Gilead Sciences accuses two NYC pharmacies of operating a dangerous drug-counterfeiting scheme in a lawsuit.

• Two New York pharmacies were selling counterfeit versions of Gilead Sciences' HIV medications.
• A twice-convicted medical fraudster, who was wearing a court-ordered GPS ankle monitor, was accused of being involved in a fraud scheme.
• Gilead has been fighting against fraudsters who alter its HIV treatment packaging and medications for years.

The company discovered a hazardous drug-counterfeiting operation that involved the manipulation of its HIV medications and their subsequent illegal resale to patients.

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

Gilead accused Khaim of controlling the two pharmacies, 71st RX and Best Scripts, located in Queens, and sued them, along with other pharmacies, for being involved in a counterfeiting scheme.

According to Geoffrey Potter of Patterson Belknap Webb & Tyler, the defendants and their accomplices created and sold fake Gilead-labeled HIV medications to pharmacies and patients in New York and New Jersey, putting the health and safety of countless patients at risk.

Gilead alleges that counterfeiters utilized its legitimate prescription containers, but manipulated the medication or accompanying records.

"In some instances, the bottles were emptied, refilled with incorrect medication, and resealed with a different material than Gilead's authentic tamper-evident seals. The co-conspirators then sold the counterfeit bottles with counterfeit patient information documents, counterfeit caps, and/or counterfeit pedigrees or invoices."

In the case, most of the Gilead HIV medications that were confiscated were Biktarvy and Descovy.

Gilead alleges that both "patients with HIV who are targeted by defendants and coerced into stopping their medication" and "patients who visit their local pharmacy and unknowingly receive a fake, Gilead-branded bottle" are victims of the company's actions.

In July, Gilead attorneys and private investigators, along with New York City Sheriff's Office deputies, conducted seizures at two pharmacies and Khaim's home, recovering over $750,000 of suspected counterfeit medication, according to the court filing.

An attorney for Khaim declined to comment.

Gilead has filed a second major civil complaint against Khaim for selling counterfeit HIV medications in the legal supply chain. In 2021, Gilead sued Khaim and others and obtained an injunction preventing him from selling Gilead-branded products. According to Gilead, Khaim made over $38 million selling counterfeit Gilead medications to distributors and directly to pharmacies.

Despite being instructed not to, Khaim managed the counterfeiting operation at the two Queens pharmacies, according to the latest complaint.

Khaim was sentenced to 96 months in prison for medical fraud and 15 years for insurance fraud. He wore a GPS ankle monitor while awaiting sentencing for the medical fraud case and while operating the pharmacies and selling counterfeit medication, according to case file documents.

"Gilead has reiterated its dedication to safeguarding patients and combating the sale of fake and illegal versions of its medicines through a lawsuit. The company is also collaborating with regulatory agencies and law enforcement to dismantle counterfeiting operations, discourage fraudsters, and prevent illegal drug distribution."

A CNBC investigation exposed the clandestine realm of fake drugs and how Gilead is battling to prevent unscrupulous individuals from tampering with its packaging and drugs.

Court documents revealed that in the recent case against Khaim, lighter fluid was discovered at the pharmacies during the seizures, indicating that the medications were obtained from patients who sold them for cash and the labels were removed before being resealed and dispensed to other patients.