U.S. Attorney's Office
Southern District of New York
(212) 637-2600
March 26, 2015

Pharmacist Sentenced in Manhattan Federal Court to 36 Months in Prison in Multi-Million-Dollar Medicare/Medicaid Fraud Scheme

Preet Bharara, the United States Attorney for the Southern District of New York, announced that PURNA CHANDRA ARAMALLA was sentenced today to 36 months in prison, and ordered to pay over $7 million in restitution, for conducting a scheme to defraud Medicaid, Medicare, and the New York State-funded AIDS Drug Assistance Program (“ADAP”) through the purchase and sale of illegally diverted prescription drugs, including HIV medication. ARAMALLA was also sentenced for tax evasion. He was sentenced by U.S. District Judge Paul A. Crotty.

Manhattan U.S. Attorney Preet Bharara said: “Purna Aramalla’s prescription drug diversion scheme defrauded millions of dollars from programs established to provide health care assistance for the elderly and indigent. The scheme also jeopardized the health of anyone induced to sell his or her prescription or medication, and anyone who unwittingly purchased repackaged drugs.”

ARAMALLA, a pharmacist, owned and operated A Fair Deal Pharmacy Inc. in Queens, New York, and Quality Drug Inc. in the Bronx, New York. Using these pharmacies, ARAMALLA carried out a multimillion-dollar scheme to defraud the New York State Medicaid, Medicare, and ADAP programs through the sale of diverted prescription drugs, that is, drugs not obtained from legitimate sources.

As part of the scheme, ARAMALLA 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. ARAMALLA 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 second-hand drugs. 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.

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.

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.

In addition to his prison term, ARAMALLA, 67, of Port Washington, New York, 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.

Mr. Bharara praised the outstanding investigative work of the New York FBI Health Care Fraud Task Force and the Internal Revenue Service. He also thanked the U.S. Department of Health and Human Services, Office of Inspector General, the New York State Office of Medicaid Inspector General, and the New York City Human Resources Administration.

The New York FBI Health Care Fraud Task Force was formed in 2007 in an effort to combat health care fraud in the greater New York City area. The task force comprises agents, officers, and investigators from the Federal Bureau of Investigation, the New York City Police Department, the New York State Insurance Fraud Bureau, U.S. Department of Labor, U.S. Office of Personnel Management Inspector General, U.S. Food and Drug Administration, New York State Attorney General’s Office, New York State Office of Medicaid Inspector General, New York State Health and Hospitals Inspector General, and the National Insurance Crime Bureau.

The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Niketh Velamoor and Andrew Adams are in charge of the prosecution.

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