May 14 (Reuters) - Eli Lilly ( LLY ) has entered into a

settlement deal with a medi spa that had sold counterfeit

versions of its popular diabetes drug Mounjaro and weight loss

treatment Zepbound, the drugmaker said on Tuesday.

As part of the deal, Totality Medispa will make a monetary

payment to Lilly and will no longer use Lilly branding in the

promotion of any of its products.

The medi spa is expected to take several corrective actions

including obtaining and distributing compounded tirzepatide

products that are produced in compliance with U.S. federal law.

WHY IT'S IMPORTANT

Lilly and Novo Nordisk have sued several medi spas

and compounding pharmacies to stop them from selling products

claiming to contain the active ingredients (semaglutide and

tirzepatide) used in the drugmakers' popular weight-loss drugs.

CONTEXT

Novo last year sued one compounding pharmacy and refiled a

lawsuit against another after finding their products claiming to

contain the active ingredient for its in-demand weight-loss drug

Wegovy were impure, some by as much as 33%.

Lilly said in March it had found bacteria and high levels of

impurities in products claiming to be compounded versions of

tirzepatide and has sued several medical spas, weight-loss

clinics and compounding pharmacies to stop them from selling

products purporting to contain tirzepatide, the active

ingredient in its weight loss and diabetes drugs.

Compounded drugs are custom-made medicines based on the same

ingredients as branded versions, and often cheaper, but also

subject to less regulatory scrutiny.

KEY QUOTE

"While this agreement is an important step forward, this is not

a problem that Lilly can solve alone. We strongly support state

and federal regulators taking action to deter and punish

compounding pharmacies, counterfeiters, and others who put

patients at risk by selling unsafe products claiming to be

tirzepatide," Lilly said in its statement.