Late last week, John N. Kapoor, the founder and majority owner of Insys Therapeutics, Inc., was arrested and charged with leading a conspiracy to profit by using bribes and fraud to cause the illegal distribution of a Fentanyl spray intended for cancer patients experiencing breakthrough pain.
The superseding indictment includes allegations of RICO conspiracy, conspiracy to commit mail and wire fraud, and conspiracy to violate the Anti-Kickback law. It also includes additional allegations against former Insys executives and managers who were initially indicted in December 2016.
The Justice Department claims that Kapoor and other Insys executives offered bribes in the form of kickbacks to doctors who wrote “large numbers of prescriptions” for patients, many of whom did not have cancer. The Department also alleged that the executives defrauded insurers by forming a “reimbursement unit” dedicated to obtaining prior authorization from insurers who were reluctant to pay for the drug.
Insys allegedly encouraged doctors to write more prescriptions by hiring their friends and family members to serve as “business liaisons’’ and “business-relation managers,’’ prosecutors said. These support-staff employees worked in the doctors’ offices but were paid by Insys in what the indictment called bribes and kickbacks. The company even made a video featuring a sales rep dressed as a giant fentanyl spray bottle, rapping and dancing to a song that pushed the idea of getting doctors to prescribe higher doses, prosecutors said.
The indictment also alleges that Kapoor and the six former executives conspired to mislead and defraud health insurance providers who were reluctant to approve payment for the drug when it was prescribed for non-cancer patients. They achieved this goal by setting up the “reimbursement unit,” which was dedicated to obtaining prior authorization directly from insurers and pharmacy benefit managers.
Charged with racketeering conspiracy and other felonies, Kapoor is the highest-ranking pharma executive to be accused of an opioid-related crime, and his arrest may portend charges against companies far larger than Insys, which has a modest $417 million market capitalization.
In Connecticut, prosecutors have begun a criminal probe of Purdue Pharmaceutical Inc.’s marketing of OxyContin. Scores of states, cities and counties have sued companies including Purdue, Endo International Plc, and Janssen Pharmaceuticals, alleging they triggered the opioid epidemic by minimizing the addiction and overdose risks of painkillers such as Percocet.
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, three years of supervised release and a fine of $250,000, or twice the amount of pecuniary gain or loss. The charges of conspiracy to violate the Anti-Kickback Law provide for a sentence of no greater than five years in prison, three years of supervised release and a $25,000 fine. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.
Insys Reaction
A spokesman for Arizona-based Insys said this week that the company is under new management and has replaced nearly all its original sales staff. It says it takes responsibility for the actions of its former employees.
“We have taken necessary and appropriate steps to prevent past mistakes from happening in the future, and are committed to conducting business according to high ethical standards and the interests of patients,” the company said in a statement Wednesday. “We also continue to work with relevant authorities to resolve issues related to the misdeeds of former employees.”
Kapoor Defense Lawyer Reaction
“He is not guilty of these charges, he intends to fight it vigorously,” defense attorney Brian T. Kelly said outside court. Kelly is a high-profile Boston lawyer and former federal prosecutor who successfully tried imprisoned gangster James “Whitey” Bulger.
Government Reaction
As the investigation spanned – and used the resources of – many government agencies, multiple agencies had a comment on the investigation and charges. Some of the comments are below.
“In the midst of a nationwide opioid epidemic that has reached crisis proportions, Mr. Kapoor and his company stand accused of bribing doctors to overprescribe a potent opioid and committing fraud on insurance companies solely for profit,” said Acting United States Attorney William D. Weinreb. “Today’s arrest and charges reflect our ongoing efforts to attack the opioid crisis from all angles. We must hold the industry and its leadership accountable – just as we would the cartels or a street-level drug dealer.”
“These Insys executives allegedly fueled the opioid epidemic by paying doctors to needlessly prescribe an extremely dangerous and addictive form of fentanyl,” said Phillip Coyne, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services. “Corporate executives intent on illegally driving up profits need to be aware they are now squarely in the sights of law enforcement.”
“As alleged, John Kapoor and other top executives committed fraud, placing profit before patient safety, to sell a highly potent and addictive opioid. EBSA will take every opportunity to work collaboratively with our law enforcement partners in these important investigations to protect participants in private sector health plans and contribute in fighting the opioid epidemic,” said Susan A. Hensley, Regional Director of the U.S. Department of Labor, Employee Benefits Security Administration, Boston Regional Office.
Congressional Reaction
Insys has also been the subject of an investigation by Sen. Claire McCaskill (D-Mo.). After Kapoor’s arrest on Wednesday, McCaskill said “anyone, including top executives, who potentially violated criminal law should be aggressively prosecuted.”
“Evidence from our investigation suggests that Insys was engaged in systemic fraud and took actions that directly harmed their own customers and public health as a whole. This company has repeatedly gotten away with fines that amounted to a slap on the wrist for actions that helped fuel a nationwide epidemic that’s claimed hundreds of thousands of American lives,” she said.