The medspa industry is facing increased scrutiny from federal agencies, with a recent grand jury indictment in Utah highlighting the risks of non-compliance. Medical spa owners and investors often mistakenly believe they operate in a regulatory gray area, but this perception is being challenged by enforcement actions.
Regulatory Compliance Risks
Counsel advising medspas must understand the regulatory compliance risks associated with these businesses. Sterile compounding is one area of concern, as the preparation of intravenous hydration therapies and peptides can inadvertently render a doctor’s office an unlicensed pharmacy.
Pharmacy boards in California, Ohio, and Kentucky have specifically called out the mixing of IV bags as sterile compounding, which must adhere to strict sterility and stability practices. Facilities should source premixed products from authorized 503A pharmacies or 503B outsourcing facilities to ensure the integrity of their supply chain.
Scope of Practice and Standing Orders
Medspa owners may confuse their facilities with luxury spas, where treatments can be chosen from a menu of options. However, this approach can lead to standing orders that bypass critical medical-legal requirements. To protect investments, investors should confirm that every patient receives a documented, individualized examination by an appropriately licensed prescriber before prescription drugs or fluids are administered.
Nursing limitations are also important, as registered nurses must act within the scope of their practice and cannot independently diagnose or prescribe. Boards in states such as Arizona and Mississippi are increasingly targeting scope creep by nursing professionals who take on a prescribing function without the appropriate license.
Corporate Practice of Medicine and Sham Directorships
Some prescribers may take on a role as a Medical Director and then effectively rent their license by providing a blanket authorization to enable nonprescribers to dispense medication without appropriate oversight. This makes the medical directors figureheads, and corporate counsel must look beyond the existence of a medical director agreement to evaluate its functional substance.
Marketing Fraud and Heightened Legal Scrutiny
Aggressive marketing of compounded GLP-1 weight-loss drugs has cultivated a high-risk environment for consumer fraud litigation. Clinics selling such drugs by associating them with the brand names of approved GLP-1 drugs have already caught the attention of branded drug companies who are actively policing their trademarks.
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State attorneys general in Ohio and Connecticut are investigating medspas that falsely claim to provide generic Ozempic or imply that their products are FDA-approved.
Medspas will need to adapt to the new reality of heightened scrutiny. As the government expects compliance-first deal-making in the highly regulated healthcare and aesthetics sectors, business counsel must integrate robust regulatory vetting into the deal cycle to avoid the full weight of a unified federal enforcement apparatus.
The recent federal indictment in Utah and the tightening grip of state boards should serve as a definitive market correction. Business lawyers advising medspas or potential acquirers must recognize that the perceived regulatory gray area inhabited by many medspas was always part of enforcement discretion and not a different regulatory mechanism.
Failure to follow state and federal requirements, such as avoiding backroom IV mixing or nurse-led menu selections, carries risks of prosecution as felony misbranding and the unauthorized practice of medicine. The Department of Justice has announced a department-wide Corporate Enforcement Policy that makes clear the expectation that acquiring entities perform rigorous, proactive due diligence to identify and remediate misconduct within target assets.
It is essential for medspa owners to understand their license suspension notice to avoid severe consequences.
Medspa owners should ensure that their facilities comply with all regulatory requirements to protect their investments and avoid prosecution.
