Three East Tennessee individuals have pleaded guilty and been sentenced for their roles in a prescription fraud operation involving the Riddle Drugs pharmacy chain that caused Medicare, drug plans, and pharmacy benefit managers (PBMs) to pay more than $7.3 million, the U.S. Attorney’s Office for the Eastern District of Tennessee announced earlier this month.
The U.S. Department of Justice (DOJ) press release explained Grant Riddle, Brian Woods, and Barbara Smith all pleaded guilty to one count of conspiracy to commit health care fraud over each of their roles in the procurement, creation, and submission of reimbursement requests related to a formulary, a list of prescription drugs meant to balance “appropriate therapy while promoting effective resource utilization,” created solely based on their high reimbursement values for Riddle Drugs.
According to the press release, former pain clinic office manager Barbara Smith was the most recent to have her sentence imposed by U.S. District Court Judge Katharine Crytzer. She received a sentence of over three years for her role in the scheme, which ran from 2018 to 2020.
Smith became embroiled in the plot after Grant Riddle hired Woods to market his formulary to local pain clinics, including the facility where Smith managed the office.
The DOJ states that Woods was compensated through “off-the-books cash bonuses based on the volume of signed formularies he delivered” for the pharmacy, and that he later reached his own agreement with Smith, paying her in cash for formularies signed by healthcare providers at her office.
Smith began procuring documents, which she and Woods altered, for Grant Riddle, who either submitted them for reimbursement or had them submitted through his pharmacy. When patients began complaining about receiving unrequested medications, the DOJ states that healthcare providers began to suspect Smith, and resorted to completing the forms themselves, complete with crossed-out medications and drawing an X over portions to prevent later alterations.
According to the DOJ, this led Smith and Woods to create their own paperwork.
“Woods and Smith then used blank formularies to create wholly forged formularies: they handwrote patient names on the formularies, marked boxes next to various medications, wrote in refills, and forged providers’ signatures—either by hand or by using a photocopy of the provider’s signature without the provider’s knowledge,” according to the DOJ. “Woods paid Smith in cash for Smith’s role in altering and forging the formularies.”
As a result of these altered and forged documents, the DOJ states that drug plans and PBMs ultimately paid the pharmacy nearly $7.4 million, including about $4.8 million from Medicare Part D.
Grant Riddle and Woods were both sentenced to nearly three years in prison, while Smith received over three years. The judge also ordered Grant Riddle to pay nearly $8.7 million in restitution, Woods to pay about $7.4 million, and Smith to pay just over $4.8 million.
The DOJ also revealed a second case involving Grant Riddle’s father, Ernest Riddle, who pleaded guilty to one count of conspiracy to solicit, pay, and receive health care kickbacks. This scheme saw the Riddles “pay kickbacks and bribes to out-of-state marketers in exchange for the marketers delivering signed prescriptions to Riddle Drugs,” which were then submitted to Medicare Part D drug plans for reimbursement, resulting in more than $1.3 million in payments to the pharmacy between 2016 and 2020.
Ernest Riddle, 78, was sentenced to over a year in prison, plus two years of supervised release, and ordered to pay $1.3 million in restitution.
Court documents show that the company that operated the Riddle Drugs locations became inactive in August 2021, while the DOJ press release appears to suggest it ceased operating in October 2020.
The convictions come as bombshell claims prosecutors made about another East Tennessee pharmacy in April continue to work their way through the courts.
Those allegations centered on A+ Pharmacy in Chattanooga, which was owned and operated by Nader Rahbe, 77, who stands accused of trading prescription drugs for sex with up to 30 women. He is next scheduled to appear in court on Tuesday.
The convictions also come amid increased statewide focus on PBMs after Governor Bill Lee signed a new law prohibiting the vertical integration between PBMs and pharmacies. While proponents of the law say it will lower the price of prescription drugs, CVS has claimed it will force the company to close more than 100 locations, and filed a lawsuit alleging it violates the U.S. Constitution.
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Tom Pappert is a 2025 recipient of the Dao Prize and the lead reporter for The Tennessee Star. He also reports for the Star News Network. Follow Tom on X. Email tips to [email protected].
