A Melville Pharmacist has been arrested for his alleged role as a ringleader in a massive scheme to distribute black market prescription HIV drugs and defraud the Medicaid Program of $155 million, law enforcement officials said.
Attorney General Eric Schneiderman announced this week that an investigation shut down the illegal operation that was distributing HIV prescription drugs obtained on the black market through MOMS pharmacy, a high-volume pharmacy located in Melville.
According to the indictment and forfeiture complaint, beginning in September 2008, Glenn Schabel, of Melville, the supervising pharmacist and compliance officer for MOMS pharmacy, allegedly accepted bribes to purchase in excess of $274 million worth of black market HIV medications from a web of shell companies, controlled by Stephen Manuel Costa, a 27-year-old Florida resident.
Officials said Costa allegedly incorporated four separate entities as “wholesale” distributors in order to disguise the sale of the diverted medications. Costa is charged with furnishing millions of the black market HIV medications, and dispensed the prescriptions to MOMS patients, many of whom were Medicaid recipients. Allion, under the direction of Schabel, continued to bill Medicaid, knowing the drugs were purchased illegally, the Attorney General said in a press release.
Schneiderman said that the scheme endangered patients by exposing them to drugs of unknown origin and potency, and in some cases, drugs that were mislabeled, potentially expired or possibly stolen from manufacturers. In addition to the criminal charges, the Attorney General is seeking $155 million in civil penalties from the defendants.
“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,” Schneiderman said.
The indictment, which was recently unsealed in New York State Supreme Court in Suffolk County by Judge James C. Hudson, charges Schabel and three other defendants with felonies including grand larceny, criminal diversion of prescription medications and prescriptions, money laundering, commercial bribery and commercial bribe receiving, offering a false instrument for filing and conspiracy. The Class B felony charges each carry a maximum of between 8 and 25 years imprisonment.
The investigation also shows that Ira Gross of Babylon, another licensed pharmacist, brokered the sale of the illegally diverted drugs between Schabel and Costa. The fourth defendant, Harry Abolafia, allegedly created false invoices for Costa’s companies—SMC Distributors, Fidelity Wholesale, Optimus Wholesale, and Nuline Pharmaceuticals—in order to make the transactions appear to be legitimate.
The indictment charges that at least $155 million in false claims were made to the New York State Medicaid Program after the drugs were dispensed.
Through the use of telephone wiretaps, the Attorney General’s Medicaid Fraud Control Unit intercepted a delivery of over $1 million worth of prescription HIV medications from one of Costa’s companies, Nuline Pharmaceuticals, to the Melville distribution center of MOMS pharmacy. The investigators simultaneously executed a search warrant, and, with the assistance of a team of pharmacists from the New York State Office of the Medicaid Inspector General (OMIG), seized millions of dollars of diverted HIV medications.
Earlier this year, the Attorney General also seized millions of dollars in assets of the defendants through a forfeiture complaint filed in conjunction with the execution of a search warrant at MOMS pharmacy in Melville.
“MOMS Pharmacy was a victim of this crime and will continue to cooperate fully with the New York State authorities to see that those involved are brought to justice. The health and safety of our patients is our first priority, and we are doing all we can to make sure nothing like this happens again. Over the past two months, we have been working to strengthen our existing quality control and compliance processes and ensure that we are better able to detect problems of this nature,” Anthony D. Luna, President of MOMs Pharmacy, said in a statement.
The charges against the defendants are merely accusations and the defendants are presumed innocent until and unless proven guilty in a court of law.