Sixth Circuit Affirms Steep Sentence in FDC Act Counterfeiting Case

As prosecutions for manufacturing and distributing counterfeit drugs continue to rise with enhanced investigatory tools and federal statutes (see DEA’s recent announcement on “Operation Meltdown”), courts are grappling with how to fashion appropriate sentences.  Last week, the Sixth Circuit Court of Appeals affirmed the 90-month sentence of Omar Wala who pleaded guilty to conspiring to manufacture and sell counterfeit generic alprazolam pills on the dark web.  See United States v. Wala, No. 24-6021 (6th Cir. Feb. 4. 2026).  The Sixth Circuit’s decision provides a roadmap for how other federal courts may end up applying complex sentencing guidelines to future drug counterfeiting cases.

For years, Wala designed and sold counterfeit pills that were meant to replicate the appearance and effect of alprazolam.  Using imprint marks that copied the designs of the generic alprazolam pills of real manufacturers, Wala manufactured these dummy pills through a mixture of benzodiazepine-class drugs other than alprazolam to replicate alprazolam’s effect (note: the counterfeit pills were not controlled substances, unlike real alprazolam).  Wala then sold these drugs to buyers (he called them “drug dealers”) on the dark web, marketing the pills as “identical to pharma in [s]ize/[t]aste/[c]olor” and as the “best replicas on the market.”  The pills were then sold to individuals at the street level.  Wala eventually pleaded guilty to conspiracy to manufacture, hold for sale, and sell counterfeit drugs in violation of 21 U.S.C. §§ 331(i), 333(b)(8).

While federal criminal statutes can set minimum and maximum sentences—here, the 10-year maximum (rather than the FDC Act’s typical 3-year maximum for felonies) applied because of the enhanced penalties for counterfeit drugs—federal courts refer to the U.S. Sentencing Commission Guidelines to craft an appropriate sentence.  A Guidelines analysis is often complex, including when the court must apply the fraud guideline calculations in § 2B1.1 as the district court did with Wala.  Wala challenged the district court’s application of the total fraud loss calculation and some of the Guidelines enhancements used to calculate his 90-month sentence, but the Sixth Circuit affirmed the district court’s analysis.

Without going too into the weeds, the following points demonstrate how, at least in the Sixth Circuit, federal courts will apply the Guidelines in future drug counterfeiting cases, at least in cases involving ultimate purchases within the black market.

First, the Sixth Circuit upheld the district court’s fraud loss calculation—typically the most significant factor in the calculation—which used a conservative estimate of the price the victims paid for the counterfeit pills on the street.  Wala argued that the fraud loss should be calculated according to what the price of generic alprazolam would be if sold to customers with valid prescriptions.  The district court rejected that approach, holding that the true victims (for fraud loss purposes) were the ultimate purchasers at the street level who paid approximately $2 per counterfeit pill.  Noting the efforts Wala and his co-conspirators took to make the counterfeit pills look real, the district court “reasonably concluded” that fraud against the street-level buyer “was the plain object” of the conspiracy.  The court then multiplied that price by the number of counterfeit pills distributed (approximately 16.1 million pills) for a total fraud loss of approximately $32 million.  The Sixth Circuit also noted that while reliance on the street value of a drug may be more common in controlled substance cases, there was no reason that the district court could not use the street value in a non-controlled substance counterfeit case.

Second, the Sixth Circuit upheld the district court’s application of an enhancement for ten or more victims (USSG § 2B1.1(b)(2)(A)), ruling that a victim included “any” person who bought the counterfeit pills “under the wrongful impression that they were purchasing legitimate alprazolam pills.”  Of note to some of our readers, the generic drug manufacturers whose pills were counterfeited were also counted as victims in this case.  However, the district court did not order restitution to those manufacturers.

Third, the Sixth Circuit affirmed the application of an enhancement that the offense involved the conscious or reckless risk of death or serious bodily injury (USSG § 2B1.1(b)(16)(A)).  While Wala contended that the evidence did not show actual knowledge of harm to anyone who used his counterfeit pills, the district court argued that the evidence supported his knowledge of the risk of harm.  This included awareness of the epidemic of drug abuse (including benzodiazepines), attempts to mirror alprazolam in both effect and behavior when manufacturing the counterfeits, and the recognition of the potency of the materials used to manufacture the illicit pills and the inconsistency in the product and danger in the supply of raw materials.

There are multiple types of counterfeiting cases, including ones where the counterfeit drugs are introduced into the legitimate supply chain, unlike this case where the counterfeit drugs were sold within the black market.  As more of these cases are investigated and prosecuted, it will be important for FDC Act criminal defense attorneys to test whether these Guidelines calculations are applied the same based on whether the ultimate purchaser obtains the counterfeit drugs within the legitimate supply chain or through illicit avenues.  Legitimate pharmaceutical manufacturers may also consider seeking restitution in these cases, though whether a court will consider the legitimate manufacturers to have a legitimate restitution claim is a separate analysis.