The U.S. Attorney's Office is charging four dozen people with fraud, in connection with an alleged prescription drug-selling scheme that charged Medicaid twice for the same drugs and authorities say there will be likely be more defendants charged as the investigation continues. NY1's Dean Meminger filed the following report.

Many people who desperately need prescription drugs for HIV, asthma and schizophrenia have actually been selling their pills to make a little extra cash on the streets of New York City.

But in the long run, it has ripped Medicaid off of $500 million over the last seven years. That's taxpayer money stolen.

"The sealed bottles of drugs that they obtained usually for free for Medicaid, these resales took place on street corners and in bodegas around the city, often in Washington Heights and in the Bronx," said Preet Bharara, the U.S. Attorney of the Southern District.

The people who bought those expensive drugs allegedly re-sold them to groups of people, who stockpiled the pills until they had thousands of them. The pills were then sold to what authorities call "corrupt whole distributors," who then sold them back to pharmacies. The pills finally were sold back to people in need of the prescription medications, often charging Medicaid a second time.

"They allegedly treated the medication bottles sometimes with lighter fluid and other chemicals to remove patient labels that showed the drugs had already been dispensed," Bharara said.

"End users of the diverted drugs were getting secondhand medication that may been mishandled," said Janice Fedarcyk, the FBI Assistant Director who works in the department's New York office.

In some cases, the medicines were expired or stored incorrectly. Authorities also said they busted some of the schemers replacing pills with gum balls.

In a South Bronx neighborhood of the hub, which is also a major commercial area, it's known that some people have been selling their life-saving HIV medicines for many years.

Police Commissioner Ray Kelly said officers made a big bust during a routine traffic stop.

"They saw in the back seat of his car dozens of bottles of prescription medication for AIDS," he said. "But there was a problem with them. The prescriptions were not in his name."

Authorities said illegal operations like the one in the city have resulted in the pills being shipped around the country to nearly 20 states, as well as Puerto Rico.

More arrests of those involved are expected, as well as arrests for pharmacy workers who knowingly resold used drugs.