GEICO has sued three New York pharmacies, alleging an $8.8 million No-Fault billing scheme built on topical pain products the insurer claims were medically unnecessary.
The insurer filed the complaint on July 29, 2026, in the Eastern District of New York against Redfern Drugs, Castle Hill Drugs and Frederick Community Pharmacy, along with two men it identifies as their owners. The allegations are untested, and the case is at its earliest stage.
According to the filing, the three pharmacies presented themselves as ordinary neighborhood drugstores but were used in what GEICO calls a "large-scale integrated scheme" to exploit New York's No-Fault system. Under No-Fault, auto insurers pay up to $50,000 per insured for necessary care after a crash, and a patient can assign that right to a provider, which then bills the insurer directly.
The complaint alleges the pharmacies acquired certain topical pain products at low cost and billed them at far higher prices. It claims the pharmacies typically sought between $2,364.00 and $2,369.00 for a single tube of Diclofenac Sodium Gel 3%, and between $1,528.72 and $1,919.65 for a single tube of Lidocaine 5% Ointment. GEICO alleges the pharmacies paid as little as $17.00 for a diclofenac tube and as little as $4.25 for a lidocaine tube.
More than 75% of the pharmacies' billing to GEICO was for these topical products, according to the complaint. The insurer says it has received more than $3.3 million in lidocaine claims and has been billed more than $3.2 million for the diclofenac gel.
The filing alleges the products were medically unnecessary and were dispensed in place of cheaper, effective options, including over-the-counter versions that No-Fault does not cover. It also alleges the pharmacies relied on prescribers and unlicensed "clinic controllers" tied to No-Fault clinics to direct high volumes of prescriptions to them, in exchange for "kickbacks or other financial incentives." GEICO points to New York Public Health Law Section 238-a, which bars referrals for pharmacy services where the referring practitioner has a financial relationship with the pharmacy.
GEICO also alleges the billing was split across three separate entities, with different names and tax identification numbers, to disguise the volume and avoid detection. The complaint says the same two owners operated all three pharmacies in the same manner, describing one as co-owner of Redfern Drugs and sole owner of the other two, and the second as the other co-owner of Redfern.
The complaint also raises patient-safety concerns. It alleges patients were at times prescribed oral and topical anti-inflammatories at the same time - what it calls "therapeutic duplication," which it says increases the risk of serious cardiovascular and gastrointestinal harm without added benefit. It notes that diclofenac carries an FDA "Black Box Warning," the agency's strictest label warning.
For insurers, the billing mechanics are central to the case. Every No-Fault claim form carries a statutory warning that anyone who files a claim "containing any materially false information ... commits a fraudulent insurance act, which is a crime." GEICO alleges the pharmacies' forms misrepresented that the drugs were medically necessary and independently prescribed, when they were, according to the complaint, the product of predetermined protocols and collusive referrals.
GEICO brings claims for declaratory judgment, multiple RICO counts, common law fraud, unjust enrichment and a Public Health Law Section 238-a count. It seeks to recover the roughly $1,238,000.00 it says it paid, a declaration that it owes nothing on approximately $6.9 million in pending claims, and treble and punitive damages.
The allegations have not been tested, and no court has ruled on the claims.
