How Four Men Got Rich Exposing Pharma Fraud
CNBC Washington Reporter
This is the story of the most successful—and least well-known—whistleblower operation of all time.
It is a group of four men who have made a vast fortune repeatedly blowing the whistle on the nation's drug industry, forcing Big Pharma to pay the federal government over a billion dollars in settlements.
In downtown Key West, Fla., the land of Jimmy Buffett, Margaritas and wild street theater, is an anonymous building, the home of a tiny company called Ven-A-Care.
The company began in the late 1980s as a home drug-infusion business. And as they processed drug claims with the government, they found something odd, says Patrick Burns, a spokesman for the non-profit group Taxpayers Against Fraud, who calls the founders of Ven-A-Care “American heroes.”
"What they discovered was that they were buying drugs for a buck and Uncle Sam was paying $5 for 'em,” Burns says. “Five-hundred percent markups, 1,000 percent markups, 2,000 percent markups that Uncle Sam was paying.”
Armed with that information, Ven-A-Care filed whistleblower suits against drug companies. And since 2001, the four men have forced drug companies to pay the federal government more than $1.3 billion dollars. Of that, the Ven-A-Care founders, known as “relators” in whistleblower jargon, got to keep $280 million dollars for themselves.
On December 7, the Department of Justice announced a massive $421 million settlement with three drug companies: Abbott Laboratories, Roxane Laboratories, and B. Braun Medical. The companies made the payments to settle allegations that they engaged in a scheme to report false and inflated drug prices to federal health care programs.
Buried deep in the press release on the case, the government revealed that the scam was uncovered by Ven-A-Care. As a result, the four co-founders split an astonishing $88.4 million as their share of the settlement.
“Yes they scored $88 million for themselves, but, more importantly, they scored over $400 million dollars for the taxpayers,” Assistant Attorney General Tony West told me.
Less than two weeks later, the government announced another settlement with another drug company, and this time, the very same four whistleblowers kept more than $67 million dollars out of a $280 million settlement.
In January, a Texas jury ruled that another drug company must pay the state $170 million for overcharging the Texas Medicaid program. And Ven-A-Care’s founders will get a piece of that money, too, eventually.
Despite their tremendous success, very little is known about the four men behind the cases.
I asked Assistant Attorney General Tony West about the four, who have worked closely with the Department of Justice for much of the last decade. But he wouldn’t say anything about them personally.
“I think I'm going to respect their privacy and ask that if you're interested in talking with them you should get in touch with them,” West said. “But I can tell you that working with those relaters, working with their attorneys have been very, very productive for our efforts."
We took West's suggestion, and went down to Key West to try to find the secretive Ven-A-Care four. They rarely appear in public forums, and they haven't talked to the media in over a decade.
So we showed up unannounced at the small offices of Ven-A-Care, which are located in an alleyway off of Duval Street, the main drag in downtown Key West. When I rang the bell one of the company’s principals, Luis Cobo, came to the door. I told him it seemed like Ven-A-Care as had a heck of a run.
“It's been a lot of years of a lot of hard work and dedication, correct,” he responded.
But Cobo didn’t want to talk to me any further, and referred me to his attorney, who didn’t respond to several calls for comment from CNBC.
But Patrick Burns explained why Ven-A-Care is so reluctant to talk in public. “Everybody wants their number. And what's the benefit to them? There really isn't. They have more litigation ahead.”
In a rare public appearance before Congress in 2004, Ven-A-Care’s Mark Jones said the drug companies had no excuse for the scams that Ven-A-Care is targeting.
“The contention by drug manufacturers that deception is somehow justified when it becomes widespread in their industry reveals a serious and fundamental integrity flaw that, if unaddressed, threatens the taxpayer, the patient, and the industry itself,” Jones testified.
In fact, Burns estimates that Ven-a-Care could force at least another billion dollars worth of settlements from the pharmaceutical industry before their cases are finished. And that could be many years from now.
Ven-a-Care may just be getting started.
Watch the final two days of Eamon Javers' special series of reports, "Bounty Hunters," Thursday, February 10 and Friday, February 11, on "Squawk Box" and "Squawk On The Street" on CNBC.