Last month, buried in all the other Insys news, was the news that Insys Therapeutics agreed to pay $225 million and plead guilty to mail fraud in connection with its marketing of Subsys. On June 5, 2019, the United States Department of Justice announced the “global resolution to settle the government’s separate criminal and civil investigations,” including a deferred prosecution agreement, the guilty plea to give counts of mail fraud, a $2 million fine, and $28 million in forfeiture. As part of the civil resolution, Insys will pay $195 million to settle allegations it violated to False Claims Act. This is an increase from their original $150 million settlement announced in the fall of 2018.
This round of legal troubles came when Insys was investigated for paying kickbacks and engaging in other unlawful marketing tactics in connection with its prescription drug Subsys. Subsys is a fentanyl spray approved by the Food and Drug Administration in 2012 for treating persistent breakthrough pain in adult cancer patients who were already receiving (and tolerant to) around-the-clock opioid therapy.
According to the U.S. Attorney’s Office for the District of Massachusetts, Insys used “speaker programs” to purportedly increase brand awareness of Subsys through peer-to-peer educational lunches and dinners. In reality, however, the U.S. Attorney alleged that Insys actually used to programs as a way to pay bribes and kickbacks to targeted practitioners in exchange for increased Subsys prescriptions written to patients and for increased dosages on those prescriptions.
One example provided in court documents is that of a physician’s assistant who practiced with a pain clinic in Somersworth, New Hampshire. During the first year that Subsys was on the market, the physician’s assistant did not write any Subsys prescriptions for his patients. In May 2013, the physician’s assistant joined Insys’ speaker program knowing that it was a way to receive kickbacks for writing Subsys prescriptions. After joining the speaker program, the physician’s assistant wrote approximately 672 Subsys prescriptions for his patients – many of which were medically unnecessary – and in turn, received $44,000 in kickbacks from Insys.
Criminal Resolution
As part of the criminal resolution of the claims, Insys agreed to a detailed statement of facts outlining its criminal conduct with respect to the illegal marketing of Subsys and the company will enter into a five-year deferred prosecution agreement with the government. Insys’ operating subsidiary will plead guilty to five counts of mail fraud pursuant to a plea agreement that will be filed in the District of Massachusetts.
As noted above, Insys will pay a criminal fine of $2 million and forfeiture of $28 million.
This resolution follows the May 2019 conviction of five former Insys executives – including John Kapoor, the founder of Insys – of racketeering conspiracy in connection with the marketing of Subsys. In total, eight company executives have now been convicted in Boston for crimes relating to the illegal marketing of Subsys.
Civil Resolution
Insys entered into a 5-year Corporate Integrity Agreement (CIA) and Conditional Exclusion Release with the Office of Inspector General of the United States Department of Health and Human Services (HHS-OIG). The CIA includes several “unprecedented” provisions, including enhanced material breach provisions, designed to protect Federal health care programs and beneficiaries. In addition, Insys admitted to a Statement of Facts and acknowledged that the facts provide a basis for permissive exclusion. However, HHS-OIG did not release its permissive exclusion authority, as it generally does for CIA parties in False Claims Act settlements. Instead, HHS-OIG will provide such a release only after Insys satisfies its obligations under the CIA.
Conclusion
This Insys case has marked many “firsts” in this new world we seem to be living in. John Kapoor was one of the first highest-ranking pharmaceutical executives to not only face trial, but also be convicted for his participation, in the racketeering scheme. Then, most recently, the company filed for Chapter 11 bankruptcy protection just a few days after the announcement of this settlement.
If the news is any indication of where we are headed, more opioid manufacturers and their executives will come under fire for actions they have taken over the last several years for their marketing of prescription drugs. One we currently see playing out in various states is that of Purdue Pharma, LP. This recent Insys news may well strengthen the case against Purdue for its part in the opioid epidemic.