Intentionally Switching Medications for Profit: A Pharmacist’s Exposure to New York State Health Care Fraud Article 177 Felonies

Healthcare Fraud (a/k/a Health Care Fraud) is crime vigorously pursued by local District Attorney’s Office and the New York State Attorney General. The basic idea or theme behind any New York Penal Law Article 177 crime, investigation or arrest is that a defendant “with intent to defraud a health care plan… knowingly and willfully provided materially false information … for the purpose of requesting payment from a health plan for a health care item or service and, as a result of such information …, [the defendant] or another person received payment in an amount [to which the defendant or another person was] not entitled.” Depending on the nature or aggregate value of the payment received, Healthcare Fraud in New York State (it is irrelevant if alleged fraud occurs in Manhattan, Brooklyn, Queens, White Plains, Yonkers or Albany) is either a misdemeanor or a felony offense. Once an individual is alleged to have received from a single health plan at least $3,000.00, the crime graduates to the class “E” felony of Health Care Fraud in the Fourth Degree. This crime is punishable by as much as four years in prison. Obviously, should the aggregate amount be greater, the felony and incarceration exposure increases significantly.

With this general understanding of New York’s Health Care Fraud statute, the following blog entry will provide a little more insight into what actions can be the basis of a criminal violation.
In People v. Khan, 18 NY 3d 535 (2012), the Court of Appeals grappled (that may be an overstatement) with the nature of proof required for a conviction under the Health Care Fraud statute. There, the New York City Police Department (NYPD) and the New York City Human Resources Administrations conducted an undercover investigation of NYC Pharmacy, Inc. NYC Pharmacy Inc. is a pharmacy located in Upper Manhattan.

Law enforcement investigated NYC Pharmacy Inc. based on information that prescription drugs were being sold at the location without prescriptions. Over six months (November 2007-May 2008) an undercover NYPD officer made seven visits to the pharmacy where he posed as a customer and received pills from the defendant or another pharmacy employee. From February 2008-May 2008 the undercover police officer visited the pharmacy four times. Each time the male officer used a Medicaid benefits card in the name of a fictitious woman, accompanied by prescriptions issued to the fictitious cardholder. The undercover officer would approach the defendant in the pharmacy hand him the Medicaid card and prescriptions, at this point the undercover officer would ask the defendant to give him different drugs instead of the ones listed on the prescription. The defendant would then give the undercover officer the different drugs but would bill Medicaid as if he had issued the prescribed drugs. The undercover officer used the prescriptions and Medicaid card to get non prescribed drugs from the defendant four times. In total the defendant billed Medicaid 3,073.47 for drugs that he never issued.

Ultimately, the defendant was later arrested and charged with Healthcare Fraud in the Fourth Degree, New York Penal Law 177.10 and Grand Larceny on the Third Degree, New York Penal Law 155.35. A jury convicted Khan of all charges and he appealed. An appellate court ruled, by a 4-1 vote, that there was sufficient evidence to support the defendant’s Fourth Degree Healthcare Fraud (NY PL 177.10) conviction on the theory that Khan knowingly and willfully defrauded Medicaid of more than $3,000 by misidentifying the recipient of the drugs he dispensed. The defendant then appealed to the highest court in the State of New York, the Court of Appeals. The Court upheld the conviction. The Court of Appeals ruled that, despite law enforcement’s failure to laboratory test all of the drugs obtained in their transactions with the defendant, there was sufficient evidence for a jury to rationally conclude that the pills dispensed to the undercover officer were different from the drugs listed on the prescriptions presented to the defendant. Yes, it was just that simple.

To learn more about New York Health Care Fraud, Federal Health Care Fraud and crimes relating to theft such as Grand Larceny, follow the links found within this entry as well as the linked blog and websites below.

A New York criminal defense firm representing clients in New York State and Federal Health Care Fraud cases, the criminal lawyers at Saland Law PC served as Manhattan prosecutors prior to establishing the defense practice. One of Saland Law PC’s former prosecutors also served and trained in HEAT and the Medicare Fraud Strike Force with the Department of Justice.


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