Justice Department investigators unsealed the indictment of 48 people charged with participating in a $500 million Medicaid fraud scheme that consisted of buying prescription drugs from Medicaid recipients and then repackaging them for sale to pharmacies and other distributors.
The fraudsters wanted expensive drugs, cheap, so they turned to Medicaid beneficiaries receiving treatment for AIDS, mental illnesses, and chronic pain. The Medicaid recipients then filled their prescriptions at taxpayer expense and funneled the medication to low-level drug dealers in the Medicaid fraud network.
“As a result of this fraud, Medicaid lost more than an estimated $500 million in reimbursements for pills that were diverted into this second-hand black market,” the Justice Department explained. For reference, that’s about as much taxpayer money as was lost when the solar company, Solyndra — which received a $535 million loan through the Energy Department — went bankrupt.
Beyond money, though, the alleged scheme posed a danger to patients. Court documents detail how participants in the fraud scheme would relabel second-hand prescription bottles so that they could be resold to pharmacies. “Collectors and Aggregators use lighter fluid and other potentially hazardous chemicals to dissolve the adhesive on the patient labels and remove the patient labels and all traces of the adhesive from the bottles” before putting new labels on the bottles.
The drugs also “may have expired” or been stored in conditions that would render them ineffective. “For example, some HIV medications require constant storage in conditions between 25 and 30 degrees Celsius to maintain their efficacy,” according to the complaint.
“The scheme was theft, plain and simple, from a program funded by taxpayers,” said FBI Assistant Director-in-Charge Janice K. Fedarcyk in a statement on the indictment. “And the scheme posed serious health risks at both the collection and distribution ends. People with real ailments were induced to sell their medications on the cheap rather than take them as prescribed, while end-users of the diverted drugs were getting second-hand medicine that may have been mishandled, adulterated, improperly stored, repackaged and expired.”