Billionaire Insys Founder Charged With Bribing Doctors to Prescribe Opioid Painkillers

Insys Founder John Kapoor

Once again Insys Therapeutics has been rocked by an indictment. Founder John Kapoor was charged with using bribes and fraud to boost sales of his company’s fentanyl-based sublingual spray, Subsys, used to treat cancer pain.

On Thursday, the U.S. Department of Justice leveled charges at Kapoor saying he lead a “nationwide conspiracy to profit” through the use of bribes and fraud. Kapoor, the former chairman and chief executive officer of Insys, was charged with RICO conspiracy, as well as other felonies, including conspiracy to commit mail and wire fraud and conspiracy to violate the Anti-Kickback Law. Kapoor, now 74, is expected to appear in federal court in Phoenix today.

Following the Thursday announcement, shares of Insys plunged about 23 percent to close at $5.74. Shares slightly rebounded in after-hours trading to rise to $5.84.

In addition to the charges against Kapoor, the federal government also brought additional charges against several former Insys executives and managers who were initially indicted in December 2016. The government said former CEO and company president Michael Babich, Alec Burlakoff, the former vice president of Sales; Richard Simon, the former national director of sales; former regional sales directors Sunrise Lee and Joseph Rowan; and former vice president of managed markets, Michael Gurry all “conspired to bribe practitioners in various states, many of whom operated pain clinics, in order to get them to prescribe a fentanyl-based pain medication,” the government said.

The government first brought charges against Babich and the five other former Insys executives in December 2016.

The DOJ’s charges are the latest against Insys. Earlier this month, New Jersey General Christopher Porrino leveled charges against Insys claiming the company directed its sales team to push Subsys to patients. The attorney general for Arizona has also been conducting an investigation into the sales practices of Insys in that state.

Thursday’s indictment alleges that Kapoor and the other former Insys executives “conspired to mislead and defraud health insurance providers” who did not want to approve payment for Subsys when it was prescribed for patients who did not have a cancer diagnosis. The DOJ said the company executives were able to get around those concerns by setting up the “reimbursement unit,” which was dedicated to obtaining prior authorization directly from insurers and pharmacy benefit managers. 

“In exchange for bribes and kickbacks, the practitioners wrote large numbers of prescriptions for the patients, most of whom were not diagnosed with cancer,” the government said in its announcement.

The charges against Kapoor and the other executives were made on the same day President Donald Trump declared a nationwide public health emergency from the opioid crisis.

Harold Shaw, Special Agent in Charge of the Federal Bureau of Investigation’s Boston Unit, which brought the charges, accused the Insys executives of creating a corporate culture that “utilized deception and bribery as an acceptable business practice, deceiving patients, and conspiring with doctors and insurers.” Shaw compared the Insys executives to street-level drug dealers by selling a highly-addictive opioid cancer pain drug to patients who did not have cancer.

If found guilty of all charges, Kapoor and the others could face decades in prison. The charges of conspiracy to commit RICO and conspiracy to commit mail and wire fraud each provide for a sentence of no greater than 20 years in prison. Charges of conspiracy to violate the Anti-Kickback Law carry a sentence of up to five years in prison.

The charges against Kapoor and the other executives are the latest in a long list of charges. In 2015, the company faced allegations it falsified data in order to sell more of its painkiller. Also in 2015, the Southern Investigative Reporting Foundation (SIRF) issued a report alleging an Insys unit has been misleading insurers to change documents to state that pain was cancer-related in order to prescribe Subsys.

Since the troubles, Insys has replaced the bulk of its management team along with 90 percent of its original sales staff and commercial operatives. In March, Insys tapped Saeed Motahari, the former chief commercial officer of Purdue Pharmaceuticals, as its new chief executive officer. In June, the company brought in Brian Jennings as the new head of sales. Jennings has held numerous sales leadership roles in the industry, including at Genentech and Sanofi.

Back to news