Nationwide Black Market in Medicaid Fraud Unearthed; 48 Charged

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On Tuesday, 48 people were charged in documents unsealed in the Manhattan federal court for running a scheme to repackage and sell medication bought from recipients of Medicaid. The operators ran a nationwide black market with expensive HIV medications and other drugs obtained from Medicaid patients and illegally sold them. The estimated profits from the operation ran close to $100 million.

The FBI and federal prosecutors said that Medicaid beneficiaries including AIDS patients filled monthly prescriptions at almost no cost and immediately sold the drugs for cash to aggregators. The accused repackaged the drug containers and sold the medicines through an underground distribution market to pharmacists who bought the drugs at heavy discounts.

According to Manhattan U.S. Attorney Preet Bharara, pharmacies have an “absolute duty” not to buy and sell second-hand drugs, but so far no pharmacists or any of the Medicaid recipients have been charged.

  

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Janice Fedrcyk, head of the FBI’s New York office said at the press conference “People with real ailments were induced to sell their medications on the cheap rather than take them as prescribed.” New York City Police Commissioner Raymond Kelly highlighted an instance where a Medicaid recipient in Bronx was paid $50 for a bottle of HIV drug Kaletra that retails for over $600.

Besides HIV drugs, other drugs that circulated through the black market included essential medication like asthma medication, pain killers and schizophrenia drugs. HIV medication Atripla, which costs about $1635 per bottle, was among the most popular ones filtered through the black market.

Authorities said though the estimate for the last 15 months shows it cost Medicaid $108 million, the fraud could well have cost more than $500 million to Medicaid if the last seven years were taken into account.

The cases are USA v. Alex Oria et al and USA v. Juan Viera et al, U.S. District Court, Southern District of New York, Nos. 12-mag-1854 and 11-cr-1072.