NEW YORK (CNN) -- Federal prosecutors have charged 48 people in a massive fraud that allegedly bought HIV medications and other prescription drugs from Medicaid recipients and sold them to unsuspecting buyers.
The scheme cost tax payers $500 million, prosecutors said Tuesday.
Prosecutors said Medicaid beneficiaries in New York, including AIDS patients and others suffering from illnesses requiring expensive drugs, sold their prescriptions to some of the defendants for cash instead of using them for treatment.
Once Medicaid beneficiaries sold the drugs to other buyers, the latter marketed the pills to pharmacies and other wholesale prescription drug companies in New York, New Jersey, Pennsylvania, Florida, Texas, Massachusetts, Utah, Nevada, Louisiana and Alabama, according to authorities.
The scheme targeted expensive medications --- some at a cost of more than $1,000 a bottle --- for illnesses such as asthma and HIV, authorities said.
"These defendants ran a black market in prescription pills involving a double-dip fraud of gigantic proportions," said Preet Bharara, the U.S. attorney for the southern district of New York.
"It worked a fraud on Medicaid -- in some cases, two times over -- a fraud on pharmaceutical companies, a fraud on legitimate pharmacies, a fraud on patients who unwittingly bought second-hand drugs, and ultimately, a fraud on the entire health care system."
Defendants made money off the difference between the often negligible Medicaid cost to the patient, and the hundreds of dollars per bottle they charged the pharmacies that sold the second-hand prescriptions to unwitting customers, authorities said.
"The scheme posed serious health risks at both the collection and distribution ends," said Janice K. Fedarcyk, FBI assistant director.
"People with real ailments were induced to sell their medications on the cheap rather than take them as prescribed, while end-users of the diverted drugs were getting second-hand medicine that may have been mishandled, adulterated, improperly stored, repackaged and expired."
The FBI said it seized more than $16 million worth of prescription drugs -- 33,000 bottles and more than 250,000 loose pills, "kept in uncontrolled and sometimes egregious conditions" by some of the suspects.
"It's one thing when people sell their blood for money; it's another when they sell their drugs, especially when the diversion compromises the pharmaceutical supply with tainted and outdated drugs," said Raymond W. Kelly, commissioner of the New York City Police Department.
E-mails obtained by a search warrant revealed that some defendants bought and sold more than $62 million worth of second-hand prescription drugs during an approximately 12-month time frame. The deals were meticulously documented through purchase orders and receipts scanned onto their computers and uploaded into e-mail accounts.
Anyone who purchased second-hand prescription drugs or was victimized by the scheme is urged to call the FBI hot line at 212-384-3555.
CNN's Marina Landis contributed to this report