Fifteen people were arrested Thursday on suspicion of taking part in an elaborate $18-million Medicare fraud scheme that officials say involved a pharmacy in San Marino and a Glendale medical clinic.
The scheme involved so-called “prescription harvesting,” in which Manor Medical Imaging Clinic and San Gabriel Valley pharmacies allegedly re-billed the government repeatedly for anti-psychotic medications, according to a federal criminal complaint unsealed Thursday.
A total of 17 people were named in the complaint. One person was arrested earlier this month, 15 were taken into custody during the early morning sweep, and one remains at large, according to the U.S. Attorney's Office.
The U.S. Attorney's Office alleged that prescriptions written by a doctor at a bogus branch of Manor Medical Imaging Clinic were funneled back to pharmacies via a fraudulent drug wholesale company.
Since the anti-psychotic drugs are significantly more expensive than many other mediations, authorities said the re-billing for the drugs — including Abilify, Seroquel and Zyprexa — can be lucrative.
The primary pharmacy allegedly involved in the scheme, Huntington Pharmacy in San Marino, billed Medi-Cal — the state-administered Medicare program for low-income people — nearly $45,000 in 2009, but that figure jumped to nearly $1.5 million in 2010, according to the U.S. Attorney's Office.
Federal authorities alleged that the vast majority of those claims were for prescriptions written by Manor's in-house doctor, Kenneth W. Johnson, 44, of Ladera Heights.
Federal authorities said it is the first case involving the use of anti-psychotic drugs to defraud government healthcare programs.
Agents from the Drug Enforcement Administration scoured Huntington Pharmacy in San Marino as a “closed” sign caught a handful of customers and employees unaware.
Hours later, the pharmacy's co-owner, 47-year-old Phic Lim of Pasadena, posted $100,000 bail in U.S. District Court in Los Angeles. He was forced to turn over his passport. His wife and business partner, Theana Khou, 39, of Pasadena, was assigned bail of $50,000.
The pair's pharmacy was adjacent to a business owned by San Marino City Councilman Eugene Sun, who on Thursday said he was surprised by the allegations.
“I would notice a couple of old, beat up vehicles with people waiting inside,” Sun said. “Other than that, I never noticed anything suspicious. I'm surprised.”
Sarah Kelley, who works at a marketing business off San Marino's business district along Huntington Boulevard, also said she noticed unusual vehicle activity.
“I would see people in unmarked vans loading and unloading what looked like meds,” Kelley said. “It was just weird to see an unmarked van delivering to a pharmacy.”
San Marino authorities first caught wind of the alleged scheme after receiving calls about the suspicious vehicles dropping what appeared to be homeless people off at the pharmacy, said police Sgt. Jay Wilburn.
In September 2009, the police department launched an investigation involving suspicious transactions at the pharmacy. During that time, police said they observed carloads of people from out of town filling their prescriptions.
“There was a large number of vehicles and vans dropping off people who were loitering for hours,” Wilburn said.
Due to the complexity of the operation, local authorities contacted the California Department of Justice, which took the lead in the investigation. The alleged defrauding of Medicare brought in the U.S. Attorney's Office.
It took hours to process the defendants in the Los Angeles courtroom Thursday. Some family members quietly sobbed, while others conferred with attorneys in attempt to come up with bail money.
Authorities hailed the multi-agency operation, which involved more than 200 agents and police officers.
“With limited resources and the sophisticated criminal enterprises operating here and abroad, our partnerships are invaluable in protecting our communities,” Glendale Police Chief Ron De Pompa said in a statement.
Attempts to reach Manor Medical Imaging Clinic were unsuccessful. The listed office address, in the 200 block of North Central Avenue in Glendale, was apparently vacant.
Lim, the pharmacy co-owner, is due back in federal court on Dec. 5.Copyright © 2015, Los Angeles Times