Brothers Sentenced in Multimillion-Dollar COVID-19 Pharmacy Fraud Scheme

Brothers and pharmacy owners Peter Khaim and Arkadiy Khaimov, both of Forest Hills, N.Y., have been sentenced to prison for their roles in a Medicare fraud scheme that took advantage of the leiniencies extended to healthcare providers during the COVID-19 pandemic.

Khaim received eight years and one month and Khaimov received six years for their roles in this pharmacy fraud scheme, a complex money laundering and healthcare fraud scheme involving 16 New York area pharmacies that they and their co-conspirators owned and controlled.

The Allegations

It was alleged in this pharmacy fraud scheme, that they exploited the COVID-19 “emergency override” billing codes to submit fraudulent claims for two expensive cancer medications — Targretin Gel 1% and Panretin Gel 0.1% — that were not prescribed by physicians or dispensed to patients. The wholesale price for Targretin, which is used in the treatment of skin problems relating to cutaneious T-cell lymphoma, typically costs more than $34,000 for each 60-gram tube.

Its use is generally covered only if other medications are not effective and prior authorization is required for a pharmacy to be reimbursed. However, during the pandemic, pre-authorization requirements were being waived to ensure that patients got their medications.

In some cases, the drugs were being “dispensed” by pharmacies that were out of business, not licensed, had no employees, and had no supervising pharmacist as required by law.

In all, there were $39 million in claims for Targretin Gel I% and $6 million in claims for Panretin Gel 0.1%

Hiding Identities and Profits

According to the indictment, the two paid others to open bank accounts by falsely representing their respective ownership rights to the pharmacies to hide their identities, when in fact the brothers owned and controlled the pharmacies and the associated bank accounts. In addition, it was alleged they paid licensed pharmacists to act as supervising pharmacists to perpetuate the healthcare fraud scheme.

To conceal the more than $18 million of their criminal proceeds gained during this pharmacy fraud scheme, Khaim, Khaimov, and their co-conspirators funneled money through several shell companies, including sham pharmacy wholesale companies set up to look like legitimate wholesalers.

The two typically sent the money from the pharmacy bank accounts they controlled to the sham wholesale companies. The money was then typically funneled to companies in China for distribution to individuals in Uzbekistan.

The same amount of cash was sent back to them from a co-conspirator, minus a commission. At other times, the fraudulent proceeds were sent from the sham wholesale companies to Khaim, Khaimov, their relatives, or their designees, in the form of certified cashier’s checks and cash. Khaim and Khaimov used the proceeds of the healthcare scheme to purchase real estate and other luxury items including jewelry.

Last November, both men pleaded guilty to one count of conspiracy to commit money laundering. Khaim was ordered to pay more than $18 million in restitution and to forfeit more than $2.7 million. Khaimov was ordered to pay more than $18 million in restitution and to forfeit more than $9.6 million. 

Defendant Previously Charged and Sentenced

This wasn’t the first pharmacy fraud case involving one of the brothers. In May 2022, Arkadiy Khaimov was sentenced to 51 months in prison for defrauding a pharmaceutical manufacturer of approximately $7.2 million by submitting fraudulent claims under the manufacturer’s Co-pay Coupon Program.

According to court documents, between February 2017 and July 2018, Khaimov and his co-conspirators used the computers of pharmacies they operated in Queens and Manhattan to submit claims for approximately $7.2 million in reimbursements under the Co-pay Coupon Program for medications that the pharmacies never actually dispensed. In some cases, Khaimov and his co-conspirators fraudulently used the credentials of a Nassau County-based physician to submit the false claims.

As part of the sentence, Khaimov was ordered to forfeit approximately $489,000 as proceeds involved in the fraudulent healthcare scheme and to pay restitution of approximately $7.2 million. In August 2020, Khaimov pleaded guilty to conspiracy to commit mail and wire fraud.

How We Can Help

COVID-related fraud began heating up just months into the pandemic. Everyone from durable medical equipment providers to telemedicine companies, have been charged. In May 2021, the U.S. Department of Justice launched the COVID-19 Fraud Enforcement Task Force. In doing so, U.S. Attorney General Merrick B. Garland stated: “The Department of Justice will use every available federal tool—including criminal, civil, and administrative actions—to combat and prevent COVID-19 related fraud.”

Four years after the start of the pandemic, many of those who sought to prosper from the emergency are being convicted or pleading guilty. This case involved a concerted effort by federal agencies including the FBI, IRS Criminal Division, HHS Office of Inspector General, and FDIC Office of Inspector General.

Should you find yourself the target of an investigation, having an experienced healthcare lawyer on your side is imperative. At The Health Law Offices of Anthony C. Vitale, we can provide the support and guidance you need to protect your practice, your reputation, and maintain your professional integrity. Contact us for additional information at 305-358-4500 or send us an email to info@vitalehealthlaw.com