Eli Lilly v. Empower Clinic Services — Court Dismisses Lanham Act Claim Against Compounding Pharmacy but Allows State Consumer Protection Claims to Proceed

Background

Eli Lilly, the manufacturer of the blockbuster GLP-1 drugs Mounjaro and Zepbound, sued Empower Pharmacy — one of the largest compounding pharmacies in the country — alleging that Empower was illegally manufacturing and selling unapproved versions of tirzepatide, the active ingredient in both drugs. Lilly accused Empower of marketing its compounded tirzepatide products as safe, effective, and “personalized,” when in reality they had never been clinically tested and were produced in standardized doses at massive scale (reportedly 70,000 doses per week).

Lilly brought three categories of claims: a federal Lanham Act false advertising claim under 15 U.S.C. § 1125(a)(1)(B), state statutory unfair competition and deceptive trade practices claims under the laws of nine states, and a Texas common law unfair competition claim. Empower moved to dismiss all claims under Rule 12(b)(6), arguing that Lilly lacked standing under the Lanham Act, that the state claims were preempted by federal law, and that Texas common law did not support a private action based on drug safety statutes.

The Court’s Holding

Judge Sim Lake granted Empower’s motion in part and denied it in part, producing a mixed result that keeps the bulk of the litigation alive while eliminating Lilly’s federal claim.

Lanham Act claim dismissed. The court applied the Supreme Court’s two-part Lexmark International v. Static Control Components framework and found that while Lilly satisfied the “zone of interests” prong — its allegations of lost sales and reputational harm fell within the Lanham Act’s protective scope — it failed the proximate causation prong. Lilly alleged that “some sales” of Empower’s products “would have been made by Lilly,” but the court found this fell far short of the near one-to-one causal link Lexmark requires. On reputational injury, Lilly’s theory that consumers might blame Lilly for adverse events caused by Empower’s products was too speculative. The court noted that a parallel case — Eli Lilly v. Willow Health Services (C.D. Cal. Feb. 3, 2026) — similarly dismissed Lilly’s Lanham Act claim on the same grounds.

State consumer protection claims survive. Empower argued that Lilly’s state-law claims were preempted by federal law under the Supreme Court’s Buckman doctrine, which bars state claims that exist solely because of federal regulatory requirements. The court disagreed, finding that Lilly’s claims rested on independent state-law duties — namely, state prohibitions on selling unapproved new drugs — not on enforcement of Section 503A of the Federal Food, Drug, and Cosmetic Act. The court followed the Fifth Circuit’s recent decision in Zyla Life Sciences v. Wells Pharma (5th Cir. 2025). State-law claims under the laws of Alaska, Colorado, Connecticut, Hawaii, North Carolina, South Carolina, Tennessee, and Washington all survived.

Texas common law claim dismissed. The court held that Texas courts do not recognize a private tort action based on violations of the Texas Food, Drug, and Cosmetic Act, following its own earlier decision in Eli Lilly v. Revive RX (S.D. Tex. 2025).

Key Takeaways

• Pharmaceutical companies suing compounding pharmacies under the Lanham Act face a significant proximate causation hurdle — courts are requiring a near one-to-one link between the defendant’s advertising and the plaintiff’s lost sales or reputational harm, which is difficult to establish when the products are not direct substitutes in the traditional sense.
• State consumer protection statutes remain a viable path for challenging allegedly unlawful compounding practices, even after Lanham Act claims are dismissed, because they rest on independent state-law duties rather than federal regulatory enforcement.
• The ruling continues a judicial pattern of skepticism toward Lilly’s causation theories in the tirzepatide compounding litigation, joining Willow Health Services (C.D. Cal.) and Revive RX (S.D. Tex.) in a growing body of case law that compounding pharmacy defendants can cite.
• Empower’s argument that compounding pharmacy regulations create a blanket exemption from state consumer protection laws was rejected — courts will assess the specific nature of the compounding operation (here, mass-scale production) rather than granting categorical immunity.

Why It Matters

This ruling is significant for the rapidly expanding GLP-1 litigation landscape. As Eli Lilly and Novo Nordisk pursue legal strategies to curb the compounding pharmacy industry’s sale of tirzepatide and semaglutide products, this decision signals that their preferred federal theory — Lanham Act false advertising — may not survive the pleading stage. The proximate causation requirement forces brand-name manufacturers to draw a specific, non-speculative line from a compounder’s marketing to the manufacturer’s lost sales, a burden that courts have repeatedly found unsatisfied.

At the same time, the survival of eight state consumer protection claims means this case — and the broader GLP-1 compounding fight — is far from over. Practitioners, compounding pharmacies, and pharmaceutical companies should pay close attention to how state-law theories develop as the primary vehicle for these disputes.