Indian-American founder and executives of Insys Therapeutics convicted in racketeering case

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In what the Justice Department is calling the “First successful prosecution of top pharmaceutical executives for crimes related to the prescribing of opioids,” the Indian-American founder and four former executives of Insys Therapeutics Inc., were convicted May 2, of racketeering conspiracy.

Trash is left by people using drugs under a bridge in Philadelphia in 2017. (Washington Post photo by Salwan Georges)

The federal jury in Boston convicted Insys founder and former Executive Chairman John N. Kapoor, and four top executives, of bribing medical practitioners to prescribe Subsys, a highly-addictive sublingual fentanyl spray intended for cancer patients experiencing breakthrough pain. They were also convicted for defrauding Medicare and private insurance carriers.

Kapoor, 76, of Phoenix, Ariz.; along with the former National Director of Sales, Richard M. Simon, 48, of Seal Beach, Calif.; a former Regional Sales Director Sunrise Lee, 38, of Bryant City, Mich.; Joseph A. Rowan, 45, of Panama City, Fla., also a former regional sales director; and Michael J. Gurry, 55, of Scottsdale, Ariz., the former vice president of Managed Markets, were convicted under RICO (Racketeer Influenced and Corrupt Organizations Act).

Sentencing dates have not yet been set, a press release from the U.S. Attorney for the District of Massachusetts, said.

Before Kapoor’s trial started, two other high-level Insys executives pleaded guilty and they testified during the trial: Michael Babich, of Scottsdale Ariz., the former CEO and president of the company, and Alec Burlakoff, of Charlotte, N.C., the former VP of Sales.

According to prosecutors, from May 2012 to December 2015, Kapoor et al conspired to bribe practitioners, many of whom operated pain clinics, in order to induce them to prescribe Insys’ fentanyl-based pain medication, Subsys, to patients often when medically unnecessary.

Kapoor and his co-conspirators used pharmacy data to identify practitioners who either prescribed unusually high volumes of rapid-onset opioids, or had demonstrated a capacity to do so, and bribed and provided kickbacks to the practitioners to increase the number of new Subsys prescriptions, and to increase the dosage and number of units of Subsys, prosecutors say. They also charged that the defendants measured their success by comparing the net revenue earned from targeted practitioners with the total value of bribes and kickbacks paid, using the information to reduce or eliminate bribes paid to practitioners who failed to meet satisfactory prescribing requirements as calculated by them.

The bribes and kickbacks took multiple forms. In March 2012, Insys began using “speaker programs” purportedly intended to increase brand awareness of Subsys through peer-to-peer educational lunches and dinners. However, prosecutors contended that the programs were used as a vehicle to pay bribes and kickbacks to targeted practitioners in exchange for increased Subsys prescriptions and increased dosage. In most instances, the programs were shams, the investigators found.

According to their findings, prosecutors say Kapoor and others convicted, set up an intricate system, to mislead and defraud health insurance providers who were reluctant to approve payment for the drug when it was prescribed for non-cancer patients.

The defendants set up the “Insys Reimbursement Center,” (IRC) which was dedicated to obtaining prior authorization for payment directly from insurers and pharmacy benefit managers.

According to prosecutors, beginning in October 2012, employees of the IRC posed as employees of the practitioner and used “the spiel” – a script of false and misleading representations about patient diagnoses in order to secure approval for the drug by the insurance provider. For example, since insurers were more likely to authorize payment for Subsys if a patient was being treated for cancer-related pain, IRC employees were instructed to mislead insurers regarding the true diagnosis of the patient.

“Today’s convictions mark the first successful prosecution of top pharmaceutical executives for crimes related to the illicit marketing and prescribing of opioids,” United States Attorney Andrew E. Lelling, is quoted saying in the press release.

The charge of RICO conspiracy carries a maximum sentence of 20 years in prison, three years of supervised release and a fine of $250,000, or twice the amount of pecuniary gain or loss.

 

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