Does GLP-1 Compounding Foretell Patent Enforcement Outside the Hatch-Waxman Framework?

Recent developments involving compounded GLP-1 products have renewed questions about compounded drugs as a potential quasi-generic competitor. This LawFlash examines the regulatory limits on drug compounding and highlights key differences between traditional brand-generic Hatch-Waxman disputes and potential enforcement actions against compounders, including differences in timing, remedies, and evidentiary development.

Hims & Hers Health Inc. recently announced plans to offer a compounded semaglutide pill, [1] despite the lack of any US Food and Drug Administration (FDA)-declared “shortage” or having previously submitted an Abbreviated New Drug Application (ANDA), although it reversed course in the wake of FDA pressure. [2] These events raise broader questions about the future role compounders could have as quasi-generic pharmaceutical competitors. As discussed below, patent enforcement against compounders would materially differ from traditional Hatch-Waxman litigation in ways that, on balance, seem disadvantageous to branded pharmaceutical companies.

COMPOUNDING PHARMACIES: A LIMITED EXEMPTION TO NDA AND ANDA PATHWAYS

Typically, those seeking to market a drug product must seek FDA approval through the New Drug Application (NDA) or ANDA pathways described in Section 505 of the Food, Drug, and Cosmetic Act. Under certain conditions, however, Section 503A exempts drug products compounded by licensed pharmacists or licensed physicians from complying with Section 505’s requirements for NDAs and ANDAs. [3]

One of those conditions is that compounded drug products may not be “essentially copies of commercially available drug products.” [4] As FDA’s guidance explains, sponsors may “be less likely to seek approval of an ANDA for a generic drug if compounders were permitted to compound drugs that are essentially copies of commercially available drugs without going through the ANDA process.” [5] Compounders cannot “mak[e] relatively small changes to a compounded drug product and then offer[] the drug to the general public without regard to whether a prescribing practitioner has determined that the change produces for the patient a significant difference.” [6] But FDA’s Guidance permits compounding if “a prescriber determines that there is a change, made for an identified individual patient, which produces, for that patient, a significant difference from the commercially available drug product.” [7]

The condition has an exception. FDA does not consider a drug product “commercially available” if it “appears on the FDA drug shortage list in effect.” [8] Specifically, the drug must be in “currently in shortage” status (and not in “resolved” status) in FDA’s drug shortage database. [9]

ANDA V. COMPOUNDING: DIFFERENCES IN PRIVATE PATENT ENFORCEMENT

Patent litigation against a compounder would differ from traditional Hatch-Waxman litigation in several important ways.

Focus on Actual Damages

Because Hatch-Waxman litigation typically resolves before the 30-month stay expires and ANDA applicants are often reticent to launch at risk, litigation typically centers on issues of patent infringement and invalidity, but not damages. By contrast, where a compounded product is already being sold, infringement—if proven—will almost certainly involve actual, measurable sales during the infringement period. This distinction may shift the litigation focus to damages, including lost profits, reasonable royalties, and potential enhanced damages for willful infringement. The availability of actual damages can materially alter settlement dynamics, as the accused compounder faces retrospective monetary exposure rather than the mere risk of delayed or foreclosed future entry.

Different Factfinders

Hatch-Waxman trials are bench trials before a district court judge, whereas the Seventh Amendment jury right applies in ordinary patent infringement actions that could be brought against an accused compounder. Suffice it to say, trying a complicated pharmaceutical case to a lay jury is a substantially different endeavor from trying such a case to an experienced district court judge, particularly in jurisdictions where the average juror lacks significant post-secondary education.

Infringement Suits Would Be Delayed

To facilitate early resolution of patent disputes, the Hatch-Waxman framework requires ANDA applicants to file certifications regarding any patents listed in the Orange Book. [10] If an ANDA applicant believes its proposed generic product would not infringe a listed patent and/or that a listed patent is invalid, it can include a paragraph IV certification. [11] Because the mere act of submitting an ANDA for a would-be infringing product itself constitutes infringement, [12] branded companies can immediately sue to resolve patent disputes—even if the ANDA applicant is years away from being prepared to launch an infringing drug product.

Without an NDA or ANDA, the compounder would not have to make certifications for Orange Book patents, and Section 271(e)(2)’s “artificial” act of infringement would not apply. A branded company would instead have to wait for the launch of the compounded drug to be “of sufficient immediacy and reality” to file suit seeking a declaratory judgment of direct and/or indirect infringement. [13] Depending on the circumstances, that could delay a branded company’s ability to file an infringement suit by months or years.

No Automatic Stay

In Hatch-Waxman litigation, final approval of the proposed generic product is automatically stayed (typically for 30 months) if the branded company sues within 45 days of receiving notice of the ANDA applicant’s paragraph IV certification.[14] This would not apply in a suit against a compounder. To prevent the launch of the compounded drug product, a branded company would instead need to prove entitlement to a temporary restraining order or preliminary injunction (i.e., (1) the branded company is likely to succeed on the merits, (2) that it is likely to suffer irreparable harm in the absence of preliminary relief, (3) that the balance of equities tips in its favor, and (4) that an injunction is in the public interest). [15]

Different Types of Infringement Evidence

Because FDA regulations require ANDA applicants to include data demonstrating that the proposed generic has the same active ingredient and is bioequivalent to the branded company’s approved drug, [16] defendants in Hatch-Waxman litigation must often concede a high degree of similarity between the branded product and the generic product accused of infringement. ANDA applicants also copy all or a portion of the branded product label that provides prescribing instructions for the generic product. [17]These simplify infringement proofs for branded companies, which can rely upon (1) clinical trial results using the branded product as evidence regarding how the proposed generic product would perform in patients and (2) the proposed label as evidence of both the ANDA applicant’s inducing acts (e.g., instructing how to engage in an infringing use) and its specific intent to induce infringement. [18]

Branded companies likely would need to develop infringement evidence from other sources in compounded drug litigation. FDA regulations do not require compounders to issue a label, much less one that copies the branded product. And absent an FDA-declared shortage, a compounded drug product may not be “essentially a copy” of a commercially available drug product. [19] As discussed, “relatively small changes to a compounded drug product” are insufficient without “a prescribing practitioner ha[ving] determined that the change produces for the patient a significant difference.” [20]

CONCLUSION

The recent events are a pressing reminder that branded companies must be prepared to protect their intellectual property and commercial investments outside the traditional Hatch-Waxman context. Although the FDA issued stern public enforcement threats here—with high-profile GLP-1 products and a compounded drug product it views as “mass-marketed”—branded companies cannot count on public enforcement. Even small amounts of compounding can prove strategically problematic, such as in orphan drug indications with limited patients.

Companies can ensure they are not caught flat-footed through thoughtful, proactive patent prosecution. Patent claims covering the active pharmaceutical ingredient and various formulations would, in many cases, allow for direct infringement allegations against a compounder. In those instances, the absence of a proposed label could prove less of a practical disadvantage. Additionally, because compounded drug products must not be “essentially a copy” of the branded product, proactively seeking patent coverage over alternative formulations may be an effective deterrent to compounders, even if those claims would be irrelevant to ANDA applicants.

Branded companies should also consider whether other causes of action could be additionally asserted. Branded companies have, in the past, asserted Lanham Act and state unfair competition claims against compounders.