An Iowa telepharmacy company faces allegations in a civil lawsuit that it sold counterfeit Ozempic, the high-demand weight-loss drug, to a Michigan company.
The lawsuit appears to be one of the first of its kind accusing a licensed pharmacy in Iowa of selling customers fake semaglutide. It's an uncommon but increasing problem nationally, according to the U.S. Food and Drug Administration and the National Association of Boards of Pharmacy.
Filed in Washington County, Iowa, by Central Pharmacy Management LLC in Dearborn, a Detroit suburb, the suit accuses SmartScripts and CEO Todd Thompson of Iowa City of breach of contract, negligent misrepresentation, fraudulent inducement, fraudulent misrepresentation, unjust enrichment, consumer fraud and fraud.
It alleges that in late 2023, Central Pharmacy Management, which owns and manages pharmacies across Michigan, purchased and paid for 168 1 milligram injection doses of Ozempic for almost $132,250, then learned from a special agent of the Food and Drug Administration visiting one of its pharmacies that the drugs were fake.
Thompson, a University of Iowa College of Pharmacy graduate and former long-term care administrator, did not respond to phone calls seeking comment.
It's unclear whether the allegedly counterfeit Ozempic sickened any patients. Substandard or falsified semaglutide has reportedly resulted in hospitalizations and even death in some cases worldwide.
A spokesperson for Iowa's Department of Inspections and Appeals said Tuesday the department was not aware of any licensed pharmacy in Iowa being disciplined for selling fake Ozempic or similar medications.
Made by Novo Nordisk, Ozempic is one of several GLP-1 agonists taking the world by storm for its weight-loss benefits. Typically used to treat type 2 diabetes and obesity, GLP-1 agonists increase insulin production and satiety, according to the National Association of Boards of Pharmacy. Ozempic has been among several such medications in short supply at times in the U.S. because demand has skyrocketed.
In a report issued this year, the National Association of Boards of Pharmacy warned that scores of websites are illegally selling fake drugs like Ozempic. But fake versions also have surfaced in licensed facilities, the association said.
In late December, the FDA announced it had seized thousands of units of fraudulent Ozempic products in the legitimate drug supply chain. The needles in the products also were counterfeit. The announcement came the week before the FDA agent visited the CPM pharmacy and allegedly discovered the counterfeit Ozempic sold by SmartScripts.
SmartScripts accused of altering drug's transaction history
Opened in 2017, SmartScripts was one of Iowa’s first telepharmacy companies. Similar to Amazon’s Pillpack, the company delivers maintenance medications through presorted SmartPacks to customers across the country. In 2018, it also introduced an insurance product that gave it the ability to offer prescription discounts to customers.
In 2021, Thompson told the Business Record he employed 120 staff members and served 8,000 to 10,000 customers nationwide. The company has locations in Iowa City; Washington, Iowa; and Fort Worth, Texas.
CPM alleged in its lawsuit that it received a transaction history and possession chain of the Ozempic it bought from SmartScripts, which purported to show a series of transactions for a legitimate drug. The lawsuit alleges SmartScripts, through Thompson, falsely represented that the drugs were legitimate, provided false transaction information and knowingly altered the transaction history.
The company discovered the Ozempic was counterfeit when the FDA agent visited one of its pharmacies, Farmington Drugs in Livonia, Michigan, on Dec. 27, 2023, the lawsuit said.
“The FDA ordered CPM to stop selling the counterfeit drugs immediately, to maintain a list of patients that had received any of the counterfeit medication, and to send identifying information to the Food and Drug Administration,” the lawsuit says. “CPM complied with all of the FDA’s demands and turned over all of the counterfeit drugs.”
The company allegedly notified SmartScripts that the FDA had confiscated the drugs, but SmartScripts didn’t respond to its calls. Later, the company got an email saying SmartScripts was working to resolve the matter. It has yet to receive a refund for the purchase, the lawsuit says.
Watchdog requested through CPM's Des Moines attorney, Alison Kanne, to interview CPM officials about the FDA probe and whether any patients were affected by the counterfeit Ozempic. Kanne did not respond.
The FDA said it could not confirm or deny the existence of an investigation "and the FDA generally does not discuss compliance matters, except with the company involved."
The World Health Organization warned in June that fake Ozempic has been found in the United States, the United Kingdom and Brazil.
In its report this year, the National Association of Boards of Pharmacy said the FDA’s Adverse Event Reporting System found 42 people around the world had been hospitalized after being injected with substandard or falsified semaglutide. Of the reports, 28 are classified as “serious,” with outcomes that include death. Three of the hospitalizations happened in the U.S.
SmartScripts faces lawsuits in other cases
The lawsuit, filed July 8, is not the first against SmartScripts.
Last week, an Omaha, Nebraska, accounting firm called CFO Systems LLC filed a motion to condemn funds from SmartScripts after it failed to pay the company $29,615.16. The move came after CFO filed a lawsuit, alleging breach of contract and unjust enrichment, after it provided financial management services and won a court judgment.
A jury trial has been scheduled for August in another suit that McKesson Corp. of Texas filed in February against SmartScripts.
The suit alleges that in 2015, SmartScripts applied for credit with McKesson for the purchase of pharmaceutical products from the Texas company. McKesson alleged it sold and delivered pharmaceutical products purchased by SmartScripts, and that Thompson and another of his companies, Thompson Long-Term Care, owed at least $2.1 million to McKesson.
In 2023, the company also was the target of a class-action lawsuit for allegedly calling individuals whose names are on the national Do Not Call Registry. SmartScripts acknowledged using phone numbers purchased from data brokers but denied deliberately calling individuals on the registry. Within a few months, the case was settled out of court.
Entities including online sellers offering counterfeit or tampered medicines or both should be reported to the FDA. Suspected counterfeit products may be reported to the FDA by calling an FDA consumer complaint coordinator.
Lee Rood's Reader's Watchdog column helps Iowans get answers and accountability from public officials, the justice system, businesses and nonprofits. Reach her at lrood@registermedia.com, at 515-284-8549, on Twitter at @leerood or on Facebook at Facebook.com/readerswatchdog.
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