The Compounding Controversy: When Innovation Meets Regulation in Modern Healthcare

The pharmacy down the street from your office might look unremarkable, but until recently, it could have been producing medications that sparked one of the most contentious regulatory battles in modern healthcare. At the center of this controversy sits an unlikely protagonist: compounding pharmacies, small-scale operations that have quietly served patients for decades, suddenly thrust into the spotlight by the explosive demand for weight loss medications.

The story begins with a shortage. In 2022, tirzepatide injection went into shortage due to increased demand, followed by similar shortages of semaglutide products. These medications, known collectively as GLP-1 receptor agonists and including popular brands like Ozempic and Wegovy, became so sought-after that manufacturers couldn’t keep up. In the Netherlands, searches like Ozempic kopen, reached unprecedented highs. Enter the compounding pharmacies: facilities legally permitted to create customized versions of medications when commercial products are unavailable.

What happened next reveals fundamental tensions in how we balance patient access, pharmaceutical regulation, and market economics.

The Compounding Exception

To understand the controversy, you need to understand compounding itself. Compounding is the process of combining, mixing, or altering ingredients in approved drugs to make medications for individual patients. Think of a pediatric patient who needs a liquid version of a medication only available in tablets, or someone allergic to a specific inactive ingredient who needs an alternative formulation.

The practice exists in two regulatory frameworks. Section 503A of the Federal Food, Drug, and Cosmetic Act permits traditional pharmacies to compound medications for individual patients with specific medical needs. Section 503B covers “outsourcing facilities” that can produce larger batches of sterile medications. Both operate under a crucial restriction: they generally cannot produce drugs that are “essentially copies” of FDA-approved medications, except during shortages.

The GLP-1 shortage changed everything. Suddenly, these regulatory exceptions allowed compounding pharmacies to produce weight loss medications at scale. Both 503A compounding pharmacies and 503B outsourcing facilities were permitted to produce compounded GLP-1 products in large quantities to meet market demand. And the market responded enthusiastically. Compounded versions cost a fraction of their branded counterparts, making them accessible to patients whose insurance wouldn’t cover the branded drugs or who couldn’t afford the $900-plus monthly price tag.

When Shortages End, Problems Begin

The FDA’s declaration that shortages had ended should have been good news. The FDA determined that the shortages were resolved: tirzepatide in December 2024 and semaglutide in February 2025. But this announcement triggered an immediate crisis for the thousands of patients who had come to rely on more affordable compounded versions.

State-licensed pharmacies and outsourcing facilities were required to cease production of compounded GLP-1 products by April 22, 2025, and May 22, 2025, respectively. The grace periods were meant to allow for orderly transitions, but they sparked fierce resistance.

The Outsourcing Facilities Association filed lawsuits challenging the FDA’s determination, arguing that manufacturers’ claims about resolved supply shouldn’t be taken at face value. In March, a federal judge denied the preliminary injunction request to prevent FDA from acting against companies for making compounded versions, but the legal battles highlighted a deeper question: who decides when a drug shortage truly ends?

The Safety Equation

The FDA’s position rests partly on safety concerns, and the data is sobering. As of February 28, 2025, FDA received more than 455 reports of adverse events with compounded semaglutide and more than 320 reports of adverse events with compounded tirzepatide. Some of these stemmed from dosing errors, as compounded versions typically came in vials requiring patients to measure doses themselves, rather than the pre-measured auto-injectors used for approved versions.

There are hundreds of bulk pharmaceutical manufacturers registered with FDA to manufacture the active pharmaceutical ingredients in GLP-1s, but FDA does not confirm that ingredients produced by bulk manufacturers are identical to those used in branded versions because they are never reviewed by the Agency. This regulatory blind spot creates genuine uncertainty about product consistency and quality.

The counterfeit problem compounded concerns. In connection with the supply shortage, many counterfeits became available online without a prescription, with reports that nearly half of online pharmacies offering GLP-1 medications may be operating illegally. The line between legitimate compounding, questionable compounding, and outright fraud became increasingly blurred.

The Innovation Workaround

Just when the story seemed settled, telehealth companies found a loophole. Companies began offering “personalized” GLP-1 drugs, which include different dosages, added ingredients, or changed administration methods to meet patients’ specific needs. Under FDA regulations, these modifications theoretically qualified as legitimate customization rather than mere copying.

Hims & Hers, Noom, and other telehealth giants launched “microdosing” programs, offering lower doses than FDA-approved versions. They argued this personalization addressed real medical needs: reducing side effects, improving tolerance, or treating metabolic health concerns beyond just weight loss. Hims touted the incremental compounded doses as medically useful beyond weight loss for other metabolic health risks like sleep apnea and high blood pressure.

But pharmaceutical manufacturers weren’t buying it. An Eli Lilly spokesperson stated that “anyone continuing to sell mass compounded tirzepatide, including by referring to it as ‘personalized,’ ‘tailored’ or something similar, is breaking the law and putting patients at risk.” The companies argue these programs violate the spirit of compounding regulations, which were designed for truly individualized medical needs, not mass-market alternatives.

The Broader Implications

This controversy extends far beyond weight loss medications. It reveals tensions that will only intensify as more breakthrough drugs face capacity constraints and price barriers.

For 503A pharmacy compounders, compounding is only permissible when the comparable marketed drug is not commercially available, there is a clinical difference justifying the compound, or other specific regulatory exceptions apply. But “commercially available” doesn’t mean “affordable” or “accessible.” A drug might be technically available but priced out of reach for most patients. Should that count as truly available?

The compounding pathway was never designed to serve as a parallel pharmaceutical manufacturing system. The regulatory framework emerged from the 2013 Drug Quality and Security Act, passed after the New England Compounding Center was linked to a nationwide outbreak of fungal meningitis that caused over 60 deaths. That tragedy led to stricter oversight, but also recognized compounding’s legitimate role in personalized medicine.

State regulators are now scrambling to provide clarity. In July 2025, the Ohio Board of Pharmacy published FAQs noting that adding commercially available drugs like B12 is insufficient to justify compounding a GLP-1 medication. Other states have issued similar guidance, signaling that the enforcement net is tightening.

What Comes Next

The GLP-1 compounding saga offers lessons for how healthcare systems adapt (or fail to adapt) to pharmaceutical innovation. When blockbuster drugs create massive demand that outstrips supply or affordability, regulatory gray areas become attractive. Compounding pharmacies, telehealth companies, and patients all found solutions in those gray areas, even if those solutions bent or broke the regulatory framework’s intent.

Stopping GLP-1 therapy often leads to weight regain, so providers should discuss maintenance strategies with patients early. This medical reality adds urgency to the access question. Patients who started on compounded versions now face difficult choices about continuing treatment at significantly higher costs or discontinuing and potentially reversing their progress.

The controversy also highlights how pharmaceutical pricing creates pressure on regulatory structures. When brand-name medications cost over $1,000 monthly and compounded versions cost $200-400, the price differential becomes impossible to ignore. Market forces pushed patients and providers toward compounding, regardless of the regulatory propriety.

As enforcement intensifies and compounding options narrow, the healthcare system will need to confront uncomfortable questions: How do we balance innovation incentives with patient access? When does regulatory protection become a barrier? And who ultimately decides what treatments patients can access?

For now, the compounding controversy remains unresolved: caught between legitimate safety concerns, genuine access needs, creative regulatory interpretations, and billion-dollar business interests. It’s a microcosm of modern healthcare’s fundamental tensions, playing out one prescription at a time.