Local Pharmacists Indicted in Massive Fraud and Drug Dealing Scheme

Fountain Valley, Irvine and Huntington Beach pharmacists were among 16 defendants indicted by a federal grand jury this month for allegedly being part of a massive drug trafficking organization that illegally obtained OxyContin pills, partly through fraudulent prescriptions billed to programs such as Medicare and selling them on the street, reaping millions of dollars in profits.

Elizabeth Duc Tran, 47, of Fountain Valley, the owner-operator of Mission Pharmacy in Fountain Valley pleaded not guilty this month along with the 15 other defendants who have been ordered to stand trial next month. Perry Tan Nguyen, 54, of Huntington Beach, the owner-operator of St. Paul’s Pharmacy in Huntington Park, also pleaded not guilty as did Irvine’s Matthew Cho, a 48-year-old part-owner of a chain of pharmacies.

Neither Tran, Nguyen or Cho could be reached for comment.

Prosecutors outline a scheme in which a medical clinic was used as a base of operations for doctors, who wrote OxyContin prescriptions for Medicare and Medi-Cal beneficiaries, as well as other patients, who did not need the powerful painkiller. The OxyContin was obtained from local pharmacies, some of which submitted fraudulent bills to the public insurance programs, the justice department contends. Members of the conspiracy allegedly resold more than 900,000 OxyContin pills on the street for between approximately $23 and $27 per pill.

Prosecutors contend that Lake Medical Group used recruiters to bring Medicare and Medi-Cal patients to the clinic in exchange for cash or other rewards. The “patients” were seen by a medical doctor or physician’s assistant, who would provide a prescription for a high dosage of OxyContin – usually 90 pills at 80mg strength – and order unnecessary medical tests and procedures to help justify the OxyContin prescriptions, Department of Justice spokesman Thom Mrozek said in a written release.

“Runners” employed by the Lake Medical Group took the recruited “patients” to pharmacies, where they obtained the OxyContin, which was then diverted to a dealer, who sold it on the street, Mrozek added.

Lake Medical Group operated for approximately 18 months, during which time doctors working at the clinic prescribed OxyContin approximately 10,833 times, billing Medicare for more than $2.7 million for OxyContin prescriptions, according to investigators.

Between 2008 and 2010, the clinic and its doctors fraudulently billed Medicare approximately $4.6 million and Medi-Cal approximately $1.6 million for medical services that were allegedly either not performed or were unnecessary, according to the indictment.

The investigation into the OxyContin distribution/Medicare fraud ring was called Operation “Dirty Lake.”

To deal with the large amounts of cash generated from the illegal OxyContin sales, some of the defendants allegedly “structured” cash deposits by making bank deposits in amounts of $10,000 or less to evade bank reporting requirements, Mrozek said.

According to the Department of Justice, the indictment replaces charges filed a year ago, adding new charges of money laundering and structuring of cash transactions. The indictment alleges a conspiracy to distribute controlled substances, a conspiracy to commit health care fraud, structuring financial transactions and money laundering. The indictment also seeks the forfeiture of proceeds related to the criminal offenses.

According to the Department of Justice:

• Some defendants used proceeds from the sale of OxyContin to gamble at casinos, to purchase automobiles and jewelry, and to buy more OxyContin.
• The scheme allegedly was orchestrated by Mike Mikaelian and Anjelika Sanamian, who operated the Lake Medical Group in Los Angeles. The indictment describes Lake Medical Group as a “prescription mill” that both generated prescriptions for unneeded OxyContin and submitted claims to Medicare and Medi-Cal for medical services that were unnecessary or were never performed.
• The indictment alleges that Dr. Morris Halfon and other physicians based at Lake Medical Group knowingly diverted the OxyContin by prescribing it to individuals who did not have a medical need. The indictment further alleges that a significant percentage of the prescriptions were filled at Southland pharmacies such as Tran’s.

Additional pharmacists indicted include:

• Phic Lim, 44, of Pasadena, a pharmacist who was part-owner of a chain of pharmacies and who allegedly structured cash deposits
• Theana Khou, 40, of Pasadena, who along with Lim co-owned the Huntington Pharmacy in San Marino and who allegedly structured cash deposits