Owners of NY pharmacies charged in a $30 Million COVID-19 healthcare fraud and money laundering case

Jan. 6, 2021

The owners of over a dozen New York-area pharmacies were charged in an indictment unsealed for their roles in a $30 million healthcare fraud and money laundering scheme, in which they exploited emergency codes and edits in the Medicare system that went into effect due to the COVID-19 pandemic in order to submit fraudulent claims for expensive cancer drugs that were never provided, ordered, or authorized by medical professionals, reported the U.S. Department of Justice. 

Peter Khaim, 40, and Arkadiy Khaimov, 37, both from New York, each were charged with one count of conspiracy to commit healthcare fraud and wire fraud, and one count of conspiracy to commit money laundering. Khaim was separately charged with two counts of concealment money laundering and one count of aggravated identity theft. Khaimov was separately charged with two counts of concealment money laundering. 

According to the indictment, the defendants used COVID-19 emergency override billing codes in order to submit fraudulent claims to Medicare, for which they were allegedly paid over $30 million for expensive cancer medication Targretin Gel 1 percent that, in fact, never was purchased by the pharmacies, prescribed by physicians, or dispensed to patients, often during periods when pharmacies were non-operational, and using doctors’ names on prescriptions without their permission. 

The indictment alleges that the defendants acquired control over dozens of New York pharmacies by paying others to pose as the owners of the pharmacies and hiring pharmacists to pretend to be supervising pharmacists at the pharmacies, for the purpose of obtaining pharmacy licenses and insurance plan credentialing. As the effects of the COVID-19 pandemic began to be felt in the United States, the defendants used the COVID-19 pandemic as an opportunity to capitalize on a national emergency for their own financial gain by using the COVID-19 “emergency override” billing codes to submit fraudulent claims for Targretin Gel 1 percent, which has an average wholesale price of approximately $34,000 for each 60-gram tube. 

The indictment also alleges that, with the proceeds of the fraud, the defendants engaged in a complex money laundering conspiracy where they created sham pharmacy wholesale companies, which they named after pre-existing pharmacy wholesalers, and fabricated invoices to make it appear that funds transferred from the pharmacies to the sham pharmacy wholesale companies were for legitimate pharmaceutical drug purchases. 

In the first phase of the money laundering conspiracy, the defendants conspired with an international money launderer who arranged for funds to be wired from the sham pharmacy wholesale companies to companies in China for distribution to individuals in Uzbekistan. In exchange, the defendants received cash provided by members of the Uzbekistani immigrant community to an unlicensed money transfer business for remittance to their relatives in Uzbekistan, minus a commission that was deducted by the money launderer. 

In the second phase of the money laundering conspiracy, when the amount of fraudulent proceeds exceeded the amount of cash available in the Uzbekistani immigrant community, the defendants directed the international money launderer to transfer funds back from the sham wholesale companies to the defendants, their relatives, or their designees, in the form of certified cashier’s checks and bags of cash that were dropped at their house in the middle of the night. The defendants used the proceeds of the scheme to purchase real estate and other luxury items. 

U.S. Department of Justice has the release

More COVID-19 coverage HERE.