Insys Therapeutics ($INSY) faces mounting pressures from federal investigations into its off-label marketing of a powerful pain med after a sales rep pleaded guilty to conspiracy fraud charges. In so doing, Natalie Reed Perhacs disclosed that she was the inducement in a kickback scheme and that Insys hired her at the urging of a doctor who was a top prescriber for the company who had a personal interest in her.
According to CNBC, which has a copy of the plea agreement, Perhacs last week pleaded guilty in federal court in Alabama to conspiracy to commit healthcare fraud, including kickback schemes for Insys. Insys has previously disclosed that it is cooperating with investigations by federal authorities in at least three states that are looking into its marketing practices.
The company's biggest drug is Subsys, a spray form of the high-powered painkiller fentanyl approved only for use in cancer patients, but which has been widely prescribed for off-label uses, leading to rapidly growing sales in the last several years. Sales of Subsys reached $219.5 million in 2014, more than double its $95.8 million total the previous year.
Perhacs' plea agreement says she was employed by Insys at the urging of, and as a kickback to, Dr. Xiulu Ruan, an Alabama physician, who also has been charged in the case, the news network reports. It says Ruan "went out of his way" to get Perhacs hired as a sales representative with the pharmaceutical company. The court documents also include an email from the doctor inquiring about Perhacs' dating status. The doctor's lawyer acknowledged to CNBC his client recommended her for the job but denied there was any romantic involvement.
According to CNBC, Dr. Ruan and his partner Dr. John Couch have pleaded not guilty after being charged last year on drug and fraud charges. The two were among doctors who received significant speaking and travel fees from the Phoenix, AZ-based drug company. In their case, it was $210,000 in 2013 and 2014.
The documents show that Perhacs did well financially as well from the arrangement, so "had a strong financial incentive to ... turn a blind eye to illegal kickbacks being paid by Company A [Insys] to Dr. Ruan and Dr. Couch," CNBC reported the agreement reads. She earned more than $700,000 in commissions off of the off-label prescriptions written between April 2013 and the doctors' arrests on May 20, 2015, CNBC reports.
The company told CNBC in a statement that it is reviewing these developments, "but it provides personnel with specific training on company policies and procedures designed to comply with applicable laws and regulations."
But Insys' legal troubles are mounting. Perhacs' plea comes after a Connecticut nurse and top prescriber last year pleaded guilty to accepting $83,000 worth of kickbacks from the company. According to its most recent quarterly filing, Insys last year entered into a settlement agreement with the Justice Department to pay $1.1 million and "to maintain certain controls and processes around our promotional and sales activity related to Subsys in Oregon."
The company last year also agreed to settle a class action lawsuit filed by investors, saying that it believed its costs in that case would be covered by insurance. Insys shares were trading down slightly today at $14.18, off from a 52-week high of $46.17.
- read the CNBC report