Counterfeit Drug “Loss” Under U.S.S.G. § 2B1.1: End-User Street Price as “Amount Paid” in an FDA-Approval Misrepresentation Scheme

I. Introduction

United States v. Omar Thomas Wala arises from a large-scale counterfeit pharmaceutical operation. Omar Wala pled guilty to conspiracy and substantive counterfeiting after manufacturing and distributing approximately 16.1 million counterfeit “alprazolam” pills (marketed as Xanax/generic alprazolam) over a five-year period, largely through the dark web and paid in cryptocurrency.

The sentencing dispute centered on how to compute “loss” under U.S.S.G. § 2B1.1. The defense urged a legitimate-market approach keyed to the wholesale acquisition cost of lawful generic alprazolam (framing the primary victims as pharmaceutical manufacturers). The government urged an illicit-market approach keyed to what defrauded purchasers paid. The district court adopted the government’s approach, using a conservative $2-per-pill “street price” multiplied by 16.1 million pills (≈ $32 million), producing a 22-level loss enhancement and additional enhancements for victim numerosity and risk of serious bodily injury. Wala appealed.

II. Summary of the Opinion

The Sixth Circuit affirmed the sentence in full. It held:

• Guidelines commentary deference remains applicable: Wala’s broad challenge to deference after Loper Bright Enterprises v. Raimondo was waived and, in any event, foreclosed by United States v. Prather, which held Loper Bright did not overrule Auer/Kisor deference.
• “Zone of ambiguity” challenge failed under plain error: Because no binding precedent addressed whether Application Note 3(E)(v) exceeds § 2B1.1’s “zone of ambiguity,” any error was not “plain.”
• Application Note 3(E)(v) applies to counterfeit pills: Copying FDA-approved pill imprints falsely represented governmental approval (subsection (II)), and distributing an unapproved “new drug” required but lacked regulatory approval (subsection (III)).
• Loss estimate was not clearly erroneous: The district court reasonably used end-user street price ($2/pill) based on texts, informant statements, and wholesale pricing data—especially given the scheme’s dependence on deceiving street-level consumers.
• 10+ victims enhancement affirmed: The court upheld the enhancement based on reasonable inferences from the scheme’s scale; identifying each victim by name was unnecessary.
• Risk-of-death/serious-injury enhancement affirmed: The panel declined to resolve a circuit split on the mens rea standard because the record supported even the stricter, subjective-awareness approach.

III. Analysis

A. Precedents Cited

1. Deference to Guidelines Commentary after Loper Bright

• Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024), and Chelvron, U.S.A. Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984): The appellant argued that Loper Bright (overruling Chelvron deference) undermined deference to Guidelines commentary. The panel treated that contention as both waived and foreclosed.
• Kisor v. Wilkie, 588 U.S. 558 (2019), and the Sixth Circuit’s application in United States v. Riccardi, 989 F.3d 476 (6th Cir. 2021): Kisor supplies the “genuine ambiguity” and “zone of ambiguity” framework. Riccardi is the Sixth Circuit’s key “zone of ambiguity” precedent, refusing to defer to an Application Note that set an automatic $500 loss per card because it was not a plausible interpretation of “loss.”
• United States v. Prather, 138 F.4th 963 (6th Cir. 2025): This was dispositive on the Loper Bright theme. Prather held Loper Bright “did not overrule Auer” and that Auer/Kisor remain binding Supreme Court law for courts of appeals. The Wala panel followed Prather under Salmi v. Sec'y of Health & Hum. Servs., 774 F.2d 685 (6th Cir. 1985) (one panel cannot overrule another).
• Berkshire v. Dahl, 928 F.3d 520 (6th Cir. 2019), and United States v. Tasis, 696 F.3d 623 (6th Cir. 2012): These cases supported the court’s finding of waiver: Wala expressly narrowed his Loper Bright argument at sentencing and could not expand it on appeal.

2. Loss methodology, standards of review, and harmless error

• United States v. Riccardi, 989 F.3d 476 (6th Cir. 2021): Provided the framework: de novo review of methodology/Guidelines interpretation; clear-error review for the amount.
• United States v. Warshak, 631 F.3d 266 (6th Cir. 2010): Reinforced that Guidelines-calculation error “typically requires remand.”
• United States v. You, 74 F.4th 378 (6th Cir. 2023), and United States v. Gillis, 592 F.3d 696 (6th Cir. 2009): Provided the Sixth Circuit’s harmless-error standard for Guidelines mistakes (“with certainty”).
• Plain-error framework cases: United States v. Russell, 26 F.4th 371 (6th Cir. 2022); United States v. Johns, 65 F.4th 891 (6th Cir. 2023); United States v. Tellez, 86 F.4th 1148 (6th Cir. 2023); United States v. Al-Maliki, 787 F.3d 784 (6th Cir. 2015). These supplied the “no binding precedent means no plain error” reasoning for the forfeited “zone of ambiguity” argument.

3. Market selection and valuation of loss

• United States v. Warshawsky, 20 F.3d 204 (6th Cir. 1994), and United States v. Ellerbee, 73 F.3d 105 (6th Cir. 1996): These were the opinion’s key market-valuation comparators. Warshawsky rejected retail valuation where all participants operated in wholesale. Ellerbee used retail valuation where the victim acted in the retail market. Wala’s panel analogized Wala’s scheme to a retail-targeted fraud because its success depended on street-level acceptance and deception of end users.
• Loss estimation deference cases: United States v. Wendlandt, 714 F.3d 388 (6th Cir. 2013); United States v. Agrawal, 97 F.4th 421 (6th Cir. 2024); United States v. Estrada-Gonzalez, 32 F.4th 607 (6th Cir. 2022); United States v. Jackson, 25 F.3d 327 (6th Cir. 1994). These framed the “reasonable estimate” standard and the “heavy burden” on appellants.
• Evidentiary permissibility: United States v. Johnson, 830 F. App'x 153 (6th Cir. 2020); United States v. Germosen, 139 F.3d 120 (2d Cir. 1998); United States v. Clark, 986 F.2d 65 (4th Cir. 1993); United States v. Hamilton, 263 F.3d 645 (6th Cir. 2001); United States v. Richardson, 843 F. App'x 775 (6th Cir. 2021). These supported reliance on co-conspirator statements/texts and reasonable inferences.
• Burden to rebut PSR facts: United States v. Lang, 333 F.3d 678 (6th Cir. 2003), and (nonprecedential) United States v. Watkins, 2024 WL 3218151 (6th Cir. June 27, 2024).

4. FDA approval concepts and counterfeit-drug framing

• United States v. Tagg, 886 F.3d 579 (6th Cir. 2018): Supplied the definition of the “dark web.”
• In re Darvocet, Darvon, & Propoxyphene Prods. Liability Litig., 756 F.3d 917 (6th Cir. 2014): Used for the proposition that a “new drug” must obtain FDA approval before entering the market.
• United States v. Milstein, 401 F.3d 53 (2d Cir. 2005): A particularly important comparator: repackaging drugs with forged labels “closely resembling” lawful packaging supported treating the scheme as one involving false representation of regulatory approval, and (as referenced) the notion that contaminated medicine may be “worthless to the consumer” in this loss context.

5. Victims enhancement

• United States v. Smith, 749 F.3d 465 (6th Cir. 2014): Interpreted “any part” of actual loss broadly for victim status.
• United States v. Stubblefield, 682 F.3d 502 (6th Cir. 2012): Established de novo review for whether someone is a “victim” under the Guidelines.
• Inference/record support: United States v. Parrish, 915 F.3d 1043 (6th Cir. 2019); United States v. Hatcher, 947 F.3d 383 (6th Cir. 2020).
• Distinguishing insufficient-proof cases: United States v. Yagar, 404 F.3d 967 (6th Cir. 2004); United States v. Gray, 71 F. App'x 300 (5th Cir. 2003); United States v. Lewis, 88 F. App'x 898 (6th Cir. 2004).

6. Risk of death or serious bodily injury enhancement and circuit split

• Circuit split identified but not resolved: United States v. Chin, 41 F.4th 16 (1st Cir. 2022); United States v. Maestas, 642 F.3d 1315 (10th Cir. 2013); United States v. Lucien, 347 F.3d 45 (2d Cir. 2003); United States v. Johansson, 249 F.3d 848 (9th Cir. 2001) (objective “obvious risk” approach) versus United States v. McCord, Inc., 143 F.3d 1095 (8th Cir. 1998) and United States v. Mohsin, 904 F.3d 580 (7th Cir. 2018) (subjective awareness requirement).
• Sixth Circuit touchpoints: United States v. Silber, 456 F. App'x 559 (6th Cir. 2012) (not yet decided); United States v. Sosa-Baladron, 800 F. App'x 313 (6th Cir. 2020) (risk must be “actual, not conjectural”); and United States v. Vivit, 214 F.3d 908 (7th Cir. 2000) (quoted via Sosa-Baladron).

B. Legal Reasoning

1. The opinion’s central move: “loss” in counterfeit-drug fraud tracks the consumer deception the scheme was built to achieve

The most practically important part of Wala is how it ties the chosen loss measure to the fraud’s operational design. The district court found—and the Sixth Circuit agreed—that the conspiracy’s “logical goal” was to fool the “ultimate user—the street buyer” by mimicking legitimate FDA-approved alprazolam pills in appearance, markings, and perceived attributes.

This approach is anchored in two Guidelines concepts that the opinion repeatedly interlocks:

• Application Note 3(E)(v)’s command (unlawful misrepresentation schemes): loss “shall include the amount paid ... with no credit provided for the value of those items.”
• Foreseeability and relevant conduct (§ 2B1.1 victim definition and § 1B1.3 “all harm that resulted” / “all harm that was the object”): the end-user’s financial harm was both the object and foreseeable result of the design choices (counterfeit imprints, replication of taste/color/effect).

In other words, the panel treats “amount paid” as a function of the fraud’s target and foreseeable endpoint, not merely the conspirators’ immediate transaction layer.

2. The court’s commentary-deference posture: pragmatic, panel-bound, and waiver-sensitive

Wala attempted to leverage Loper Bright Enterprises v. Raimondo to argue against deference to Guidelines commentary. The court rejected that effort on two tracks:

• Waiver: at sentencing, Wala affirmatively narrowed his Loper Bright point; the panel treated the broader claim as waived under Berkshire v. Dahl and United States v. Tasis.
• Merits foreclosed by circuit precedent: United States v. Prather controlled: Loper Bright did not overrule Auer/Kisor, and courts of appeals must follow Supreme Court precedent unless and until it changes.

The result is stability: within the Sixth Circuit, Prather continues to cabin post-Loper Bright arguments that seek to topple Kisor-style deference indirectly.

3. Application Note 3(E)(v) fit: counterfeit pill imprints and unapproved “new drug” composition

The panel endorsed two independent triggers:

• Subsection (II): the pills were “falsely represented as approved” by a government regulatory agency. Copying manufacturer imprints (and marketing pills as “identical to pharma”) constituted a representation “by conduct,” sufficient to imply FDA-approved provenance—particularly where street acceptability depended on stamping quality.
• Subsection (III): the goods required regulatory approval but did not obtain it. The court reasoned that Wala’s mixture of other benzodiazepine-class substances to “replicate the effects” of alprazolam amounted to distributing an unapproved “new drug” under federal definitions; FDA approval was required and absent.

The opinion also rejects an attempted categorical carve-out: that “counterfeit” goods are “contraband” and thus beyond (III). The court’s response is conceptually straightforward: the goods are contraband because they are unapproved/misrepresented—not because they are exempt from the regulatory-approval premise.

4. Loss amount proof: conservative price selection plus inferential reasoning from the conspiracy’s economics

On clear-error review, the panel emphasized the district court’s conservative method:

• It picked the bottom of the supported street-price range ($2), despite evidence of substantially higher per-pill resale prices.
• It relied on multiple sources (co-conspirator texts, confidential informant information, and wholesale listings such as EZ Bars pricing) to triangulate a plausible retail valuation.
• It treated resale markup as a reasonable inference in an illicit wholesale-to-retail distribution chain whose explicit purpose was profit.

A notable doctrinal move is the opinion’s willingness to accept a retail “amount paid” estimate even without identifying specific, audited end-user transactions—so long as the district court’s estimate is plausible and the defendant fails to produce countervailing evidence beyond denial (invoking United States v. Lang).

5. Victims enhancement: identification-by-name not required where the record supports a numerical inference

The district court found (and the panel agreed) that the operation “certainly reached more than 10 victims.” Crucially, the panel treated victim identification as distinct from victim existence:

• The Guidelines define a victim as anyone who sustained “any part” of actual loss.
• Unlike restitution statutes that speak of “identifiable victim or victims,” § 2B1.1’s victim enhancement has no express requirement that the court list victims individually.
• Given 16.1 million pills, wholesale sales to many buyers, and a business model premised on retail deception, it was reasonable to infer at least six end-user victims in addition to the four pharmaceutical companies.

6. Risk enhancement: the court avoids the circuit split by finding subjective awareness on this record

The panel acknowledged but did not resolve the circuit split on whether § 2B1.1(b)(16)(A) requires subjective awareness. Instead, it affirmed because the district court made detailed findings that Wala was aware of, and consciously or recklessly disregarded, serious risks:

• Awareness of a national benzo abuse epidemic;
• Intent to mirror alprazolam effects (i.e., designing psychoactive potency outcomes, not mere look-alike tablets);
• Recognition of potency and inconsistency (“hot spots,” “no way to tell how many are bad”);
• Recognition of unsafe production and handling conditions.

The panel also reaffirmed that the enhancement focuses on actual risk rather than documented injuries, invoking United States v. Sosa-Baladron.

C. Impact

• Sentencing leverage in counterfeit-drug cases not charged as drug trafficking: Even where the substances were not “controlled substances” at the time, courts may still use street-value concepts as a reasonable estimate under the misrepresentation-scheme rule when the fraud is designed for street distribution.
• Evidence expectations: The opinion signals that texts, informant information, and marketplace listings can suffice to support a conservative estimate; the defendant must respond with more than denial to generate a real factual dispute.
• Victim numerosity without a victim roster: Large-scale counterfeit distribution can support 10+ victims by inference, lowering the practical burden on the government to identify end users.
• Risk enhancement in unregulated-drug manufacturing: Where defendants discuss potency, inconsistency, and unsafe handling, courts can affirm § 2B1.1(b)(16)(A) even absent documented overdoses.
• Deference doctrine stability: After Prather and now Wala, Sixth Circuit panels will continue to treat Kisor as controlling against broad “post-Loper Bright” attacks on commentary reliance.

IV. Complex Concepts Simplified

• “Loss” under § 2B1.1: Think of “loss” as the money harm caused by fraud. In certain fraud categories (like fake “approved” goods), the Guidelines use a special rule: count what buyers paid, and don’t subtract any supposed value of the goods.
• Application Note 3(E)(v) (unlawful misrepresentation schemes): A rule for cases where goods are falsely represented as regulator-approved (like FDA-approved) or sold without required approval. It tells courts to treat loss as the full purchase price.
• “Zone of ambiguity” (Kisor/Riccardi): Courts defer to commentary only when the Guideline text is genuinely unclear and the commentary’s reading is a reasonable interpretation—not a new rule invented out of thin air.
• Clear error vs. de novo review: The appellate court reviews the method (what rule the judge applied) fresh (de novo), but reviews the estimate (the number arrived at using evidence) deferentially (clear error).
• “Victim” for § 2B1.1(b)(2): Anyone who suffered any part of the monetary loss. The court can infer victim counts from scale and business model; it need not name them individually for this enhancement.
• Risk of death or serious bodily injury enhancement: The government doesn’t have to prove someone actually died or was hospitalized—only that the offense created a real (non-speculative) risk, and (here) the defendant’s own messages supported awareness and disregard of that risk.

V. Conclusion

United States v. Omar Thomas Wala solidifies a sentencing approach to counterfeit pharmaceutical fraud in the Sixth Circuit: when the scheme is designed to deceive retail consumers into believing pills are legitimate and regulator-approved, § 2B1.1 loss may reasonably be pegged to end-user street price under Application Note 3(E)(v). The decision also underscores that (1) post-Loper Bright challenges to Guidelines commentary deference remain constrained by Kisor and Sixth Circuit precedent (Prather), (2) large-scale distribution supports victim-numerosity findings by inference, and (3) clandestine, inconsistent, unregulated pill manufacturing can warrant the serious-risk enhancement, especially where the defendant’s communications show knowledge of the dangers.