A former Houston pharmacy owner was convicted on Tuesday of defrauding Medicare out of $160 million by submitting claims for medically unnecessary drugs using patient information that he illegally obtained.
The panel of 12 jurors delivered its verdict after deliberating for about five hours. Mohamed Mokbel was found guilty on all 15 counts he faced, including healthcare fraud, mail fraud and money laundering.
Prosecutors at first charged in their indictment that Mokbel had stolen $140 million from Medicare. But in the time that elapsed since the filing, the prosecutors said they had uncovered evidence that Mokbel had pocketed $20 million more than originally believed.
Mokbel, wearing a gray suit and tie, showed little emotion as U.S. District Court Judge Lee Rosenthal read the verdict. He was immediately taken into custody by U.S. Marshals and will be sentenced on January 7.
The 59-year-old faces the possibility of decades in prison. Adam Goldman, who prosecuted the case alongside Kathryn Olsen, said in court after the decision was read that the maximum sentence Mokbel could receive is 150 years. Mokbel also faces millions in restitution and fines, Goldman said.
Charles Flood, a Houston lawyer who defended Mokbel along with San-Francisco-based attorney John Cline, declined to comment on the verdict.
Flood argued during the trial, which lasted ten days over a two-week period, that Mokbel acted within the bounds of the law and took steps to protect his businesses from pharmacy benefit managers, whom he viewed as direct competitors. He also contended that paying for patient information, including Medicare ID numbers, was legal so long as patients willingly gave such information and denied Mokbel paid kickbacks as alleged.
The jury, however, was not persuaded by those arguments, ultimately convicting in one of the largest Medicare fraud cases ever prosecuted by the U.S. Attorney’s Office for the Southern District of Texas.
Mokbel owned and operated 4M Pharmaceutics, which, at its peak, employed more than 100 people. Former employees testified that 4M managed 14 pharmacies, 10 of which operated in the Houston area before they folded in 2022. The pharmacies specialized in providing diabetes testing equipment, such as syringes, needles, alcohol swabs, gauze, and insulin injection devices.
Prosecutors successfully argued that the diabetes testing equipment was a ruse to hide Mokbel’s real objective: to send patients topical creams and Omega-3 pills they didn’t actually need and get paid by Medicare. “He turned pills and creams into liquid gold,” Goldman said of Mokbel in his opening statement.
The scheme worked like this, according to the prosecutors: Using illegally obtained patient information, 4M employees submitted test claims to see if insurance companies would cover the creams and pills. If the claims were approved, pre-filled prescription request forms were sent to patients’ doctors for diabetic testing equipment, along with the creams and pills. Many doctors signed the requests, which oftentimes had the word “Urgent” at the top. Prosecutors dubbed it a prescription factory.
4M employees then called patients, mostly senior citizens, and told them their doctors had approved the medications and that no copayment was needed, even though most healthcare programs require pharmacies to collect copayments as a way to combat fraud, the indictment said.
Employees were paid $10 for every patient who agreed to receive a shipment, said Parris Rhodes, a former sales manager who estimated that in her four years at 4M she called more than 10,000 people to confirm their mailing address.
Rhodes testified that it wasnt unusual for 4M’s customer service department to receive hundreds of phone calls a day from patients who were angry and confused as to how the company got their information. (Mokbel paid a now-defunct Florida-based company about $12 million for patient information gleaned from online ads.)
“The patients would say, ‘you’ve maxed out my insurance,’” Rhodes said. The patients would also say their doctors couldn’t recall authorizing the topical creams. “When patients began talking to their doctor… it got really chaotic after that,” Rhodes said.
Rhodes said Mokbel was aware of the calls and told her and other employees to give patients something for free, like compression socks. If that didn’t placate them, their account was canceled. But patients whose accounts were canceled sometimes kept receiving topical creams and Omega-3 pills, Rhodes and other former employees said.
4M patients were oftentimes signed up for auto-fills, meaning they were sent a fresh batch of calcipotriene, lidocaine, clobetasol, halobetasol or Omega-3 pills every month, former employees testified.
“They weren’t a diabetic supply company, they were a calcipotriene company,” Olsen said in her closing argument.
Prosecutors played recordings of phone calls in which 4M customers begged to be taken off the company’s mailing list. In one, a now-68-year-old man pleaded with a 4M customer service representative to stop sending him lidocaine cream, which can be used to alleviate itching and pain.
“I’ve begged this place. I’ve sent letters begging for them to quit sending this s*** to me,” he said. “If it’s sent to me one more time, I’m going to throw it in my stove and burn the damn stuff.”
Between 2014 and 2021, 4M Pharmacies billed Medicare and other healthcare programs about $160 million for the drugs, according to prosecutors. Prosecutors said Mokbel made over $200 million as a result of the scheme, using the money to purchase his Afton Oaks home and fund an expensive gambling hobby.
To get around audits and investigations by pharmacy benefit managers (PBM), which negotiate the price of drugs, Mokbel was accused of bribing an employee of OptumRX, one of the “Big Three” PBMs, over $155,000 between 2015 and 2020.
Flood contended that the bribes to the former OptumRX employee were in fact gratuities or topics for advice on navigating complex and cumbersome audits. Indeed, for much of the trial, Flood tried to paint a picture of a savvy businessman who PBMs singled out for unfair treatment because he had figured out what medications were reimbursed at the highest rate.
“They do not like Mohamed Mokbel. They cannot allow him to exist. This is essentially corporate warfare where they audit him to death,” Flood said, who also contended that Mokbel did not intend to defraud Medicare and was part of an emerging trend where pharmacies drive prescriptions instead of patients.
While one former employee agreed with Flood that the PBMs 4M contracted with tried to put the company out of business with frequent audits and costly fines, another disagreed that PBMs singled out 4M for unfair treatment.
“My belief is that any companies that are working with an insurance company are obligated to honor the terms of the contract they signed with the PBM,” said Cindy Hanson, who worked as 4M’s bookkeeper.
When asked by Flood whether she thought PBMs tried to steal 4M’s patients, she said: “I wouldn’t say (that.) I would say they were trying to prevent patients from using up their insurance to buy supplies so they could buy necessary medication for their conditions.”
In the end, the jury agreed with Hanson and other 4M employees who testified that they felt like they were worked for a company that did questionable things to overcome audits initiated by PBMs, like creating false checks and money orders to make it appear like patients had paid their copay.
As Goldman told the jury in his opening statement: “Your job is not to consider whether the industry is unfair, or how a businessman is allowed to make money. Lying cheating and stealing is not OK because you think the industry is unfair.”
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