‘Operation Black Market Meds’ involved New York State, Florida and federal investigators
One of the biggest drug-diversion crimes in history has drawn to a conclusion with the conviction of Ira Gross, the “mastermind” of an alleged scheme to sell substandard HIV medications to Medicaid patients, then billing the New York State Medicaid program for $274 million. The products were diverted from legitimate wholesalers in some cases, but also allegedly involved purchases from “the street using various illegal means and in batches which potentially included pills which had been previously dispensed to individuals, stolen from manufacturers, or had expired.” The drugs were obtained from a dealer in Florida (who earlier accepted a guilty plea), then shipped to MOMS Pharmacy, formerly part of a company known as Allion Healthcare. The New York State Attorney General’s office filed the original indictments in 2012. Ira Gross, who was convicted on Aug. 8, was one of the alleged ringleaders; another was Glenn Schabel, MOM’s supervising pharmacist, who pleaded guilty in March. Other criminal and civil suits are pending.
Gross, who was accused of receiving over $25 million in ill-gotten gains from the scheme, was convicted of grand larceny, criminal diversion and money laundering. Schabel pleaded guilty to charges of receiving more than $5 million in bribes. Both now face multiple years in prison; Gross plans an appeal, according to his attorney. MOMS Pharmacy, which had mail-order operations nationally, is now owned by the AIDS Healthcare Foundation, a Los Angeles nonprofit.
“The perpetrators 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” said Attorney General Eric Schneiderman, in a statement. “These convictions should send a clear message that my office will not tolerate these types of abhorrent schemes. If you seek to line your pockets at the expense of the health and well-being of New Yorkers, you will be punished.”
With the breathtaking scale of this operation, it’s curious that it hasn’t reverberated throughout the drug distribution world. Part of the reason for this might be that it’s being characterized as Medicaid fraud, where illicit schemes regularly result in fines or recoveries of tens to hundreds of millions of dollars. Another part could be that the substandard products involved diversion and repackaging of the HIV medications, rather than outright counterfeiting. However, from a regulatory perspective, the suspect nature of the products is essentially identical to that of counterfeit products, especially if expired product was used.
When the story broke in 2012, a spokesperson for Allion told Pharmaceutical Commerce that “As the alleged fraud was financial in nature, we have no evidence at this time indicating that the distribution of these products caused adverse health consequences to our patients.” However, the insidiousness of diversion or counterfeiting in cases like this, or for incapacitated seniors in nursing homes, is that the patient follow-up is very difficult to carry out.