Financially wobbly opioid drugmaker Insys agrees to pay $225M to settle government probes
After being found guilty of engaging in a bribery scheme to get doctors to prescribe its potent, addictive painkiller and duping insurers into paying for the opioid drug by a federal jury last month, former executives of the controversial Insys Therapeutics are being held accountable. The Phoenix, Arizona-based drugmaker $INSY has agreed to pay $225 million to settle the government’s separate criminal and civil investigations, the Department of Justice (DoJ) said on Wednesday.
The two investigations are focused on the company’s fentanyl spray Subsys that was approved in 2012 by the FDA for breakthrough cancer pain. Fentanyl is a man-made opioid 50 times more potent than heroin and 100 times more potent than morphine, according to the CDC. Prosecutors charged Insys with inflating Subsys sales by bribing doctors to prescribe the drug to patients without cancer — in an elaborate scheme that included wining and dining them, paying them to speak at “educational events” and in one case even a lap dance — fueling the raging opioid crisis that kills 130 Americans every day.
Jurors from the trial who found Insys founder John Kapoor and and four of his high ranking colleagues (that are no longer working with Insys) guilty, were also given a front-row seat to the crass video designed to train the company’s sales reps, in which two impeccably suited men — ostensibly Insys employees — ‘rap’ Insys’ sinister strategy replete with rapid hand gestures: “I love titrations. Yeah, that’s not a problem. I got new patients, and I got a lot of ‘em…If you want to be great, listen to my voice. You can be great — but it’s your choice.”
Altogether, eight Insys executives have now been convicted by the U.S. Attorney’s Office in Massachusetts for crimes relating to the illegal marketing of Subsys, the DoJ said.
As part of the criminal resolution, Insys will enter into a deferred prosecution agreement with the government, its operating subsidiary will plead guilty to five counts of mail fraud, and the company will pay a $2 million fine and $28 million in forfeiture. The criminal conviction is historic as it takes aim at the powerful masterminds behind a marketing ploy designed to put profit ahead of patients — instead of mere fines, or letting powerful executives make sacrificial lambs of their lieutenants.
Under the civil resolution, Insys agreed to pay $195 million to settle allegations that it violated the False Claims Act.
“Today’s settlement sends a strong message to pharmaceutical manufacturers that the kinds of illegal conduct that we have alleged in this case will not be tolerated,” said Assistant Attorney General Jody Hunt of the DoJ’s civil division, in a statement.
The settlement is not cheap for the already financially strained Insys. Last month, the company indicated it was facing a liquidity crisis, which could compel it into filing for bankruptcy protection.
The company’s legal expenses jumped about 150% to $25.7 million in the first-quarter of 2019, versus the same quarter last year. In April, Insys’ auditor raised doubts on the drugmaker’s ability to continue as a going concern.
As of March 31, the company had $87.6 million in cash and cash equivalents and investments — as well as accrued liabilities of roughly $240.3 million in proposed settlements of various litigation matters, Insys said, adding it expects to have continued negative cash flows from operating activities.
Insys is hardly the only opioid drug maker in financial trouble. Purdue Pharma — the maker of one of the most widely abused prescription opioid painkiller Oxycontin — is reportedly considering bankruptcy. Meanwhile, other drug manufacturers, distributors and pharmacies are also facing hundreds of civil lawsuits for their role in propagating the opioid crisis.
Image: Kristoffer Tripplaar for SIPA AP