Zionsville pharmacist who put himself in feds’ sights admits to felonies

The odyssey that led to Zionsville pharmacist Hongxing “Harry” Zhang’s 2016 fraud indictment, and subsequently his guilty plea to two felony counts on Oct. 4, began in a curious fashion.

In 2015, he enlisted attorneys to request a meeting with the U.S. Attorney’s Office “to discuss Zhang’s concern that he was the target of a federal criminal investigation,” according to a filing by the government. In the meeting, he disclosed that he had been “actively engaged in unauthorized illicit pharmaceutical trade activity,” the filing said, and that to conceal his crimes he had taken a Dell laptop containing incriminating information to China and left it with his brother.

“Armed with this information, the FBI opened a criminal investigation,” the filing notes.

Federal prosecutors lowered the boom on Zhang last December, alleging a $2.6 million scheme under which he fraudulently obtained low-priced medicines from Germany and Canada, then flipped them to pharmaceutical companies in his native China at higher prices. According to investigators, even though he bought the drugs outside the United States, he resold them as “original research prescription drugs from the United States” and said they were priced as much as 30 percent cheaper than comparable drugs.

Investigators say Zhang, a former pharmacist at Eli Lilly and Co. and at CVS, obtained the prescriptions under false pretenses from an Indianapolis doctor, using a variety of patient names, then escaped customs scrutiny by misidentifying the contents of packages.

Before agreeing to plead guilty to two of the 14 counts he was facing, his legal team had cast his activities in innocent terms.

“The business model was proper and lawful, no narcotics or contraband drugs were involved, and the medicines came from registered and licensed foreign pharmacies/wholesalers and were appropriate for the treatment of various illnesses,” a filing from May by his attorneys at Pence Hensel LLC said. “Many Americans, of course, buy their prescription drugs from Canadian or other foreign pharmacies on a routine basis, with no threat of prosecution.”

Zhang, 47, struck a different tone on Oct. 4 as he sat in a nearly empty courtroom and somberly acknowledged he was guilty of one count of wire fraud and one count of failure to file export information. His voice cracked with emotion as he responded to a series of questions from Judge Jane Magnus-Stinson aimed at ensuring he understood what he was pleading guilty to and what the ramifications could be.

Taking responsibility

By accepting responsibility for his actions, Zhang positions himself for a lighter sentence than he might have gotten had he been convicted after a trial that was scheduled for next month. The wire-fraud count carries a maximum sentence of 20 years in prison; the maximum for the other count is five years.

According to court records, Zhang carried out the fraud through H3 Direct LLC, which he had formed in 2009 to import Chinese arts and crafts to the United States. But after an unsuccessful first year, he shifted its focus to pharmaceuticals.

Doctor’s role

While some court records identify the Indianapolis doctor who wrote the prescriptions only as “P.H.,” others identify her in full as Peiyi Hu, a family physician whose Community Health Network practice is at 9015 E. 17th St.

Filings by the government say Zhang duped the doctor into believing the prescriptions were for patients with legitimate medical needs. Even so, the government notes that doctors are forbidden from prescribing medicine to nonpatients outside their normal practices, as Hu did.

According to a filing by Pence Hensel, Hu wrote at least some of the prescriptions after being provided prescriptions from Chinese physicians, “causing her in turn to write prescriptions for the same patients and same medications.”

Hu did not respond to messages left at her practice; a Community Health spokeswoman had no comment.

David Hensel—whose law firm began representing Zhang last spring—declined to comment.•