products-therapeutic-equivalence-evaluations-orange-book (last visited Jan. 23, 2025).

[11] See id.; see also Patrick Wingrove & Bhanvi Satija, U.S. FDA Says Shortage of Novo’s Weight-Loss Drug Resolved, Reuters (Feb. 21, 2025), https://www.reuters.com/business/healthcare-pharmaceuticals/us-fda-says-shortage-novos-weight-loss-drug-resolved-2025-02-21/.

[12] See Patrick Wingrove & Bhanvi Satija, supra note 11.

[13] See id.

[14] See Drug Safety: FDA Faces Challenges Overseeing the Drug Compounding Industry, U.S. Govn’t Accountability Office (Feb 6, 2024), https://www.gao.gov/products/gao-24-107359.

[15] See C. Scott Hemphill & Bhaven N. Sampat, Evergreening, Product Hopping, and Strategic Patenting, 132 Colum. L. Rev. 1, 18–22 (2018).

[16] See Federal vs. State Regulations in the U.S. Pharma Industry, DrugZone (Feb. 17, 2025), https://www.drugzone.com/blog/federal-vs-state-regulations-in-the-u-s-pharma-industry; see also Human Drug Compounding Laws, supra note 3.

[17] See 21 U.S.C. § § 353a(a), 353b(a).

[18] See id.

[19] See U.S. Food & Drug Admin., About Warning and Close-out Letters, https://www.fda.gov/inspections-compliance-enforcement-and-criminal-investigations/warning-letters/about-warning-and-close-out-letters (last visited Jan. 25, 2026).

[20] See U.S. Food & Drug Admin., Memorandum of Understanding Addressing Certain Distributions of Compounded Drugs (last updated Aug. 8, 2025), https://www.fda.gov/drugs/human-drug-compounding/memorandum-understanding-addressing-certain-distributions-compounded-drugs.

[21] See id.

[22] See id. 

[23] See Barbara A. Knightly, The MOU – What Is It and What Does It Mean to Compounding Pharmacies? (Apr. 13, 2021), https://bpsweb.org/2021/04/13/the-mou-what-is-it-and-what-does-it-mean-to-compounding-pharmacies.

[24] See id.

[25] See Memorandum of Understanding Addressing Certain Distributions of Compounded Drugs, supra note 20; see also Wellness Pharmacy, Inc. v. Becerra, No. 1:20-cv-03082, 2021 WL 4284567, at 1. (D.D.C. Sept. 21, 2021) (Cooper, J.) (mem. op.).

[26] See Memorandum of Understanding Addressing Certain Distributions of Compounded Drugs, supra note 20.

[27] See Compounding and the FDA: Questions and Answers, supra note 6.

[28] See U.S. Food & Drug Admin., FDA Alerts Health Care Providers, Compounders, and Patients to Dosing Errors Associated With Compounded Drugs (last updated Aug. 8, 2025), https://www.fda.gov/drugs/human-drug-compounding/fda-alerts-health-care-providers-compounders-and-patients-dosing-errors-associated-compounded.

[29] See id. 

[30] See id.

[31] See 21 C.F.R. § 201.80(f)(2).

[32] See FDA Alerts Health Care Providers, Compounders, and Patients to Dosing Errors Associated with Compounded Drugs, supra note 28.

[33] See U.S. Food & Drug Admin., FDA’s Concerns With Unapproved GLP-1 Drugs Used for Weight Loss (last updated Aug. 8, 2025), https://www.fda.gov/drugs/postmarket-drug-safety-information-patients-and-providers/fdas-concerns-unapproved-glp-1-drugs-used-weight-loss.

[34] See id. 

[35] See id. 

[36] See id. 

[37] See Drug Compounders Sue U.S. FDA Over Removal of Wegovy, Ozempic From Shortage List, Reuters (Feb. 24, 2025), https://www.reuters.com/business/healthcare-pharmaceuticals/drug-compounders-sue-us-fda-over-removal-wegovy-ozempic-shortage-list-2025-02-24/

[38] See Outsourcing Facilities Ass’n v. United States Food & Drug Admin., No. 4:25-CV-0174-P, 2025 WL 1239727, at *8 (N.D. Tex. Apr. 24, 2025).

[39] See 21 U.S.C. § 337(a); see also Enforcement of the Food, Drug, and Cosmetic Act: Select Legal Issues, Congress, https://www.congress.gov/crs-product/R43609#fn61 (last visited Jan . 25, 2026).

[40] See Brendan Pierson, Novo Nordisk Expands Lawsuits Against Weight-Loss Drug Compounders, Reuters (Aug. 5, 2025), https://www.reuters.com/legal/litigation/novo-nordisk-expands-lawsuits-against-weight-loss-drug-compounders-2025-08-05/ (explaining that Novo Nordisk has filed 14 new lawsuits against telehealth providers, compounding pharmacies, and medical spas alleging illegal sales of unapproved compounded versions of semaglutide after FDA declared drug shortage resolved).

[41] See 15 U.S.C. § 1125(a)(1) (Lanham Act false designation and false advertising); see also 15 U.S.C. § 1114(1) (trademark infringement for unauthorized use of registered mark in commerce).

[42] See 35 U.S.C. § 271(a); see also FDA’s Concerns with Unapproved GLP-1 Drugs Used for Weight Loss, FDA, https://www.fda.gov/drugs/postmarket-drug-safety-information-patients-and-providers/fdas-concerns-unapproved-glp-1-drugs-used-weight-loss (last visited Jan. 26, 2026).

[43] See William P. Ramey III, The Hidden Price of Patent Wars: How Legal Costs are Killing Innovation, Ramey LLP (June 16, 2025), https://www.rameyfirm.com/the-hidden-price-of-patent-wars-how-legal-costs-are-killing-innovation (summarizing findings from AIPLA Economic Survey in 2023 and explaining how patent litigation has cost barrier).  

[44] See 21 U.S.C. § 374(a) (explaining FDA inspection authority).

[45] See Compounding and the FDA: Questions and Answers, supra note 6.

[46] See 21 U.S.C. § 353a(b)(3)(B) (establishing Memorandum of Understanding framework governing interstate distribution of compounded drugs).

[47] See 21 U.S.C. § 393(b) (defining FDA’s mission and authority as established by Congress).

[48] See 21 U.S.C. § 353b(b) (requiring registration of outsourcing facilities under § 503B).

[49] See Heckler v. Chaney, 470 U.S. 821, 831 (1985) (recognizing that agencies can exercise discretion in enforcement depending on resource-allocation and internal priority).