Pharmacy fraud costs millions

Babubhai Patel was the owner of about 35 pharmacies in Southeastern Michigan, all contracted to do business with Medicare, Medicaid and Blue Care Blue Shield of Michigan. Most of the pharmacies were in the names of “straw owners” and corporations set up by Patel or at his direction. The ownership and locations of these pharmacies changed frequently. All of them had provider agreements in effect to do business with us and were licensed by the State of Michigan. Patel brought over many people from India to work at his pharmacies. They had visas requiring them to maintain employment to stay in the United States. 

The investigation conducted by the DEA, FBI, U.S. Department of Health and Human Services-Office of Inspector General, and assisted by Corporate and Financial Investigations, showed that Patel was paying kickbacks to providers who would write prescriptions at his direction. He also engaged recruiters who would pay individuals to use their Medicare and insurance contract information. Often times, these individuals were allowed to get controlled drugs in lieu of an actual cash payment. Search warrants were given at most of these pharmacies at the time the arrests were made.

The investigation also showed that prescriptions would be written at Patel’s direction for controlled drugs, such as Vicodin, as well as several more expensive maintenance drugs. The person recruited would leave the pharmacy with his/her Vicodin and we would be billed for the maintenance drugs, which would never be dispensed. Patel would give providers instructions to write prescriptions for expensive drugs, such as lidocaine patches, because he knew he would be paid greater amounts.     

During the time period of Jan. 1, 2006 through Dec. 31, 2010, Patel Pharmacies billed Blue Cross Blue Shield of Michigan about $12.9 million, Medicare about $37.7 million and Medicaid about $20.8 million.

The first round of charges came on July 26, 2011, when the Federal Grand Jury for the Eastern District of Michigan returned indictments against 26 people, including physicians, pharmacists, marketers and an accountant. The charges included health care fraud conspiracy, conspiracy to distribute controlled substances and aiding and abetting both. 

Searches and arrests were done on Aug. 2, 2011, and a trial was held on Aug. 10, 2012. Prior to the trial, there were nine guilty pleas entered in U.S. District Court, Eastern District of Michigan. At the end of the trial, there were six people found guilty by a jury, including Babubhai Patel, who was sentenced to 17 years in prison and ordered to pay restitution in the amount of $1,589,968.00. 

On Feb. 7, 2013, a superseding indictment was returned by the Federal Grand Jury for the Eastern District of Michigan, charging 14 more people and adding charges to four people from the initial indictment. In addition to the charges in the initial indictment, charges were added for conspiracy to receive health care kickbacks. There are currently fugitives in India and Canada. 

A trial is currently scheduled in U.S. District Court, Eastern District of Michigan on June 10, 2013, for the remaining defendants from the initial indictment. There have been negotiations underway for additional guilty pleas.

There have been no pleas entered or trial date set as a result of the superseding indictment.

Blue Cross Blue Shield of Michigan members who suspect health care fraud should call our Anti-Fraud Hotline at 1-800-482-3787 or report fraud through our website.