The FDA recently issued a public warning about counterfeit Ozempic (semaglutide) discovered within the U.S. drug supply chain, underscoring growing concerns about the sourcing and distribution of FDA-approved GLP-1 products. As prices for these drugs remain high and demand continues to surge, the prevalence of counterfeit, diverted, and adulterated products is also increasing. For pharmacies and drug wholesalers, these developments present not just reputational concerns—but also real and escalating legal exposure.
FDA Alert: A Wake-Up Call
On April 14, 2025, the FDA issued an updated alert confirming the presence of counterfeit Ozempic injections in distribution, identifying falsified packaging, improper labeling, and potentially unsafe contents. The FDA not only directed pharmacies to stop dispensing product from certain suspect lots, but also emphasized that the broader drug supply chain must act with vigilance in verifying product sources. What’s more, the April 2025 update is simply the latest alert in a series of ongoing FDA alerts and monitoring going back to December 2023. The message is clear: liability does not end with the manufacturer.
The Legal Risks of Noncompliance
Pharmacies, drug wholesalers and others in the drug supply chain face many legal and regulatory risks if they do not closely scrutinize pharmaceutical products. Risks include regulatory enforcement from the FDA, from state Boards of Pharmacy and from brand drug manufacturers, and can include administrative, civil and even criminal consequences.
- Federal Enforcement Risks:
Under the Federal Food, Drug, and Cosmetic Act (FDCA), introducing or delivering an adulterated or misbranded drug into interstate commerce is a strict liability offense, meaning it is strictly prohibited regardless of intent. Pharmacies and wholesalers that dispense or distribute counterfeit or diverted GLP-1 products—even unknowingly—can face FDA enforcement, including:
- Inspection Findings and Form 483 Observations
- Warning Letters
- Product Seizures and Injunctions
- Civil Monetary Penalties
- Criminal Penalties
Additionally, under the Drug Supply Chain Security Act (DSCSA), all stakeholders in the supply chain must maintain transaction information, transaction history, and transaction statements (“T3” data). Distributors and dispensers must be able to promptly quarantine, investigate, and notify FDA of suspect or illegitimate product.
- State Board of Pharmacy Enforcement Risks:
In recent months, state Boards of Pharmacy across the country have significantly increased enforcement activity related to GLP-1 products (both compounded GLP-1s as well as FDA-approved versions). This includes aggressive audits of purchase histories, pedigree documentation, and supplier licensure.
Boards are particularly focused on pharmacies and wholesalers that:
- Purchase from out-of-state suppliers not licensed in the state
- Source product from non-traditional or “gray market” distributors
- Fail to retain or produce complete DSCSA documentation
- Dispense GLP-1 products without proper due diligence on the product’s origin
We are aware of Board investigations that began with a simple request for transaction documentation and escalated into full-blown disciplinary actions when pharmacies could not provide a clear chain of custody for semaglutide or tirzepatide products.
Examples of Disciplinary Activity Include:
- Board of Pharmacy issued a Notice of Proposed Action to a retail pharmacy that purchased semaglutide from an unlicensed distributor offering steep discounts. The pharmacy was fined and placed on probation for one year.
- Board of Pharmacy suspended a wholesaler’s license for sourcing compounded GLP-1 products from an entity that was neither an FDA-registered outsourcing facility nor licensed in the state.
- Board of Pharmacy required a chain pharmacy to engage an independent consultant and submit to enhanced compliance reporting after it was discovered that a significant quantity of semaglutide inventory could not be traced back to an authorized manufacturer.
- Board of Pharmacy suspended an out-of-state distributor’s nonresident license for selling counterfeit Ozempic. The counterfeit nature of the product was confirmed using the National Association of Boards of Pharmacy’s (NABP) Pulse verification technology.
Many Boards of Pharmacy are becoming extremely aggressive in their actions against pharmacies and drug wholesalers in connection with suspect or potentially counterfeit products. Many Boards of Pharmacy are now demanding proactive verification that drugs like Ozempic and Mounjaro are obtained from appropriately licensed, authorized sources. The have issued administrative subpoenas, requests for information and other inquires upon pharmacies and wholesalers alike. Failure to meet these expectations can result in licensure action, fines, mandatory audits, and reputational damage.
- Civil Litigation Exposure to Brand Manufacturers:
Pharmacies and wholesalers that distribute counterfeit or diverted GLP-1 products risk litigation from manufacturers under the federal Lanham Act and state unfair competition laws. For example, Novo Nordisk and Eli Lilly have pursued aggressive legal strategies—including suits against pharmacies and distributors—for the sale of counterfeit or unapproved versions of semaglutide and tirzepatide. These suits may allege trademark infringement, false advertising, and product disparagement, regardless of whether the seller had actual knowledge of the product’s illegitimacy.
The recent litigation brought by Gilead is a stark example. Gilead sued multiple pharmacies and wholesalers for allegedly selling diverted HIV medication. Even companies that cooperated with the investigation or claimed lack of knowledge were named as defendants. The case highlighted that brand manufacturers are prepared to pursue wide-ranging civil enforcement against any entity contributing to the distribution of suspect product.
With Novo Nordisk and Eli Lilly already filing suits against compounding pharmacies and telemedicine companies, it is likely only a matter of time before pharmacies and wholesalers engaged in questionable GLP-1 sourcing become the next targets.
Best Practices: Steps to Protect Your Business
Pharmacies and wholesalers must act now to reduce their regulatory and legal risk. Not only are stakeholders encouraged to take steps aimed at avoiding the purchase of counterfeit or suspect product, but must take clear and immediate steps if they suspect or believe that they have received counterfeit or suspect product.
Prevention
As the saying goes, “an ounce of prevention is worth a pound of cure.” The following are several basic steps stakeholders can take to mitigate exposure:
- Vet All Suppliers: Only purchase GLP-1 products from wholesalers that are licensed in your state and that are registered with the FDA. Verify that they are authorized distributors of record (ADR) under DSCSA and that they have appropriate accreditation.
- Scrutinize Pricing and Sources: Be wary of product offered well below market value or sourced from new or international vendors. Courts and regulators have looked to the pricing paid for specific drugs as indicia that the product could be suspect. Make sure the methodology for any discounts is fully explained before obtaining low cost products.
- Maintain Pedigree Records: Ensure T3 documentation is complete, accurate, and readily available. Consider software tools that automate DSCSA compliance tracking.
- Conduct Supplier Audits: Implement a regular supplier audit process, especially for high-risk product categories like GLP-1s. Consider contacting “upstream” suppliers and sources as indicated on suppliers’ T3s to validate proper chain of custody.
- Monitor Industry Updates: Regularly follow FDA’s alerts and updates regarding suspect products, as well as updates put out by brand manufacturers.
Response to Suspect Product
If you suspect you have received counterfeit, diverted, adulterated or suspect product, it is likely that you will have to take immediate action as prescribed by federal and state law. Depending on the nature of the product (i.e., “suspect” vs. “counterfeit”), different action could be required, which could include:
- Quarantining the Product Immediately. Prevent dispensing or further distribution of suspect or counterfeit product. The pharmacy or wholesaler must physically separate the suspect product from other inventory and clearly label it as “quarantined.”
- Conduct an Investigation. Pharmacies and wholesalers must work with the most immediate trading partner (as well as potentially the manufacturer) to investigate whether the product is legitimate. As part of the investigation, they will need to verify: (i) lot numbers and expiration dates; (ii) packaging, labeling, and product characteristics; and (iii) transaction documentation (T3 data). Pharmacies and manufacturers may be able to utilize tools, such as manufacturer authentication tools or the FDA’s Counterfeit Drug Task Force Guidance, to validate suspect product.
- Notify FDA and Manufacturer. If the product is deemed illegitimate (e.g., counterfeit or diverted), the pharmacy or wholesaler must notify the FDA within 24 hours via the FDA Form 3911. The pharmacy or wholesaler must also notify all immediate trading partners (e.g., manufacturers, suppliers, purchasers) that may have received the product. Companies can also file a report with FDA’s Office of Criminal Investigations and MedWatch (Form FDA 3500). Alert the manufacturer for verification.
- Initiate a Recall if Dispensed. Notify downstream customers and recall any distributed counterfeit product.
- Retain Records. Maintain records of the investigation and notification for at least 6 years (per DSCSA), including product description and NDC, nature of the suspicion (e.g., mismatched labeling, unusual price), description of quarantine and disposition actions, and copies of all communications and reports submitted.
- Engage Legal Counsel. Develop a coordinated response plan. Counsel can interface with regulators, advise on mitigation strategy/corrective plan, guide on State-specific rules, and help avoid escalation.
How Frier Levitt Can Help
Frier Levitt has extensive experience advising pharmacies, drug wholesalers, and supply chain participants on regulatory and enforcement risks related to product sourcing, DSCSA compliance, and state licensing issues. We regularly assist clients in responding to FDA and Board of Pharmacy inquiries, and we counsel businesses on how to avoid exposure under the Lanham Act and other legal theories being pursued by aggressive brand manufacturers.
If your business is sourcing or dispensing GLP-1 products—or if you’ve already received an inquiry or notice from a regulatory agency—contact us immediately. Early intervention can mean the difference between a quick resolution and years of litigation or compliance monitoring.
Frier Levitt provides strategic, industry-focused legal counsel tailored to your needs. Contact our team today to learn how we can help you.
