The U.S. Attorney's Office for the Southern District of New York is known for leading high-profile criminal prosecutions, so it comes as no surprise that the current head of that office, Damian Williams, recently announced the first federal prosecution of a woman, Isis Navarro Reyes, for marketing, advertising, and selling misbranded weight loss drugs. The case is fairly unremarkable by federal standards, but the message it sends is unmistakable: an industry-wide crackdown is underway.

DOJ's Announcement Regarding the Ozempic Prosecution

The Department of Justice's press release regarding the Reyes case states:

"Recently, public interest in semaglutide and weight loss drugs has skyrocketed, and criminals have sought to take advantage of this interest for their ends. With this, the first misbranding and adulteration charges brought pertaining to Ozempic, Reyes will be held accountable for her conduct, and criminals should think twice before trying to sell weight loss drugs without a license to do so. This case makes clear that extreme caution and physician consultation should always be taken when purchasing medications, especially on social media."

The Defendant's Semaglutide Sales

Federal investigators, such as the FBI, routinely monitor social media, and this case was no different. According to the criminal complaint, Reyes was advertising weight loss drugs for sale on social media, including Tik Tok, where the Ozempic craze first went viral.

Specifically, Reyes posted dozens of videos about weight loss drugs, including how to administer drugs such as Ozempic, Axcion and Mesofrance. In addition, Reyes told social media followers to contact her cellphone to order the drugs she was selling.

Subsequently, an undercover law enforcement officer conducted "controlled buys" of weight loss drugs from Reyes. The drugs were labeled Ozempic, but the labeling was in Spanish, in violation of FDA regulations. In other words, Reyes likely purchased international versions of the brand drug and redistributed them in the United States. As a result, she was also charged with smuggling.

In addition to other aggravating factors, Reyes was selling weight loss drugs without a prescription, and at least one of the vials that Reyes sold appears to have been contaminated. Notably, a customer was diagnosed with a mycobacterium infection, and the drug sold by Reyes tested positive for the same bacteria.

Legal Analysis of the Ozempic Prosecution

It would be easy for many to downplay the Reyes case based on patient harm and other differentiating factors, such as the international aspect. As a former federal prosecutor, however, I can assure you that would be a grave mistake. Regulators from all angles are clearly concerned with what they perceive is widespread noncompliance across the industry and the risk of another New England Compounding Center outcome.

That said, there are a number of challenges to regulation of the semaglutide industry. First and foremost, much of the business is cash-pay, which means that the government does not have payors and PBMs to review aberrant claims through audits, Special Investigative Units (SIU), or Fraud, Waste & Abuse (FWA) investigations. Hence, the pipeline of semaglutide referrals to law enforcement is weak.

In addition, government resources have been dedicated to combatting significant COVID fraud in years past. That fraud, which spans PPP loans, COVID tests, and innumerable other scenarios, involves billions of dollars in government money subject to recoupment. On the other hand, false Ozempic and Wegovy claims present less attractive recoupment potential because Medicare coverage is limited.

Finally, FDA investigations are rare, and state boards typically do not have the manpower necessary to pursue complex investigations, including across state lines. These limitations are structural and long-standing; they will not be alleviated anytime soon.

How to Prepare for Semaglutide Enforcement

The regulatory enforcement environment around semaglutide has intensified beyond state boards and the FDA. Now, criminal prosecutors are investigating potential violations of state and federal law. Accordingly, industry participants should act proactively to limit potential exposure.

In particular, a robust compliance program is absolutely critical for anyone involved in the semaglutide or weight loss drug industry. This includes all participants in the supply chain, from manufacturers, importers and distributors, to compounders and clinics. To illustrate this point by analogy, before my kids were born, I would run my small boat hundreds of miles offshore for big tunas and sharks. I never left for a trip without safety gear, even though I hoped that the cost of liferafts, beacons, and survival suits, would be the worst investment I ever made.

You get it. Implement a compliance program now, and hope it is a complete waste of money. However, if you need it, you won't regret that investment. Contact us today for a proposal.