***Apologies for the back-to-back HIMS GLP-1 update but we share our notebook as we update it with notes/ideas/etc. There is one last broader report we’ll send out that we’ve been working on but excluding a random encounter, we should be back to sharing new updates/ideas with you all soon.***

On Friday, January 31st, 2025, we spoke with a lawyer regarding the FDA shortage around GLP-1s and what their take was on the situation. For legal reasons, we have not included their name but have included their background for context on the knowledge and expertise they bring.

We have to paraphrase here without giving too much but basically, they’re very well-informed and knowledgeable. Below are the notes from our discussion today.

**Please note that this is not a transcription! It’s our notes that we’ve summarized only.

So aside from the research we’ve put out recently (below), we wanted to get a sanity check on the situation and get their thoughts on what’s happening. When it came to the general compounding of GLP-1s, broadly speaking, they were concerned about the situation, and when it came to what happens after a shortage, they had choice words as well.

We’ve bucketed our notes from the call into 2 main categories and a few subcategories for clarity and organization.

They are incredibly skeptical and nervous regarding the current compounding landscape. They understand that there is a need for compounding but not nearly close to what these companies are suggesting.

They said

Almost verbatim, they brought up the notion that creating a compounded drug with a vitamin or creating an inter-dosage vial (dosage between the FDA-approved drug dosages) is not grounds for compounding.

Compounding should be done for extreme circumstances where a patient cannot be able to take the drug in its existing form and yield a materially different clinical outcome.

They labeled this as them [compounders] using this as an excuse to effectively create a new drug that will definitely lead the FDA to bring the hammer down on those thinking they can do that.

***This leads us to believe that it could be on the lower end of our range for the MOU/proxy math we shared in our most recent post.***

There are not many that fit that mold on a good day and they don’t see that changing in this situation.

They said that price and access are conditions that should not be taken into consideration when compounders are making a case for why they should be allowed to compound at the moment which is what OFA and others will try to use to justify the “extended supply need” for compounding to stay on.

It is not the FDA’s job to remind providers that when they recommend a compounded drug on shortage to a patient, it could interrupt their medication regimen with no alternatives for a backup once it comes off shortage (if a niche need isn’t available to compound). Not the FDA’s problem in general nor when it comes to deciding when a drug comes off.

It would only be an issue if the FDA believes that once the shortage comes off we would go back into a shortage because the supply wasn’t calculated correctly from the conversion of patients currently on a compounded drug moving to branded.

They mentioned the various lawsuits that have currently already been submitted by Eli Lilly (LLY) and Novo Nordisk (NVO) but these lawsuits are at the “little guy” level mainly because the smaller guys fold easily when they’re confronted with a cease and desist letter.

They have yet to go after a “big fish” but predict that time will come soon.

They mentioned the appalling conditions of some of these facilities and that by no means should a 503a really be allowed to compound these drugs. Perhaps in extreme circumstances after a shortage but the big picture, is not in their view.

Instances of poor conditions, not tested products, and products sitting out for too long (contaminated/tainted) have already been captured by the FDA which further proves why NVO and LLY are saying that this is “too hard for compounders.”

Granted, this has come from 503a pharmacies but the point is that the supposed exemption for 503a pharmacies should stand but they can’t even do it right now so why would the FDA bend their view to allow it after the shortage?

Doesn’t really know where everyone is getting all their supply from. Assumes that most of it is coming from China or India which can have very questionable conditions and quality that will inevitably go into the bodies of American patients.

This further reinforces, in their opinion, why the FDA should want to take the drug off shortage to prevent more potentially harmful knock-offs from getting to patients.

Public health is number one. Whispers from within the FDA when they had conversations with them back in December are that they are very aware of the situation and they aren’t the biggest fans of what’s going on.

When the topic was brought up, the staff literally chuckled. If that’s a hint of the sentiment within the agency.

They [FDA] don’t like that the abuse is persisting under the shortage and understand that taking action will eventually come.

The expert noted that in regards to the OFA suit against the FDA, the FDA wouldn’t have removed tirzepatide from the shortage list if the data did not prove that it could be taken off.

They were originally surprised when the FDA backtracked a bit into agreeing to take a second look at the data to potentially appease the OFA. They noted that the FDA does not do that very often which was why it was surprising when it did happen and then was surprising again when they delayed it a month.

Seems that the goal is indeed to remove these drugs from shortage to meet the original mandate of being in the best interests of the broader public and protecting the health of the public via FDA-approved drugs.

There’s no question about that and they are pessimistic that the FDA will let compounders try and skirt or push the rules that will allow them to continue in a meaningful way.

What was interesting was that they weren’t so sure that RFK would get confirmed and if he was, the outcome is still very much a wild card.

They were vocal about Martin Makary and despite him having a conflict of interest from being the CMO of a telehealth company, that he would be quick to remove the drug from shortage.

The conflict would seem at first that he’d be in favor of keeping compounding around but the expert made the argument that to nip any misconception about a conflict of interest arising from his past he’d take on the biggest conflict there is, which is the shortage.

Highlighted that Makary is a trained doctor and is (and should be) very knowledgeable about how the FDA treats drug approvals and why that process is in place to begin with. To avoid confusion, he believes it would be in his best interest to end the shortage if the data supports it.

The expert believes that the shortage will be coming off within the next few months without a doubt though there are a few things that could be affecting that decision at the moment.

So much of the decision-making level at the FDA has left that there are plenty of gaps that will need to be filled under the new administration. The interim people aren’t as knowledgeable or stern enough to take a stand for pharma at the moment (in their opinion) though never say never.

They related to the current situation as “needing to have an adult in the room to make a decision.”

FDA doesn’t want another OFA tirzepatide suit with semaglutide so they might be waiting to see how the trial ends up and if they somehow lose, they’ll have to file an appeal.

Given that LLY has entered into that lawsuit, it’s getting heated and noted that unlike smaller pharmacies that would give up once a letter comes in (mentioned previously), the OFA is well-funded and ready to fight (as shown).

Again references that these compounders are making money hand over fist and that’s why they’ll try and drag out this suit for as long as possible even though they believe it won’t take that long.

Ranks just need to be filled out and whether that’s on its own or through Makary when/if he gets there will be a big question.

Typically, all signs point to the FDA being able to take the drug off shortage (lack of supply constraints, above and beyond the typical time the drug has been marked available before being removed, and a confirmed second look that taking tirzepatide off was the right call) but no one wants to hit the button at the moment.

It’s interesting because as we spoke, it pretty much seemed like everything was there but because this administration is so different that no one really knows how to handle it.

Stands by their comments that it will end soon but will probably be waiting for that “adult” to show up.

As always, we appreciate your support of our work. If you have any questions, please make sure to message or comment below. If you think others would benefit from the research/commentary we release, we would greatly appreciate you sharing.

Until next time,

Paul Cerro | Cedar Grove Capital

Personal Twitter: @paulcerro

Fund Twitter: @cedargrovecm