According to a recent interview with Mopreme Shakur, 2Pac's stepbrother, Pac's incarceration was a big part of Thug Life not continuing to make music.
Mopreme explained that it caused the group to fracture and members to pursue other opportunities. Apparently, Macadoshis, and Rated R already had plans to leave the group and join Coolio, but Tupac's sudden imprisonment further complicated things. Life got in the way, causing the group to lose momentum.
Interestingly, the interview also revealed that Biggie was supposed to be a part of Thug Life. Mopreme says 2Pac admired Biggie's talent and wanted him to join the group, promoting unity across the coasts. However, tensions between Biggie and Tupac arose, and after Tupac was shot in New York, it all went downhill.
Mopreme then addressed the Quad Studios shooting that 2Pac narrowly escaped with his life, and he revealed that 2Pac approached Biggie and Diddy afterward to ask for money they owed him. To hear Mopreme's full story, hit the above video.
Source: Youtube