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The N.J. State Commission of Investigation said in a report released today that criminals and organized crime are fueling the state's rise of prescription drug and heroin abuse.

(Ed Murray/The Star-Ledger)

TRENTON — Nondescript minivans pulled up like clockwork outside Newark's homeless shelters, and the drivers offered a deal few desperate people would turn down: a free health checkup and a guaranteed prescription for painkillers, which can fetch as much as $100 per pill on the street.

They were bused 10 miles away, authorities said, to a rundown strip mall in Passaic where the deal went down. A doctor offered a quick, often bogus exam before writing scripts for OxyContin or oxycodone. As a special thank you, he threw in a $10 gift card.

His patients could take the drugs or sell them on the black market. The doctor didn’t care; he got paid by Medicaid either way.

And so did his business partners in the Russian mafia.

The operation was a centerpiece of a new report issued today by the State Commission of Investigation, which found dirty doctors, shady entrepreneurs and organized crime are helping fuel the rapid rise of prescription drug and heroin abuse in New Jersey.

"There is a new and more sophisticated type of drug corner," Patrick Hobbs, chairman of the commission, said today. "It’s indoors, it has a waiting room, maybe a nurse, and the person doing a deal wears a white coat and hides behind the shield of a medical license."

The report, "Scenes From An Epidemic," is the product of a two-year SCI investigation examining who is profiting off the growth of prescription painkiller addictions in New Jersey, and how addicts eventually turn to a far less costly choice for getting high: heroin.

Unlike drugs mostly found in inner cities, the report said, prescription drug and heroin abuse are now pervasive in nearly every community and particularly afflict affluent people ages 18 to 25.

The number of people who entered treatment centers in New Jersey for opium-based painkiller addictions tripled from 2006 to 2011, the report said, and police are seeing dramatic increases in the use of heroin and overdose deaths.

Demand for heroin, in turn, is fueling violent gangs such as the Bloods in the state’s major cities, the report said.

The Newark busing operation dated to early 2009, when Joseph Dituro, a doctor licensed in New Jersey since 1983, responded to an ad on Craigslist seeking a director for the Passaic Medical Center, a small, private office located in a Passaic strip mall, according to the report.

The facility was owned at the time by a company whose principals included Michael "Michail" Lipkin, identified in the report as a longtime Russian mafia associate. Lipkin allegedly paid Dituro $4,000 a week to see as many as 20 to 25 patients from Newark per day.

"He is really just signing his signature and keeping it going," one patient told the commission. "He really is full of crap, really."

The center was not about medicine, the report said, but rather a front for bilking Medicaid and Medicare about $1.6 million from 2010 to 2011.

Most patients were enrolled in the programs, and the office billed the government whether services were provided or not, the report said. The operation dissolved in August 2010 because Lipkin opened a larger clinic on Branford Place in Newark, the report said.

Reached by telephone, Lipkin staunchly denied the accusations in the report and said that he had nothing to do with the mafia and that he had hired a lawyer to investigate the commission’s findings. He said the SCI was not in search of the truth but someone to blame for painkiller addictions.

"My daughter had the pills, it took me about seven years to clean her up," Lipkin said. "I have my friends, they have pills. All over, the state’s under siege, the country is under siege because of drugs. But they don’t blame the pharmaceutical companies."

He added, "The government, they’re only looking for convictions. The more convictions, the better for the lawyers. But they’re not the brightest people. I’m a businessman."

Lipkin said the purpose of the clinic was to treat HIV positive patients and offer immunizations. He called Dituro a "greedy liar" and a drug dealer, and said they only worked together for a few months. Lipkin said his current clinic is "one of the best in Newark."

Dituro could not be reached for comment.

After breaking off from Lipkin, the report said, Dituro linked up with Lev Natovich, whom it identified as a Russian mafia associate and nephew of Leonid Abelis, who was a top lieutenant to the most powerful leader of the Russian mafia in the United States.

In October 2010, Dituro reopened in the same location, but the business eventually fell victim to its own success. Word of the doctor’s willingness to write prescriptions spread like wildfire, the report said, and the office was overrun by drug addicts looking for pills.

Natovich hired a bouncer, but when he, too, was found to be a heroin addict, he was fired and Natovich closed the center, the report said. Dituro reopened with Oleg Gorodetsky, identified as a mafia associate, but the venture failed when Gorodetsky attacked him, the report said.

Of the $1.6 million Dituro got from Medicare and Medicaid from 2010 to 2011, he gave more than $1.4 million to Lipkin, Natovich and Gorodetsky, the report said. Dituro ranked third in 2011 among all New Jersey doctors in the number of narcotic drug claims submitted to Medicaid.

Natovich and Gorodetsky could not be reached for comment.

No charges have been filed, but the investigation has been handed over to the state Division of Criminal Justice.

The SCI — formed in 1968 as an independent watchdog over organized crime, corruption and government waste — called for stronger oversight of the medical community and tougher penalties for diverting prescription drugs to the black market. It suggested a new state task force to lead prescription drug investigations, improvements to the state prescription drug monitoring program and changes to make it easier to prosecute possession of heroin with intent to distribute.

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