UC uncovers scheme that allegedly stole $12 million via student health plan

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Updated 4/21/2017: This article has been updated to reflect additional information from legal documentation. 

The University of California filed a lawsuit Thursday against several organizations and individuals for allegedly running a scheme using university student health plan information to steal nearly $12 million in fraudulent medical prescription.

The university said in a press release that is plans to file a motion for a temporary restraining order Friday morning in Los Angeles County Superior Court against the party in order to immediately stop the alleged scheme. In the motion, the university alleged that the scheme convinced more than 500 students to disclose their sensitive personal information through methods such as a Facebook ad promising $550 in cash for participating in “clinical trials,” the press release stated.

“Our first priority is to our students,” said Dr. John Stobo, executive vice president for UC Health, in the press release. “This needs to be immediately stopped. We have identified nine different health care providers who prescribed medications to these students, likely without any indication of physical exams or even a physician-patient relationship.”

As of press time, the scheme has not made any impact on UC Berkeley students, according to University Health Services spokesperson Kim LaPean. Berkeley students with health insurance are covered by a plan separate from UC SHIP.

The press release said that in one day, the single podiatrist based in City of Industry allegedly wrote 600 prescriptions for three medications at a cost of more than $1.7 million.

The university is also arranging “entity protection services for all affected individuals,” according to the press release, and is in the process of notifying affected students.

Most of the 3200 prescriptions were filled before April 13 at the same location in Studio City, approximately 13 miles from UCLA. According to the court document, the scheme drew $1 million a week at times from UC SHIP.

According to the court document, fraudulent Facebook ads were posted on student group pages for UCLA, UC Riverside, UC San Diego, and UC Irvine. The document notes that the pages are likely to be frequented by economically disadvantaged students. Additionally, the ads required that students have UC SHIP membership in order to participate in the “clinical trials.”

Pharma Pro LLC, a recruiting company, was allegedly present at UC Riverside for a job fair around October 2016. Representatives allegedly told students that the company was recruiting for their sales team, but that students had to be “evaluated for medical eligibility” and were required to write down personal information, including their UC SHIP number. Additionally, Pharma Pro allegedly required students to waive their right to privacy under HIPAA and consent to releasing their medical records.

The document alleges that Pharma Pro has repeatedly appeared at job fairs at various UC campuses, as recently as April 2017.

According to the document, the majority of prescriptions that were given out between October 2016 and April 2017 were unusually expensive drugs: Dermacin and Inflammacin. Both drugs essentially act as painkillers, as noted in the document, but are astronomically more expensive, and are generally used to treat osteoarthritis — a condition common among the elderly, but rare among college-age students.

UC blocked Dermacin and Inflammation coverage mid-March 2017 — almost immediately, UC SHIP had a dramatic increase in prescriptions for Dicloflex, another incredibly expensive drug. According to the document, the pattern continued even after April 18, when UC SHIP blocked the aforementioned drugs from coverage.

The defendants allegedly attempted to fill hundreds of prescriptions at a different pharmacy, Excel Care Pharmacy, for exorbitantly expensive drugs, resulting in an additional $1.77 million loss for UC SHIP.

The document alleges that the same person, Fauzia Khan, is responsible for filling prescriptions at both Studio City and Excel Care Pharmacies.

“When you rip off a UC program, you’re taking public money, period,” said UC General Counsel Charles Robinson in the press release.

Contact Pressly Pratt and Revati Thatte at [email protected].