The security camera captures a real player, a

larger-than-life gambler, a familiar face at World

Poker tournaments in Las Vegas.

Day one chip leader Lazaro Hernandez is once again

setting the pace.

With posts from luxury boats and private planes,

Lazaro Hernandez fashioned himself as a

high-flying high roller.

Turns out he was the mastermind of a $230

million drug counterfeiting operation,

and he was gambling with people's lives.

These thousands of bottles were all

originally prescribed and filled for patients.

Now they fill an evidence room at Gilead Sciences in

Northern California.

Every single bottle was discovered in a complex

criminal drug diversion scheme.

We are playing a bit of a game of whack-a-mole.

Lori Mayall fights to find the counterfeits every

day. She oversees global product security at

Gilead, which manufactures HIV

medications Biktarvy and Descovy, drugs at the

center of Hernandez's fraud.

We know that upward to 80,000 of bottles of

counterfeits were entered into the supply chain.

And what would those be worth if someone was

paying full retail price?

Those bottles would be about $230 million.

Here's how drug diversion works: a patient fills a

prescription for a medication worth several

thousand dollars, but turns around and sells it

for a fraction of that in cash.

The buyer, known as an aggregator, removes the

patient information, alters the bottle, then

sells it to a wholesale distributor who sells it

back to the pharmacy at a discount, so the same

bottle reenters the supply chain.

It's part of a massive, illegitimate drug industry

the World Health Organization estimates at

as much as $431 billion annually around the world.

Not only a financial threat, but one with

serious health consequences, too.

Tell me all the ways that a drug that Gilead

manufactures could be counterfeit.

You could have an original bottle with wrong tablets

inside that's resealed to make it look like a

genuine Gilead product.

That's a counterfeit.

You can have a cap that is not a genuine Gilead

cap on a bottle.

That's a counterfeit.

The label itself could be a copy and not coming from

our line.

Gilead first learned it had a serious problem in

2020 when reports came in of Biktarvy bottles filled

with an anti-psychotic drug called Seroquel.

That raised immediate alarms that something was

amiss and we mobilized a team to launch an

extensive investigation to try to understand what

was happening.

What they found involved a slew of counterfeits.

This bottle doesn't even contain pills, just rocks.

Why do you think somebody would try to pass this off

as a real bottle of prescription medicine?

All they need to do is make the sale.

And this man, let's call him Julio, who agreed to

an interview if we concealed his identity,

said it was easy to persuade patients to sell

their bottles.

The had AIDS, cancer, and they don't have any money.

So for $100, $200, they'll sell it every day.

So they'll forgo the medication.

They won't take the medication.

They won't take the medication.

Julio says he got rich, even as a mid-level

middleman, in a hustle that billed millions to

Medicare for counterfeit medications.

What are the most lucrative drugs to resell?

Truvada.

Seroquel.

He says he processed the pill bottles himself.

How many bottles of pills would you have to have to

fill a box?

I'm going to say 300.

And then how many boxes would you sell to the

wholesaler?

In a week, 1,500.

The fraud achieved size and national scale because

licensed distributors buy from aggregators like

Julio, sell to the pharmacies and give the

whole process the sheen of legitimacy.

How troubled are you by the licensed distributors?

Very troubled.

They're a critical cog in the scheme.

Most pharmacies are unlikely to purchase from

the fly-by-night entities that didn't exist a year

ago or 30 days ago and are now offering large

amounts of medication for them to purchase.

And the distributors have relationships with

thousands of independent pharmacies across the

nation. Is there ever a deal to be had on HIV

medication?

Gilead sells all of its medicine to our authorized

distributors at one price .

So there's no deals to be made.

Is it possible that one bottle of legitimate

prescription medication gets billed and rebilled

over and over again to Medicare?

Yes. One bottle can be billed two, maybe three

times.

Stephen Mahmood is assistant special agent in

charge at Health and Human Services Office of

Inspector General.

He leads investigations into Medicare fraud.

The pharmacies that are on the receiving end of

these diverted prescriptions, do they

know?

Some do, some don't.

They're the kinds of drugs that the government pays a

lot of money for people to receive.

Right, yes. Medicare pays out to pharmacies a lot of

money for these drugs because they are expensive

and life-sustaining.

It drives up the government's health care

costs and adds to the more than $100 billion in

waste, theft and abuse that taxpayers pay for

annually. Investigators have watched the crime in

progress. This hidden camera video has never

been seen in public.

Shot by an undercover informant, it shows a

woman, her husband and son cleaning prescription

pill bottles in a South Florida apartment.

The individual in the white shirt in the middle,

you can see what appears to be lighter fluid.

He's using that lighter fluid, a harsh chemical,

to clean the bottle and remove the pharmacy

prescription label.

That would have had the name of the patient.

It would have had the name of the patient on it.

Because obviously no one is going to sell a drug

with someone else's name on it.

And they're cleaning it to make it look new again.

It's a mom-and-pop operation.

Often, it shows.

So here is an example of a patient leaflet that was

attached to a counterfeit Biktarvy bottle that we

seized from one of the wholesalers.

And you can see it's a very horrible copy.

It's falling apart.

But in other words, if a patient were to get a

bottle and have a patient leaflet like this, that

would be a warning sign that something's wrong.

Absolutely. It would be a warning sign and a patient

should never receive a leaflet in this type of

condition.

Though the companies lose money on every bottle that

gets reintroduced in the system, they say their top

concern is safety.

Johnson and Johnson, whose HIV drug Symtuza was

targeted, said in a statement it's found "HIV

medication bottles filled with a different product

or bearing false or adulterated packaging,

labeling or instructional inserts." The company

insists "Counterfeiting of life-saving medicines

is a criminal act that puts patient lives at

risk." Cancer patients cut their dosing in

exchange for cash.

Hiv patients get paid but go without.

Their viral load can increase, which makes it

more likely to spread HIV to others.

The pharmaceutical companies are serious

about disrupting the drug diversion.

Gilead Sciences and Johnson and Johnson have

sued distributors and pharmacies throughout the

country. Their investigations and

litigation are still unfolding.

These three were convicted in connection

with the prescription drug counterfeiting

operation. Julio served time behind bars for his

pill diversion scheme, and insists his

counterfeiting days are behind him.

And the big-time poker player?

Lazaro Hernandez's jet-setting days ended

abruptly this year.

He was convicted in that $230 million drug

counterfeiting operation.

An attorney for Hernandez argued in court his

"gambling addiction" was a "driving force behind

his participation in the criminal conspiracy." And

said Hernandez regularly took "large quantities of

cash obtained from his sales of diverted drugs"

to casinos.

He pled guilty to conspiracy charges related

to distributing adulterated and misbranded

drugs and money laundering.

He is serving a 15-year prison sentence.

And the critical cog in these schemes, the

distributors?

None have been criminally charged, though the CEO of

Scripts Wholesale was indicted in June for

buying more than $150 million of "illegally

diverted prescription HIV medication" and reselling

it to pharmacies.

He pled not guilty.

His attorney declined to comment.

Today, federal authorities say they are

actively investigating other major drug

counterfeiters. In October, prosecutors

charged New York pharmacy owners with a $20 million

scheme to buy and sell HIV medications on the

black market and pay illegal kickbacks.

Then, fraudulently bill Medicare, Medicaid and

private insurance companies. The proceeds

allegedly went for lavish purchases, like this

Mercedes Maybach.

Drug diversion is widespread and it impacts

the entire country.

I'm saddened and disheartened that the

schemes cross the entire United States and the

territories, but I'm not surprised.

Fraud is always evolving.