The nation's top retail pharmacies are starting to convert Tamiflu capsules into liquid form as demand for that version of the antiviral medication has outpaced supply.

The Food and Drug Administration first noted short supply of Tamiflu oral suspension—used by children and patients who have difficulty swallowing capsules, or when lower doses than available in Tamiflu capsules are required—in mid-January. The agency said at the time that the liquid was on back order, but that supplies still remained at distributors, wholesalers and pharmacies.

Walgreen Co. said Tuesday pharmacies in all 50 states are prepared to compound capsules into the liquid form and "many" already have, as the pills remain in adequate supply. A Walgreen spokesman couldn't immediately say how many Tamiflu prescriptions have been compounded.

A CVS Caremark Corp. spokesman said some CVS pharmacies have begun to compound Tamiflu when necessary. Although CVS isn't tracking the compounding, the spokesman said it is fair to characterize the incidence of compounding as still small at this point.

A spokeswoman for Rite Aid Corp. said the company's pharmacists have been "doing a lot of compounding."

Tamiflu was developed by Gilead Sciences Inc., which licensed it to Roche Holding AG for royalty payments.

The drug, produced by Roche's Genentech unit, is taken when symptoms first emerge to reduce the spread of the flu virus in the body, and can therefore shorten the duration of the illness.

A Genentech spokeswoman said the company saw an unexpected increase in demand for the oral suspension formulation early in the flu season, but isn't sure what caused the increased use and is "still trying to understand why this happened."

The spokeswoman said the company won't be producing more of the drug this flu season, but it will be available again in July. There is "ample supply" of the capsule formulation—described as "millions of courses of treatment"—and no shortage is expected, she said.

Walgreens on Tuesday said flu activity is on the rise and widespread in 44 states, citing statistics provided by the Centers for Disease Control and Prevention. According to Google's Flu trends website, flu activity in February, typically the peak flu month, was the highest since 2008, although the fall of 2009 saw a massive surge with the global H1N1 flu scare.