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The Pharmed group was once the premier international distributor of medical, surgical, pharmaceutical and rehabilitative supplies in Florida and the largest Hispanic distributor in the United States, Latin America and the Caribbean, but it later became a symbol of corruption in South Florida. From its humble beginnings in 1980 in a small storage room with only one desk and one phone in southwest Miami, The Pharmed Group emerged as the premier international distributor of medical, surgical, pharmaceutical and rehabilitative supplies in Florida and the largest Hispanic distributor in the United States, Latin America and the Caribbean. In 2007, the company and its founders were charged with multiple counts of health care fraud and tax evasion, and Pharmed declared bankruptcy later that year. In 2009, Pharmed founders Carlos De Cespedes and Jorge De Cespedes pleaded guilty to health care-related wire fraud and tax evasion and were sentenced to 9 years in federal prison. Pharmed was liquidated in bankruptcy and is no longer in operation.
Founders’ Pedro Pan Beginnings
In 1961, the de Céspedes parents entrusted the lives of their two boys, Carlos and Jorge, to the Roman Catholic Church in the United States. Operation “Pedro Pan,” a program created by the Catholic Welfare Bureau of Miami in December 1960, brought many young children to the United States at the request of parents in Cuba who sought a means to send their children to Miami to avoid Marxist-Leninist indoctrination. Operation Pedro Pan separated many children from their parents. Separated upon arrival in Miami, the de Céspedes boys were raised in an orphanage and were allowed to visit one another once a week. This involuntary separation helped the brothers form a bond that has proven to be unyielding and unmatched. So much so that when SmithKline decided it needed a second sales rep in South Florida, Carlos recommended his brother Jorge. Here began the business partnership that would flourish into The Pharmed Group.
The success of The Pharmed Group was attributed to the entrepreneurial spirit and steadfast determination of its founders, but that view changed once the brothers plead guilty to felony fraud and were sentenced to federal prison.
Pharmed’s foundation began as a vision of brothers Carlos and Jorge de Céspedes while working as executives for SmithKline Beecham in South Florida. In 1980, the de Céspedes brothers quit their jobs at SmithKline Beecham and established a 230-square-foot (21 m2) office and distribution center in Miami, Florida. From 1980 to 1982, Pharmed primarily sold medical and pharmaceutical supplies to Latin America and the Caribbean. Within two years, the Cuban-born duo had sold approximately $1.7 million in medical supplies.
By 1983, Pharmed had moved into a larger warehouse facility in the Miami area and was distributing medical and pharmaceutical supplies to small clinics in the area. The company had almost doubled its sales to $3.1 million. In 1986, with a $3 million bid to Jackson Memorial Hospital in Miami, Pharmed won its first benchmark contract, and reached $9 million in sales.
By 1993, Pharmed found its niche distributing medical products and supplies to nine major hospitals in South Florida and had become the dominant distributor of the Johnson & Johnson product line. Within the next few years, Pharmed hired several experienced senior executives and installed a technologically advanced computer system that enabled the company to handle larger contracts. Pharmed developed its Latin American customer base by establishing an affiliated operation in San Jose, Costa Rica named Pharmed Costa Rica. By the end of 1998, the company was carrying 55 private label products and sales had grown to $62 million.
The years to follow Pharmed established operations in Brazil, Panama, Costa Rica, Colombia and the Caribbean. In the early part of 2001 the Pharmed Group acquired PAL Laboratories, a manufacturer of vitamin supplements. Pharmed also joined forces that year with one of the largest manufacturers of gauze and cotton-based products for the medical surgical arena.
In 2007, the de Céspedes brothers and Pharmed were charged with multiple counts of health care fraud and tax evasion. The brothers testified that the fraud began in 1993 and lasted until discovered by law enforcement in 2007. In one example, the de Céspedes brothers admitted to cheating the Kendall Regional Medical Center out of $5 million through fraudulent practices. Pharmed declared bankruptcy in 2007, was liquidated and is no longer in operation. In its bankruptcy filing, the company claimed an acquisition and loss of major customers led to bankruptcy but it failed to mention the fraud prosecution of the company and its founders.
Pharmed donated money and time to many community organizations and causes, including Little League and NCAA-sanctioned basketball summer leagues, and providing presents and meals for the needy during the holidays. The brothers were honored by many local charities for their philanthropic work. They were named Humanitarians of the Year in 2006 by the American Red Cross of Greater Miami & the Keys; inducted into the Florida International University College of Business Entrepreneurship Hall of Fame in 2005 among dozens of business awards they received.
However, the de Céspedes brothers' and Pharmed's record of community involvement was tarnished by their admission that they intentionally defrauded hospitals, Medicare and Medicaid, and the United States Government.
- "Two Pharmed Directors Sentenced To 108 Months On Wire Fraud Conspiracy And Tax Evasion Scheme". U.S. Attorney's Office for the Southern District of Florida. 7 January 2009. Retrieved 26 August 2012.
- "Pharmed founders sentenced in fraud case". South Florida Business Journal. 7 January 2009. Retrieved 26 August 2012.
- "Brothers admit defrauding hospital". Sarasota Herald-Tribune. 13 September 2008. Retrieved 26 August 2012.