What's happening
This bill expands and strengthens criminal penalties for the diversion, fraudulent prescription, and unlawful possession of non-controlled substance prescription medications and devices in New York.
Why it matters
Targets a previously under-regulated area. The bill specifically criminalizes fraudulent activities and unlawful possession involving non-controlled (i.e., not federally scheduled) prescription medications and devices—addressing a legal gap, as previous law focused mostly on controlled substances.
Creates tiered penalties and new felonies. It establishes multiple degrees (fifth through first) of criminal diversion, fraudulent prescription, and unlawful possession, with penalties escalating based on the value, quantity, or repeat offenses. This means both minor and large-scale offenders may now face significant criminal liability, including up to class B felonies.
Directly regulates medical professionals and pharmacies. The legislation introduces strong criminal penalties for doctors, pharmacists, and others authorized to prescribe or dispense medications, particularly if they act outside the bounds of good faith or professional practice, increasing accountability within healthcare.
Impacts patient access and legal risk. By expanding what constitutes criminal possession and tightening definitions, patients or caregivers who inadvertently violate these rules (e.g., possessing medication prescribed to someone else) could face misdemeanor or felony charges, raising the stakes for compliance and potentially affecting legitimate access in some scenarios.
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Who cares
Headline styles
Tougher Penalties for Prescription Fraud
Plain English, a few words. Used as the page title.
Sponsors
History
- Referred to codes
- Delivered to assembly
- Passed senateVote 63–0
- Ordered to third reading cal.866
- Committee discharged and committed to rules
- Referred to codes
- Returned to senate
- Died in assembly
- Referred to codes
- Delivered to assembly
- Passed senateVote 63–0
- Ordered to third reading cal.1619
Show 2 earlier actions
- Committee discharged and committed to rules
- Referred to codes
Companion bill
The same bill in the other chamber. A bill becomes law when one version passes both houses and the governor signs it, so either number can carry it.
Crack Down on Prescription Fraud
In Assembly Committee · Codes · Sponsor John T. McDonald III
Full text
8 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
2814
2017-2018 Regular Sessions
IN SENATE
January 17, 2017
Introduced by Sen. HANNON -- read twice and ordered printed, and when printed to be committed to the Committee on Codes
AN ACT to amend the penal law, in relation to criminal diversion of prescription medications and prescriptions, establishing the offense of fraudulent prescription, dispensing and procurement of non-controlled substance prescription medications and devices, and establishing the offense of unlawful possession of non-controlled substance prescription medications and devices
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Section 178.00 of the penal law, as added by chapter 81 of the laws of 1995, is amended to read as follows: § 178.00 Criminal diversion of prescription medications and
prescriptions; definitions.
The following definitions are applicable to this article:
1. "Prescription medication or device" means any article for which a prescription is required in order to be lawfully sold, delivered or distributed by any person authorized by law to engage in the practice of the profession of pharmacy.
2. "Prescription" means a direction or authorization by means of a written prescription form, electronic prescription or an oral prescription which permits a person to lawfully obtain a prescription medication or device from any person authorized to dispense such prescription medication or device.
3. "Prescription form" means an official state prescription form authorized by a state for use by health practitioners authorized to write prescriptions.
4. "Criminal diversion act" means an act or acts in which a person knowingly:
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD02907-01-7
S. 2814 2
(a) transfers or delivers, in exchange for anything of pecuniary value, a prescription medication or device with knowledge or reasonable grounds to know that the recipient has no medical need for it; or
(b) receives, in exchange for anything of pecuniary value, a prescription medication or device with knowledge or reasonable grounds to know that the seller or transferor is not authorized by law to sell or transfer such prescription medication or device; or
(c) receives, in exchange for anything of pecuniary value, a prescription medication or device, prescription, or prescription form from a law enforcement officer acting in an undercover capacity or his or her agent, believing or having reasonable ground to believe that the officer or his or her agent is someone who is not authorized by law to sell or transfer such prescription medication or device, prescription, or prescription form; or
(d) transfers or delivers a prescription or prescription form in exchange for anything of pecuniary value; or
[(d)] (e) receives a prescription or prescription form in exchange for anything of pecuniary value.
§ 2. Paragraph (c) of subdivision 1 of section 178.05 of the penal law, as added by chapter 81 of the laws of 1995, is amended and two new paragraphs (d) and (e) are added to read as follows:
(c) a person acting in good faith who is seeking [treatment for a medical condition or assisting another person to obtain treatment for a medical condition] to obtain a prescription, prescription medication or device that has been lawfully prescribed to him or her, and for which he or she has a medical need; or
(d) a person acting in good faith, who reasonably believes that he or she is assisting another person to obtain a prescription, prescription medication or device that has been lawfully prescribed to that other person; or
(e) a duly registered manufacturer or wholesaler of drugs, as defined in article one hundred thirty-seven of the education law, acting in good faith in the lawful course of his or her business.
§ 3. Section 178.10 of the penal law, as added by chapter 81 of the laws of 1995, is amended to read as follows: § 178.10 Criminal diversion of prescription medications and
prescriptions in the [fourth] fifth degree.
A person is guilty of criminal diversion of prescription medications and prescriptions in the [fourth] fifth degree when he or she commits a criminal diversion act.
Criminal diversion of prescription medications and prescriptions in the [fourth] fifth degree is a class A misdemeanor.
§ 4. Section 178.15 of the penal law, as added by chapter 81 of the law of 1995, is amended to read as follows: § 178.15 Criminal diversion of prescription medications and
prescriptions in the [third] fourth degree.
A person is guilty of criminal diversion of prescription medications and prescriptions in the [third] fourth degree when he or she:
1. commits a criminal diversion act, and the value of the benefit exchanged is in excess of one thousand dollars; or
2. commits the crime of criminal diversion of prescription medications and prescriptions in the [fourth] fifth degree, and has previously been convicted of [the crime of criminal diversion of prescription medications and prescriptions in the fourth degree] an offense defined in this article; or
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3. commits the crime of criminal diversion of prescription medications and prescriptions in the fifth degree on two or more occasions over a thirty-five day period.
Criminal diversion of prescription medications and prescriptions in the [third] fourth degree is a class E felony.
§ 5. Section 178.20 of the penal law, as added by chapter 81 of the laws of 1995, is amended to read as follows: § 178.20 Criminal diversion of prescription medications and
prescriptions in the [second] third degree.
A person is guilty of criminal diversion of prescription medications and prescriptions in the [second] third degree when he or she:
1. commits a criminal diversion act, and the value of the benefit exchanged is in excess of three thousand dollars; or
2. commits the crime of criminal diversion of prescription medications and prescriptions in the fifth degree on four or more occasions over a thirty-five day period; or
3. commits the crime of criminal diversion of prescription medications and prescriptions in the fifth degree, and is:
(a) a physician or other person authorized to issue a prescription; or
(b) a pharmacist or other person authorized to dispense prescription medications and devices.
Criminal diversion of prescription medications and prescriptions in the [second] third degree is a class D felony.
§ 6. Section 178.25 of the penal law, as added by chapter 81 of the laws of 1995, is amended to read as follows: § 178.25 Criminal diversion of prescription medications and
prescriptions in the [first] second degree.
A person is guilty of criminal diversion of prescription medications and prescriptions in the [first] second degree when he or she:
1. commits a criminal diversion act, and the value of the benefit exchanged is in excess of fifty thousand dollars; or
2. commits the crime of criminal diversion of prescription medications and prescriptions in the fifth degree on six or more occasions over a thirty-five day period; or
3. commits the crime of criminal diversion of prescription medications and prescriptions in the fifth degree on two or more occasions over a ninety day period, and is:
(a) a physician or other person authorized to issue a prescription; or
(b) a pharmacist or other person authorized to dispense prescription medications and devices.
Criminal diversion of prescription medications and prescriptions in the [first] second degree is a class C felony.
§ 7. The penal law is amended by adding a new section 178.30 to read as follows: § 178.30 Criminal diversion of prescription medications and
prescriptions in the first degree.
A person is guilty of criminal diversion of prescription medications and prescriptions in the first degree when he or she commits the crime of criminal diversion of prescription medications or prescriptions in the fifth degree on five or more occasions over a ninety day period, and is:
(a) a physician or other person authorized to issue a prescription; or
(b) a pharmacist or other person authorized to dispense prescription medications and devices.
Criminal diversion of prescription medications and prescriptions in the first degree is a class B felony.
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§ 8. The penal law is amended by adding a new article 178-A to read as follows:
ARTICLE 178-A
FRAUDULENT PRESCRIPTION, DISPENSING AND PROCUREMENT OF
NON-CONTROLLED SUBSTANCE PRESCRIPTION MEDICATIONS AND DEVICES Section 178.50 Definitions.
178.55 Fraudulent prescription, dispensing and procurement of
non-controlled substance prescription medications and
devices in the third degree.
178.60 Fraudulent prescription, dispensing and procurement of
non-controlled substance prescription medications and
devices in the second degree.
178.65 Fraudulent prescription, dispensing and procurement of
non-controlled substance prescription medications and
devices in the first degree. § 178.50 Definitions.
The following definitions are applicable to this article:
1. "Prescription medication or device" means any article for which a prescription is required in order to be lawfully sold, delivered or distributed by any person authorized by law to engage in the practice of the profession of pharmacy.
2. "Prescription" means a direction or authorization by means of a written prescription form, an electronic prescription or an oral prescription which permits a person to lawfully obtain a prescription medication or device from any person authorized to dispense such prescription medication or device.
3. "Controlled substance" means any substance listed in schedule I, II, III, IV or V of section thirty-three hundred six of the public health law other than marihuana, but including concentrated cannabis as defined in paragraph (a) of subdivision four of section thirty-three hundred two of such law.
4. "Dispensing" and "dispenses" refer to the dispensing of a prescription medication or device from or within a pharmacy, hospital, physician's office, clinic or other pharmaceutical or medical facility. § 178.55 Fraudulent prescription, dispensing and procurement of non-
controlled substance prescription medications and devices in
the third degree.
A person is guilty of fraudulent prescription, dispensing and procurement of non-controlled substance prescription medications and devices in the third degree when he or she:
1. issues a written, electronic or oral prescription for a non-controlled substance prescription medication or device, and is not a duly licensed physician or other person authorized to issue such prescription; or
2. dispenses a non-controlled substance prescription medication or device, with knowledge or reasonable grounds to know that:
(a) the person for whom the medication or device has been prescribed has no medical need for such medication or device; or
(b) no prescription for such medication or device was issued by a duly licensed physician or other person authorized to issue such prescription; or
(c) the prescription for such medication or device was forged; or
(d) the prescription for such medication or device was issued by a duly licensed physician or other person authorized to issue such prescription who was acting other than in good faith in the lawful course of his or her professional practice; or
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3. presents or submits a prescription for a non-controlled substance prescription medication or device to, or receives a non-controlled substance prescription medication or device from, a duly licensed pharmacist or other person authorized to dispense such prescription medication or device, with knowledge or reasonable grounds to know that:
(a) the person for whom the medication or device has been prescribed has no medical need for such medication or device; or
(b) the prescription for such medication or device was not issued by a duly licensed physician or other person authorized to issue such prescription; or
(c) the prescription for such medication or device was forged; or
(d) the prescription for such medication or device was issued by a duly licensed physician or other person authorized to issue such prescription who was acting other than in good faith in the lawful course of his or her professional practice.
Fraudulent prescription, dispensing and procurement of non-controlled substance prescription medications and devices in the third degree is a class D felony. § 178.60 Fraudulent prescription, dispensing and procurement of non-
controlled substance prescription medications and devices in
the second degree.
A person is guilty of fraudulent prescription, dispensing and procurement of non-controlled substance prescription medications and devices in the second degree when he or she:
1. being a duly licensed physician or other person authorized to issue a prescription, issues a written, electronic or oral prescription for a non-controlled substance prescription medication or device, or dispenses a non-controlled substance prescription medication or device:
(a) with knowledge or reasonable grounds to know that the person for whom the prescription is issued, or to whom the medication is dispensed, has no medical need for the medication or device that is being prescribed; or
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the penal law, in relation to criminal diversion of prescription medications and prescriptions, establishing the offense of fraudulent prescription, dispensing and procurement of non-controlled substance prescription medications and devices, and establishing the offense of unlawful possession of non-controlled substance prescription medications and devices
Purpose
This bill would address the growing black market in prescription drugs by restructuring the existing crime of criminal diversion of prescription medications and adding a new Penal Law article 179 entitled Fraudulent Prescription, Dispensing and Procurement of Non-controlled Substance Prescription Medications and Devices, and a new article 219 entitled unlawful possession of non-controlled substance prescription medications and devices.
Summary of provisions
Sections 1 through 7 of the bill restructure the existing crime of criminal diversion of prescription medications and prescriptions by amending Penal Law ("PL") §§ 178.00, 178.05, 178.10, 178.15, 178.20 and 178.25, and by adding a new section 178.30. This restructuring enhances sanctions when unlawful criminal diversion acts are committed on multiple occasions within a given period of time and when such acts are committed by a physician, pharmacist or other person authorized to issue a prescription or to dispense prescription medications and devices.
Read the full memo (1,226 words)
Section 178.00 is amended to clarify that transactions with undercover agents may also be also be prosecuted under this section if the dealer believes, or has reasonable basis to believe, that the officer is someone who is not authorized by law to sell or transfer the prescription form, prescription medication or device. Section 178.05 is amended to clarify that those seeking to obtain a lawful prescription or prescription medication, and those seeking to assist such persons, are exempt from prosecution for criminal diversion.
Section 8 of the bill adds a new PL Article 178-A entitled Fraudulent Prescription, Dispensing and Procurement of Non-controlled substance Prescription Medications and Devices. This Article New PL § 178-A establishes the crime of fraudulent prescription, dispensing and procurement of non-controlled substance prescription medications and devices in the first, second and third degree. Generally, this crime prohibits:
*Issuance of a prescription; 1) when the issuer is not duly licensed and authorized to do so, 2)with knowledge or reasonable grounds to know that the prescription is not medically necessary, or 3) when issued other than good faith;
*Dispensing of a non-controlled substance; 1)with knowledge or reasonable grounds to know that the person for whom the medication has been prescribed has no medical need, 2) when the prescription was not issued by a duly licensed physician or other person authorized, 3) when the prescription was forged, or 4) when the prescription was written by a physician or other authorized individual not acting in good faith; and,
*Presenting or submitting a prescription, or receiving a non-controlled substance or device from a pharmacist with knowledge or reasonable grounds to know that the prescription was not duly issued and authorized to an individual with a medical need for prescription.
Fraudulent prescription, dispensing and procurement of a non-controlled substance prescription in the first degree is a class B felony, in the second degree is a class C felony, and in the third degree is a class D felony.
Section 9 of the bill adds a new PL Article 219 entitled Unlawful Possession of Non-Controlled Substance Prescription Medications and Devices. This Article defines terms for purposes therein, sets out limitations its applicability, and establishes the crime of unlawful possession of non-controlled substance prescription medications and devices in the fifth to first degrees.
Section 10 provides an effective date.
Justification
Expensive non-controlled substance prescription medications such as AIDS medication, asthma medication, and anti-psychotic medication have obtained a high street value, making, them particularly popular on the black-market in the last few years. This exploding blackmarket in non-controlled substance prescription medications is well documented. Last April, New York authorities arrested four individuals heading a black market HIV/AIDS prescription drug scam which cost the Medicaid program an estimated $150 million. These individuals were charged with grand larceny, criminal diversion, money laundering and conspiracy, among other felonies. In May, 14 individuals in Manhattan were charged in a massive illegal prescription pill diversion and distribution scheme that distributed over 10,000 pills weekly. In July, the U.S. Attorney announced charges against 48 individuals in a prescription fraud ring. One of the primary drugs targeted by this group was the HIV drug Atripla, which has a Medicaid reimbursement value of $1,635 per bottle. Then this October, Attorney General Eric T. Schneiderman announced a $1.2 million dollar settlement with NYC pharmacist who sold these black market medications.
As the New York Times reports, these "different sort of drug deals" usually occur on the street or at the train station when an individual, pharmacy bag in hand, passes through - either intentionally, or unintentionally - a gantlet of dealers. The individuals are approached and asked if they have prescription drugs to sell. The sought after, expensive medications with a high street value are most often paid for with Medicaid dollars and sold on the street for a fraction of their actual value. The purchasers of these medications bring the medications to a stash house where they are collected and re-sold back to unscrupulous pharmacies or shipped overseas.
There are many negative and severe consequences resulting from these black market deals, which include: sick patients not taking their medications; unsuspecting patients purchasing black market drugs from their pharmacy which have not been properly stored and maintained; and, Medicaid paying huge sums for medications that are dispensed under these fraudulent circumstances.
An unscrupulous pharmacy can charge Medicaid for medicine that it has purchased at a significantly lower price through the black market. Most likely Medicaid has already paid for this same medicine on an earlier occasion when it was originally dispensed to the patient who subsequently sold the medicine on the street.
Current law does not contemplate a large-scale illegal market of these drugs. As a result, there is either no penalty or insufficient penalties for the following conduct:
*repeated purchases of non-controlled substance prescription medications from someone not authorized to sell or transfer the medication (the dealers who buy the medications and enter them into the black market);
*possession of large quantities of non-controlled substance prescription medications by someone with no lawful basis for the prescription (the people who have the stash houses for the black market medicine);
*the writing of fraudulent prescriptions by physicians to "patients" with no medical need for the medication; and
*the purchasing or dispensing of medications by pharmacists who have obtained the medication through the black market.
The gaps in existing law and the growth of this black market make it self-evident that change is necessary. This legislation will address this by increasing, or establishing, criminal penalties that better fit these crimes. In addition to making sure sick patients take necessary medication and that pharmacies are not selling black market drugs, this bill will save the Medicaid program millions a year. It is estimated that the prosecution of just 5 doctors who are unlawfully prescribing non-controlled substances could save Medicaid $3.5 million a year.
Legislative history
2016: S.5396 - Passed Senate, died in Assembly 2014: S.2942 - Passed Senate 2012: S.5260-C - Passed Senate 2011: S.5260-B - Passed Senate
Fiscal implications
Savings to State Medicaid Program.
Effective date
This act shall take effect 90 days after becoming a law.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.