Compounding has been regulated by the FDA for quite some time, but, with the recent compounding “copies” of Ozempic and other GLP-1 drugs, there are renewed questions about the purpose, and legality, of such processes. This article explores the reasons why the FDA endorses an “illegal” process, and why compounding pharmacies go unpunished by patent litigators. 

What is compounding? What are copies?

Compounding is regarded as the “combining, mixing, or altering ingredients [of a pre-existing medication] to create a medication tailored to the needs of an individual patient.” Though compounded drugs are not approved FDA-approved, they still have an important role in serving patients. For example, if a patient is unable to swallow pills, or is allergic to an inactive ingredient, compounding facilities can alter the medications to be more accessible to such a patient. 

Regulated by section 503A, “copies” of a drug are, more or less, a replica of a particular drug. Restrictions on manufacturing “copies” are relaxed when a drug appears on the FDA’s drug shortages list, like Ibuprofen oral suspension was in January 2023, when RSV, COVID-19, and the flu ravaged the country simultaneously. 

If the FDA Allows it, is it Legal?

Any IP-litigator worth their salt will realize that just because the FDA allows compounding copies of drugs does not mean that patent-holders will allow the manufacturing of copies, no matter how much of a shortage there is. In fact, there is nothing particularly special about the FDA’s permission to compound copies: it doesn’t suspend patents, and it most certainly doesn’t pause patent-holders’ ability to litigate against compounders. So why don’t they?

Damages and Injunctive Relief

Intellectual property litigation can be placed in two buckets: patent holders are asking for monetary damages and/or injunctive relief. So, why, during shortages of drugs, don’t companies such as Novo Nordisk, whose products include Wegovy,^® Ozempic,^® and Rybelsus,^® litigate against compounding pharmacies? The answer lies in how damages are calculated. Monetary damages are based on how much a company “loses out on” given the competition of patent-infringers. When drugs are in shortage, however, drug companies’ stock cannot satisfy the market demand for their products, meaning that compounders do not cause these companies to lose out on any sales: they are already selling as much as they possibly can. Additionally, to ask for injunctive relief, drug companies need to prove that compounders are causing harm, which is nigh impossible to do, particularly when the drugs in question are medically necessary/lifesaving. Litigation is more likely to occur in regards to trademark infringement, when compounders market their drugs by comparing them to brand-names (e.g. “with the same ingredients as/a generic version of [Brand Name]”).

Conclusion

Thus, compounding copies, even when they are in short supply, does infringe on patents in the United States, whether or not the FDA approves such an action. The caveat lies in the fact that, during such shortages, drug companies have no legal recourse to prevent compounding nor seek monetary damages. Outside the U.S., over 40 countries provide explicit exemptions to patent infringement laws for compounding.