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Questionable tactics used to profit from genetic testing boom

About 10 new genetic tests enter the market every day, and with insurance reimbursements that can range in thousands of dollars, there is lots of incentive to find patients to sign up for them.
Gift cards used to lure patients for genetic test scam 04:42

The genetic testing industry is booming, with more than 60,000 genetic testing products on the U.S. market today, up from an estimated 30,000 three years ago.

About 10 new genetic tests enter the market every day, and with insurance reimbursements that can be thousands of dollars, there is lots of incentive to find patients to sign up for them. But a CBS News investigation found one troubling approach being used to attract patients in Texas -- which all begins with an online ad.

The Craigslist ad said, "Call Kirk." So we did.

Kirk Zajac CBS News

A few weeks ago, we arranged to meet Kirk Zajac at a Starbucks in Austin, Texas, to get details on his "wellness program," which was advertised as genetic testing and a $50 gift card for "food and groceries" at Walmart. Cost to the patient? Zero.

"The products that we offer really do enhance the lives of our patients," Zajac told us.

He said patients could get several cutting edge genetic tests.

"There's pharmacogenetic DNA testing, there's gene ID or gene-aware testing for people that want to have children," Zajac described.

All they have to do, he told us, is stop by one of his several locations across Texas.

We found one of them in a medical building in Austin. The receptionist told our producer the $50 Walmart gift card was ours if we would produce proof of insurance and take a few quick tests.

"This isn't going to cost me anything?" the producer asked after handing over her insurance card.

"No ma'am, everything we do is billed through your insurance," the receptionist said.

After a brief health assessment, we were ushered into another room. There a nurse practitioner administered a genetic test for cancer risk.

"Do you know how much it costs my insurance?" the producer asked the nurse.

"That's a good question. I don't know," the nurse responded.

Documents we've obtained show that cancer tests could cost a patient's insurance company $11,708.

Not bad for a $50 gift card.

"For every person you refer, you'll get $50 per person you refer and come back every week for the next three weeks at your leisure," the receptionist said.

We did come back, but not for more gift cards.

"Hi, how are you? My name's Jim Axelrod. I'm with CBS News... I have some questions about the wellness program," Axelrod said.

"I'm not...uh, I don't know," the receptionist asked.

Zajac got on the phone and told us everything was completely above board. Then he told us to leave.

Lloyd Matthews was a patient at another clinic Zajac operated with the help of an ex-con named Erik Bugen. Matthews was lured in by the Walmart gift card.

"We just got done paying the monthly bills, and oh -- we got nothing to give the kids for Christmas, you know, so it helped," Matthews said.

The clinic Matthews visited was one of two in Killeen, Texas. The other was in log cabin at the back of a parking lot. When we visited, from the looks of things, they were no longer doing business there. But we found plenty of evidence in the trash they had been, with dozens of copies of soldiers' Tricare ID cards and cancer tests with saliva samples like the one our producer had taken in Austin. One belonged to Matthews.

"So this is where we found your samples," Axelrod told Matthews.

"Wow," Matthews responded.

"You don't look happy," Axelrod said.

"Not at all," Matthews said.

Matthews was told his samples would be tested and a doctor would be in touch with them. That, obviously, never happened.

"Just a bit far-fetched for me to even imagine that someone is actually not only doing this, but they [are] actually getting away with it because they haven't been caught yet," Matthews said.

Matthews' insurance wasn't billed for that test we found in the trash. We reached out to the doctor who ordered it, and he told us he wasn't aware his provider information had been used to order tests.

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