Pharmacist Convicted in Multi-Million Dollar Black Market HIV Drug Scam

Through a shell company, a New York pharmacist improperly billed Medicaid and others $274 million for illegally obtained HIV drugs.

A pharmacist was recently found guilty of distributing black market HIV medications that lead to millions of dollars in profit from illegal billings.

Pharmacist Ira Gross, 63, and his shell company Chaparral Services, LTD, were found guilty after a 4-week trial for the distribution of HIV medications illegally obtained from the black market and distributed to patients, profiting him $25 million, according to the New York Attorney General’s office. As part of the scheme, Medicaid and others were illegally billed $274 million, according to the press release.

Gross was found guilty by a Suffolk County Supreme Court jury of grand larceny, criminal diversion of prescription medications and prescriptions, and conspiracy. He faces a state prison sentence of up to 8 and one-third years to 25 years. His company, Chaparral Services, was found guilty of commercial bribing and money laundering.

“The perpetrators of this complex scheme not only cheated the state Medicaid program out of millions of dollars, but preyed on some of New York’s most vulnerable patients just to make a quick buck,” said Attorney General Eric T. Schneiderman in a press release. “These convictions should send a clear message that my office will not tolerate these types of abhorrent schemes. If you seek to line your pockets at the expense of the health and well-being of New Yorkers, you will be punished.”

In April 2012, Gross and 3 others were arrested for distributing HIV drugs obtained on the black market through MOMS pharmacy, a high-volume, online pharmacy that dispensed the illegally-obtained medications, and billed the New York State Medicaid program. Gross served as the broker between the buyer and seller of the medications, according to the press release.

Typically, black market deals are conducted by illegally obtaining medications from different sources, including buying back drugs from patients and rebottling them using fake labels and serial numbers, refilling bottles with a different medication than what’s indicated on the label, or pill bottles with broken seals.

In March 2016, the supervising pharmacist and compliance officer for MOMS pharmacy, Glenn Schabel, pled guilty and admitted to accepting more than $5 million in bribes during a 4-year period, according to the attorney general.

Stephen Manuel Costa, an additional co-defendant who pled guilty at an earlier date, incorporated 4 separate entities as “wholesale” distributors so he could disguise the sale of the diverted medications to MOMS, according to the press release. His companies were Fidelity Wholesale, Nuline Pharmaceuticals, Optimus Wholesale, and SMC Distributors.

The 4 shell companies were used to sell millions of dollars of black market HIV medication to MOMS, who in turn dispensed the medications to its patients, many of which were Medicaid recipients, according to the press release. The medications were obtained from the street using various illegal means, and in batches that potentially included pills previously dispensed to individuals, had expired, or were stolen from manufacturers, according to the attorney general.

Harry Abolafia was the fourth defendant to pled guilty at an earlier date for creating false invoices for Costa’s 4 shell companies to make it seem as though the transactions were legitimate.

On behalf of MOMS Pharmacy, Schabel purchased a total of $274 million worth of HIV black market medications from Costa through Gross, according to the attorney general. For their efforts, Schabel and Abolafia were paid more than $5 million, and profited more than $1 million, respectively, while Gross made $25 million in illegal profits.