Man Gets 76-Months For Sophisticated Fraud Scheme To Divert Prescription Drugs

An Arizona man has been charged in what federal prosecutors have called a “sophisticated fraud scheme” to divert medicine from secure supply chains into the black market and then back into the white market at deeply discounted prices. Wholesalers, who obtained the drugs through illegal means or off the streets, would provide the defendant with drugs that he would sell to legitimate pharmacies. Once black-market operators had secured the drugs, they would repackage them and fabricate documentation related to the drug’s origins. Federal prosecutors claimed that the defendant knew he was purchasing illegal drugs. The defendant was accused of reselling these drugs to legitimate pharmacies.

The defendant pleaded guilty to one count of conspiracy to traffic medical products with false documentation and another count of money laundering.

How was the fraud perpetrated? 

There were several players in this ring and this article only mentions the prosecution of one of those players, a drug supplier who purchased black market drugs for sale in legitimate pharmacies. Procuring the drugs is a completely separate crime for which several defendants still have cases pending.

Essentially, the federal government isn’t a fan of this form of entrepreneurialism due in large part to the fact that the supply chain cannot be verified. Once the drugs are diverted from the legitimate supply chain, just about anything can happen to them and the drug companies cannot ensure the quality of their drugs.

This incident will also give drug companies a defense against dangerous drug lawsuit allegations. In cases where a drug can be said to have a manufacturing defect or is contaminated with some toxin (which does happen during manufacturing), the drug company would be able to claim that there is no way that a plaintiff can prove that the supply was not diverted by someone operating on a similar fraud. Once the supply chain is broken, the drug companies no longer have control of the drugs.

The fraud was lucrative. An estimated $78 million in cash was laundered through a shell corporation set up by the defendants.

The prosecution was a part of the federal government’s Operation Southern Hospitality which helps local law enforcement officers coordinate with federal prosecutors and agents along with state police. The partnership is an effort to identify and dismantle the largest drug traffickers in the country by targeting them at every level.

It remains unclear what charges those who were tasked with acquiring the drugs will face. But several counts of health care fraud are not unlikely. It is likely these medications were paid for by someone else’s insurance and then resold at major profits back to the pharmacies that prescribed them. So, that would be very illegal.

Talk to a Tampa Federal Defense Attorney Today 

If you’re facing federal charges related to a sophisticated drug trafficking charge, call the Tampa criminal defense lawyers at The Matassini Law Firm today to discuss the matter in greater detail and allow us to begin preparing your defense.

Resource:

justice.gov/usao-sdfl/pr/76-month-federal-prison-sentence-arizona-man-who-participated-south-florida