Updated 3:30 p.m.
Sixteen people, including a doctor and the two owners of in San Marino, were arrested Thursday morning for criminal charges related to an $18 million scheme to defraud Medicare and Medi-Cal, the United States Attorney’s Office said in a statement Thursday.
“This is the first case in the nation alleging an organized scheme to defraud government health care programs through fraudulent claims for anti-psychotic medications, a type of scheme that investigators say is on the increase around the nation,” said the U.S. Attorney’s Office.
The scheme involved several pharmacies, though Huntington Pharmacy is alleged as being the primary offender, and caused $7.3 million in actual losses to the Medicare and Medi-Cal programs.
Huntington Pharmacy owners Theana Khou, 39, and Phic K. Lim, 42, are residents of Pasadena and have owned the pharmacy since at least prior to 2009 when the investigation began, San Marino Detective Candice Torres told Patch Thursday morning.
From the United States Attorney's Office, Central District of California:
Manor Medical Imaging Clinic in Glendale operated a bogus clinic authorized to make claims to Medicare, hired a doctor to write prescriptions and recruited Medicare and Medi-Cal beneficiaries, while some also had their identities stolen and used for the scam without their knowledge, according to the U.S. Attorney’s Office.
Beneficiary information was used to bill Medicare and Medi-Cal for millions of dollars in illegitimate medical services and expensive anti-psychotic drug prescriptions. As a result, some beneficiaries were denied coverage for drugs they legitimately needed.
Drugs dispensed by the involved pharmacies did not go to beneficiaries but to black market wholesalers and back to the pharmacies where they were re-labeled, re-packaged and re-dispensed so new bills could be submitted to Medicare and Medi-Cal as if the drugs had not been dispensed previously.
Huntington Pharmacy saw a huge spike in claims to Medi-Cal—from just under $45,000 in 2009 to nearly $1.5 million in 2010—and the vast majority of claims were the result of prescriptions written by Manor’s in-house doctor, according to a federal criminal complaint unsealed Thursday morning that alleges the owners of Huntington Pharmacy were receiving kickbacks and “structuring” cash deposits totaling hundreds of thousands of dollars into their personal and business accounts.
In addition to the arrests, authorities searched five pharmacies, offices belonging to a drug wholesale company, the Manor clinic and homes of several conspirators.
One federal defendant was arrested earlier this month in connection with another Medicare fraud charge, while another defendant remains a fugitive.
All 17 defendants named in the federal criminal complaint are charged with conspiracy to commit health care fraud, which carries a statutory maximum penalty of 30 years in federal prison. The 15 federal defendants arrested Thursday are expected to make their initial appearances this afternoon in United States District Court in Los Angeles.
Updated 12:45 p.m.
San Marino Police, the Federal Bureau of Investigation, United States Attorney General and others raided San Marino's Thursday morning and arrested the two owners, following a two-year investigation into suspicious activity at the pharmacy, San Marino Police Chief John Schaefer told Patch Thursday morning.
"This investigation resulted in surveillances that seemed to point to a very sophisticated operation that involved a wide ring of suspects who had doctors writing multiple prescriptions for various antipsychotic medications to patients who were recruited and paid to get these prescriptions," according to a Thursday SMPD press release.
Patients then went to various pharmacies, including Huntington Pharmacy, in groups and filled their prescriptions and turned the drugs over to others who distributed the drugs through their criminal network and sold them on the black market, said SMPD.
"People came in by carloads," said Schaefer. "This business was a front for a scheme."
San Marino detectives contacted the California Department of Justice, who took over leading the investigation due to its complexity, magnitude and elements involving Medicare and Medi-Cal fraud.
More than $18 million in fraudulent claims were submitted to Medicare and Medi-Cal from Sept. 2009 to July 2011, said the SMPD, and it is alleged that Huntington Pharmacy is the largest distributor of Abilify, Seroquel, and Zyprexa.
Police and other officials are currently searching the pharmacy for evidence.
Check back as Patch continues to investigate and update this story.
Did you ever witness suspicious activity at Huntington Pharmacy? Tell us in the comments.