Gilead claims that pharmacies in New York are counterfeiting drugs

Gilead Sciences The company said it had uncovered a dangerous drug counterfeiting operation in which HIV drugs were tampered with and resold improperly before they reached patients.

The mastermind of the scheme, allegedly run out of two New York pharmacies, was identified as Peter Khaim, a twice-convicted medical fraudster, according to court documents unsealed this month. The company described Khaim as one of the most brazen and largest manufacturers and sellers of counterfeit Gilead drugs in the country.

Gilead sued Khaim, as well as Queens-based pharmacies 71st RX and Best Scripts, and others allegedly involved in the counterfeiting scheme. Gilead's lawsuit said Khaim controlled the two pharmacies.

“The defendants and their accomplices manufactured and sold these counterfeit Gilead-branded HIV drugs to pharmacies and patients in at least New York and New Jersey, endangering the health and safety of countless patients,” said the lawsuit, filed by attorney Geoffrey Potter of Patterson Belknap Webb & Tyler.

Gilead's lawsuit alleges that the counterfeiters used the company's original vials but tampered with the actual drug or its documentation.

“In some cases, the contents of the bottles were emptied, refilled with the false drug, and then resealed with a material other than Gilead's authentic tamper-evident seals,” the lawsuit states. “The co-conspirators then sold the counterfeit bottles with fake patient information documents, fake closures, and/or fake pedigrees or invoices.”

Most of Gilead's HIV drugs seized in this case were Biktarvy and Descovy.

Victims include both “HIV patients who are exploited by the defendants and persuaded to stop taking their prescribed medications” and “patients who go to their neighborhood pharmacy and, without their knowledge, receive a sealed, authentic-looking bottle” that is instead a counterfeit, Gilead's lawsuit states.

Accompanied by officers from the New York Sheriff's Office, Gilead lawyers and private investigators conducted seizures at the two pharmacies and Khaim's home in July, seizing more than $750,000 worth of suspected counterfeit drugs, the court filing said.

A lawyer for Khaim declined to comment.

The case is Gilead's second major civil lawsuit against Khaim related to counterfeit HIV drugs in the legal supply chain. Gilead sued Khaim and others in 2021 and obtained an injunction prohibiting him from selling Gilead-branded products. In that case, Khaim earned more than $38 million selling counterfeit Gilead drugs to distributors and directly to pharmacies, according to Gilead.

Despite the injunction, Khaim continued to oversee a counterfeiting operation at the two Queens pharmacies, the latest complaint says.

In another case, Khaim was sentenced to 96 months in prison for one medical fraud case and 15 years for another insurance fraud case. While awaiting sentencing in the medical fraud case and while operating the pharmacies and selling the counterfeit drugs, he wore a court-ordered GPS ankle bracelet, records show.

“This lawsuit is further clear evidence of our ongoing commitment to putting patient safety first and protecting individuals from criminals attempting to sell counterfeit and illegal versions of Gilead's medicines,” Gilead said in a statement to CNBC. “In addition to this lawsuit, we continue to work closely with the FDA, OIG, FBI and prosecutors to dismantle counterfeit networks, deter fraudsters and thwart the illegal distribution of drugs.”

Last year, a CNBC investigation revealed the shadowy world of drug counterfeiting and how Gilead fought to prevent criminals from counterfeiting its packaging and drugs.

According to Gilead and law enforcement, in many cases counterfeiters obtain drugs from patients who then resell them for cash. The labels are typically removed with lighter fluid, the bottles resealed and distributed to other patients. In this latest case against Khaim, lighter fluid was found in the pharmacies during the seizures, court documents say.