New York City’s adult day care centers are facing law enforcement searches, while a separate federal criminal case involving a Chinese pharmacy in Flushing has shed light on the potential operation of healthcare kickback schemes.
According to a criminal lawsuit filed in the Eastern District of New York federal court and sworn statements from agents of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), three Chinese individuals operating pharmacies in Flushing were arrested and criminally charged on September 30. As the case is in the early stages of criminal proceedings and has not been formally indicted by a federal grand jury, the names of the defendants are omitted in this article.
According to the sworn statement submitted by HHS-OIG agents, the individuals involved are suspected of conspiring to provide cash, supermarket gift vouchers, or other benefits to Medicare and Medicaid beneficiaries from September 2020 to March 2026. They allegedly induced beneficiaries to obtain medications from the pharmacies and used federal health insurance programs to cover the related costs. Investigators claim that some prescriptions involved unnecessary medications, undelivered drugs, or prescription fulfillment facilitated by illegal kickbacks.
The court records in the lawsuit reveal that through long-term undercover investigations, including the deployment of informants, law enforcement discovered that some pharmacies in Flushing, in connection with accounting firms, were operating kickbacks and Medicaid fraud systematically. For example, individuals involved used the term “apples” in communications as a code for cash kickbacks, offering different amounts of “apples” (cash or gift vouchers) depending on the insurance plan.
One text message sent on October 5, 2022, reads, “Give me their (OTC) card through WeChat, we will swipe it here, you just have to give them the apples.” The message goes on to state discrepancies in the number of “apples” given to patients with different insurance plans or no insurance plan at all.
Subsequently, pharmacy staff provided informants with perforated and uniquely stamped colored paper strips (or orange tickets) to record the kickbacks customers were entitled to, aiming to prevent disputes among the beneficiaries. Transactions were reportedly calculated per prescription, accumulating to a certain amount before customers could exchange it for gift vouchers or other benefits.
The documents state that a government informant visited the related pharmacies multiple times between July 2025 and January 2026, recording audio or video during some of the processes. The informant claimed not to have related symptoms, yet pharmacy staff allegedly recommended hydrocortisone prescriptions. In another instance, the informant was directed to obtain the more expensive ibuprofen pain patch, despite expressing no intention of using it, receiving the drug and kickbacks anyway.
Agents mentioned that some pharmacies were suspected of billing for drugs that customers did not request or receive, even continuing prescriptions without the patient’s knowledge or contact with the prescribing doctor.
On March 31, 2026, law enforcement officers conducted searches at the pharmacies and an accounting firm, reportedly seizing around $300,000 in cash and orange accounting papers at the accounting firm. Envelopes labeled with customer names containing cash or supermarket gift vouchers, along with bundles of gift vouchers, were found at one of the pharmacies.
Surveillance footage allegedly showed one individual using the OTC card terminal in the pharmacy, while another calculated and processed kickbacks for customers, conducting transactions using cards for absent customers, and preparing related envelopes.
The sworn statement indicated that between September 2020 and March 2026, prescription drug costs at the pharmacies in question exceeded $55 million, paid by federal health insurance programs. Agents believe that some claims were for drugs that were medically unnecessary or linked to kickback arrangements.