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FBI
Health Care
Fraud Enterprise Dismantled Ringleader Operated Multiple Pharmacies
08/15/14
It was a combination health care fraud and drug distribution scheme on
a massive scale. It involved 26 Michigan pharmacies, nine doctors, and
two health care agencies. There were bribes and kickbacks aplenty and
thousands of illegal doses of sought-after drugs like oxycodone and
hydrocodone. And fraudulent billings to Medicare and Medicaid totaled
more than $60 million, not to mention additional amounts to private
insurers.
But the case began on a much smaller scale. In 2008, the Bureau learned
that a single Michigan pharmacy was allegedly sending phony bills to
Medicare and private insurance companies for prescription drugs. During
the ensuing joint investigation with the Drug Enforcement
Administration and the Department of Health and Human Services’ Office
of Inspector General, however, we were able to connect a wide array of
other pharmacies—and subjects—to this illegal activity. We also
uncovered the illegal diversion of controlled substances to people who
didn’t medically need them, as well as billings to the government and
private insurers for millions of dollars of non-controlled medications
that were never dispensed to patients.
In August 2011 and March 2013, a total of 39 individuals—including
ringleader Babubhai Patel—were indicted on various federal health care
fraud and drug charges related to this scheme, which ran from 2006 to
2011.
After a six-week trial, Patel was convicted and sentenced to a 17-year
prison term in 2013. And just last month, the 38th defendant in the
case was convicted in federal court. These defendants included
pharmacists, doctors, home health care agency owners, an accountant,
and a psychologist. (The 39th defendant is currently a fugitive
believed to be outside the U.S.—law enforcement continues to pursue
him.)
How the scheme worked. Patel, a pharmacist and businessman from Canton,
Michigan, owned and/or controlled 26 pharmacies and several home health
care agencies in that state, but he concealed his involvement in many
of these facilities through the use of straw owners. He and his
associates recruited a number of pharmacists—mostly from overseas—to
staff his pharmacies and help facilitate his scheme to defraud
government and private insurers.
Patel and his associates offered kickbacks and bribes to doctors
willing to write medically unnecessary prescriptions, home health care
referrals, and bills for other services to Medicare, Medicaid, and
private insurers. He also provided kickbacks and bribes to patient
recruiters—individuals hired to go out and find patients willing to
share their insurance information—as well as other inducements, such as
doses of the drugs from the illegally written prescriptions. Patient
recruiters, in turn, would then offer some of the same inducements to
government and private insurance patients to get the patients to fill
their prescriptions at Patel-owned pharmacies.
Such an extensive and complex fraud scheme required a similar response
from law enforcement, and we obliged with the same sophisticated
investigative techniques we’ve been using for years against savvy
fraudsters—careful reviews of financial records, interviews, physical
surveillance, undercover scenarios, confidential sources,
court-authorized wiretaps, and analysis of medical data and corporate
filings.
When all was said and done, a prolific criminal enterprise was
completely dismantled. And its ringleader discovered that crime really
doesn’t pay: In addition to his 17-year prison sentence, Babubhai Patel
was ordered to pay nearly $19 million in restitution to the insurance
programs he had bilked.
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