Semaglutide — higher identified by its model names Ozempic (for diabetes) and Wegovy (for weight reduction) — obtained FDA approval in 2017. Since then, U.S. prescriptions have surged from roughly 6.1 billion in 2018 to over 6.7 billion in 2022, because of its medical effectiveness and its weight reduction aspect impact. However as demand continues to outpace provide and prices stay excessive, many sufferers and suppliers are turning to compounded GLP‑1 (glucagon-like peptide-1) options. The catch? These variations aren’t FDA-approved. Which means no formal assessment for security, efficacy, or constant dosing — a spot that introduces actual threat for sufferers and the businesses behind them.
A authorized and reputational minefield for startups
For startups trying to transfer quick and fill the GLP‑1 provide hole, compounding can appear to be a sensible workaround. However stepping outdoors the FDA approval course of comes with critical penalties. With out regulatory oversight, there’s no unbiased verify on what’s being produced or the way it’s made. That opens the door to inconsistent dosages, contamination, or ineffective formulations and places the total authorized and reputational burden on the startup.
- Product legal responsibility: If sufferers expertise uncomfortable side effects, incorrect dosages, or contamination, the startup is accountable, with no regulatory buffer to lean on.
- Regulatory motion: The FDA is actively watching this area and has already issued warning letters and cease-and-desist orders to firms advertising and marketing unapproved GLP‑1 compounds.
- State scrutiny: Medical and pharmacy boards in a number of states are ramping up oversight, rising the probabilities of license opinions, fines, or authorized challenges.
Extreme reputational injury
One antagonistic occasion is all it takes to lose public belief. A contaminated batch or dosing error can shortly spiral into media backlash, social outrage, and investor hesitation. For early-stage biotech firms, these moments aren’t simply unhealthy press — they will threaten all the enterprise. Startups on this area face distinctive vulnerabilities, together with management publicity to D&O claims. With out the protect of FDA approval, even probably the most promising model can discover itself on shaky floor.
FDA non‑approval: understanding legal responsibility publicity
When startups market compounded semaglutide with out FDA approval, they’re primarily giving up the regulatory security web that comes with official validation. That selection carries weight. As of April 30, 2025, the FDA has logged over 520 antagonistic occasion studies tied to compounded semaglutide and one other 480 involving compounded tirzepatide. Most of those stem from the standard suspects: dosage errors, contamination, or labeling points — issues that correct oversight is designed to forestall.
The legal responsibility at stake
- Product legal responsibility: Startups could possibly be held accountable for defects in design, manufacturing points, or failing to supply correct warnings — even when they didn’t intend hurt.
- Skilled malpractice: Clinics prescribing these compounded medicine threat authorized motion if sufferers undergo hurt from incorrect dosages or high quality points.
- Administrators & officers (D&O): Management groups aren’t immune. Founders and board members may face private legal responsibility for choices tied to the manufacturing or advertising and marketing of unapproved medicine.
- Enterprise interruption & remembers: If the FDA steps in with a recall or halts operations, the monetary and operational toll could be vital.
- The “unknown unknowns:” With out medical trials, there’s no dependable knowledge on long-term results. This makes it a lot more durable to foretell threat or defend towards it.
How insurers are responding to the GLP-1 increase
Image this: a startup jumps into the GLP‑1 increase, providing compounded semaglutide for $350 a month. It’s reasonably priced, agile, and solutions an actual affected person want. However as soon as the FDA removes the official scarcity designation, issues shift. A cease-and-desist letter arrives, and all of a sudden their insurance coverage underwriters are pulling again — elevating premiums, demanding stricter documentation, and carving out exclusions for something tied to compounded meds.
This state of affairs displays what’s taking place throughout the board. Because the dangers round unapproved GLP‑1s develop, insurers are tightening their underwriting playbook. Many legal responsibility {and professional} insurance policies now exclude protection for compounded or non-FDA-approved merchandise, leaving startups uncovered proper once they want safety probably the most.
Underwriting is getting more durable
Insurers are listening to the spike in claims — malpractice payouts for compounding pharmacies now common almost $438,000, far greater than different pharmacy sorts. In response, underwriters are digging deeper into operational particulars, elevating premiums, and in some instances, refusing protection altogether for firms tied to unapproved GLP‑1s.
Challenges in securing protection
Many conventional product legal responsibility or skilled legal responsibility insurance policies now carry exclusions for non-FDA-approved merchandise, and compounded semaglutide usually falls squarely into that hole. Moreover, medical doctors prescribing compounded GLP‑1s might even see their skilled legal responsibility protection revoked or restricted, and clinics concerned face steep licensing and board motion dangers.
A wiser path ahead
For startups, protection isn’t out of attain — nevertheless it takes work to get there:
- Construct robust high quality management protocols, together with third-party lab testing and clear documentation, even with out an FDA mandate.
- Work with authorized and regulatory specialists to remain on prime of compounding guidelines and state board expectations.
- Present underwriters you’re critical by following greatest practices in manufacturing, security, and compliance; you enhance your probabilities of securing significant protection.
Backside line: insurers aren’t sitting on the sidelines anymore. They’re redrawing the chance map. Startups within the GLP‑1 compounding area must suppose larger than simply the product — they should think about threat technique and insurance coverage from day one.
Defending innovation with technique and construction
The demand for GLP‑1 drugs is altering the sport — and altering it quick. With the worldwide marketplace for anti-obesity medicine projected to hit $95 billion by 2030, it’s no shock that compounded semaglutide is gaining traction as a less expensive, extra accessible choice. However for all its attraction, this route comes with actual dangers: regulatory uncertainty, authorized publicity, and main insurance coverage hurdles.
For biotech startups, long-term success will rely on greater than pace or market alternative. It’s going to require a deliberate funding in high quality, compliance, and threat administration from the beginning. Which means constructing smarter methods, working carefully with authorized and insurance coverage companions, and setting a better bar — whether or not or not the FDA requires it.
Photograph: erhui1979, Getty Photos
Justin Kozak is the Govt VP at Founder Defend, a tech-enabled business insurance coverage brokerage. He leads the Life Sciences observe, having 10+ years of expertise in threat administration with Hub Worldwide, PBC, and now Founder Defend. He launched his profession with a BS in Historical past from the College of Delaware, the place his eager understanding of the previous informs his instinct within the insurance coverage world. It’s no shock that Justin’s specialty is customizing insurance coverage applications for rising markets with little historic knowledge. He enjoys spending time along with his younger household and may’t get sufficient of the Phillies.
This submit seems by means of the MedCity Influencers program. Anybody can publish their perspective on enterprise and innovation in healthcare on MedCity Information by means of MedCity Influencers. Click on right here to learn how.
