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Former Insys CEO Pleads Guilty to Conspiracy and Fraud Charges

— January 16, 2019

Michael Babich, the former Insys CEO who resigned in 2015, admitted to conspiracy and mail fraud charges after entering into a cooperation deal with prosecutors. He faces up to 25 years in prison and has agreed to become a government witness. 

The former chief executive of Insys Therapeutics Inc., Michael Babich, 42, pleaded guilty to participating in a nationwide scheme to bribe doctors to prescribe the addictive opioid medication, Subsys.  He admitted to conspiracy and mail fraud charges after entering into a cooperation deal with prosecutors and has agreed to become a government witness.  Babich resigned from the company in 2015.

The former CEO’s plea comes just three weeks before five ex-Insys executives and managers including John Kapoor, its founder and former chairman, face trial for fraud charges.  Prosecutors allege that in the three-year span from 2012 to 2015, Kapoor, Babich, and the others conspired to offer kickbacks to physicians in exchange for prescribing the fentanyl spray which is 100 times stronger than morphine.

Subsys is such a powerful opioid, and the risk of addiction and overdose is so high, that the Food and Drug Administration (FDA) requires doctors to undergo special training before they are allowed to prescribe it to patients.  It was only approved by the FDA for cancer patients who suffer excruciating pain.  Insys allegedly paid doctors in the form of fees to participate in speaker programs that proved to be scripted events.  They were asked to attend ahead of time to make it appear as if Insys was following the agency’s requirements.

Former Insys CEO Pleads Guilty to Conspiracy and Fraud Charges
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Babich faces up to 25 years in prison but might receive a reduced sentence by testifying at Kapoor’s trial later this month.  Assistant U.S. Attorney Fred Wyshak indicated Babich acted at Kapoor’s direction.  Kapoor and the others have pleaded not guilty to racketeering conspiracy.

In August 2018, Insys announced it had agreed to pay $150 million as part of a settlement after being investigated by the U.S. Justice Department for fraud.  The company said it has taken steps to ensure it operates legally moving forward.  Alec Burlakoff, Insys’ former vice president of sales, pleaded guilty in November and agreed to testify as a government witness.  Babich’s wife, Natalie, who is also a former sales rep pleaded guilty to conspiring to pay kickbacks in 2017.  She testified last month at the trial of Christopher Clough, a former physician assistant accused of accepting kickbacks from Insys.  A federal jury convicted him on December 18.

The Centers for Disease Control and Prevention (CDC) reports that from 1999 to 2017, more than 700,000 people died from a drug overdose.  In 2017, approximately 68% of the more than 70,200 drug overdose deaths involved an opioid.  That same year, the number of overdose deaths involving opioids was six times higher than in 1999.  On average, 130 Americans die every day from an opioid overdose.

The agency states that the first wave of increased prescribing of opioids and opioid-related deaths began in the 1990s with natural, semi-synthetic opioids, and methadone.  The second wave began in 2010, with a spike in heroin overdose deaths.  The third began in 2013, with significant increases in overdose deaths involving synthetic opioids.  Fentanyl caused the most deaths.  Synthetic forms of fentanyl are mostly shipped illegally from China and have become the most deadly form of opioid available on the market.

In 2018, Insys decided to shift its focus from opioids, selling off its remaining stock, to drugs based on compounds found in marijuana.


Former Insys CEO to plead guilty in opioid kickback case

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