Chinese pharmaceutical companies that previously supplied ingredients for billions of makeshift weight-loss drug doses in the United States are now pivoting to develop generic versions of blockbuster obesity medications as regulatory restrictions curtail the compounding market.
At least eight Chinese companies, including publicly traded Jiangsu Sinopep-Allsino Biopharmaceutical and Hybio Pharmaceutical, helped flood the U.S. market with raw semaglutide and tirzepatide—the active ingredients in Novo Nordisk's Wegovy and Eli Lilly's Zepbound, respectively. This massive supply operation supported the explosive growth of compounded weight-loss medications over the past two years.
Unprecedented Market Opportunity
The compounding boom emerged from an extraordinary supply shortage situation. Robert Califf, who served two stints leading the U.S. Food and Drug Administration, noted that "never before had a new drug become so wildly popular that the manufacturer simply couldn't keep up."
The shortage created an unprecedented opportunity for compounding pharmacies, enhanced by telehealth firms that flourished during the COVID pandemic, to supply cheap copies to a massive market seeking promised weight loss benefits. The branded drugs have demonstrated the ability to help patients lose up to 20% of their body weight.
Scale of Chinese Supply Operations
FDA shipping data reveals the enormous scale of Chinese ingredient supply operations. In 2024 alone, the eight Chinese companies shipped enough raw material into the U.S. to produce more than 1 billion starter doses of the blockbuster medicines.
Novo Nordisk's estimates are even higher, stating that Chinese companies shipped enough semaglutide into the U.S. in just over six months to manufacture 1.5 billion starter doses of Wegovy, according to a letter submitted to the U.S. Department of Commerce.
The economics proved highly attractive for Chinese suppliers. A month's supply of semaglutide powder costs just 7 cents to produce, according to a 2024 JAMA report. Chinese ingredient manufacturers could sell this material for up to seven times that amount to companies producing copies. U.S. compounding pharmacies then sold the injectable drugs for an average of $230 per month, representing more than half off the branded drug prices.
Regulatory Crackdown and Market Shift
The regulatory landscape shifted dramatically as authorities moved to restrict compounding operations. U.S. law now limits compounding pharmacies to producing personalized doses for patients who specifically need them, or formulations not offered by branded medicines.
The impact on Chinese shipments was swift and severe. By the second quarter of this year, shipments had plunged 90% from a year earlier for semaglutide and by 34% for tirzepatide used to make Zepbound and Mounjaro copies.
Strategic Pivot to Generic Development
Sources indicate that Hybio and Sinopep are actively working to launch their own generic semaglutides. Additionally, Nanjing Hanxin Pharmaceutical and Fujian Genohope Biotech, two companies that previously supplied compounders, may also pursue generic launches.
For at least one Chinese manufacturer, supplying ingredients for compounded weight-loss drugs had been its biggest business. The company is now targeting markets where Novo's main semaglutide patent expires next year, such as Canada and Brazil, to sell ingredients to generic drugmakers.
At least five other Chinese companies known to supply compounding pharmacies are similarly refocusing their efforts on supplying semaglutide for generic production.
Market Impact and Future Outlook
The transition has taken a significant toll on Novo Nordisk. The company missed quarterly sales targets, and shares of the Danish drugmaker have been halved this year, contributing to the CEO's ouster in May.
Meanwhile, records show that Sinopep, Hybio, and other companies have begun shipping more liraglutide into the U.S.—the main ingredient of Novo's older drugs Victoza and Saxenda, which produce more modest weight loss. Generic versions of liraglutide became available in the U.S. in 2024 and are now featured by online telehealth sites that previously promoted semaglutide.
However, the switch to generic production is unlikely to generate similar explosive growth. Manufacturing semaglutide to its final, injectable form is complex, and companies seeking to sell generics may also negotiate deals with branded companies that delay their market entry.
Califf expects companies to test the legal restrictions on compounding sales, with the FDA setting enforcement tone through industry guidance. The FDA has stated it remains committed to using all available tools to oversee the safety and quality of regulated products.
Despite ongoing challenges, Califf characterized the massive-scale compounding of weight-loss drugs as likely a "once-in-a-decade issue," suggesting the unprecedented nature of this market disruption may not be easily replicated.
