Drug Shortage Arbitrage

The mechanism is a narrow safety valve used at scale. United States law bars compounders from producing what is essentially a copy of a commercially available drug, but a product listed as in shortage is not treated as commercially available, so the prohibition lifts while the listing stands. The provision exists so patients are not left without therapy during a supply failure. Nothing in it evaluates the copy, and nothing in it survives withdrawal of the listing.

The incretin shortages made this visible. Semaglutide and tirzepatide were listed as in shortage from 2022, and an entire compounding and telehealth sector organised around the exemption. The FDA declared the tirzepatide shortage resolved in October 2024 and the semaglutide shortage in February 2025, each followed by wind-down dates after which compounders had to stop. The price gradient was large: branded list prices above a thousand dollars a month against compounded offerings marketed at a fraction of that.

Reading the exemption correctly matters because it is a supply determination and never an equivalence finding. Permission during a shortage says nothing about bioequivalence, stability or excipients, and confers no grandfathering once the shortage ends. Any arrangement resting on it has a scheduled expiry set by an agency's assessment of the originator's manufacturing capacity.

Both common failures mistake the list for a verdict. Patients read the volume of compounded product sold during a shortage as validation, when volume followed price and the exemption; and they read delisting as a safety action, when it states only that supply recovered. The other move to watch is reframing: as the exemption closes, the same preparation is relabelled a personalised formulation or a combination with an added ingredient, which attempts to leave the copy rule rather than satisfy it.