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Insys and Top Executives Face Crime Allegations Amid Bankruptcy

— December 7, 2018

Insys and Top Executives Face Crime Allegations Amid Bankruptcy

Alec Burlakoff, one of the former top sales executives at Insys Therapeutics Inc., was forced to listen in a Boston courtroom as federal prosecutors read aloud the crimes he and the company had allegedly committed.  These claimed, “Insys had bribed doctors and their employees with payments for sham medical events that often turned out to be parties.  Physicians who didn’t write prescriptions for the company’s powerful opioid were cut off from the company’s money.  There were lavish dinners, strip club visits and gun range outings, all of which led to booming sales of one of the world’s most powerful — and dangerous — pain drugs.”  There was even more evidence that the prosecutors had left out, according to Burlakoff’s attorneys, and their client was prepared to plead guilty.

Burlakoff is one of the first drug-company executives charged in the opioid crisis, which was tied to about 50,000 deaths last year according to the Centers of Disease Control and Prevention (CDC).  He will face up to 20 years in prison.  However, the former executive has a cooperation agreement with the government, so it’s unclear how much time he will serve.

Insys could also go underwater as the company continues to spend millions to defend its former executives, including billionaire founder and ex-chief executive John Kapoor.  Insys’s new managers are trying to sell off its main pain drug to a corporate buyer to raise money, hoping to use the proceeds to shift from opioids to cannabis-derived drugs.

Insys and Top Executives Face Crime Allegations Amid Bankruptcy
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“There’s no guarantee the process will yield any results,” Insys spokesperson Joe McGrath said. “We haven’t found a buyer — and we might not.”  The company indicated in a November 9 regulatory filing that it could also try to raise funds through debt, equity offerings or other means.

Insys’s main product is Subsys, a spray version of the dangerous opioid fentanyl.  When it was introduced in the U.S. in 2012, the drug cost between $3,000 and $16,000 a month, depending on the dose and the Food and Drug Administration allowed the company to only market it to cancer patients.

However, Kapoor and other executives essentially bribed doctors to prescribe it for non-cancer chronic pain and back aches, and defrauded insurance providers who were reluctant to approve prescriptions.  Some physicians were paid as much as $200,000, prosecutors said at the Nov. 28 hearing at which Burlakoff pleaded guilty.  With this business move, Subsys sales increased drastically from $8.6 million when it launched in March 2012 to $329.5 million in 2015.  The drug was also quickly diverted to the black market and sold on the streets, leading to numerous overdoses.

In June 2015, a Connecticut nurse pleaded guilty to federal charges of accepting more than $83,000 in kickbacks.  And, indictments of doctors, nurses, sales representatives, and, eventually, Insys executives soon followed.  The company agreed to a $150 million settlement with the Department of Justice to resolve a civil and criminal investigation.

The company has new board directors, “a new management team and employees committed to a culture of compliance, ethics and integrity, all aligned around a vision focused on the interests of patients.  Suits involving the company mostly pertain to allegations of past misdeeds by former employees,” Insys said in a written statement.


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