The U.S. Justice Department said the fraud cost Medicaid more than an estimated $500 million in reimbursements for pills diverted into the second-hand black market.
Thirty-four suspects were arrested Tuesday morning.
Fifteen defendants were taken into custody in New York and New Jersey, and one defendant from the area was expected to surrender. The 16 defendants were scheduled to appeal before a U.S. magistrate in New York.
Nineteen other suspects were arrested in Pennsylvania, Massachusetts, Florida and Texas. The remaining defendants were still at large Tuesday.
The prescription drugs stolen were designed to treat various illnesses, including HIV -- the human immunodeficiency virus that causes AIDS -- schizophrenia and asthma, among others, and were non-controlled substances that did not lend themselves to abuse, the department said.
The drugs originally were dispensed to Medicaid recipients in the New York City area, who then sold them into collection and distribution channels that ultimately led to pharmacies for resale to unsuspecting consumers.
The suspects targeted the most expensive drugs, which often cost more than $1,000 per bottle, the department said..