UC moves to shut down alleged fraud targeting students

The University of California today (April 20) announced it has uncovered a massive scheme targeting students through its student health plan that fraudulently obtained student information and then stole almost $12 million from UC by writing phony medical prescriptions in the students’ names.

The university plans to file a motion for a temporary restraining order early Friday in Los Angeles County Superior Court to immediately shut down the scheme, which involved enrolling UC students in sham “clinical trials” and “recruiting” them at campus job fairs. UC believes both tactics were ploys to gain access to the students’ health insurance information and then write millions of dollars in phony prescriptions.

“Our first priority is to our students,” said Dr. John Stobo, executive vice president for UC Health. “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.”

The bulk of the medications at issue — prescription-grade pain creams — are usually prescribed to elderly patients to treat arthritis. In court papers, the university alleged that the scheme specifically targeted UC students through Facebook ads, offering them as much as $550 in cash to participate in “clinical trials.” Medications were sent by mail without any pharmacist consultation, and even after the pharmacy was asked to stop.

Said UC Associate Vice President for Student Affairs Robin Holmes-Sullivan, “We are also concerned that the defendants appear to have convinced more than 500 students to part with sensitive personal information, which was then abused. For this reason, in addition to pursuing the temporary restraining order, we are arranging identity protection services for all affected individuals.”

In a complaint filed today (April 20) in Los Angeles County Superior Court, the university described the scheme, which appears to have begun in the fall of 2016. As outlined in the court brief:

  • Various defendants set up a company called California Clinical Trials, LLC, or CCT.
  • At the same time, the defendants began posting ads on Facebook inviting young people who receive their health benefits through UC’s Student Health Insurance Plan, known as UCSHIP, to earn easy money by participating in a study operated by CCT.
  • Defendants also exhibited at job fairs on campus as late as this week, holding out the prospect of marketing jobs at a pharmaceutical company to students who disclosed their health insurance and medical information and agreed to try out the medications.
  • The vast majority of the prescriptions were filled at pharmacies in the southern California cities of Studio City and Chino, even though students were enrolled at UCLA, UC Riverside, UC San Diego, and as far away as UC Santa Cruz and UC Davis.

Most of the prescription drugs involved are “convenience kits” or compound vitamins, which are an emerging target for sophisticated health care fraud schemes. These are comprised of low-cost, off-patent medications but are billed to patients, insurers and government health care programs at a cost of thousands of dollars per drug.

The fraud emerged and expanded rapidly, according to the court filing. In a single day, more than 600 prescriptions for three of the medications written by a single podiatrist operating out of City of Industry were allegedly filled at a pharmacy in Chino, at a cost of over $1.7 million.

The university is in the process of notifying all students whose membership information was used to prescribe, dispense and bill for the medications. The prescription medications involved in this scheme include Dermacin, Inflammacin, Diclofex, Mebolic, Migranow, Inflammation Reduction Pak, Xelitral, and possibly others. UC is warning students to beware of anyone offering “free” samples or easy cash in exchange for their personal information and of so-called “clinical trials” that offer large amounts of money just for signing up.

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

Law enforcement officials and various regulatory agencies, including the relevant licensing boards, have been notified of the scheme and UC will actively cooperate to advance all criminal, civil or administrative investigations.

The facts described in this release remain allegations, pending in court. The matter remains under investigation and subject to further proceedings in a court of law.