Melville Pharmacist Defrauds Medicaid With Black Market Meds

Written by Amy Gernon  |  09. April 2012

New York State Attorney General Eric T. Schneiderman announced the indictment of four men, including a Melville pharmacist, last Wednesday, in what is being described as a massive scheme to defraud Medicaid by distributing black market prescription HIV medications.  An investigation codenamed “Operation Black Market Meds,” during which telephone wiretaps were used to intercept a $1 million delivery of diverted HIV medications, revealed that HIV prescription drugs that had been obtained illegally were being dispensed by a high-volume pharmacy with locations from Brooklyn to Suffolk to HIV and AIDS patients.  

MOMS Pharmacy is a specialty pharmacy that focuses exclusively on providing medication and support services to HIV/AIDS patients.  The pharmacy is a popular choice for people living with HIV/AIDS because it offers the MOMSPak, a conveniently packaged daily regime of medication and automatically scheduled refills.  
The Medicaid Fraud Control Unit has shut down the pharmacy, which has allegedly defrauded the program a whopping $155 million in false claims.  Medicaid Inspector General James C. Cox has said, “Creating a black market with taxpayer-funded HIV medication is an insidious and costly fraud.  Our pharmacy investigators were there as part of the search warrant team and offered important testimony to the grand jury to obtain an indictment that was unsealed today. I am proud of the work that not only these investigators did, but also the work of our entire staff in cases such as these.”
AG Schneidermann released a statement saying, “The ringleaders of this complex scheme not only cheated the state Medicaid program out of millions of dollars, but preyed on some of New York’s most vulnerable patients just to make a quick buck. These crimes are intolerable, and the perpetrators will be held accountable for breaking the law.  Our office will continue to protect taxpayers and consumers from schemes that threaten the safety of the public.”  
Indeed, this illegal activity put many lives in danger.  According the the AG’s report, the operation started in September 2008 at which time Glen Schabel, the supervising pharmacist and compliance officer for MOMS, began to accept bribes for purchasing $274 million worth of black market HIV medications, whose origins, dosages and even expiration dates cannot be guaranteed.  In some cases it was found that the medications distributed by MOMS had been previously dispensed to other customers or had been stolen from manufacturers.  
The group had gotten away with it up until this point because one of the ringleaders, 27-year-old Florida resident Stephen Manuel Costa, incorporated four entities as pharmaceutical wholesalers to disguise the sale of the questionable and unsafe medications.  In order to make the transactions between MOMS and the shell companies appear legitimate, Harry Abolafia, another defendant, created false invoices.  Ira Gross, a fourth defendant, is charged with brokering the deal between Costa and MOMS.  The AG’s report claims that Allion Healthcare, the parent company of MOMS pharmacies, continued to bill Medicaid for the black market medications even while the company knew the pills had been illegally obtained.  In exchange, Costa shared a portion of his profits with Schabel, Gross and Abolafia, who received $5,336,465, $21,165,374 and $1,429,612 respectively.  
Anthony D. Luna, president of MOMS Pharmacy, said in a statement, “MOMS Pharmacy was a victim of this crime and will continue to cooperate fully with the New York state authorities.”  According to Luna, an internal investigation of quality control procedures is being undertaken to avoid cases like this in the future.
The AG is also seeking $155 million in civil penalties from the defendants.  
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