Insys Therapeutics Founder Settles with the State of New Jersey Over Role in Opioid Epidemic

On January 21, 2021, Gurbir S. Grewal, Attorney General of New Jersey, announced an anticipated $5 million settlement with John Kapoor, the founder of Insys Therapeutics. The settlement stems from allegations that Kapoor was involved in orchestrating illegal bribes to New Jersey doctors as part of a nationwide kickback scheme to boost sales of Subsys.

In 2017, New Jersey filed a complaint against Kapoor that alleged that he directed and approved a campaign to fraudulently market Subsys to boost sales in New Jersey and other states. While the United States Food and Drug Administration (FDA) had approved Subsys to treat breakthrough pain in opioid-tolerant cancer patients, New Jersey alleged that Kapoor directed his employees to bribe healthcare professionals to write “off-label” Subsys prescriptions and prescriptions at doses that were higher than recommended/approved by the FDA. In the complaint, New Jersey also alleged that Kapoor directed and approved a scheme to lie to insurance carriers and pharmacy benefit managers about patient diagnoses and treatment histories to ensure payment would be made for the prescriptions.

Therefore, New Jersey argued, Kapoor directly contributed to a “flood” of improper Subsys prescriptions, many of which were paid for by the State’s public employees’ health and workers’ compensation insurance programs.

Kapoor agreed to make an immediate payment of $1 million (within 10 days) followed by an additional payment (expected to be $4 million) once he satisfies the monetary obligation imposed in his federal criminal case. The additional payment will be calculated by taking 30% of any amount of the criminal obligation not paid by him in the federal suit – and instead paid by one of his coconspirators – up to $4 million.

In addition to the monetary settlement, Kapoor is not permitted to manage or own any business organization in New Jersey and cannot serve as an officer, director, trustee, member of an executive board, principal, manager, or stockholder owning 10% or more of the aggregate outstanding capital stock of all classes of any corporation that does business in New Jersey.

This settlement marks the first settlement in any of New Jersey’s civil suits against corporations and individual executives involved in manufacturing and fraudulently marketing opioid drugs and is separate from claims New Jersey has against Insys.

The settlement will be used in part to reimburse New Jersey from costs of the lawsuit but will mostly be used to fund New Jersey’s efforts to combat the opioid epidemic. The rest will be divided among various state agencies that have been affected by the alleged fraudulent scheme.

“We are committed to holding accountable anyone whose bad conduct has helped fuel the opioid epidemic, whether they pushed drugs from a board room, an exam room, or a street corner,” said Attorney General Grewal. “With today’s settlement, we’ve recovered a substantial sum from one individual who used his perch in a corporate board room to sell addictive drugs through bribes and fraud. We are looking forward to additional recoveries from other opioid manufacturers and distributors, who also are responsible for helping New Jersey overcome and heal from the epidemic they unleashed.”