A Port Washington man who ran a scheme to defraud government health programs out of millions of dollars by selling secondhand prescription drugs as "factory fresh" has been sentenced to 3 years in prison and ordered to pay more than $7 million in restitution, federal prosecutors said.
Purna Chandra Aramalla was sentenced Friday for conducting a scheme to defraud Medicaid, Medicare and the state-funded AIDS Drug Assistance Program (ADAP), according to a news release from the office of Preet Bharara, the U.S. attorney for the Southern District of New York.
Aramalla also was sentenced for tax evasion by U.S. District Judge Paul A. Crotty.
Aramalla, 67, a pharmacist who owned two New York City pharmacies, purchased prescription drugs, including high-cost medications used to treat HIV, that were obtained from patients who sold the drugs rather than use them to treat their illnesses, officials said.
He then repackaged and resold those prescription drugs to his customers, as if they were new drugs obtained from legitimate sources. Aramalla requested and received reimbursement from Medicaid, Medicare, and ADAP in connection with these sales, even though these programs would not have been willing to reimburse the cost of secondhand drugs, prosecutors said.
Aramalla operated A Fair Deal Pharmacy Inc. in Queens and Quality Drug Inc. in the Bronx, prosecutors said.
In addition, in some cases, these programs had already paid for the prescription drugs when they were initially dispensed. In order to make the diverted drugs appear to be new drugs from legitimate sources, Aramalla and his co-conspirators used lighter fluid and other means to dissolve the adhesive on the patient labels on prescription bottles so that they could be removed and replaced with new labels, prosecutors said.
Aramalla also sought and obtained reimbursement for prescription drugs that were never actually dispensed to patients. Instead, customers with prescriptions for drugs essentially "sold" their prescriptions to Aramalla, agreeing not to take delivery of the drugs in exchange for a share of the reimbursed proceeds, according to prosecutors.
From January 2010 to September 2013, Aramalla's pharmacies received more than $10 million in reimbursements from Medicaid, Medicare and ADAP that cannot be accounted for by Aramalla's purchases from legitimate wholesalers, officials said.
He was ordered to forfeit $7,503,605, pay restitution to his victims in the same amount, file amended tax returns for the years 2010 through 2012, and pay back taxes and applicable penalties.