## Facts

- Moshe Milstein operated as a wholesale prescription drug distributor.
- He and associates bought foreign-made versions of prescription drugs and repackaged them to appear to be domestic, FDA-compliant products sold under well-known trademarks.
- During repackaging, they used counterfeit packaging and phony lot numbers to make the products look authentic and FDA-approved.
- Milstein lacked authorization from trademark owners to repackage and sell the foreign-made products under the marks in the United States.
- Some sampled lots later tested by the government were contaminated with bacteria and endotoxins despite being labeled “sterile.”
- A jury in the Eastern District of New York convicted Milstein of: (1) conspiracy; (2) trafficking in counterfeit goods; (3) distributing misbranded drugs with fraudulent intent; (4) unlicensed wholesale distribution of prescription drugs; and (5) failure to provide required pedigree information.
- The district court imposed a 48-month prison sentence, supervised release, a fine, special assessment, and approximately $3.5 million in restitution.
- During trial, after contamination evidence emerged, the government obtained a mid-trial superseding indictment that altered the misbranding allegations.

## Issues

1. Whether repackaging foreign-made pharmaceuticals to resemble domestic, FDA-compliant branded drugs can constitute trafficking in counterfeit goods under 18 U.S.C. § 2320, notwithstanding a “genuine goods” theory.
2. Whether the mid-trial superseding indictment and shift in the misbranding theory created a prejudicial variance or impaired grand-jury and notice protections requiring vacatur of the misbranding conviction.
3. Whether federal wholesale prescription drug licensing requirements tied to interstate distribution (21 U.S.C. § 353(e)) are constitutional.
4. Whether the sentence imposed under mandatory Sentencing Guidelines with judge-found enhancements required remand for resentencing after intervening Supreme Court authority.

## Decision

- The Second Circuit affirmed the convictions for conspiracy (Count 1), trafficking in counterfeit goods (Count 2), unlicensed wholesale distribution (Count 4), and failure to provide pedigree information (Count 5).
- The court vacated the conviction for distributing misbranded drugs with fraudulent intent (Count 3) due to defects arising from the mid-trial superseding indictment and the theory presented at trial.
- The court rejected Milstein’s constitutional challenge to the federal licensing scheme for wholesale prescription drug distribution.
- The court found no reversible error in the challenged evidentiary rulings or jury instructions as to the affirmed counts.
- The court vacated the sentence and remanded for resentencing in light of post-trial constitutional developments governing the Sentencing Guidelines.

## Legal Principles

- Trafficking in counterfeit goods under 18 U.S.C. § 2320 may be established where a defendant, without authorization, uses trademarks and counterfeit packaging to pass off foreign-made pharmaceuticals as domestic, FDA-compliant branded products; the “genuine goods” theory does not protect materially altered or misrepresented goods.
- A mid-trial superseding indictment that materially shifts the factual basis and theory of a charge can violate grand-jury and notice protections and support vacatur where the defendant is effectively tried on a theory not properly charged.
- Federal regulation of wholesale prescription drug distribution, including conditioning interstate distribution on state licensing requirements under 21 U.S.C. § 353(e), is a valid exercise of congressional authority.
- Sentences imposed under a mandatory Guidelines regime with enhancements based on judge-found facts may require vacatur and remand for resentencing under an advisory framework.

## Conclusion

The Second Circuit held that Milstein’s counterfeit repackaging and sale of foreign pharmaceuticals as domestic, FDA-compliant brand-name drugs supported counterfeiting and related drug-distribution convictions, but it vacated the misbranding conviction due to the government’s mid-trial shift in the charged theory and remanded for resentencing under post-Booker sentencing law.


United States v. Milstein, 401 F.3d 53 (2d Cir. 2005)