In Las Vegas, Lazaro Hernandez was a flamboyant, jet-setting poker participant proven in televised tournaments with stacks of colourful chips. But the casually dressed gambler noticed on safety cameras with wads of money on the on line casino cage was hiding a secret life.
And federal investigators say he was playing with individuals’s lives. Hernandez, they are saying, oversaw a nationwide $230 million scheme to counterfeit prescription medicines, notably lifesaving HIV drugs, in which capsule bottles have been altered and offered again to pharmacies at a large low cost.
Hernandez’s operation altered bottles for Biktarvy, the No. 1 prescribed drug for HIV, in addition to Descovy, one other HIV treatment, and different prescribed drugs, in keeping with courtroom information. In some circumstances, the information present, the drugs in the bottles have been swapped for Seroquel, an antipsychotic drug.
Hernandez, primarily based in south Florida, gambled with proceeds from the counterfeiting operation, taking personal jets to Las Vegas and showing in quite a few poker tournaments, authorities say.
The drug counterfeiting scheme was a part of what the World Health Organization estimates is as much as $431 billion in drugs counterfeited worldwide yearly. In the U.S., there have been 2,121 incidents of counterfeiting in 2022, up 17% from the prior 12 months, in keeping with the Pharmaceutical Security Institute, which tracks trade tendencies.
It’s a large concern for Gilead Sciences, which has made it a precedence to seek out and struggle prescription drug diversion and counterfeiting extra broadly.
The firm filed a lawsuit in July 2021 towards 161 defendants, together with pharmacies and wholesale pharmaceutical distributors, accusing them of collaborating in the scheme to change the corporate’s medicines Biktarvy and Descovy. Johnson & Johnson filed a related lawsuit towards 27 defendants over its HIV treatment Symtuza in April 2022. Other lifesaving drugs have been counterfeited over the previous a number of years, together with most cancers medicines, in keeping with trade specialists and regulation enforcement officers. The fits are pending.
“These criminals are preying on essentially the most weak,” stated Lori Mayall, Gilead’s head of anti-counterfeiting and product safety.
What makes a counterfeit medication?
Lori Mayall, Gilead Sciences’ head of anti-counterfeiting and product safety.
Source: CNBC
In an interview at Gilead’s headquarters in Foster City, California, Mayall defined what constitutes a counterfeit: Altered packaging, a bottle with the improper tablets, the improper cap or label and even the leaflet hooked up which incorporates essential details about the treatment.
Here’s how drug diversion works: A affected person fills a prescription for a treatment that’s price a number of thousand {dollars} however is paid for by Medicare, Medicaid or insurance coverage. The affected person then sells it for a fraction of the listing worth in money. The purchaser, often called an aggregator, removes the affected person data, alters the bottle and sells it to the wholesale distributor, who sells it again to the pharmacy.
Biktarvy has a bundle listing worth of $3,795, though most sufferers’ copays are usually far much less or they might receive vital reductions by way of the corporate’s affected person help applications, in keeping with Gilead.
In the Gilead counterfeiting operation, which authorities say was overseen by Hernandez, the corporate found it had a potential downside in August 2020. That’s when an unbiased pharmacy reported that a affected person had obtained a sealed bottle of Biktarvy with Excedrin drugs inside, in keeping with the lawsuit.
The bottle and label gave the impression to be genuine. Over the following a number of months, the corporate obtained extra complaints from sufferers and pharmacies that different sealed bottles of Biktarvy contained different medicines, primarily Seroquel, the antipsychotic. Mayall stated counterfeiters had obtained genuine empty bottles, stuffed them with the improper drugs and packaged them with a counterfeit seal. In one case, she stated, a affected person briefly couldn’t stroll or discuss after taking the Seroquel, however quickly recovered.
“What we have seen is our bottles reused,” Mayall stated. “They’re cleaned and repackaged to seem like real Gilead merchandise.”
Every sale of a prescription treatment is meant to be tracked to offer a chain of custody again to the producer beneath the federal Drug Supply Chain Security Act. But that hasn’t stopped criminals akin to Hernandez from circumventing the method by altering the labels and prescription paperwork and counterfeiting the availability chain documentation, in keeping with regulation enforcement officers interviewed by CNBC.
Typically, the crime begins on the road degree, the place sufferers are approached outdoors a homeless shelter or clinic, Mayall stated. They’re induced to promote their month’s provide of Biktarvy, for instance, for a number of hundred {dollars} or much less.
“It’s type of the reverse of drug dealing on the streets,” Mayall stated. “They go to those places the place they know there are sufferers who obtain medication that is been distributed from a pharmacy, and oftentimes these medicines are given to the sufferers by way of authorities insurance coverage or by way of different free drug applications, and they’ll pay the sufferers for his or her medication and the bottles that include the medication.”
Gilead’s battle room
A “battle room” at Gilead Sciences incorporates hundreds of confiscated capsule bottles.
Source: CNBC
Behind a locked door marked “battle room” at Gilead headquarters are tens of hundreds of drugs and bottles. All have been confiscated as counterfeits, Mayall stated as she took CNBC on a latest tour. Some of the fakes are apparent as a result of the paperwork incorporates quite a few misspellings.
Legitimate Gilead medicines are manufactured on the firm after which offered to a licensed Gilead distributor, who then sells them to a pharmacy. The counterfeit medicines in the battle room, most of which have been linked to the Hernandez case, have been repackaged to seem like Gilead merchandise, Mayall stated.
The Gilead lawsuit consists of 4 licensed distributors: Safe Chain Solutions, Scripts Wholesale, ProPharma Distribution and ProVen.
Of the 4, solely Safe Chain Solutions, by way of its attorneys, responded to CNBC’s request for remark.
Safe Chain Solutions denied claims by Gilead in the swimsuit that it offered or purchased counterfeit drugs.
“Safe Chain is a family-owned, full-service wholesale pharmaceutical firm that gives a big selection of prescribed drugs and different well being care merchandise to retail pharmacies and different healthcare amenities nationwide,” the assertion stated. “Independent wholesalers like Safe Chain play a very important function in supplying unbiased pharmacies, surgical facilities, and different retailers with prescription drugs at costs and in volumes they may not receive from bigger wholesalers.”
The firm stated it “has by no means knowingly offered inauthentic drugs or drugs with falsified pedigree documentation, whether or not manufactured by Gilead or in any other case. It has by no means altered or fabricated drug transaction histories. Safe Chain and its homeowners have been, at most, victims of this conspiracy.” It stated it has shipped greater than 100,000 orders with about 2 million items since its founding in 2011 and offers solely with licensed suppliers.
Authorities are investigating schemes in which capsule bottles containing prescription drugs are altered after which resold to pharmacies.
Source: HHS-OIG
“Safe Chain additionally communicated extensively with Gilead to research issues about HIV drugs. Indeed, Gilead itself discovered about a number of of those incidents instantly from Safe Chain. Safe Chain offered documentation about a whole bunch of bottles that it offered and additional documentation displaying what transaction historical past it had obtained from its personal suppliers. Safe Chain even invited Gilead to examine its amenities to guarantee Gilead of its dedication to affected person security and to work collaboratively in investigating these severe points. These aren’t the actions of understanding and willful counterfeiters,” the assertion stated.
ProPharma Distribution settled the Gilead swimsuit for $3.3 million and agreed to be completely prohibited from promoting Gilead medicines, courtroom information present. Details of the total settlement are confidential, in keeping with Gilead attorneys.
Johnson & Johnson, in a assertion to CNBC, stated it discovered in November 2020 that counterfeit variations of its HIV treatment Symtuza have been being distributed to a few pharmacies in the U.S. The firm stated it then reported that to the Food and Drug Administration.
“Counterfeiting of life-saving medicines is a prison act that places affected person lives in danger,” Dr. Dave Anderson, a firm vice chairman, stated in the assertion. “In addition to the anti-counterfeiting measures and authorized motion we now have taken, we need to remind all stakeholders concerning the scenario and supply particular steerage on find out how to determine HIV medicines.”
Criminal schemes
Geoffrey Potter, a companion with the New York City-based regulation agency Patterson Belknap Webb & Tyler, represents each Gilead and Johnson & Johnson.
“We do not understand how a lot counterfeit treatment is in the system as a result of there isn’t a great way of measuring it. But once we do discover these schemes, they’re very giant,” he stated.
In the Hernandez case, which concerned distributors all through the nation, Potter stated, there was no straightforward approach to decide whether or not a capsule bottle was actual or faux simply by taking a look at it.
“Virtually no one inspects their treatment earlier than taking it, so they would not have the ability to inform,” he stated.
Potter stated counterfeiters akin to Hernandez use subtle strategies much like these favored by drug traffickers. That is not shocking, since a variety of them have been convicted of narcotics-related crimes, he added.
Stephen Mahmood, assistant particular agent in cost on the U.S. Department of Health and Human Services’ Office of Inspector General, or HHS-OIG, stated the extent of drug diversion fraud is alarming.
Stephen Mahmood, assistant particular agent in cost on the U.S. Department of Health and Human Services’ Office of Inspector General.
Source: CNBC
“I’m saddened and disheartened that the schemes cross the complete United States and territories, however I’m not stunned. Fraud is at all times evolving,” Mahmood stated.
Depending on the scheme, he stated, a pharmacy might or might not know that it’s getting a counterfeit drug.
“Some of the pharmacies are concerned with the fraudulent wholesalers. They know precisely what they’re doing,” he stated. “Some are unwitting, they usually might get a fax from a wholesaler saying, ‘Hey, we now have a discounted drug.’ And as a consequence of competitors and attempting to make cash, they might purchase the drug.”
In a 2014 case dealt with by HHS-OIG in Miami, brokers used an informant carrying a hidden digicam to movie a girl, her husband and her grownup son in a South Florida condo altering treatment bottles. The video, obtained by CNBC, exhibits how they used lighter fluid to take away the affected person data affixed to the bottle.
“Because clearly nobody goes to promote a drug with another person’s title on it. And they’re cleansing it to make it look new once more,” stated Mahmood, describing the video as a “drug diversion in progress.”
The three have been convicted of expenses associated to the unlicensed distribution of prescription drugs in 2015 and served jail time. All have since been launched, and their attorneys didn’t reply to a request for remark.
A convicted felon who spoke to CNBC on the situation his id wouldn’t be disclosed and who requested to be known as “Julio” stated altering treatment bottles was his life for about 10 years in South Florida.
“Julio” says he made millions from the drug counterfeiting enterprise.
Source: CNBC
“I used to be in the capsule enterprise. I used to have sellers in the highway. The pharmacies shopping for drugs from me, wholesale worth,” he stated.
He stated sufferers determined for money willingly forgo their important treatment.
“They will carry it to me. I’ll pay them. I’ll pack it up. I’ll clear it, make it look good. Then I had a wholesaler who will purchase it from me,” he stated. He stated the wholesaler would then promote the medicines again to pharmacies.
Describing how he cleaned the bottles, he stated, “When I get them from the supplier, they arrive with the label over, with the individual’s title. I’ve a factor that I put — it is like a liquid that we put on it and we clear it, and we make it look model new once more. It’s bought to be model new so we will resell it.”
Eventually, he was caught and went to jail.
The FDA instructed CNBC it had nobody accessible to debate counterfeit drugs, however despatched a assertion: “The FDA urges the general public to acquire prescription drugs solely from state-licensed U.S. pharmacies or physicians which can be situated in the United States, the place the FDA and state authorities can guarantee the standard of drug manufacturing, packaging, distribution and labeling. Non-FDA accredited drugs might comprise the improper elements, comprise too little, an excessive amount of, or no lively ingredient in any respect, comprise different dangerous elements, or be shipped and/or saved outdoors of accredited circumstances.”
For Lazaro Hernandez, his high-flying days ended abruptly earlier this 12 months. He pleaded responsible in April to conspiracy expenses associated to distributing adulterated and misbranded drugs and cash laundering in reference to a $230 million fraud ring. In June, he was sentenced to fifteen years in jail.
In courtroom paperwork, one in every of his attorneys stated his “playing dependancy” was a “driving drive behind his participation in the prison conspiracy,” and stated Hernandez frequently took money from his gross sales of diverted drugs to casinos.
A unique lawyer for Hernandez stated in an e-mail that she had no remark on the case.
None of the distributors in the Gilead case have been criminally charged.
However, Steven Diamanstein, the proprietor of Scripts Wholesale, primarily based in the Brooklyn borough of New York City, was indicted in June on expenses of shopping for greater than $150 million price of illegally diverted prescription HIV treatment and reselling it to pharmacies, in keeping with the indictment and a Justice Department information launch. He pleaded not responsible, and his lawyer had no remark.
Other investigations into extra counterfeit schemes are pending, regulation enforcement officers instructed CNBC, including that altering capsule bottles and the drugs themselves is simply too profitable for criminals to decelerate.
“We must put locks on all of the doorways and home windows to maintain the criminals out,” Mayall stated. “Right now, it’s means too straightforward for these bottles which have been beforehand distributed to sufferers to make their means again into the availability chain.”