NEW YORK CITY, New York: Chinese suppliers that once fueled America's gray market for cut-price weight-loss drugs are pivoting toward making legitimate generics, as U.S. regulators crack down on compounding pharmacies and shipments of raw ingredients plunge.

For the past two years, companies in China shipped enough semaglutide and tirzepatide, the key ingredients in Novo Nordisk's Wegovy and Eli Lilly's Zepbound, to produce more than a billion makeshift doses, according to FDA data. The flood of ingredients allowed U.S. telehealth firms and compounding pharmacies to offer cheaper versions of the blockbuster drugs when manufacturers couldn't keep up with demand.

"It was unprecedented," said Robert Califf, who has twice led the U.S. Food and Drug Administration. "Never before had a drug become so popular that the manufacturer simply couldn't keep up."

But that window is closing. U.S. law now limits compounding pharmacies to personalized doses or formulations not otherwise available, and the FDA has pressed for an end to mass production. By mid-2025, shipments of semaglutide from Chinese suppliers had dropped 90 percent from a year earlier, while tirzepatide shipments fell 34 percent.

At least eight Chinese companies, including Jiangsu Sinopep-Allsino Biopharmaceutical and Hybio Pharmaceutical, were among the biggest suppliers. Both are now working to launch their own generics, sources told Reuters, as patents expire in markets such as Canada and Brazil. Other firms that once sold bulk ingredients to compounders may follow.

For many manufacturers, compounding had been a lucrative sideline. A month's supply of semaglutide powder can cost just seven cents to produce but is sold to U.S. buyers at up to seven times that amount, according to sales figures and a 2024 JAMA report. Compounding pharmacies then sold injections for as little as US$230 a month — less than half the branded price.

Novo has paid a steep price. It missed quarterly sales targets, its shares halved this year, and CEO Lars Fruergaard Jørgensen was ousted in May. Now, Sinopep and Hybio are shipping more liraglutide, an older Novo drug with modest weight-loss effects, while online telehealth sites shift to marketing it.

Califf cautioned that large-scale compounding of such drugs was likely a "once-in-a-decade issue" but said companies may still test the limits of U.S. law. "The FDA will set the tone for enforcement," he said.