AG Grewal Announces Charges Against 19 Individuals in $11 Million Medicine for-Cash Insurance Fraud Ring That Diverted Lifesaving Prescription Drugs
Alleged Ringleader is Pharmacy Owner Who Arranged Payments to Medicaid Patients for HIV Drugs, Other Medicine, Then Returned Drugs to Wholesalers and Distributors for Big Profits
TRENTON – Attorney General Gurbir S. Grewal and the Office of the Insurance Fraud Prosecutor (“OIFP”) today announced charges against 19 individuals for their alleged participation in an $11 million “medicine-for-cash” insurance fraud scheme that was run by a Manhattan pharmacy owner and operated across New York and New Jersey.
As alleged in the charging documents, the scheme exploited the fact that pharmacies that purchase prescription drugs from wholesalers or distributors can return those drugs for a partial refund if the drugs expire before being sold. Pharmacies can recoup up to 85 percent of the price they paid for the drugs.
Generally speaking, the alleged scheme worked as follows:
- Medicaid beneficiaries obtained and filled prescriptions for expensive, lifesaving drugs to treat HIV, Hepatitis C, and other diseases. Under the Medicaid program, the patients received the drugs from pharmacies for free, with the government reimbursing the pharmacies for the wholesale cost of drugs—sometimes more than $20,000 for a single 30-day prescription.
- Instead of taking their drugs as prescribed, the Medicaid beneficiaries sold the unopened boxes of pills, inhalers, and other forms of medication, on the street to a “runner,” typically for $20 to $100 in cash.
- The runner delivered the drugs to the scheme’s ringleader, who then held the drugs until their expiration date passed.
- Finally, the ringleader used his status as a pharmacy owner to return the expired drugs to wholesalers and distributors, seeking refunds under the false pretense that his own pharmacy had legitimately purchased the drugs. The ringleader typically received refunds up to 85 percent of the wholesale price, allowing him to pocket thousands of dollars for each prescription obtained by the runner.
The criminal enterprise was dismantled after a months-long joint investigation between OIFP’s Medicaid Fraud Control Unit (“MFCU”) and the Jersey City Police Department. The investigation was conducted with assistance from the U.S. Food and Drug Administration, the New Jersey Office of Homeland Security and Preparedness, and the New York Attorney General’s Medicaid Fraud Control Unit.
The investigation also resulted in the recovery of more than $6.8 million in diverted prescription medications and more than $4 million in alleged illegal profits from the scheme.
“Medicaid is designed to provide much-needed medical care to lower-income Americans, not to line the pockets of fraudsters and cheats,” said Attorney General Grewal. “By cracking down on this type of fraud, we’re not just protecting taxpayers, we’re protecting the integrity of our medical system.”
The alleged ringleader of the scheme is Elfatih Ibrahim, 58, of Brooklyn, a New York- licensed pharmacist who owns Maxwell Pharmacy in Manhattan. Ahmed Mohamed, 62, of Jersey City, allegedly served as the scheme’s runner who bought and transported drugs to Ibrahim’s pharmacy on a regular basis between January and August 2018.
Ibrahim and Mohamed are charged with second- and third-degree conspiracy, second-degree possession with intent to distribute prescription legend drugs, and third-degree Medicaid fraud.
The ring trafficked and diverted an array of prescription drugs, including those used to treat illnesses requiring expensive therapies like HIV, Hepatitis C, pulmonary disease, and type 2 diabetes. These drugs are of little value to street users but are sought-after commodities on the prescription black market.
Among the most trafficked drugs in the scheme were HIV medications Atripla and Truvada. According to national wholesale price averages, single 30-day prescriptions of these drugs cost about $2,735 and $1,567, respectively.
The most expensive drugs trafficked were Hepatitis C medications Vosevi, Epclusa, and Zepatier. According to national wholesale price averages, single 30-day prescriptions of these drugs cost about $24,920, $24,344, and $18,200, respectively.
“We’ve taken down a network of alleged criminals that stole millions of dollars from a program intended as a safety net for those who otherwise could not afford healthcare,” said Acting Insurance Fraud Prosecutor Tracy M. Thompson. “This brazen raid on the Medicaid system is a crime against all New Jersey taxpayers. We urge everyone to fight back by reporting insurance fraud that makes victims of us all.”
Five who allegedly collected and sold prescription drugs in the scheme were indicted on charges of second-degree conspiracy and third-degree Medicaid fraud. They are:
- Constance Douglas, 52, of Jersey City
- Kendall Brown, 55, of Jersey City
- Hiram Estrada-Garcia, 37, of Jersey City
- Mohamed Gaafar, 62, of Jersey City
- John Schmalberger, 60, of Morganville
Twelve individuals who allegedly sold their own prescription drugs in the scheme were charged with third-degree conspiracy and third-degree Medicaid fraud. They are:
- Michelle Hazelwood, 50, of Jersey City
- Dawn Jackson, 50, of Jersey City
- Marcus Colon, 38, of Jersey City
- Rhonda Hoffman, 49, of Jersey City
- Julissa Borges, 48, of Bayonne
- Margaret Moore, 47, of Jersey City
- Michael Garland, 49, of Jersey City
- Sobhy Eid, 60, of Bayonne
- Wayne Jones, 58, of Jersey City
- Shawn Morris, 47, of Jersey City
- Alexander Cotto, 37, of Kearny
- Brenda Noel, 60, of Newark
Second-degree charges carry a sentence of five to 10 years in state prison and a fine of up to $150,000, while third-degree charges carry a sentence of three to five years in prison and a fine of up to $15,000.
The indictment, which was handed up by a state grand jury in Trenton on Friday, is merely an accusation and the defendants are presumed innocent until proven guilty.
Deputy Attorney General Michael A. Klein presented the case to the grand jury.
Deputy Insurance Fraud Prosecutor Al Garcia, Bureau Chief Peter Sepulveda, Assistant Bureau Chief Klein, and Deputy Attorneys General Fernando Maldonado and Debra Conrad initiated and implemented the prosecutorial strategies that were essential in supporting this criminal investigation.
OIFP detectives Lt. Louis Renshaw, Sgt. Kevin Weinkauff, and Detectives Claudia Diez, Celeste Dowd, Corey Fischer, Danielle Han, Suzanna Lopez, Paul McGrory, Laura Parisi, Michael Rosati, Dawn Ryan, Janet Thai, and Little Trenard conducted the investigation, with assistance from Investigative Analysts Gabrielle Kane, Marwa Kashef and Elizabeth O’Brien, and under the supervision of Deputy Chief of Detectives Anthony Butler and Acting Deputy Chief of Detectives Rich King.
Acting Insurance Fraud Prosecutor Tracy M. Thompson acknowledges and thanks the Jersey City Police Department for its partnership in the investigation, in particular Captain Edward Nestor, Sgt. Joe Walsh, and Detectives Eamon Nally, Raymond Weber, Carlos Lugo, Joseph Anzivino, Israel Acevedo, Jeff Guilfoyle, Maria Cortes, Alex Bermudez, Tony Goodman, Omar Aly and Jamie Wilde. She also thanks the U.S. Food and Drug Administration’s Office of Criminal Investigations, the New Jersey Office of Homeland Security and Preparedness Operations Bureau, and the New York Attorney General’s Medicaid Fraud Control Unit for their assistance in the investigation.