The government says this Houston pharmacy owner defrauded Medicare. His lawyers don’t think so.

Opening statements begin Tuesday in the trial of a Houston pharmacy owner who prosecutors say illegally obtained patient information from mostly elderly individuals to submit $140 million in fraudulent Medicare claims.

Mohamed Mokbel stands accused of orchestrating a scheme in which pharmacies he owned and controlled were reimbursed for medically unnecessary drugs. Prosecutors also allege he paid bribes to an employee of one of the country's three major pharmacy benefit managers to secure favorable regulation.

Defense attorneys for Mokbel plan to argue in court that he acted within the bounds of the law and took steps to protect his businesses from pharmacy benefit managers, whom he viewed as direct competitors. The attorneys, Charles Flood and John Cline, say paying for patient information is legal and deny Mokbel paid kickbacks as alleged.

If convicted on all counts, Mokbel faces decades in prison. The U.S. Attorney's Office declined to comment on the trial, expected to last three weeks.

Last week, Mokbel's co-defendant, Fathy Elsafty, signed a plea agreement admitting that he lied to Texas state officials about owning one of Mokbel's 14 pharmacies, 10 of which operated in the Houston area until they folded in 2022. They included Distinguished Pharmacy, Mace RX Pharmacy, Primary Care Pharmacy and Pharmacare Plus Pharmacy.

The scheme, outlined in a 16-count indictment, allegedly began in 2014 when Mokbel founded 4M Pharmaceuticals. According to his defense attorneys, the pharmacies that Mokbel controlled specialized in providing diabetes supplies and equipment, like syringes, needles, alcohol swabs, gauze, and insulin injection delivery devices.

According to court documents, a large part of Mokbel's business strategy to get customers to use the pharmacies was to buy patient information, like someone's name, age, medical history, and insurance information. Between July 2016 and August 2020, Mokbel spent $12 million to get such information, using it to submit test claims to Medicare and other healthcare programs to see if he could get reimbursed for topical creams and Omega-3 pills, according to the indictment. The ointments and fish oil pills had high reimbursement rates, meaning Mokbel could make a profit on his purchases.

Once the test claims were approved, 4M employees sent pre-filled prescriptions to patients' doctors for diabetic equipment, along with the creams and pills, the indictment says. But prosecutors contend the topical creams and pills served no medical purpose for the diabetes patients, and the prescriptions were made without their knowledge.

Once the prescriptions were signed by a doctor, 4M employees called the patients, mostly senior citizens, and told them their medications had been approved and that no copayment was needed, even though most healthcare programs require pharmacies to collect copayments as a way to combat fraud, the indictment says.

Between 2014 and 2021, 4M Pharmacies billed Medicare and other healthcare programs about $140 million for the drugs, according to the indictment. To get around audits and investigations by pharmacy benefit managers (PBM), which negotiate the price of drugs, Mokbel is accused of bribing an employee of OptumRX, one of the "Big Three" PBMs, over $155,000 between 2015 and 2020.

Text messages that prosecutors included in the indictment show Mokbel and the employee referred to the payments as "cake" and "ice cream."

"When should I expect my cake, brother???????," the unnamed employee asked Mokbel in October 2017, according to court documents.

In another text quoted in the indictment, the employee wrote, "Cake and ice cream received. Delicious!" Mokbel had allegedly sent him a $5,000 check the day before.

Mokbel's defense attorneys reject most of the government's claims. They argue that paying for leads, or information on people who have shown interest in a company's products or services, is not illegal and that Mokbel did not pay kickbacks as alleged in the indictment.

"Mokbel paid a reasonable, flat rate" for patient info, said Flood.

He also denied that patients were kept in the dark about prescriptions filled on their behalf.

"The patient is called numerous times. The patient consents. The doctor consents," Flood said. "That's why we're kind of shocked to still be here." (Mokbel was first arrested in connection with the case in 2021.)

Flood explained that one of the companies Mokbel bought leads from, identified as Company A in the indictment, created online ads that asked people to provide contact information if they wanted to save money on diabetes supplies and equipment. During subsequent phone calls, marketers asked prospective patients if they suffered from skin conditions. For those who responded "yes," their information was passed along to Mokbel, who used it to file prescriptions.

"They're not data scrubbing. This is a service that is provided," Flood said of Company A. He and Cline plan to play recordings of the calls.

"These patients knew what they had told the lead generator, they knew what they had told the pharmacy, and if they are saying now that they didn't, then they have forgotten," Flood said.

Flood also disputes the government's contention that the topical creams and Omega-3 pills were medically unnecessary, saying that's not a conclusion for prosecutors to make. He added that it's common for people with diabetes to have skin complications.

In response to allegations that his client bribed a PBM employee for favorable treatment, Flood said the payments were gratuities or tips for advice on navigating complex and cumbersome audits.

Just about the only thing Flood does not dispute is prosecutors' claim that Mokbel zeroed in on topical creams because of their high reimbursement rate. "That's true. Not a very successful business to get less than what you paid for," he said. "I don't think we're going to criminalize that."

A key part of Flood and Cline's defense will be their contention that PBMs like Optum Rx tried to put Mokbel's pharmacies out of business and that the government is trying to criminalize the actions Mokbel took to prevent such a thing from happening.

Mokbel at first exclusively provided diabetic supplies and equipment at his pharmacies, Flood said. When the PBMs he contracted with began to lower the reimbursement rate for the diabetic supplies, he pivoted to topical creams. But the PBMs started to lower reimbursement rates for those medications as well.

Flood said throughout Mokbel's time as a pharmacy owner, he was frequently audited by PBMs and slapped with sizable fees when he failed to follow what Flood called burdensome and complex contractual requirements.

To buttress his argument, Flood plans to reference a Federal Trade Commission report from July that sharply criticized PBMs and said, in part, that the companies exert "substantial influence over independent pharmacies, who struggle to navigate contractual terms imposed by PBMs that they find confusing, unfair, arbitrary, and harmful to their businesses."

Mokbel has filed two two lawsuits against PBMs he contracted with, alleging they did not pay his claims. Flood said the first was settled for $800,000, while the second is pending.

Mokbel has been free on bond for much of the last three and a half years. News of his 2021 arrest generated attention from his Afton Oaks neighbors, some of whom told reporters that Mokbel was known for loud parties and flashy cars.

Asked to comment on Mokbel's apparent lavish lifestyle, Flood told this reporter what he told TV stations during that year: "It's not illegal to be wealthy or successful."