Medicaid Is Start of Drug Resale Trail

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By Mary Pat Flaherty and Gilbert M. Gaul
Washington Post Staff Writers
Thursday, October 16, 2003

The box of Trizivir "looked like it had been through the war," Phoenix pharmacist Barbara Renthal recalled thinking in April 2002 as she unpacked the shipping carton containing 10 boxes of the expensive HIV medication.

Then she opened a box and found a bottle with a patient's name on it. The label showed it had been dispensed months earlier at a drugstore in Fort Lauderdale, Fla. A phone call revealed Florida's Medicaid program had paid for it.

Renthal was staring at a small part of a growing fraud nationwide: Poor patients receive high-priced medications through Medicaid and sell them to sophisticated crime rings that pass them around like fenced TV sets, until eventually they get to patients.

The scams thrive because some drug wholesalers and pharmacies are looking for any advantage.

Bioengineered drugs that cost $1,000 a dose and more are especially attractive. But common drugs also have surfaced in the illegal rings: the heart medication Procardia, the heartburn drug Propulsid, the antibiotic Augmentin.

In August, nearly $15 million worth of prescription drugs was seized in New Jersey and New York. As police searched a house on the day of the arrests, a Federal Express truck delivered a package that contained $30,000 in cash from a Florida man believed to be one of the outlets for the pharmaceuticals, New Jersey prosecutor John I. Molinelli said. Drugs were found rebottled in amber vials "with the safety caps, just like you'd see in your drugstore," he said.

Scammers have hired "cleaning crews" that expose medicine to lighter fluid, heat guns and even open flames to peel patient labels from dispensing bottles. "What these drugs are used for in real life is an afterthought," said Ken Karp, a police officer with the New York State Attorney General's Medicaid Fraud Control Unit.

The schemes have burned outlets as large as Caremark Inc., the mail-order pharmacy for Florida state employees and other group plans. In April 2002, the company brought in 70 pharmacists to call patients nationwide to tell them the source of their medications was in doubt.

About 975 people returned medications, costing the company $2 million. Caremark had purchased the drugs from a Florida wholesaler who bought from another Florida wholesaler linked to a fraud ring, state investigators found. The ringleader is believed to be in Venezuela. Caremark said it no longer deals with small suppliers.

Two brothers sentenced in Trenton, N.J., in April sold to drugstores in New Jersey, Georgia and Louisiana, court records show. Godwin and Patrick Okoye were in a ring that cost Medicaid $5 million, prosecutors said. They did not respond to interview requests.

Horace Bynum Sr. bought Procardia from the Okoyes for his New Orleans pharmacy a few years ago, Bynum, 86, recalled. "I wanted to give someone else a hand who was young and starting out," he said.

Bynum did not think more about it until investigators called him much later. "I'd sold what I had by then," he said.

Last year in Miami, pharmacy inspectors visiting a wholesaler applicant found a backroom operation with "rags that reeked of lighter fluid," heat guns, $75,000 worth of drugs and a trash can containing labels from 21 Medicaid patients, according to state records. The application was denied. One of the 21 patients was Michael McKinnon, who in November pleaded guilty to selling drugs that had cost Florida Medicaid nearly $16,000. McKinnon, 43, was making $5,000 a month from the scheme, court records show.

That arrangement pales beside an ongoing case in Sacramento involving the growth hormone Serostim, which costs $6,700 a month. Court records document 300 participants and a $18.9 million loss to California Medi-Cal between 2001 and last April. The ring serviced bodybuilders, but then expanded into selling the drug back to pharmacies, investigators said.

The conspirators recruited patients at HIV clinics in Los Angeles and drove them to pharmacies. "Some of them dumped these guys off by the vanload," federal prosecutor Daniel Linhardt said.

The Trizivir sent to Renthal in Arizona started out on Feb. 11, 2002, with a patient from Lauderhill, Fla., according to records and interviews obtained by The Post. Florida Medicaid paid $967 for the prescription at Commcare Pharmacy.

The patient's bottle went to a ring that concocted paperwork making it appear the drug had moved through small wholesalers in Texas and New Hampshire, which investigators say were fronts.

The bottle then went to Albers Medical Distributors of Kansas City, Mo., which sold it on April 4, 2002, according to a complaint filed by the Missouri Board of Pharmacy. An Albers spokeswoman said she was unaware of the incident.

From Albers, the Trizivir went to ActSys Medical Inc. of Westlake Village, Calif., which sold it to Renthal in mid-April. ActSys President Kelly Smith later said his company was unaware that the drugs had come off the streets. "It was eye-opening," he said. "It showed us some cracks in the system."

Renthal recalled being offered the drug for "about $50" less than the usual $1,100. She went with the small supplier, who was not her regular source, "because the marketing was so good. Lots of phone calls, mailings."

But when the drugs arrived, they bore a label showing they had been sold to the Florida Medicaid patient.

All of Renthal's Trizivir was returned to Florida, where inspectors concluded it came from the streets and was cleaned with lighter fluid.

In July, Florida prosecutors indicted 18 people and charged them with operating a huge racketeering ring that dealt in stolen, counterfeit and adulterated pharmaceuticals, including the Trizivir that went to Renthal.

Renthal called the Fort Lauderdale pharmacist who filled the prescription. "He acted like I was stupid for not knowing this type of thing goes on," she said.

"It isn't shocking to me," the pharmacist, Sal Saraniti, told The Post. "If you can't make your rent and don't have money but have a prescription worth 900 bucks or more that you can sell for $100 or $200, that's a lot of money you can get right away."


© 2003 The Washington Post Company

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