17 accused of Medicare fraud

A physician, a pharmacist and 15 others have been charged with bilking Medicare and Medi-Cal out of millions of dollars in an elaborate prescription drug fraud that resulted in the government paying over and over for the same pills.

Using stolen or illegally obtained Medicare beneficiary cards, members of the ring known as “runners” would obtain prescriptions for expensive drugs from Kenneth Wayne Johnson, a Glendale physician, according to a criminal complaint unsealed Thursday in U.S. District Court in Los Angeles.

The runners would fill the prescriptions at pharmacies using the stolen Medicare cards and then funnel the drugs back to other pharmacies involved in the scheme, the complaint alleges. Those pharmacies would then repackage, relabel and dispense the drugs, often — again — to ring members using stolen Medicare cards, the complaint says.

The medications favored by the ring were anti-psychotic drugs, such as Seroquel and Zyprexa, for which Medicare pays pharmacies up to $2,800 a bottle.

The 17 defendants, including Johnson and Phic Lim, the owner of Huntington Pharmacy in San Marino, are accused of billing the Centers for Medicare and Medical Services for $7.3 million in drugs that were prescribed and dispensed in the names of beneficiaries who never used them. Medicare officials said actual losses to the program were much higher.

Officials said that it was the first time the government had broken up a psychiatric drug recycling ring, but that such scams are on the rise because the value of such drugs makes them tempting fraud targets.

“This goes way beyond just a problem medical provider,” Peter Budnetti, a Medicare deputy administrator, said in an interview Thursday. “This is organized. The allegations in this situation speak to a much broader kind of activity that sweeps a lot of people into it.”

The drug recycling ring collected the identities of Medicare beneficiaries in two ways: some were stolen; others were purchased from poor and elderly Medicare and Medi-Cal recipients, the complaint alleges.

The Medicare identification numbers were then submitted to Johnson, who wrote the prescriptions, prosecutors alleged in court documents.

The scheme came to light when Medicare beneficiaries noticed that medications that they didn’t use were being prescribed in their names. They alerted authorities in 2007, a year after the federal government launched Medicare Part D, the prescription drug benefit portion of the national health program.

Medicare officials in Washington said the scheme was one of the biggest and most sophisticated examples of the fraud that has plagued the nation’s prescription drug program since its inception.

Fifteen alleged members of the ring were arrested Thursday and scheduled to appear in court. A 16th reputed ring member already was in custody on a separate fraud case, and a 17th person remained at large.

lisa.girion@latimes.com