Health Law Advisor

Drug manufacturer Eli Lilly has filed suit against four companies involved in making, prescribing, and/or selling compounded versions of its weight loss and diabetes drugs ZEPBOUND® and MOUNJARO®. Lilly’s drugs, injected under the skin, are the only FDA-approved medicines containing tirzepatide in the United States.

Two complaints, filed April 23 in the U.S. District Court for the Northern District of California, contend that the founders and chief executive officers of Mochi Health Corp. (“Mochi Health”) and Fella Health exerted control over multiple affiliated entities, including medical groups, in violation of California law prohibiting unlicensed individuals and corporations from practicing medicine (generally known as the “Corporate Practice of Medicine” or “CPOM” laws). The plaintiffs allege unfair competition and false advertising under state law and the Lanham Act; and assert state CPOM claims through supplemental and/or diversity jurisdiction.

This latest development on the drug compounding front comes at a time when states are keeping a sharp eye on private investment in the health care space—increasingly proposing legislation to strengthen CPOM laws and also increase oversight on corporate transactions involving health care entities. The majority of U.S. states have some form of CPOM restriction, and some, including Oregon, Texas, and Washington, are considering taking steps advocates say will strengthen theirs—with proposals, for example, to prevent private equity groups or hedge funds from interfering with health care decisions and limiting or eliminating common forms of affiliation with professional medical practices.

While tremendous strides continue to be made in the growth and adoption of telehealth services, significant legal obstacles remain.  Among these obstacles are state drug prescribing laws.  In many states, physicians cannot lawfully prescribe drugs during a telehealth encounter, except in very limited circumstances.  For example, California requires that physicians perform a “physical exam” before prescribing drugs, and explicitly outlaws prescribing on “the internet” without a prior examination.  These restrictions vary from state to state, but many share certain ...