John N. Kapoor, Ph.D., founder and majority owner of Insys Therapeutics.
John N. Kapoor, Ph.D., founder and majority owner of Insys Therapeutics.

The founder and majority owner of Insys Therapeutics intends to fight federal racketeering and conspiracy charges that could, if he is convicted, send him to prison for decades.

John N. Kapoor, Ph.D., 74, of Phoenix, AZ, was arrested yesterday on felony charges stemming from what federal prosecutors alleged was a nationwide conspiracy to profit by bribing doctors and pharmacists to prescribe the opioid agonist Subsys® (fentanyl sublingual spray), indicated for patients with cancer pain.

Dr. Kapoor—a former executive chairman and CEO of Insys who remains on the company’s board—was charged with conspiracy under the Racketeer Influenced and Corrupt Organizations (RICO) Act, and other felonies that include conspiracy to commit mail and wire fraud, and conspiracy to violate the Anti-Kickback Law.

Dr. Kapoor appeared yesterday in U.S. District Court in Phoenix, where a federal judge set his bail at $1 million and ordered him to wear an electronic monitoring bracelet and surrender his passport.

“He is not guilty of these charges. He intends to fight it vigorously,” Dr. Kapoor’s defense attorney Brian T. Kelly told reporters outside court, according to the Associated Press.

Dr. Kapoor faces up to 20 years in prison, three years of supervised release, and a fine of $250,000, or twice the amount of pecuniary gain or loss, on both the RICO conspiracy and the mail and wire fraud conspiracy charges. He faces an additional up to five years in prison, three years of supervised release, and a $25,000 fine if convicted of conspiracy to violate the Anti-Kickback Law.

Dr. Kapoor is set to appear in U.S. District Court in Boston at a later date on additional charges related to a superseding indictment unsealed yesterday that includes additional allegations against several former Insys executives and managers who were initially indicted in December 2016.

Dr. Kapoor, Insys’ former CEO and president Michael L. Babich, and five other former executives of the company are accused of conspiring to bribe practitioners in various states—many of whom operated pain clinics—to get them to prescribe Subsys, a Schedule II controlled substance.

A Top-20 Abused Prescription Drug

Subsys is indicated for the management of breakthrough pain in cancer patients 18 years old and older who are already receiving, and are tolerant to, around-the-clock opioid therapy for their underlying persistent cancer pain. Subsys ranked number 19 on GEN’s most-recent list of Top 20 Abused Prescription Drugs, published September 11.

However, the practitioners wrote large numbers of prescriptions for the patients, most of whom were not diagnosed with cancer in exchange for bribes and kickbacks, federal prosecutors have alleged.

The seven are also accused in the superseding indictment of conspiring to mislead and defraud health insurance providers who were reluctant to approve payment for the drug when it was prescribed for noncancer patients—by setting up a “reimbursement unit” dedicated to obtaining prior authorization directly from insurers and pharmacy benefit managers. 

Babich, 40, of Scottsdale, AZ, and the other five ex-Insys executives have pleaded not guilty to those charges, and are set to go to trial in October 2018. The other five are Alec Burlakoff, 42, of Charlotte, NC, former VP of sales; Richard M. Simon, 46, of Seal Beach, CA, former national director of sales; former regional sales directors Sunrise Lee, 36, of Bryant City, MI, and Joseph A. Rowan, 43, of Panama City, FL; and former VP of managed markets, Michael J. Gurry, 53, of Scottsdale.

Babich and the five ex-executives were first indicted in December 2016 for what federal prosecutors alleged was a nationwide conspiracy to bribe medical practitioners to unnecessarily prescribe Subsys and defraud healthcare insurers. A month later, Dr. Kapoor retired as chairman and CEO, effective immediately.

“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,” Acting U.S. Attorney William D. Weinreb said in a statement. “[Thursday’s] arrest and charges reflect our ongoing efforts to attack the opioid crisis from all angles.”

“Public Health Emergency”

The indictment came the same day President Donald Trump declared the nation’s opioid epidemic a “nationwide public health emergency.” Through the declaration, Trump’s administration committed itself to actions that included expanded access to telemedicine services, allowing the Department of Health and Human Services to more quickly make temporary appointments of opioid specialists, allowing the Department of Labor to issue dislocated worker grants to help victims, and shifting resources to help people eligible for HIV/AIDS programs to receive substance abuse treatment.

Trump on March 29 created via executive order a President's Commission on Combating Drug Addiction and the Opioid Crisis, led by New Jersey Gov. Chris Christie. On October 5, New Jersey Attorney General Christopher S. Porrino sued Insys, accusing the company of “a greed-driven campaign of consumer fraud and submission of false claims to health insurers.”

Insys responded at the time with a statement similar to one it issued this week following Dr. Kapoor’s arrest: “We continue to work with relevant authorities to resolve issues related to inappropriate actions taken by some of our former employees.” The company also noted that it is under new management, has replaced 90% of its original sales force and commercial organization, and has acted to prevent the recurrence of past misdeeds.

In a separate indictment related to Insys and Subsys, Rhode Island doctor Jerrold Rosenberg, M.D., on Wednesday pleaded guilty in U.S. District Court in Providence, R.I., today to conspiring to solicit and receive kickbacks in connection with his prescribing of the drug Subsys.

Dr. Rosenberg, 63, of North Providence and Jamestown, RI, is scheduled to be sentenced on January 16, 2018. He faces up to 10 years in prison for the healthcare fraud scheme charge and up to five years imprisonment on the charge of conspiracy to accept kickbacks, followed by up to three years of supervised release and a fine of up to $250,000.00 on each charge.  Dr. Rosenberg has agreed to pay restitution of $754,736.48 under a plea agreement filed with the Court.

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