by Margaret Coker, The Current

This article was produced for ProPublica’s Local Reporting Network in partnership with The Current. Sign up for Dispatches to get stories like this one as soon as they are published.

Last summer, as political debate swirled over the future of Georgia’s experiment with Medicaid work requirements, Gov. Brian Kemp held a press conference to unveil a three-minute testimonial video featuring a mechanic who works on classic cars.

Luke Seaborn, a 54-year-old from rural Jefferson, became the de facto face of Georgia Pathways to Coverage, Kemp’s insurance program for impoverished Georgians. In a soft Southern drawl, Seaborn explained how having insurance had improved his life in the year that he had been enrolled: “Pathways is a great program that offers health insurance to low-income professionals like myself.”

Kemp lauds Pathways as an innovative way to decrease the state’s high rate of uninsured adults while reining in government spending, holding the program up as an example to other Republican-led states eager to institute Medicaid work requirements.

But in the nine months since Seaborn’s video testimonial was released, his opinion of Pathways has plummeted. His benefits have been canceled — twice, he said, due to bureaucratic red tape.

“I used to think of Pathways as a blessing,” Seaborn recently told The Current and ProPublica. “Now, I’m done with it.”

Rather than an enduring symbol of success, Seaborn’s experience illustrates why the program struggles to gain traction even as the state spends millions of dollars to burnish Pathways’ brand. The Current and ProPublica previously reported that many of the approximately 250,000 low-income adults potentially eligible for the health insurance program struggle to enroll or maintain coverage.

The politics of Pathways were not on Seaborn’s mind when he received a phone call last summer from an insurance executive who handles Pathways clients. One of the first Georgians to enroll in the program in 2023, Seaborn had written a letter thanking his insurance provider for covering a procedure for his back pain. The executive from Amerigroup Community Care wanted to know: Would he take part in a promotional video for Pathways?

Seaborn, a supporter of the governor, said yes without hesitation. Soon afterward, Kemp’s press secretary, Garrison Douglas, arrived at his auto repair shop, located a few miles from the governor’s hometown, and spent hours filming in the garage filled with vintage Ford and Chevy trucks and handpainted gas station signs.

A trained chemical engineer, Seaborn had quit his corporate job to embrace his dream of repairing classic cars. But the realities of being a small business owner made that path difficult, Seaborn said, especially when it came to shouldering the cost of health insurance for himself and his son. Pathways eased the way, he said.

Seaborn said he was surprised when the governor called him out by name weeks later at the press conference during which his testimonial video was released. He wasn’t expecting to be the singular face of Pathways.

By November, though, Seaborn encountered some of the problems that other Georgians say have soured their opinion on Pathways. Seaborn said he had logged his work hours into the online system once a month as required. But his benefits were canceled after he failed to complete a new form that he said the state had added without adequate warning. Seaborn said the form asked for the same information he had been submitting every month, just in a different format. The state’s Medicaid agency did not respond to questions about Seaborn’s experience or the new form.

He said he called the same insurance executive who had asked him to take part in the testimonial. She told him she would be lunching with one of Kemp’s aides that day and promised to help, he recalled. Within 24 hours, Seaborn said, his benefits were restored, and a representative from Georgia’s Division of Family and Children Services, which administers federal benefits programs, called to apologize.

Douglas said the governor’s office “had no involvement in Mr. Seaborn’s case.” The insurance company did not respond to requests for comment.

Pathways enrollees must submit paperwork every month proving they had completed the requirements necessary for coverage: 80 hours of work, study or volunteering. But the state says it is not verifying the information on a monthly basis — only during enrollment and upon annual renewal.

Seaborn said that after his coverage was restored, his insurance company told him he would no longer have to file his work hours monthly; the next time he would need to submit such documentation would be during his annual reenrollment. Nevertheless, Seaborn said he signed up for text and email notifications from the Pathways program so that he wouldn’t be caught off guard if requirements changed again.

Even so, technical glitches and more red tape caused him to lose his coverage once more, he said. He stopped receiving texts from the Pathways program in February. When he logged in to the digital platform in early March to make sure everything was in order, a notice informed him that his benefits would be terminated on April 1. The reason: he had missed filing an annual income statement. He said the surprise requirement had popped up on the digital platform even though his coverage was not up for renewal.

“My head exploded,” he said. “I didn’t get a text or an email. I did what I was supposed to, but that wasn’t good enough.”

Seaborn said he went ahead and filed the information, although it was late. He tried to call his insurance provider again for an explanation — and help. He reached out to the Division of Family and Children Services as well. This time, however, he said no one called him back.

In April, Seaborn paid out of pocket for his and his son’s prescription medications, an extra $40 that he said is difficult for him to afford.

Ellen Brown, a spokesperson for Georgia’s Division of Family and Children Services, would not say why Seaborn’s benefits were terminated.

“We are sorry to hear this happened and are looking into how we can better serve our customers and resolve communication gaps in the future,” Brown said in a written statement Friday. “Every Georgian that seeks our services is important, and we take these matters very seriously.”

Meanwhile, Seaborn received a phone call that day from the same Division of Family and Children Services representative who had apologized to him after he was kicked off Pathways last fall. He said she told him she would make sure he got his coverage back. The representative did not respond to a request for comment from The Current and ProPublica.

On Monday evening, Seaborn received a text message to alert him to a notification in the Pathways digital platform. He logged on: A notice confirmed that he had been reenrolled, a change of fortune that he credited to The Current and ProPublica’s questions to state officials about his predicament because he had already given up on contacting people for help.

“I am so frustrated with this whole journey,” Seaborn said. “I’m grateful for coverage. But what I don’t understand is them leaving me like a mushroom in the dark and feeding me nothing, no information, for more than a month.”

This post was originally published on ProPublica.

by Margaret Coker, The Current

This article was produced for ProPublica’s Local Reporting Network in partnership with The Current. Sign up for Dispatches to get stories like this one as soon as they are published.

When the state of Georgia handed Deloitte Consulting a $10.7 million marketing contract last July to promote the nation’s only Medicaid work requirement program, the initiative was in need of serious PR.

At the time, a year after the program’s rollout, less than 2% of those eligible for Georgia Pathways to Coverage had enrolled, well short of state targets.

To get the word out, the state turned again to the firm that it had relied on to build and manage the program. About 60% of the marketing contract went toward creating and placing ads about Pathways on television and radio, including during NFL games and morning talk shows.

Much of the remainder of the seven-month contract would go toward two efforts: $250,000 per month for Deloitte-trained teams to hand out brochures and Pathways-branded merchandise at community events and $300,000 a month for Deloitte to produce reports about its own performance.

When Deloitte’s publicity campaign ended in February, enrollment in Pathways remained less than 3% of the approximately 250,000 Georgians who are potentially eligible.

The marketing contract is part of a larger suite of services that Georgia has commissioned from Deloitte for its Medicaid experiment. Deloitte has made at least $51 million as of Dec. 31 to manage Pathways, including creating and maintaining its problematic software platform, as The Current and ProPublica previously reported. It is also earning at least $3 million more to oversee the state’s relationship with federal regulators, including its application to extend the experiment beyond its expiration this fall.

Deloitte’s outsize — and unusual — role in promoting the program it has built has allowed the firm to keep pulling in payments despite Pathways’ struggles. And there is virtually no public accounting of how well it is increasing enrollment, a key goal of the policy experiment.

An excerpt of Deloitte’s marketing contract shows its $300,000 per month expenditure on reports on its own performance, $250,000 per month for community outreach and $10.7 million total budget. (Obtained by The Current and ProPublica. Highlighted by ProPublica.)

The marketing contract, obtained through a public records request, allows Deloitte to charge the state nearly half a million dollars for a final report on its publicity campaign, which was due to be submitted in February. When The Current and ProPublica requested the monthly and final performance reports, the state said they needed to be “reviewed” first and demanded $900 for that work. The news outlets did not pay because previous responses to public records requests for Deloitte’s Pathways contracts were heavily redacted, with the general counsel’s office at the Department of Community Health citing “confidential/trade secret.” The agency did not charge for those records.

The state recently approved another $10 million to Deloitte, Fiona Roberts, spokesperson for the Department of Community Health, Georgia’s Medicaid agency that oversees Pathways, said in response to questions about the effectiveness of Deloitte’s marketing efforts. The new marketing contract, which runs until November, includes more community meetings and a text message campaign by Salesforce Marketing Cloud rolling out in May to potentially eligible Georgians, Roberts said.

“In 20 years of researching these kinds of programs, I can’t think of another instance like this” in which a state has selected a for-profit company to both manage and market a federal benefit program, said Joan Alker, executive director for Georgetown University’s McCourt School of Public Policy Center for Children and Families, where researchers have concluded that Medicaid work requirements prevent people from accessing health insurance.

Deloitte has designed and managed Medicaid and other benefit programs for many states, including Georgia, making the firm one of the nation’s experts in government health policy. But Alker said that when states want to educate and enroll residents in federal safety net programs, they typically select local nonprofits that have established relationships with low-income communities. Georgia’s arrangement with Deloitte raises questions, she said, about “whether the state is more committed to spending money on consultants or poor people.”

Deloitte, which has been in charge of the Pathways communications strategy for the past three years, declined to answer questions about its Georgia Pathways work, referring requests for information to the Department of Community Health. A contract signed in 2023 worth approximately $7 million stipulates that Deloitte would “develop first draft of response to media inquiries” on behalf of the Department of Community Health, but that responses “will be submitted by DCH and not Deloitte.” Deloitte’s duties also include drafting talking points for media interviews, including for the governor.

Roberts declined repeated requests for an interview with agency officials. When asked about Deloitte’s marketing and outreach work and whether the firm has met the state’s goals, she described the effort as a “robust, comprehensive awareness and outreach campaign throughout the state” that has generated 1.6 million visitors to the Pathways website since the campaign’s August 2024 launch.

“The state has invested heavily in marketing and outreach to reach Georgians potentially eligible for Pathways,” Roberts said in a written statement.

In 20 years of researching these kinds of programs, I can’t think of another instance like this.

—Joan Alker, executive director for Georgetown University’s McCourt School of Public Policy Center for Children and Families

Gov. Brian Kemp has described Pathways as an innovative alternative to expanding Medicaid, something 40 other states have done. By contrast, Georgia’s program covers only the poorest individuals who can prove they are working, studying or volunteering at least 80 hours a month. Congressional Republicans are pointing to similar work requirements as a model in their budget negotiations.

In early 2024, less than a year after Pathways’ launch, however, Georgia legislators — including some of Kemp’s Republican allies — considered ending the experiment and instead expanding Medicaid without any work requirements. Georgia’s uninsured rate was 11.4%, or 1.2 million people, compared to the national average of 8% in 2023, the latest data available, according to KFF, a nonprofit focused on national health issues. State data showed that Pathways enrollment was well under the first-year target of 25,000 published in Georgia’s agreement with the federal government. As of April 25, approximately 7,400 Georgians were enrolled, according to the Department of Community Health.

An independent evaluation team commissioned by the state recommended ways to boost enrollment in a December 2024 report. The evaluators, Public Consulting Group, highlighted North Carolina’s strategy of allowing residents from rural communities and communities of color to help create outreach campaigns for its expanded Medicaid program in 2023. North Carolina Medicaid officials told The Current and ProPublica that they designed their outreach efforts to maximize participation in the new program, with a two-year target of enrolling 600,000 people. They achieved that goal within one year.

Georgia and Deloitte, however, took a different tack. The $10.7 million marketing contract does not lay out specific enrollment goals as a way of measuring the success of Deloitte’s efforts. The purpose of Pathways “is not and has never been to enroll as many Georgians as possible,” according to the state’s application to the federal government to continue the experiment.

The contract budgeted $247,000 to create up to four testimonial videos featuring satisfied Pathways clients; only one can be found on the state Medicaid agency’s YouTube channel, where it has received approximately 350 views since it was posted in January. The state did not respond when asked how many testimonials Deloitte produced.

Few people stopped by the Georgia Pathways booth at the Washington County Health Fair in Sandersville, Georgia, in March. (Nicole Craine for ProPublica)

Meanwhile, another part of Deloitte’s marketing strategy has also failed to catch wind: Deloitte had sent public relations teams to dozens of community events including farmers markets, a school Christmas pageant and a catfish festival to plug Pathways and encourage applications.

In March, one such team drove two hours from Atlanta to a health fair in Central Georgia’s rural Washington County. At the Pathways booth, the Deloitte team barely looked up from their phones for three hours. Residents largely bypassed the team to chat with locals staffing other kiosks where they could receive diapers, information on subsidized in-home nursing care and blood pressure screenings. Of those who stopped at the Pathways booth, only a handful asked about enrollment.

Other public events were tied to the state’s pursuit of federal permission to extend the Pathways program beyond September, when its original five-year mandate expires. Georgia is once again paying Deloitte to ensure that happens.

The monthslong process, managed by Deloitte, requires opportunities for public comment. A summary of these comments must be submitted with the application, which Deloitte is drafting. Health advocacy organizations say public outreach for this effort, especially to Black Georgians, has been superficial at best.

The only notice for two virtual public meetings appeared on a Department of Community Health web page that was not linked from the agency’s homepage. During both virtual events, health care advocates criticized the program’s inequitable access, but state officials did not engage with the speakers.

A third event — an in-person meeting in the rural 10,000-person town of Cordele — was added later and posted on the same website just one week before it was scheduled to occur. Only about a dozen people, some traveling for more than 80 miles, showed up to the noon meeting on St. Patrick’s Day.

Georgians traveled up to 80 miles to speak at a public meeting about Pathways held by the Georgia Department of Community Health in Cordele in March. (Nicole Craine for ProPublica) The town of Cordele has a population of around 10,000 people. (Nicole Craine for ProPublica)

The low attendance reflected the meeting’s out-of-the-way location and holiday timing, not a lack of public interest, said attendee Sherrell Byrd, executive director of Sowega Rising, a community advocacy group based in the majority Black town of Albany.

Inside the one-story cinder block building, three state health officials sat along a table at the front of the largely vacant room. One by one, attendees rose to the microphone to complain of technical glitches in the Pathways enrollment process, the lack of customer service and the generational health care inequalities faced by Black Georgians.

Tanisha Corporal, who lives approximately 140 miles away in Atlanta, was the only person to participate virtually. She told the Department of Community Health officials that she had submitted a Pathways application three times over the Deloitte-built digital portal only to have her file disappear. The licensed clinical social worker whose nonprofit job ended in January 2024 said state agencies offered her little enrollment support.

Grant Thomas, deputy commissioner for the Georgia Department of Community Health, sits in the back of the room during a public meeting on the Georgia Pathways program in Cordele. (Nicole Craine for ProPublica)

The state health officials did not respond to any of the speakers during the meeting. Grant Thomas, Kemp’s former health policy advisor and deputy director of the state Medicaid agency, sat in the back of the room and did not interact with the attendees. Thomas declined to speak on the record.

“There is a lot of disdain for real-life problems of Georgians who look like us,” Byrd said.

Robin Kemp of The Current contributed reporting.

This post was originally published on ProPublica.

by David Armstrong

ProPublica is a nonprofit newsroom that investigates abuses of power. Sign up to receive our biggest stories as soon as they’re published.

The pain jolted me awake. It was barely dawn, a misty February morning in 2023. My side felt as if I’d been stabbed.

I had been dealing with pain for weeks — a bothersome ache that felt like a bad runner’s cramp. But now it was so intense I had to brace myself against the wall to stand up.

A few hours after arriving at the emergency room, I heard my name. A doctor asked me to follow him to a private area, where he told me a scan had uncovered something “concerning.”

There were lesions, areas of bone destruction, on top of both of my hip bones and on my sternum. These were hallmarks of multiple myeloma. “Cancer,” he said.

Multiple myeloma is a blood cancer that ravages bone, leaving distinctive holes in its wake. Subsequent scans showed “innumerable lesions” from my neck to my feet as well as two broken ribs and a compression fracture in my spine. There is no cure.

I walked out of the ER in search of fresh air. I sat on a metal bench and did what many patients do. I turned to Google. The first link was a medical review stating that the average lifespan of a newly diagnosed patient was three to five years. My stomach churned.

I soon learned that information was outdated. Most patients today live much longer, in large part due to a drug with a horrific past. It was a doctor at the hospital who first told me I would likely take a thalidomide drug as part of my treatment.

That couldn’t be possible, I told him.

I knew the story of thalidomide, or at least I thought I did. It represented one of the darkest chapters in the history of modern medicine, having caused thousands of severe birth defects after it was given to pregnant women in the 1950s and 1960s. The drug was banned in most of the world, and the scandal gave rise to the modern-day U.S. Food and Drug Administration.

It turns out the drug once relegated to a pharmaceutical graveyard had new life as a cancer fighter.

That drug I take is called Revlimid. It is a derivative of thalidomide, a slightly tweaked version of the parent compound.

Revlimid is now one of the bestselling pharmaceutical products of all time, with total sales of more than $100 billion. It has extended tens of thousands of lives — including my own.

But Revlimid is also, I soon learned, extraordinarily expensive, costing nearly $1,000 for each daily pill. (Although, I later discovered, a capsule costs just 25 cents to make.)

That steep tab has put the drug’s lifesaving potential out of reach for some cancer patients, who have been forced into debt or simply stopped taking the drug. The price also helps fuel our ballooning insurance premiums.

For decades, I’ve reported on outrageous health care costs in the U.S. and the burden they place on patients. I’ve revealed the tactics used by drug companies to drive sales and keep the price of their products high.

Even with my experience, the cost of Revlimid stood out. When I started taking the drug, I’d look at the smooth, cylindrical capsule in my hand and consider the fact I was about to swallow something that costs about the same as a new iPhone. A month’s supply, which arrives in an ordinary, orange-tinged plastic bottle, is the same price as a new Nissan Versa.

I wanted to know how this drug came to cost so much — and why the price keeps going up. The price of Revlimid has been hiked 26 times since it launched. Some of what happened was reported at the time. But no one has pieced together the full account of what the drugmaker Celgene did, how federal regulators failed to rein it in and what the story reveals about unrestrained drug pricing in America.

What I discovered astonished even me.

My journey started with an indefatigable New York City lawyer on a quest to give her dying husband a chance.

Tiny and Terrifying

Beth Wolmer’s story begins on a moon-splashed beach in the Cayman Islands in the winter of 1995. She and her husband, Ira, were holding hands as they walked in the sand, enjoying a rare break from a hectic life as parents to a 1-year-old daughter and demanding jobs as 30-something professionals in New York City.

They had met through friends and clicked from the start. On Sunday mornings, they sat together for hours, sharing sections of the newspaper and eating bagels. They planned trips to Europe and outings to the Metropolitan Museum of Art.

Ira was an interventional cardiologist who followed his father into medicine. Beth was a lawyer at the high-powered firm Skadden Arps.

“We had a great life,” Beth told me. “I specifically remember coming home on the bus and thinking: ‘My life is just perfect, perfect. I’m not going to change a thing.’”

As they walked that night in the Caribbean, Ira felt a sharp pain in his cheekbone. The pain flared several more times during the trip, becoming so intense that it brought tears to his eyes.

When he got home, Ira made an appointment to figure out what was wrong. Imaging tests revealed multiple myeloma. The prognosis was grim. The couple was told Ira had two years to live.

Specialists recommended treatments that would only provide a brief reprieve. The couple searched for someone who could offer something more. That’s when they found Dr. Bart Barlogie in Little Rock, Arkansas.

I’ve never been more scared of a spouse of a patient than I was of her.

—Dr. David Siegel, who treated Ira Wolmer

Barlogie had been recruited to the University of Arkansas for Medical Sciences from the more prestigious MD Anderson Cancer Center in Houston. In Texas, Barlogie had been frustrated by a medical culture that he viewed as too timid in its approach to multiple myeloma.

He remembers working on a Sunday when a newly diagnosed patient was admitted to the hospital. With few options, Barlogie decided to put the patient on a taxing, four-drug chemotherapy cocktail used for lymphoma patients. It didn’t work. The patient died from a sepsis infection, a known complication of the treatment.

The attending physician later admonished him, Barlogie said, saying, “Bart, we have to learn to treat myeloma gently.” Barlogie said he thought to himself, “Fuck you.”

In Arkansas, Barlogie was in charge. He quickly developed a reputation as a practitioner willing to try anything to fight the fatal disease. Patients from around the world — including the actor Roy Scheider from the movie “Jaws” — flocked to his clinic.

Beth and Ira heard Barlogie before they saw him. The cowboy boots he’d taken to donning since his time in Houston clacked down the linoleum hallway floors. A short, slight man, Barlogie had a booming voice with a German accent. He wore leather jackets and round, red-framed glasses on his bald head.

When he strode into the exam room, he hugged Beth and Ira and told them they had come to the right place.

Now retired, Barlogie recalls being struck by Beth’s intensity. He said she told him “you must do something” to help Ira.

I met Barlogie at his home in Little Rock. We sat in his office, which is filled with photos of the red Ducati motorcycle he used to ride to work. An old license plate with the letters “MMCURED” sat on a shelf, reflecting his goal to find a cure for multiple myeloma.

When Beth and Ira found him, Barlogie told me, he had been having some success with a novel approach that put patients through two stem cell transplants a few months apart, which he called a tandem stem cell transplant. With a transplant, a patient is bombarded with high-dose chemotherapy to kill the cancerous plasma cells. The patient is then infused with healthy stem cells that travel to the bone marrow.

The intense chemotherapy can be grueling and poses a small risk of death.

Ira underwent three transplants. Each time, he relapsed. By the fall of 1997, after two years of treatment, Ira’s thick black hair was gone. He was losing weight. Then he had a stroke. His kidneys failed and required dialysis. He developed pneumonia and had to be intubated.

Beth was determined to keep him alive long enough for their toddler daughter to remember him. With a photograph of Ira smiling with their baby as motivation, she applied her lawyer’s tenacity to the case. She pored over medical journals and peppered oncologists with questions about why what they were trying wasn’t working or quizzing them about a promising study. When doctors told her there was nothing more they could do for her husband, she refused to accept it.

“She is a tiny person, but she is terrifying,” said Dr. David Siegel, part of the team that treated Ira in Arkansas. “I’ve never been more scared of a spouse of a patient than I was of her.” He meant it as a compliment.

By late fall in 1997, Ira was dying and Beth was desperate.

A researcher told her about the work of Dr. Judah Folkman, a surgeon and researcher at Boston Children’s Hospital. Folkman believed the growth of cancerous tumors could be stunted by starving them of a supply of new blood vessels.

“Thank You, God”

Folkman was a workaholic who, when he wasn’t in the operating room or the research lab, was traveling across the world to promote his novel theory of how to attack cancer. Peers had ridiculed his idea since he first proposed it in the 1970s. The prevailing belief at the time was that tumors didn’t need a new blood supply to grow.

A young researcher in his lab, an ophthalmologist named Robert D’Amato, was at work on the top question Folkman had posed. Could they come up with a drug, in pill form, that blocks the growth of new blood vessels?

Folkman has since died, but it wasn’t difficult for me to track down D’Amato. He still works at Boston Children’s Hospital, where he has his own lab and holds the Judah Folkman Chair in Surgery. Now in his early 60s, D’Amato has a youthful energy and speaks in a rapid, matter-of-fact clip.

D’Amato told me that he had set out to find existing drugs that block blood vessel growth. He started by thinking of his own body and side effects caused by certain drugs. A drug that causes hair loss might be the result of the blood supply to hair follicles being shut off, for example. But this exercise wasn’t producing any viable candidates.

After giving it some thought, D’Amato realized he had myopically narrowed his search. What about a woman’s body? There were drugs that stopped menstrual cycles. Then there were drugs that caused birth defects in pregnant women. In both of those cases, it was possible the drug was inhibiting blood vessel growth. He came up with a list of 10 drugs. At the top of the list was one with a devastating history: thalidomide.

Beginning in the 1950s, pregnant women in Europe, Australia and other countries were frequently prescribed thalidomide as a treatment for morning sickness and to help them sleep. The drug was thought to be harmless and in Germany was sold over the counter. An advertisement for thalidomide in the United Kingdom claimed it could “be given with complete safety to pregnant women and nursing mothers without adverse effect on mother or child.”

They were wrong.

The drug was eventually linked to birth defects in more than 10,000 babies. Those babies were born without limbs or with shortened limbs, malformed hands, disfigured faces and damage to internal organs. Nearly half died within months of being born.

By the early 1960s, the drug was widely banned, considered a shameful chapter in the history of pharmaceuticals. It was never sold in the U.S. thanks to the unwavering objections of a resolute reviewer at the FDA named Frances Oldham Kelsey. The close call, however, prompted Congress to require more rigorous safety and efficacy data from drug manufacturers and empower the FDA to monitor the industry more closely.

D’Amato theorized that the thalidomide birth defects were the result of the drug stopping the growth of new blood vessels that the fetus needs to develop. He walked me through his experiments: He cracked a fertilized chicken egg on a glass petri dish and placed thalidomide on the surface. After two days, if no blood vessels grow on the embryo, a halo should appear around the thalidomide sample, showing the drug worked. It didn’t.

Folkman told D’Amato to move on. But D’Amato couldn’t shake the disappointing results. He did more research and realized thalidomide needs to first be broken down in the body to have an effect on humans. He purchased metabolites of thalidomide, repeated the test and this time found a halo around the sample.

He kept experimenting and in 1994 published a paper finding that thalidomide had “clear implications” for treating tumors.

So when Beth called three years later, Folkman told her they should try it.

Barlogie told me he didn’t think it would work. Beth said she had to convince him to try it.

Barlogie agreed to test it on Ira and two other patients who were out of treatment options in early December.

I wanted him alive forever.

—Beth Wolmer

The drug did not work for Ira. Beth said just before he died, Ira sat up in bed, kissed her and smiled. It was March 10, 1998. He was 38.

After years of frantically searching for anything that would help, the finality of his death was difficult to accept, she said. “I wanted him alive forever.”

It is unclear what happened with the second patient. The third patient, however, started to get better.

His name was Jimmy. Little more is known about him except that he was a patient of another oncologist at the hospital, Dr. Seema Singhal, and near death before he started the drug. “I told him it might work, but at the very least it would help him sleep,” Singhal said. Shortly after Jimmy took his first dose of thalidomide, Singhal left for a vacation.

Dr. Bart Barlogie and Dr. Seema Singhal (Painting by James Lee Chiahan for ProPublica)

When she returned two weeks later, her mailbox was full of lab results for Jimmy. He was still alive. She sat down to double-check the results, which showed declining amounts of a cancer marker. “For 30 minutes, I was the only person in the world who knew this worked,” she said.

Singhal walked down to Barlogie’s office to give him the news. “He took me by the hand, opened a window and shouted, ‘Thank you, God,’” she said.

“Violent Arguments”

Word of Jimmy’s stunning recovery in Arkansas quickly made its way to the offices of Celgene Corp., located in a small corporate park in a rural patch of northern New Jersey.

The company had just wrapped up a brutal year-end accounting, which showed losses of $27 million on revenue of just $1.1 million. Money was so tight that executives engaged in what one of them called “violent arguments” over whether to charge employees for coffee.

Celgene had acquired the rights to thalidomide patents held by researchers at Rockefeller University in 1992. The company, which was new to pharmaceuticals, planned to use the experience of obtaining FDA approval for thalidomide to develop other drugs.

“It wasn’t meant to be a blockbuster,” said Sol Barer, who started at the company in 1987 and later became CEO.

When Celgene announced plans to develop the disgraced drug for new uses, the only analyst following the company on Wall Street dropped coverage and told Celgene officials they didn’t know what they were doing.

The company thought the largest market would be as a treatment for AIDS patients experiencing dangerous weight loss. To win approval of the drug, however, Celgene selected a use that was already in practice in parts of the world for a small group of patients.

In July 1998, the FDA approved thalidomide for the treatment of a painful complication of leprosy. It was a momentous decision, coming just a few decades after the drug caused so much harm.

The market for leprosy was tiny, but what happened with Jimmy in Arkansas changed everything for the company.

Blocked Exits

The Arkansas doctors had been busy since first testing thalidomide on Ira Wolmer, Jimmy and the other patient. They quickly got approval to conduct a larger experiment funded by a grant from the U.S. National Institutes of Health. Now, in December 1998, they were ready to share their initial findings at the annual meeting of the American Society of Hematology.

It had been three decades since a new therapy for multiple myeloma had been approved, and there was a buzz among the oncologists gathered in Miami Beach for the conference. So many doctors crowded into the room for the presentation that the fire marshal had to intervene several times to clear exit ways. Word had already spread among multiple myeloma specialists about Jimmy. Now, the assembled doctors wanted to know whether it had been a fluke or a discovery that would fundamentally change how they practiced.

Singhal was tasked with presenting the data. It was a big stage for the 32-year-old doctor, who had only been practicing in the U.S. for two years.

It completely changed the treatment landscape.

—Dr. Seema Singhal

The 89 patients in the study were high-risk cases who had undergone prior treatment. They were patients who, like Ira, had run out of options. Now, after thalidomide treatment, one-third had declines in myeloma activity.

Those were stunning numbers, unlike anything seen before in the treatment of multiple myeloma. When Singhal finished, the room erupted in applause.

“It completely changed the treatment landscape,” she said.

I wasn’t able to track down Jimmy, but I have a sense of how he might have felt when he realized the treatment was working.

After my initial emergency room visit, it took time to confirm my diagnosis and do some additional testing. While I waited, the pain worsened. Painkillers barely made a dent. All I could picture was this cancer eating away at my bones, doing more damage every day.

David Armstrong (Painting by James Lee Chiahan for ProPublica)

Some patients wait months for care. I was lucky enough to meet my oncologist within weeks. He had a script for Revlimid ready to go, part of a regimen of four drugs I would take as standard induction therapy, and I was able to start it within days.

The initial dose of Revlimid cost $18,255 for a month’s supply, and my insurance covered the cost.

Within a month, my blood tests showed a massive drop in a key cancer indicator.

My pain gradually subsided too. By the end of April, I wrote in my journal that the pain was a 3 or 4 instead of the usual 9 or 10. “It doesn’t hurt to get out of bed anymore,” I wrote.

A Piggy Bank

The discovery in Arkansas made thalidomide, which Celgene sold as Thalomid, an instant hit.

As a result, Celgene’s revenue increased nearly sevenfold to $26.2 million in the year after the Miami presentation. It sold its thalidomide pills for $7.50 each.

From those modest beginnings, Celgene took a slightly altered version of that pill and turned it into one of the bestselling and most expensive prescription drugs in history. Celgene’s success with Thalomid was the result of remarkable good fortune, a case where the heavy lifting of discovery and initial testing had already been done, by Beth Wolmer, D’Amato, Barlogie, Singhal and others.

The development of the drug that would become Revlimid took me deep into the confounding, sharp-elbowed world of drug patents, which ostensibly protect drugmakers, allowing them to recoup the massive investments they made in developing a new product. Celgene drew on patent law, a drug safety system and even patient assistance programs to guard the exclusivity of its prized drug and the massive revenue it generated.

Those tactics, detailed in reams of court filings, allowed Celgene to treat Revlimid like a piggy bank, tapping it whenever it wanted.

There was a common internal theme at Celgene that cancer patients were willing to pay almost any amount Celgene charged.

—David Schmidt, a former Celgene executive

Amid the early success of Thalomid, Celgene identified two potential threats: One was obvious. Thaldiomide caused birth defects, a looming risk that could result in it being pulled from the market.

The other was that Celgene held limited patents on the drug. Patents are exclusive legal rights to inventions, and researchers file them on nearly every aspect of drug development as soon as they can, locking up everything from specific sets of ingredients to the way the drug is used and administered. The more robust patents a company has, the longer it can potentially ward off competitors.

Thalidomide was an old drug and Celgene’s patents did not cover the active ingredient, leaving it open to competition. The patents it did have, covering items such as the optimal dosages and its use in treating particular diseases, were considered weaker and open to a court challenge. If Celgene could create a new version of thalidomide — ideally one that didn’t cause birth defects — the company could seek more and stronger patents that would extend beyond those of the original drug.

So researchers at Celgene tested analogs of thalidomide, which are drugs that have a similar effect but are different from the parent compound in minor ways, such as having one less oxygen atom. The analogs are also more potent than the original, meaning they can achieve a similar effect at lower doses.

Celgene was not alone in its efforts. D’Amato was also studying thalidomide analogs and filing patents on their use, which he and Boston Children’s Hospital licensed to a Celgene competitor, EntreMed Inc.

With dueling patents, the companies sued each other in 2002.

Celgene was newly flush with cash from rising sales of thalidomide. EntreMed, on the other hand, was burning through money as it focused most of its resources on developing other drugs discovered in Folkman’s lab.

In December of 2002, the companies settled.

Celgene agreed to pay Boston Children’s Hospital royalties from future sales of Revlimid. In exchange, the hospital and D’Amato licensed their patents of thalidomide analogs to Celgene. Celgene also agreed to pay EntreMed $27 million.

For Celgene, the fight with EntreMed was a valuable experience. It learned that competition can be neutralized.

The Rise of Revlimid

Celgene had kept the price of Thalomid low when it was initially intended for AIDS patients, CEO John Jackson told investors in 2004, as the company “didn’t want huge numbers of people demonstrating in front” of its office.

That wasn’t a problem with cancer patients. There was “plenty of room for very substantial increases” in the price of the drug now, Jackson told investors.

It is time for us to take Jimbo to the wood shed.

—A senior Celgene official discussing a doctor critical of Revlimid

Just two days earlier, Celgene had hiked the price of Thalomid to $47 a pill.

“There was a common internal theme at Celgene that cancer patients were willing to pay almost any amount Celgene charged,” wrote David Schmidt, a former national account manager at the company, in a whistleblower lawsuit he filed after his employment was terminated in 2008. The lawsuit was voluntarily dismissed by Schmidt. (Jackson didn’t respond to requests for comment; Schmidt declined to talk to me.)

When Celgene launched Revlimid in December of 2005, it set the initial price at $55,000 a year, or $218 a pill, which was about double what analysts expected.

Seven months later, when the FDA approved the drug for multiple myeloma, the price jumped to $70,560 a year, or $280 a pill.

The Price of Revlimid Has Increased 26 Times Since FDA Approval

Each dot indicates a new manufacturer list price per pill.

(Source: AnalySource)

The cost to manufacture each Revlimid pill, meanwhile, was 25 cents. I found a deposition marked “highly confidential” in which a top Celgene executive testified that the cost started at a quarter and never changed.

Even on Wall Street, which cheered higher pricing, the initial cost of Revlimid prompted concern among analysts who tracked the company that such aggressive maneuvering would cause insurers to push back. In the U.S., that is one of the only real checks on the price of prescription drugs.

That fear turned out to be unfounded, and Celgene would repeatedly test the bounds of how high it could go.

At the same time, Celgene worked to mute any criticism of Revlimid.

In 2005, Celgene received reports that Los Angeles oncologist Dr. James Berenson was “bashing” Revlimid in presentations sponsored by patient groups.

In one email, a senior company official said, “it is time for us to take Jimbo to the wood shed.” The company discussed a range of options for dealing with the doctor, from taking legal action to arranging a sit-down with Celgene’s chief executive.

Ultimately, the company appears to have decided on a friendlier course of action. Berenson became a frequent paid speaker and consultant for the company, with payments totaling at least $333,000, according to Celgene disclosures. Berenson declined to comment.

He wasn’t the only doctor the company befriended. Payment records show that between 2013 and 2018, Celgene paid doctors $11 million for speaking engagements and consulting work related to Revlimid. At one point, Celgene rented a suite at the Houston Astros baseball stadium to throw a party for the entire multiple myeloma department at the MD Anderson Cancer Center, according to court testimony. The center said it was unable to verify any of those details.

They remind me of an octopus with many, many tentacles, and at the end of each tentacle is a wad of cash.

—David Mitchell, president of Patients For Affordable Drugs

Celgene went on to spread its largess across the multiple myeloma world. It funded patient groups, sponsored medical meetings and contracted with prestigious academic medical centers.

“They remind me of an octopus with many, many tentacles, and at the end of each tentacle is a wad of cash,” said David Mitchell, a former Washington, D.C., communications executive who launched a nonprofit organization to fight for lower prices after he was diagnosed with multiple myeloma. “Everybody relies on the money.” Mitchell said his group, Patients For Affordable Drugs, does not accept donations from any entity that profits from the development or distribution of pharmaceuticals.

At the same time it showered doctors and patient groups with money, Celgene was shutting Beth Wolmer out. She told me that John Jackson, the CEO at the time, had promised her a paid board seat at the company as a way of compensating her for her role in the discovery before the company cut off communication.

Wolmer sued Celgene in federal court in 2009, seeking $300 million or more for alleged misappropriation of her idea and what she termed the “unjust enrichment” of Celgene.

Celgene said it never promised to compensate Wolmer. The company also suggested she greatly inflated her role in the discovery and, in any event, waited too long to take legal action.

In 2010, a judge granted Celgene’s motion for summary judgment in the case, agreeing that the statute of limitations had expired while at the same time expressing “admiration” for Wolmer’s “contribution to the struggle against this terrible disease.”

Ira and Beth Wolmer in the Cayman Islands (Painting by James Lee Chiahan for ProPublica)

Wolmer has remarried and changed her name to Jacobson. She remains disappointed about the way she was treated by Celgene. “There was no ambiguity about who found the purpose of this drug, and I’m thrilled that it’s helping so many people,” she said. “Why they treated me that way? I don’t know.”

The Generic Threat

After the FDA approved Revlimid in late 2005, it also granted Celgene something else: seven years of market exclusivity because the drug treats a rare disease. In those seven years, Celgene raised the price of the drug nine times, increasing the price per pill by 82% to $397 in 2012.

The company also fended off challengers by claiming its patents protected the drug from competition until 2027.

But by 2010 generic makers were already working on copies of the drug, preparing to challenge those patents and enter the market earlier. A government analysis has found that generics generally lower the price of brand name drugs by an average of 85% after just one year.

Celgene was well aware of the danger generics posed and warned in a 2012 financial filing that their entry into the market could have a “material adverse effect” on its finances. At that point, Revlimid sales made up 70% of the company’s revenue.

Celgene needed another move.

The drug still posed a risk of birth defects like the parent compound. In approving the drug, the FDA had mandated a strict safety program to control its prescription and distribution.

Celgene realized early on that this could also be a tool to thwart competition. An internal company presentation at the time noted that the safety program could make it “more difficult for generic companies to access” thalidomide for testing.

Generic drug makers are required by the FDA to test their version against the brand name drug, so they need to buy small amounts of Revlimid from the company.

By 2012, at least six generic makers had requested to purchase Revlimid for testing. In every case, Celgene refused.

Federal regulators took notice. The FDA had warned Celgene that it could not use the safety program “to block or delay approval” of generic competitors. Now, it appeared to be doing just that.

The Federal Trade Commission, which enforces antitrust laws, had been investigating Celgene for years and in June of 2012 notified the company it was poised to take action.

In a previously unreported letter, the FTC said that its staff had recommended filing a legal complaint against the company for refusing to sell to competitors, thereby keeping them out of the marketplace.

The commission’s patience is wearing thin.

—FTC official Richard Feinstein to a Celgene attorney

In its letter, the FTC noted that while Celgene refused to sell its drugs to potential competitors, it routinely provided Revlimid to other third parties around the world, including researchers and universities studying the drug.

Then, in August of 2012, the FDA directed Celgene to sell a small amount of Revlimid to a generic competitor.

With both federal agencies bearing down on Celgene, a closed-door meeting was held at FDA headquarters at the end of August. The FTC sent five lawyers, and 11 FDA staffers attended. Celgene showed up with a large contingent that included in-house lawyers and outside counsel.

Celgene started by denying it was using the safety program to block generics, according to minutes of the meeting. (The minutes were filed in a court case against Celgene, and it is unclear if they were prepared by the agencies or the company.) Citing the threat of birth defects, the company said that it had legitimate safety concerns about selling Revlimid to generic companies and that it needed to protect its investment in the drug.

Jane Axelrad, an associate director for the FDA, told Celgene that it was raising safety concerns because “the company does not want generics on the market,” according to the minutes. She declined to comment.

The meeting ended without a resolution. The FDA had no way of enforcing its directive to Celgene. The FTC staff, however, was still determined to act. The agency had spent more than two years investigating Celgene. It hired experts, deposed Celgene officials and obtained internal company documents.

The staff drafted a complaint alleging the company engaged in unfair actions to maintain a monopoly, hoping either that it would push the company to agree to sell to competitors to avoid legal action or that Celgene would be forced to do so by the courts, according to a person familiar with the agency’s stance.

“The commission’s patience is wearing thin,” FTC official Richard Feinstein wrote to the company’s lawyer in February 2013. “We have reached a point where the staff may be instructed in the very near future to commence litigation.” (Feinstein did not respond to emails seeking a comment.)

Celgene appeared to relent, telling the FTC that it would sell to generic makers, as long as the FDA approved their safety plan. In July, the FDA approved the safety protocols of generic maker Mylan.

Still, Celgene refused to sell.

Jon Leibowitz, who was the chairman of the FTC at the time, told me that Celgene’s promise to cooperate, even if it didn’t result in any sales to generic makers, lessened interest in the case among his fellow commissioners. Three of five commissioners need to vote in favor of commencing litigation. Now, in retrospect, he said that “if we knew then what we know now” about the delays, “we certainly would have brought a case.”

The agency would close its case in 2017 without taking any action.

With would-be generic competitors sidelined by Celgene’s refusal to sell drugs for testing, the company continued to raise the price of Revlimid.

They could raise their price any time they wanted to.

—Francis Brown, former Celgene sales executive

On a Saturday morning in early March of 2014, Celgene President Mark Alles sent an internal email complaining of disappointing first quarter Revlimid sales. Revenue from the star drug, which had surpassed $1 billion the previous quarter, was down by about 1% — or $11.4 million.

“I have to consider every legitimate opportunity available to us to improve our Q1 performance,” he wrote. But the only idea he proposed was a familiar one: raise the price of the drug.

Alles said he wanted a meeting the following Monday to discuss an immediate 4% price increase, followed by another increase of 3% at the beginning of September.

The company implemented those hikes, along with a third in December. It brought the price of Revlimid to $9,854 a month, or $469 a pill, and helped boost Revlimid sales for the year to $5 billion. Alles didn’t respond to my requests for comment.

“They could raise their price any time they wanted to,” said Francis Brown, a former sales executive at the company, in a 2015 deposition. I wasn’t able to reach Brown for comment.

Celgene found a solution to the generic threat when it struck a deal to settle a lawsuit brought by generic maker NATCO Pharma in 2015. NATCO could bring a generic to market, Celgene agreed, but not for seven more years — in March 2022. Even then, the generic would be limited to less than 10% of the total market for Revlimid in the first year, with gradual increases after that.

The deal set the bar for deals with other rivals for limited generic sales, and it ensured that unlimited generic competition — and lower prices — would not arrive until 2026.

The delayed entry of generics may have been bad news for patients and health care payors, but there was one constituency that was thrilled with the 2015 deal. Celgene’s stock jumped nearly 10% the day after it was announced.

“Ridiculous,” “Ugly” and “Killer”

Revlimid turned out to be a unicorn for Celgene, a drug whose financial success proved impossible to replicate.

In October of 2017, Celgene announced it was abandoning a once-promising effort to develop a drug for Crohn’s disease. Shares of Celgene declined by 11%.

As it had done so many times in the past, Celgene tapped Revlimid to try to mitigate the damage. The day it announced the failure of the Crohn’s drug, it quietly raised the price of Revlimid by 9%.

By the end of the year, Celgene had cumulatively raised the cost 20% to $662 a pill, the largest one-year increase in the drug’s history.

That made Revlimid the most expensive Medicare drug that year, with the government insurance program spending $3.3 billion to provide it to 37,459 patients.

At Celgene, the brash increases triggered rare internal dissent. Betty Swartz, the company’s vice president of U.S. market access, objected to the measures in a pricing meeting with the CEO, who at the time was Alles, and other top executives. She said her concerns were swiftly dismissed, according to a whistleblower lawsuit she filed and later dismissed.

“Why would you be afraid to take an increase on our products?” she said the CEO told her. “What could be the worst thing that happens … a tweet here or there and bad press for a bit.” Swartz declined to comment.

The price increases added to the burden faced by many patients. In online groups, patients use words like “ridiculous,” “ugly” and “killer” when talking about the financial pain they have experienced related to the high costs associated with Revlimid. Some have taken out mortgages, raided retirement funds or cut back on everyday expenses like groceries to pay for Revlimid. Others have found overseas suppliers who ship the drug for pennies on the dollar, although doctors caution there’s no way to guarantee quality. Some just decide not to take the drug.

By increasing the price of Revlimid, Celgene executives in several instances boosted their pay. That’s because bonuses were tied to meeting revenue and earnings targets. In some years, executives would not have hit those targets without the Revlimid price increases, a congressional investigation later found.

In total, Celgene paid a handful of top executives about a half-billion dollars in the 12 years after Revlimid was approved.

Robert Hugin, who worked as Celgene’s CEO and then executive chairman, received $51 million in total compensation from 2015 to 2017. Hugin retired in 2018 to launch an unsuccessful Senate bid.

Even sales reps earned more than $1 million a year and were rewarded with trips to resorts such as the Four Seasons in Maui. That pay is more than two times what the average oncologist earns.

I connected with Hugin just before Christmas while he was driving. He was ardent in his defense of the pricing of Revlimid. He told me the drug passes any cost-benefit analysis because of its impact on multiple myeloma patients like myself. “People recognize when you have a breakthrough therapy and you have an opportunity to deliver that, you want to deliver that across the world,” he said. “And I think Revlimid is an example of a product that ends up to be a global lifesaver because of what it did.”

Hugin told me that when Revlimid has unlimited generic competition, the price will be “cheaper than aspirin” and patients will benefit from that low price for many decades.

Celgene also cited the cost of developing drugs and its expansive research efforts as reasons for the high cost of Revlimid. Celgene said it spent $800 million to develop Revlimid and spent several hundred million more on additional trials to study the use of the drug in other cancers. Those combined figures represent about 2% to 3% of Revlimid sales through 2018.

The drug didn’t get any better. The cancer patients didn’t get any better. You just got better at making money. You just refined your skills at price gouging.

—Former Rep. Katie Porter, D-Calif.

By the end of 2018, Celgene’s stock was down 56% over the past 15 months amid development failures. Despite the raft of bad news, Alles’ total pay that year increased by $3 million to $16.2 million.

Celgene tried desperately to boost its flagging stock price by buying back $6 billion of its own shares that year.

Ultimately, the buyback was not enough. Just days into the new year in 2019, Celgene announced it had agreed to be acquired by Bristol Myers Squibb in a deal valued at $74 billion.

As part of a severance agreement, top Celgene executives stood to make millions once the deal closed. For Alles, that meant a potential estimated payday of $27.9 million.

In the fall of 2020, Alles appeared before the House Oversight Committee, which was investigating the high cost of prescription drugs. He said pricing decisions “reflected our commitment to patient access, the value of a medicine to patients and the health care system, the continuous effort to discover new medicines and new uses for existing medicines, and the need for financial flexibility.”

When it came time for questions, then-Rep. Katie Porter, D-Calif., quizzed Alles in rapid-fire style about Revlimid. Did the drug change as the price increased? Did it work faster? Were there fewer side effects? The drug was the same, Alles responded.

“So, to recap here,” Porter said. “The drug didn’t get any better. The cancer patients didn’t get any better. You just got better at making money. You just refined your skills at price gouging.”

The Drumbeat Continues

High prices have consequences beyond individual patients. While there have been tremendous advancements in the treatment of my disease, there is still no cure. The specter of relapse hovers over every blood test, every new ache or pain.

The day I learned I was in remission, in November 2023, was bittersweet. I wrote at the time that I didn’t get to ring a bell — the traditional sign that a cancer patient has finished treatment. Instead, my doctor explained the next step: “maintenance” treatment.

This includes not only continuing Revlimid, but making monthly visits to my cancer center to get a shot of a bone-strengthening drug, have another drug injected into my stomach and blood drawn for lab tests.

“The visit,” I wrote that day, “only reinforced the fact that I’m a patient, and I always will be.”

For most of us, cancer will return at some point after treatment. And for most patients, the drugs eventually stop working.

Revlimid can also be difficult to live with. Some patients quit the drug after developing severe gastrointestinal issues, infections or liver problems. The drug also poses an increased risk of stroke, heart attack and secondary cancers.

Those are the trade-offs for keeping multiple myeloma in check.

Meanwhile, the drumbeat of price increases continues under Bristol Myers Squibb, helping the company bring in $48 billion in revenue from Revlimid since it purchased Celgene. Bristol said its pricing “reflects the continued clinical benefit Revlimid brings to patients, along with other economic factors.” The company said it is “committed to achieving unfettered patient access to our medicines” and provides some financial support for eligible patients. “While BMS develops prices for its medicines, we do not determine what patients will pay out of pocket.”

Last July, the cost of my monthly Revlimid prescription increased by 7% to $19,660.

At the beginning of this year, my insurer switched me to generic Revlimid. I didn’t fight it, thinking it would result in a dramatic decrease in what ProPublica’s health plan pays for the drug.

It turns out it is not much of a savings: The generic costs $17,349 a month.

Alec Glassford contributed research.

This post was originally published on ProPublica.

by Jasmine Demers, Arizona Center for Investigative Reporting

ProPublica is a nonprofit newsroom that investigates abuses of power. Sign up for Dispatches, a newsletter that spotlights wrongdoing around the country, to receive our stories in your inbox every week.

Two years after Arizona officials revealed a $2.5 billion Medicaid fraud scheme that targeted Native Americans seeking treatment for addictions, the state has recovered just a fraction of the taxpayer funds lost to fraud.

The Arizona attorney general’s office is leading the criminal investigation into the network of behavioral health providers and sober living homes that from 2019 to 2023 exploited the American Indian Health Program to obtain inflated Medicaid payments. Investigators found fraudulent operators didn’t provide the services they’d billed for and sometimes allowed patients to continue the substance use for which they had sought treatment.

The state has so far indicted more than 100 individuals and recouped $125 million — or about 5% of the funds the state estimates it paid to bad actors.

Attorney General Kris Mayes said in a May 1 press conference that she hopes to retrieve “at least hundreds of millions” from fraudsters. But she warned that “it’s hard, because what happens is these … criminals get the money, they buy lavish homes, they buy multiple expensive cars, they hide the money offshore, they spend the money in ways that is unrecoverable.”

“My team is working day in and day out to seize those assets,” Mayes said.

The Arizona Health Care Cost Containment System struggled to rein in the rampant fraud under two governors, leaving more than 11,000 people vulnerable to the chaos that followed. Prior reporting by the Arizona Center for Investigative Reporting and ProPublica found that at least 40 Indigenous residents of sober living homes and treatment facilities in the Phoenix area died as the state fumbled its response.

The damage also rippled out through the state’s behavioral health industry, which was nearly brought to a standstill when the agency suspended some 300 providers and enacted policies that halted or substantially delayed payments to those still operating. Those reforms included enhanced scrutiny when screening and reimbursing providers.

Gov. Katie Hobbs, a Democrat, recently signed legislation further increasing oversight of sober living homes by requiring the facilities to promptly report resident deaths. But advocates like Reva Stewart, a Diné activist who has helped Indigenous victims of the scheme through her group Stolen People Stolen Benefits, don’t think the state has done enough.

“I feel like I’m on a hamster wheel, and we’re still at the beginning,” Stewart said. “They have a lot of indictments and people being charged, but at the same time … they’re just getting a slap on the wrist.”

The U.S. Department of Justice has also indicted several individuals and is conducting parallel investigations into the fraudulent billing schemes under federal statutes.

Yet despite these state and federal efforts, it’s likely that most of the stolen taxpayer money won’t be recovered.

From 2019 to 2023, the Arizona Health Care Cost Containment System allowed about 13,000 unlicensed providers to enter its system, including some that exploited weak oversight by overbilling or charging for services that were never delivered.

The agency also didn’t act decisively when solutions to stem the fraud were proposed internally. It initially yielded to pressure from special interest groups connected to the behavioral health industry, which argued that reforms to the fee-for-service American Indian Health plan would threaten their financial interests.

Now, AHCCCS says its efforts to unravel the crisis could take many years, describing its investigation as a “highly complex and manual process.”

Officials must review improper payments, whether they were obtained by fraud or not, on a case-by-case basis. Though providers are required to repay AHCCCS as soon as they become aware of overpayments, they often cannot do so in one lump sum. Repayments may occur over months or years.

Because state Medicaid agencies receive much of their funding from the federal government, improper payments come with added financial consequences: States must repay the federal government for its share.

In Arizona, the federal government covered 70% to 76% of Medicaid costs between 2019 and 2023. The rate was even higher for people who received services through the American Indian Health Program.

AHCCCS has repaid $49.1 million to the federal government since January 2023, according to spokesperson Havona Horsefield, who has since left the agency. That amount will likely grow as AHCCCS continues to review fraudulent cases.

The agency is not, however, required to reimburse the federal government for overpayments made to facilities that are now bankrupt or out of business. Of the 322 providers suspended on suspicion of fraud, 90 have closed, according to AHCCCS.

The agency could not provide an estimate of how much those providers were overpaid, but said it notifies the attorney general when a provider goes out of business and provides information to support criminal cases against them.

State Sen. Theresa Hatathlie, a Democrat from Coal Mine Mesa on the Navajo Nation, has been critical of the state’s response and continues to call for stricter regulation of sober living facilities. During a March floor vote, she expressed frustration over the reforms Hobbs later signed into law, contending they did not go far enough.

“It’s time to stop protecting bad actors or even those people who continue to allow bad actors to keep coming back,” she said.

As the state slowly works to untangle the fraud and recover taxpayer funds, national debates over Medicaid’s future are intensifying. Republican majorities in both Arizona’s Legislature and Congress are pushing to cut Medicaid to offset President Donald Trump’s proposed tax cuts. Among their justifications are fraud and abuse of the system.

Health policy experts, however, say that most Medicaid spending pays for legitimate care, and that fraud is typically committed by a small number of providers — not patients.

Instead of the current system where the federal government covers a larger share of Medicaid costs in lower-income states, conservatives are advocating to cap Medicaid funding tied to inflation, a model that would shift more of the cost to state budgets.

Arizona is one of nine states where such a change could trigger the end of Medicaid expansion, which currently insures 648,000 low-income residents, or about 30% of AHCCCS recipients.

Despite Medicaid’s uncertain future, Arizona officials are pressing forward with efforts to address the lasting damage the fraud scandal inflicted on tribal communities. In November, Mayes announced a $6 million grant initiative offering up to $500,000 per organization to fund victim compensation and housing support for those displaced or otherwise affected by fraudulent treatment centers. Recipients include tribal nations and Native health organizations.

But Stewart says the state’s work is far from over, and many of those harmed have yet to see real accountability or support.

“They call it a travesty … and they want to get justice,” she said. “But where’s the justice when it comes to the amount of deaths that we have, the amount of Native relatives that are still missing?”

Christopher Lomahquahu, a Roy W. Howard fellow at the Arizona Center for Investigative Reporting, contributed reporting.

This post was originally published on ProPublica.

by Mary Hudetz

ProPublica is a nonprofit newsroom that investigates abuses of power. Sign up for Dispatches, a newsletter that spotlights wrongdoing around the country, to receive our stories in your inbox every week.

The director of Arizona’s embattled Medicaid agency resigned this week, just as she was expected to face questions from lawmakers about her handling of a massive fraud scheme that largely targeted Native Americans.

Gov. Katie Hobbs, a Democrat, announced Wednesday that she had accepted the resignation of Carmen Heredia, director of the Arizona Health Care Cost Containment System. The governor lauded Heredia’s leadership of the agency while blaming Republican lawmakers for politicizing the confirmation process, saying it had become clear they would not confirm Heredia’s nomination.

Sen. Jake Hoffman, a Republican and chair of the Senate’s Committee on Director Nominations, said in a statement that in responding to the fraud scheme, Heredia had “poorly executed” the suspensions of hundreds of behavioral health providers. Heredia had served as the head of AHCCCS without Senate confirmation since early 2023, several years after officials say the fraud likely began during the Republican administration of former Gov. Doug Ducey. In the year before Heredia became director, records show that officials were warned that the fraud was harming patients, but they struggled to respond and failed to alert the public, which Heredia did along with other state leaders in May 2023.

(Earlier this year, a spokesperson for Ducey did not comment on missed opportunities to stop the fraud but said that the former governor went to great lengths to assist in Hobbs’ transition.)

Under Heredia’s leadership, AHCCCS withheld payment to more than 300 businesses as the agency investigated allegations that they were fraudulently billing Medicaid for treatment services. Often, the services had not been provided, and business owners were accused of allowing patients to continue the substance use they had hoped to overcome through treatment.

In a statement, Heredia said she submitted her resignation with a heavy heart and expressed concern that a partisan agenda had resulted in professionals being dragged “through career damaging hearings.” Two years ago, Senate Republicans derailed the nomination of one of Hobbs’ previous picks to lead the health department.

Last September, more than a year after the crackdown began, the Arizona Center for Investigative Reporting and ProPublica reported that the suspensions had rendered patients homeless. Victims of the scheme, some from other states, were also left without access to the drug and alcohol treatment they were seeking.

Over several years, businesses across much of Arizona, but mostly in Phoenix, reaped huge Medicaid reimbursements by enrolling Native Americans in their programs and billing the state’s American Indian Health Program at exorbitant rates for services, like counseling sessions. (The AIHP is a Medicaid insurance option that, until the fraud was discovered, had no set limit on the amount of money providers could bill for services.)

At a news conference Thursday, Attorney General Kris Mayes, a Democrat, said there had been more than 100 indictments and 25 convictions so far related to the scheme. She also said she expected more indictments to come.

AHCCCS said over the past two years that officials’ top priority was patient safety, and in May 2023, the agency set up a hotline for victims. It provided brief hotel stays for people displaced from shuttered facilities. However, AHCCCS said last year that it had no record of what happened to a majority of the hotline’s then 11,400 callers, largely because after six months it had stopped tracking outcomes for people who did not stay in a hotel. According to available data, more than 575 people ended up without housing as of last September. AZCIR and ProPublica also found that at least 40 Indigenous residents of sober living homes and treatment facilities in the Phoenix area died as the state fumbled its response.

A handful of the suspended providers, out of hundreds investigated, were allowed to resume billing Medicaid after clearing allegations with the state. But they said the suspensions still pushed them to the brink financially and upended their patients’ care, AZCIR and ProPublica found. As a result, Heredia’s swift and aggressive response to the crisis — which authorities said was needed to root out fraud and save lives — caused concerns that behavioral health care, especially for Native Americans, was increasingly difficult to access.

“Under Katie Hobbs’ leadership, Heredia’s response has been incredibly disturbing, to say the least,” Hoffman said. “We are left with a broken system due to Heredia’s mismanagement, and our vulnerable populations are caught up in this collapse.”

A spokesperson for Senate Republicans declined a request for an interview with Hoffman.

While Hoffman’s statement mostly focused on the fraud scheme that authorities say cost the state $2 billion, he said he also took issue with other matters within AHCCCS involving long-term care.

In addition to Heredia’s resignation, Jennifer Cunico, the director of the Arizona Department of Health Services, also stepped down this week. Like Heredia, Cunico was set to appear before lawmakers for a confirmation hearing. Cunico said she was proud of her work at the department but made the difficult decision to withdraw her nomination after it became clear she wouldn’t be confirmed either. Her resignation comes two years after Hobbs’ previous pick to lead the health department withdrew her nomination following a heated confirmation hearing.

Hoffman said Cunico had defended public health officials’ pandemic response during meetings with lawmakers but did not provide details. Hoffman previously sponsored legislation that prohibited state and local agencies from enacting vaccine mandates.

The governor defended Heredia’s response to the fraud crisis and said both Heredia and Cunico had worked on a range of initiatives, including improving access to maternal health care.

“Carmen Heredia helped root out a multi-billion dollar wave of Medicaid fraud and the related humanitarian fallout which the previous administration ignored,” Hobbs said in a statement. “Her work to eliminate waste, fraud, and abuse in our healthcare system is a model for the nation, and she always ensured people who needed help continued to get it.”

She added, “The Senate’s unprecedented politicization of the director confirmation process has ended the directorship of two healthcare professionals who have made our state government run more efficiently and more effectively.”

Christopher Lomahquahu, an investigative reporter and Roy W. Howard fellow for AZCIR, contributed reporting.

This post was originally published on ProPublica.