What happened: Allstate alleges four New York pharmacies billed more than $1.49 million in medically unnecessary pain creams through no-fault auto claims
Who's involved: Allstate and affiliates versus Avi Pharmacy Corp., Castle Hill Drugs Inc., Frederick Community Pharmacy Inc., and H Plaza Pharmacy Inc.
What's at stake: More than $589,000 in paid claims Allstate wants back, plus roughly $903,000 in unpaid claims it says it should not have to pay - with a federal racketeering law that could triple the damages
Why it matters: A major carrier filing four near-identical fraud suits on the same day signals a coordinated crackdown on topical pain cream billing in the no-fault space
Where it stands: All four complaints filed September 28, 2026, in the Eastern District of New York; no responses on record
One of the pharmacies, according to the complaint, was created for the purpose of running the alleged scheme. It is one of four that Allstate is now suing.
The insurer and its affiliates filed four federal lawsuits on the same day - September 28, 2026 - in the US District Court for the Eastern District of New York. Each complaint tells the same story: a pharmacy exploited New York's no-fault auto insurance system to bill for expensive, medically unnecessary topical pain creams while cheaper alternatives went unprescribed.
Every filing includes a claim under the federal Racketeer Influenced and Corrupt Organizations Act - a law originally designed to combat organized crime that, when invoked successfully, can triple the payout. That detail alone signals how seriously Allstate is treating the alleged conduct.
The combined exposure across the four complaints: more than $1.49 million. That is made up of $589,000 in claims Allstate says it already paid out and should not have, plus approximately $903,000 in outstanding bills the insurer says it should never have to pay.
The four targets are Avi Pharmacy Corp., Castle Hill Drugs Inc., Frederick Community Pharmacy Inc., and H Plaza Pharmacy Inc. (also known as Moduna Pharmacy). Each is accused of submitting "hundreds of false and/or fraudulent insurance claims" for what the filings call "specifically-targeted, medically unnecessary 'pain relieving' pharmaceutical products."
The alleged playbook barely changes from one complaint to the next. According to the filings, each pharmacy entered into financial arrangements with no-fault clinics across the New York metro area. Those clinics then prescribed expensive topical pain creams - including Lidocaine 5% Ointment and Diclofenac Sodium products - to people who had been in car accidents, regardless of whether the medications were actually needed.
The pharmacies dispensed and billed those products at what the filings describe as "exorbitant prices." Cheaper, FDA-approved over-the-counter alternatives were available. They went unprescribed.
The paperwork backed it up, the complaints allege. Prescriptions were "in numerous instances, tailored to boilerplate examination reports designed to justify continued, voluminous and excessive use of prescribed pharmaceuticals." In plain terms, the filings say the documentation existed to support the billing - not the treatment.
The filings also detail how the billing allegedly gamed New York's no-fault fee schedule, which reimburses pharmacies based on a drug's published reference price. By targeting products with the highest reference prices, the complaints allege, the pharmacies inflated what they could charge while paying far less for the medications themselves. The drugs could be bought cheaply and billed at "inflated amounts based on egregiously high Average Wholesale Prices," one complaint states.
The individual amounts range widely. For claims already paid, Allstate is chasing more than $226,000 from Avi Pharmacy, more than $177,000 from Castle Hill Drugs, more than $139,000 from Frederick Community Pharmacy, and more than $47,000 from H Plaza. Each complaint also asks the court to declare that Allstate does not owe the pharmacies' outstanding unpaid bills - approximately $207,000, $248,000, $277,000, and $171,000, respectively.
The alleged schemes stretch back to different starting points. Avi Pharmacy's goes back the furthest, to January 2023. Castle Hill Drugs' is the most recent, beginning in October 2024.
One thread ties two of the four cases together. According to the complaints, Castle Hill Drugs and Frederick Community Pharmacy were both controlled by the same individual, who the filings say directed the billing at each. That person faces racketeering claims in both suits.
The Avi Pharmacy filing goes a step further. The complaint alleges, "on information and belief, Avi Pharmacy was created for the purpose of participating in the fraudulent billing of insurance companies under the No-fault Law."
All four complaints point to a wider pattern. Each cites a pair of federal reports - from 2015 and 2018 - in which the US Department of Health and Human Services' inspector general flagged topical pain cream billing as a significant fraud risk, particularly involving diclofenac and lidocaine products.
And across all four cases, the complaints say, not one of the pharmacies ever handed over wholesale purchase invoices showing what it actually paid for the medications it dispensed and billed.
Four coordinated complaints in a single day, each targeting a different pharmacy but alleging the same scheme, suggest Allstate's fraud unit is treating topical pain cream billing as a systemic problem in its New York no-fault book. For claims and SIU teams tracking pharmacy billing exposure elsewhere, the pattern is worth watching.
The allegations in all four complaints have not been tested, and no court has ruled on the merits of any of the claims.
