DEC 8 (HOUSTON, Texas) - Four people have been charged in a $17 million health insurance fraud scheme involving the sale of ketamine to patients without a valid prescription, announced U.S. Attorney Kenneth Magidson along with Special Agent in Charge Catherine A. Hermsen, Food and Drug Administration - Office of Criminal Investigations (FDA-OCI), Kansas City Field Office and Drug Enforcement Administration Special Agent in Charge Joseph M. Arabit, Houston Division
Dr. Michael Kelly, 71, of The Woodlands, surrendered to federal authorities today as did Priscilla Orosco, 32, and Joyce Ann Gilmore-James, 67, both of Houston. Kelly is expected to make his initial appearance before U.S. Magistrate Judge Frances Stacy at 10:00 a.m. today. Orosco and Gilmore-James are also expected to appear today, either at 10:00 a.m. or at 2:00 p.m. before Judge Stacy. A fourth defendant - Tamara Mitchell, 49, of Fulshear - had been originally charged by criminal complaint and made an initial appearance. She is set for her arraignment on the indictment before Judge Stacy Dec. 11, 2015, at 10:00 a.m.
The defendants are charged with conspiracy to commit wire fraud, unlawfully distributing a controlled substance and aiding the unlawful distribution of ketamine.
The four-count indictment alleges Mitchell was an owner of two pharmacies, Diamond and Save Rite, that sold controlled substances as part of a marketing scheme, rather than for legitimate medical need. Diamond Pharmacy and Save Rite almost exclusively sold compounded creams containing prescription drugs and ketamine to the public by using pre-signed prescriptions to fill orders for customers, who had the “right” insurance plans, according to the charges .
Mitchell allegedly hired pharmacy technician Orosco and pharmacist Gilmore-James to conduct the day-to-day operations of the business. The indictment alleges Diamond Pharmacy paid Kelly thousands of dollars per month to provide pre-signed prescriptions without examining patients. Diamond and Save Rite then allegedly billed insurance companies for compounded creams containing controlled substances.
The scheme allegedly resulted in $17 million in fraudulent billings over the course of the two-year conspiracy.
“U.S. consumers rely on the FDA to ensure that the prescription medications they use are both safe and effective,” said Hermsen. “We are committed to bringing to justice those who attempt to circumvent FDA’s consumer protections.”
If convicted of the wire fraud conspiracy, the four defendants face up to 20 years in federal prison and a possible $250,000 maximum fine. They also face another 10 years for both the conspiracy to distribute and for aiding the distribution of Ketamine as well as a possible $500,000 fine. The charges were the result of an investigation conducted by FDA-OCI and Drug Enforcement Administration. An indictment is a formal accusation of criminal conduct, not evidence. A defendant is presumed innocent unless convicted through due process of law.
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