The former CEO and president of Insys Therapeutics was among six former company executives who were arrested yesterday on federal charges of leading a nationwide conspiracy to bribe doctors to unnecessarily prescribe a fentanyl-based pain medication and defraud insurers.
Michael L. Babich, 40, of Scottsdale, AZ, and the other five ex-Insys executives were accused of conspiring to bribe practitioners—many of them operators of pain clinics—to coax them into prescribing Subsys (fentanyl sublingual spray), a pain medication designed to treat cancer patients.
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 U.S. Attorney’s Office alleges in its indictment.
According to the indictment, Babich and the other former Insys executives conspired to mislead and defraud health insurance providers by setting up a “reimbursement unit” dedicated to obtaining prior authorization directly from insurers and pharmacy benefit managers.
The conspiracy generated substantial profits for the defendants, their company, and for the co-conspirator practitioners, federal prosecutors added.
Charged with Babich were Alec Burlakoff, 42, of Charlotte, N.C., former vp of sales; Richard M. Simon, 46, of Seal Beach, CA, former national director of sales; Michael J. Gurry, 53, of Scottsdale, AZ, former vp of managed markets; and two former regional sales directors, Sunrise Lee, 36, of Bryant City, MI, and Joseph A. Rowan, 43, of Panama City, FL.
The defendants were arrested in their respective states and are set to appear in U.S. District Court in Boston at a later date.
Babich was charged with conspiracy to commit racketeering, conspiracy to commit wire and mail fraud, and conspiracy to violate the Anti-Kickback Law. Burlakoff, Simon, Lee, and Rowan were charged with RICO conspiracy, mail fraud conspiracy, and conspiracy to violate the Anti-Kickback Law. Gurry was charged with RICO conspiracy and wire fraud conspiracy.
“I hope that today’s charges send a clear message that we will continue to attack the opioid epidemic from all angles, whether it is corporate greed or street level dealing,” Carmen M. Ortiz, U.S. Attorney for the District of Massachusetts, said in a statement.
Babich resigned from Insys last year without explanation, soon after CNBC aired allegations of fraud, kickbacks, and aggressive drug marketing behavior attributed to unnamed sources.
Babich was succeeded by the company’s founder and chairman John N. Kapoor, Ph.D., a billionaire who placed at No. 335 on this year’s Forbes 400 list of the wealthiest Americans. On September 21, Insys said its board had launched a search for someone to succeed Dr. Kapoor, who will continue as president and CEO until that successor has been appointed.
Subsys is the sole product marketed by Insys, though the company in July received FDA approval to market a second product, SyndrosTM (dronabinol oral solution), a liquid formulation of dronabinol. According to Insys, Syndros has advantages over the current soft gel capsule formulation of dronabinol, marketed as Marinol® by AbbVie.