Medicaid Fraud Case on Resold Drugs Targets 50, FBI Says

July 17 (Bloomberg) -- The U.S. charged 48 people with taking part in a “massive” Medicaid fraud scheme to divert and traffic hundreds of millions of dollars in prescription drugs around the country.

More than a dozen people were arrested today in New York by agents of the Federal Bureau of Investigation, said Peter Donald, a spokesman for the FBI’s New York office.

An indictment unsealed today in federal court in New York charges 42 people with obtaining free or low-cost drugs to treat HIV, schizophrenia and asthma through Medicaid and re-selling them. Six more people were charged in a separate criminal complaint. Medicaid is the federal-state program to help cover the health-care costs of people with low incomes.

“The defendants and their co-conspirators profit by exploiting the difference between the cost to the patient of obtaining bottles of prescription drugs through Medicaid -- which typically is zero -- and the hundreds of dollars per bottle that pharmacies pay to purchase those drugs,” prosecutors in the office of Manhattan U.S. Attorney Preet Bharara said in the felony indictment.

Bharara’s office said it would hold a news conference with the FBI and New York Police Commissioner Ray Kelly later today.

To reap maximum profits, the scheme targeted the most expensive drugs, including HIV medications such as Atripla, which costs $1,635 a bottle, and Trizivir, which costs $1,347 a bottle. The Medicaid recipients sold the drugs to corrupt distribution companies, which acted as wholesale distributors, thereby concealing the origin of the medications.

The case is part of a crackdown on the illegal reselling of prescription drugs, Donald said. Arrests are “ongoing” and 35 people have been taken into federal custody so far, he said.

The cases are U.S. v. Viera, 11-CR-1072; U.S. v. Oria, 12-MAG-1854, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Patricia Hurtado in New York at

To contact the editor responsible for this story: Michael Hytha at