Three East Tennessee pharmacy insiders are headed to federal prison after a judge said they helped run a multimillion-dollar prescription reimbursement scheme tied to a small chain of Riddle Drugs pharmacies. On Thursday in Knoxville federal court, Barbara A. Smith, 75, of Powell, Jared Grant Riddle, 47, of Clinton, and Brian M. Woods, 48, of Dandridge were each sentenced to between 33 and 37 months behind bars. Prosecutors say they used altered and forged formularies to bill pharmacy benefit managers and Medicare Part D for expensive medications that were never actually prescribed. Federal officials describe the case as one more in a growing line of profit-driven mail-order pharmacy scams that target federal drug plans.
U.S. District Judge Katharine A. Crytzer sentenced Smith to 37 months in prison, followed by one year of supervised release, and ordered her to repay $4,810,878. Riddle and Woods each received 33-month prison terms and three years of supervised release, with restitution orders of $8,687,531.89 and $7,365,897.89, respectively, according to the U.S. Attorney's Office, Eastern District of Tennessee. All three defendants pleaded guilty to a single count of conspiracy to commit health care fraud as part of plea agreements. Prosecutors said the scheme ran from May 2018 through October 2020 and involved six retail pharmacies operating under United Apothecary, LLC, doing business as Riddle Drugs and Riddle Express Pharmacy. The investigation was led by the Department of Health and Human Services Office of Inspector General (HHS-OIG) and the FBI.
How Prosecutors Say the Scheme Worked
According to prosecutors, Grant Riddle designed a drug formulary packed with products chosen for their high reimbursement rates, then used marketers to take those lists to local pain clinics and primary care offices, including a clinic where Smith worked as office manager, according to WVLT. Woods was accused of supplying stacks of blank formularies to providers at the clinic and paying Smith in cash for signed forms. Prosecutors said Smith and Woods later altered those forms or used them to create completely forged prescriptions and refill authorizations.
Patients at the clinic began receiving medications they had not asked for, prompting some providers to start crossing out entries on the forms in an effort to keep them from being misused. The government says the altered and forged formularies were then pushed through to pharmacy benefit managers and drug plans for reimbursement, turning other people’s medical records into a revenue stream.
The Money and the Mail-Order Spike
Investigators said the fraudulent claims generated about $7,365,897.89 in payments to United Apothecary, including roughly $4.8 million from Medicare Part D, according to the U.S. Attorney's Office, Eastern District of Tennessee. At one point, prosecutors noted, the Riddle Drugs pharmacy in Oliver Springs ranked as the top pharmacy in the country for dispensing chlorzoxazone 250 mg, a medication they say was handpicked for its generous reimbursement rate rather than patient need.
“These sentencings underscore the serious consequences faced by individuals who exploit federal health care programs for personal gain,” HHS-OIG Special Agent in Charge Kelly Blackmon said in a statement. The FBI’s Nashville Field Office also emphasized its role in teaming up with HHS-OIG on the case, an example of the kind of joint work that has become standard in large-scale health care investigations.
Charges and Penalties
Under their plea agreements, Smith, Riddle, and Woods each admitted to conspiracy to commit health care fraud, a violation of 18 U.S.C. 1349. The statute allows for prison time, financial penalties, and court-ordered restitution to repay affected insurers and drug plans. In addition to their prison terms, all three defendants will serve supervised release and are on the hook for multimillion-dollar restitution obligations that will be enforced through the court’s restitution process. Assistant U.S. Attorneys William A. Roach, Jr., and Michael S. Deel handled the prosecution.
Where This Fits in the Bigger Crackdown
Federal officials say this case is part of a broader campaign against outlier billing and abusive mail-order operations nationwide, coordinated through HHS-OIG’s Medicare Fraud Strike Force and Department of Justice health care fraud units. Strike Force teams rely on data analytics and multi-agency partnerships to spot suspicious pharmacy billing patterns and have brought thousands of criminal actions and recovered billions of dollars, according to HHS-OIG. For pharmacies that treat federal health programs like an ATM, the message from investigators is that those numbers are only going up.
