Bad Medicine

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Carmine Passero’s room in the Bronx is at the dead end of a windowless corridor that smells of bleach and cold turkey. As he hunches on the edge of his single bed, he looks gaunt and tired; one of the effects of HIV medicine is jaundice, and Passero’s skin is sallow and pitted with acne scars. A bedbug crawls across the sheets. The critters, he says, come with the room.

Passero has been HIV positive since 1989, and for years his viral load–the amount of HIV in his bloodstream–was undetectable. But then heroin got the better of him, and Passero started to sell the only commodity he had: his HIV medication. His viral load shot up, from less than 50 per ml of blood to 200,000.

Passero’s doctor saw what was happening and stopped writing his prescriptions. “If you don’t care about your health, why should I care?” his doctor told him. “When you’re ready to go back on them, let me know.”

Anyone who needs a fix badly enough to sell their meds knows all about the street corners in Hell’s Kitchen and Washington Heights, where dealers buy up prescription drugs for knock down prices. All Passero had to do to get money for a hit was take the subway a few stops to 59th and Ninth and his monthly supply of Kaletra, Sustiva, Videx and Viracept–anti-retrovirals that fight AIDS–was quickly converted to cash.

Passero contributed to a black market worth tens of millions of dollars annually in New York City, and hundreds of millions nationwide. In four recent cases across the city investigated by the New York State Attorney General’s Office, fraudulent claims for HIV medications cost Medicaid an estimated $2.8 million.

In another case this April, after an investigation that lasted close to a year and ranged across Utah, New York, New Jersey and California, a federal grand jury indicted six individuals and six businesses with mail fraud and drug diversion. The conspiracy involved more than 40 different types of drugs–many for the treatment of HIV and AIDS–and more than 80 pharmacies are part of an ongoing investigation of the distribution of the drugs.

“It’s having an unbelievable impact on the system,” says Ken Karp, a police officer investigator with the Attorney General’s Medicaid Fraud Control Unit and president of the New York State chapter of the National Association of Drug Diversion Investigators (NADDI). “It’s like keeping control on gold or money. It’s such a valuable commodity, there are people hijacking shipments at airports.”

On average, an HIV positive Medicaid recipient receives $2,000 worth of medication a month. But a single bottle of pills can have a retail value of $1,700, and one month’s supply of Serostim–a growth hormone sometimes prescribed to combat wasting from AIDS–is worth $5,000. On the street, depending on the type of drug and the state of the person selling it, a month’s supply of meds can fetch anywhere from $50 to $600.

In short, it is possible for someone on SSI, receiving $400 to $600 per month, to double his or her income in one shot. For a person trapped in the moment-to-moment crisis of homelessness and drug addiction, the immediate benefit of selling their meds often outweighs the abstract concept of extending their life.


The dealers are known on the street as “the non-man,” or “non-control”–men dealing in noncontrolled substances, drugs that don’t get you high. They loiter on corners in Midtown and Washington Heights, waiting for addicts to turn up from all over New York. In seconds, they exchange wads of cash for plastic bags full of medication. The dealers pass the drugs on to crooked pharmacies that pay about $800 for $2,000 worth of medication. The next time a patient comes in with a prescription, instead of dispensing drugs bought at full cost from a supplier, the pharmacist hands over the street-bought meds, bills Medicaid for the full amount, and makes a fat profit. Sometimes the pharmacies simply buy a patient’s script and bill Medicaid for drugs that were never ordered.

Jaime is an old pro who’s been hustling for nearly 20 years. Propped on a tin chair in the corner of the examining room of the New York Diagnostic Centers in Midtown, he’s barrel-chested and big bellied. There is a deep scar bisecting his left eyebrow, and he’s missing one of his front teeth.

Jaime pitches out of his chair, steps past the spaghetti of blood pressure tubing hanging above the examination couch, and plucks a chart off the wall. It looks like a jelly bean menu, but instead of candy it depicts the multicolored lozenges and diamonds of the HIV regimen, alongside their names and side effects. He peers at the small writing by each pill and works down the list with a thick thumb, checking off the street prices for each as he goes–Epivir: $50. Reyataz: $50, Kaletra: $35 to $40. Retrovir: $35.

Now 35, Jaime tested positive for HIV when he was 19–infected perhaps from shared needles, perhaps from a woman he knew once, he isn’t certain. Jaime’s right knee shakes when he talks about it, and he isn’t sure it matters anyway. He says that he only ever sells his methadone, and, though tempted by the money, never his AIDS medication.

He can describe the system in minute detail. The hawker on the street holds some of the money and drugs, exchanging cash for bottles of pills, while a middleman ferries back and forth, supplying him with money and passing the drugs on to small pharmacies and bodegas. They even have solvents to take the stickers off the bottles, ready for restocking the pharmacist’s shelves.

On a hot day in Hell’s Kitchen, trade is brisk, and to the untrained eye, invisible. But as Jaime hustles up and down Eighth and Ninth avenues, pointing out the dealers and buyers looming up through the crowd, it’s as if he has dimmed the lights and turned on a UV bulb.

Jaime gives a quick, urgent nod across the street at a short man in oversized pants, black T-shirt and a backwards black-and-red baseball cap, rushing to Ninth Avenue. He has the junkie strut: shoulders too far back and jittery like a broken windup toy.

Skittering behind him are two small men, one younger with a black-and-yellow sweatshirt and a backpack, the other middle-aged, bald, and wearing a black leather jacket. They’re both gripping small white bags, knotted tight so that their contents are balled up at the end of a skinny stretch of plastic string. One has the typical red outline of a smiley face used on the shopping bags of local pharmacies.

Black-and-red runs across Ninth Avenue with the other two trailing close. As the three hurry south, they join a fourth man, wearing a black baseball cap and carrying a bulging blue plastic bag. They cross 48th Street. The newcomer takes one of the white bags from the man in the yellow sweatshirt and unknots it with his teeth. He peers inside and examines its contents, their hands meet, and sweatshirt peels off empty-handed.

The remaining three jostle to a halt around a pay phone. Black-and-red cap pulls out a bundle of notes, the man in a black leather jacket ducks away, and the two dealers march off up the street, shoulders back, heads jerking from side to side, the bag’s plastic sides straining a little more tightly.


The money made on the street is modest compared to the heavy doses of cash absorbed by the pharmacies, and often without any medication changing hands.

In May 2004, Newton Igbinaduwa, owner of Aduwa Pharmacy on Sutphin Boulevard in Jamaica, Queens, pleaded guilty to charges that he defrauded Medicaid out of more than $800,000 in AIDS medication. Between 1998 and 2003 he submitted thousands of claims to Medicaid for HIV medicines including, Combivir, Crixivan, Epivir, Kaletra, Procrit, Sustiva, Trizivir, Viracept and Zerit.

Igbinaduwa rarely paid cash for the prescriptions. He simply traded scripts for over-the-counter goods such as toothpaste, shaving cream, nail polish, lipstick and hairspray. Unfortunately for Igbinaduwa, a number of his clients turned out to be undercover officers from the Attorney General’s Medicaid Fraud Control Unit. He was sentenced to six months in jail and five years probation.

That same month, Albert and Hector Perez, who ran a pharmacy in Washington Heights–one of Manhattan’s most notorious underground marketplaces for HIV medicine–were indicted in a similar scheme. According to prosecutors, they either paid cash for prescriptions or allowed Medicaid recipients to trade their prescriptions for other drugs such as Viagra or Tylenol 3. The racket is alleged to have made them more than $800,000. This April they pleaded guilty to grand larceny in the third degree and were due to be sentenced in June.

In a third recent case, Narendra Patel, the owner of Merrick Boulevard Pharmacy, also in Jamaica, paid cash for scripts and then billed Medicaid for $750,000 worth of drugs that he never stocked. He’s been sentenced to six months in jail.

Private insurance companies estimate that, in total, fraud amounts to 10 percent of the state Medicaid budget.

The Attorney General’s office does not keep statistics on what proportion of its budget goes to AIDS Medicaid fraud. Kevin Ryan, press officer with the Attorney General’s Medicaid Fraud Control Unit, ventures an informed guess: “If you’re talking in terms of dollars, pharmacy fraud is up there, especially with HIV because [the drugs] are so expensive.”

Here’s some back-of-a-napkin math. In the latest report published by the New York State Department of Health, in 2002, the total cost of HIV treatment to Medicaid recipients was just under $2 billion. Of this, nearly a third, $590 million, went to pharmacies. If the same level of fraud throughout Medicaid applies to HIV pharmaceuticals as well, 10 percent of that is lost to the street trade–nearly $60 million a year.


Jaime’s midtown single room occupancy (SRO) residence is calm and clean, and he says he’s been off heroin for several months. Monique Binford, his medical provider at New York Diagnostic Centers, says that one has a lot to do with the other.

Binford, who has known about the trade in HIV meds since she worked in Red Hook in 1997, sees her clients’ struggles with chaotic lives, mental health problems and unstable living conditions as the main reason they sell their meds. In her experience, patients often use the meds not only for drugs but as supplemental income for food and living expenses. She estimates that up to two-thirds of her patients are either in transitional housing or homeless. “If you can’t meet a person’s food, shelter, clothing issues, how can you have them focus on their health?” she asks. “There’s numerous times we come in and patients haven’t eaten for two days.”

She also contends with ignorance and distrust of professional medicine. “A lot of them don’t buy into the health care system being there to do any good for them,” says Binford. “Especially the HIV patients–they think the system has developed HIV or AIDS to destroy them.” Pharmaceutical companies are simply part of the conspiracy.

The illicit drug trade is another story. For many SRO residents, heroin, cocaine and other drugs are never far from home. Carmine Passero shuts himself up in his room with his small television set and his piles of medication, and tries to resist the drugs for sale merely a few steps and a door knock away.

Passero was released from prison in 2000 after a five-year stretch–a period that he says saved his life. A lot of the people he knew before serving time are dead. Inside, he was given protease inhibitors and three meals a day. When he was freed, he was even a little overweight. It’s his life on the outside that’s the problem. With nowhere to go on his release, Passero has been living in SROs ever since. He was first housed in one that “was unbelievably disgusting, terrible,” he recalls. “I was in a room as big as my jail cell.”

He fought to get out of there, and he now lives in Bronx SRO–”a crack hotel,” he calls it. Many of the residents are users, and dealers pass freely in and out of the building. The man behind a grimy plastic window barely looks up as he buzzes the door open without any questions. At the end of last year, a girl fell from the roof and died. “I go back and forth to my program and I stay in my room and watch the TV,” he says. “I fight it every day. I stay here and I sweat it out.”

The isolation doesn’t do him much good either. “That’s when the bipolar kicks in,” he says, “and I start thinking about all that stuff that’s negative which leads you straight back to the needle.

“As an addict with AIDS, they’re taking care of your medical problem, but you’re still an addict,” he says. “They’re giving us all they can, and I’m grateful, but it’s like a merry-go-round: drugs, jail, here, drugs, jail, here.”


The AIDS drug trade confronts care providers with a difficult dilemma: They don’t want to take patients off their medication, but neither do they want to finance their drug use. And doctors need to protect themselves: Medicaid routinely investigates physicians whose records show that they prescribe large quantities of high-value meds, such as the ones used to control HIV.

Then there are the feds. Controlled drugs, such as Oxycontin and Vicodin–powerful painkillers with a high street value as alternatives to heroin–are tracked by the Drug Enforcement Agency (DEA). Nonetheless, as a primary care provider for HIV patients, Binford often needs to treat patients who are in severe pain. “Say you see 300 patients and maybe 100 of them are on Oxycontin. That’s going to flag,” she says. “There’s a catch-22: How do you prevent the sale of the narcotics but yet assist the people who really need it?”

One way is to limit both the number of care providers from whom a patient can claim their prescriptions and the number of pharmacies where they can have them filled. Chronic abusers may be restricted to a single doctor and a single pharmacy. But even this can’t prevent someone from selling their meds once they get them.

Another way is to snuff out the trade at its source. Besides the Attorney General’s Medicaid Fraud Control Unit, agencies investigating illegal pharmaceutical sales include the city Human Resources Administration (HRA), the New York State Bureau of Controlled Substances, the Department of Health (DOH), the Food and Drug Administration (FDA), and the Federal Bureau of Investigation (FBI).

HRA carries out stings of pharmacies that buy HIV drugs illicitly, and it claims to have a report detailing how its fraud investigation bureau has saved $80 million in Medicaid fraud in the last year alone. The agency declined to permit an interview with investigators.

Karp from the Attorney General’s office recognizes that even with a battery of bureaus on the case, the fight against the black market in prescription drugs, including HIV medication, is “like bailing out the ocean. You can put a dent in it and be a good cop, but people want their drugs.”

New York has a good incentive to keep HIV drug fraud under control. State Medicaid costs overall are spiraling upward, driven primarily by long term care for the old and dying. Meanwhile, New York is threatened with a billion dollars in federal Medicaid funding cuts. The coming fiscal year will also see $1 billion chopped from the state budget, plus $1 billion in federal matching funds.

The cuts themselves will not affect HIV Medicaid mills. Drugs that target wasting and other symptoms will be available only by a doctor’s special request. But protease inhibitors and antiretrovirals that fight the actual virus will continue to be freely available.


Back at the New York Diagnostic Centers, Binford recognizes that sometimes, regardless of how closely she monitors her clients, there isn’t much she can do. Rashid (not his real name) is one of them. Binford has been working with Rashid for a year. He is one of her favorite patients, and he is dying. He has sold his meds on and off, but more often than not he just doesn’t feel like taking them.

The rear entrance to the center on West 37th Street is a narrow wedge of black marble flecked with silver, jammed between an empty storefront and a discount clothing store. Waiting in the doorway is Rashid.

He is little more than a stack of bones and a cigarette slumped against a wall. The marble looks like a tombstone, as it props up Rashid’s body, full of 180 ml of Methadone and 12 ml of Xanax. His sunken cheeks inhale from under the collar of a huge black leather jacket; he shudders, winces and sinks deeper beneath his baseball cap.

Rashid has just resurfaced at the center after disappearing for two weeks in what Binford described as “a last hurrah.” When he turned up, he was barely conscious.

He says that his uptown SRO is “infected” with drugs. According to Binford, he has been repeatedly robbed and attacked by the local dealers. Rashid’s fingers are swollen and covered in bandages. It was his frustration with finding a safe home, says Binford that sent him on a two-week bender.

But Binford is thrilled to see him. She has just found him a place at a nursing home. Now all she has to do is help fold him into a cab and take him there. “His disease is so out of control I can’t manage him in the community,” she says. “This guy won’t make it through the summer on the streets.”

As the taxi creeps downtown to the bed that Binford has found for him at Rivington House on the Lower East Side, Rashid moans and his head lolls back against the seat as he slips in and out of consciousness. Virtually all that is visible of his face are the three blue teardrops tattooed under the corner of his left eye. “I’m going to lose every little thing I got,” he mumbles. “It’s chaos.”

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