On December 12, 2013, a New York pharmacy owner was arrested and charged for engaging in a scheme to defraud Medicaid and Medicare through the sale of illegally diverted prescription drugs. The complaint, which resulted from a joint DOJ, FBI and IRS investigation, alleged that the defendant had perpetrated a multi-million dollar scheme to defraud New York State Medicaid and Medicare programs through the sale of diverted pharmaceutical drugs. The defendant had purchased pharmaceuticals, including high-cost medications used to treat HIV, directly from patients, who had sold the pharmaceuticals to the defendant, rather than using them to treat their illnesses. The defendant then repackaged and resold those pharmaceuticals to his customers, as if the pharmaceuticals were new drugs obtained from legitimate sources. The defendant and his co-conspirators would use lighter fluid and other means to dissolve the adhesives on the patient labels on prescription bottles, to remove them and replace them with new labels, making the reused pharmaceuticals appear to be new pharmaceuticals from legitimate sources.
In addition, the defendant sought and obtained reimbursement for these re-dispensed pharmaceuticals, which we obtained from illegitimate sources, and therefore not eligible for reimbursement under Medicare/Medicaid. More troublingly, through the scheme, defendant also sought reimbursement for pharmaceuticals that were never actually dispensed to patients, but instead, had been “sold” back to the pharmacy by the patients, who agreed not to take delivery of their prescribed medications, in exchange for a share of the reimbursed proceeds.
The owner of two New York pharmacies was charged with conspiracy to commit health care fraud, wire fraud, and money laundering, and faces up to 20 years in prison, in connection with this conspiracy. Importantly, the DOJ has transmitted its focus on illegal drug diversion and “grey market” drugs, stating that patients’ health is threatened by unwittingly purchasing the repackaged drugs believing them to be factory-fresh. In addition, the IRS has stated that it intends to rely on the money laundering statutes to fight the illegal prescription drug business
Together, this recent action puts immense focus on the need to obtain drugs from legitimate sources. While the defendant’s actions in this case had been particularly egregious, pharmacies must nonetheless ensure that their medications are sourced from proper, legitimate locations. Moreover, this latest action shows that pharmacies, like other health care providers, are under the microscope by law enforcement for compliance with Federal and State laws and regulations.