After watching its founder and former CEO convicted on federal racketeering charges, Insys Therapeutics knew it could soon face the music in its own investigations. Turns out that reckoning will come with a nearly quarter-of-a-billion-dollar price tag.
Insys and the Justice Department settled for $225 million to end criminal and civil investigations into an alleged kickback scheme to turbocharge scripts of the company’s powerful opioid spray Subsys. As part of the agreement, Insys will enter a five-year deferred prosecution with the federal government while a subsidiary will plead guilty to five counts of mail fraud.
“Illegal conduct by pharmaceutical manufacturers, especially in the midst of the opioid crisis, will not be tolerated,” said Claire Murray, the DOJ’s principal deputy associate attorney general. “We will continue to investigate and vigorously prosecute these types of allegations and hold opioid manufacturers accountable under the law.”
The deal covers civil and criminal investigations. Insys agreed to shell out $2 million in criminal fines and forfeit $28 million. The company also agreed to pay $195 million to end the government’s probe into False Claims Act violations, tied to its scheme defrauding the feds of millions in false Medicare billing.
Insys said in a statement that the settlement was “in the best interest of the Company and its stakeholders” and that the federal government would not seek to exclude the company’s drugs from key healthcare programs if it followed the terms of the agreement.
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The settlement closes the book on the government’s aggressive pursuit of Insys and former Insys executives who ran a C-suite-driven plan to funnel money and gifts to doctors through a sham speaker program. The alleged kickbacks aimed to promote the over-prescription of Subsys, a potentially highly addictive painkiller.
Details of the scheme, including marketing execs treating physicians to $10,000 meals at chic seafood restaurants and wild nights at Hooters and strip clubs, were laid bare during the trials of former Insys execs under the gun on racketeering conspiracy and bribery charges.
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The federal probe eventually reached Insys’ highest ranks after founder and former chief executive John Kapoor was found guilty in early May on RICO conspiracy charges. Prosecutors went after Kapoor for his role in pushing sales and marketing employees to aggressively sell and mislead physicians about the drug’s safety and usefulness.
But Kapoor, who has yet to be sentenced, wasn’t the only big game the DOJ was after. The feds also nabbed settlements with another former CEO, Mark Babich, on federal conspiracy and mail charges, and Alec Burlakoff, a former VP of sales who reached a plea deal in November for his role as director of the company’s speaker program.
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Burkaloff was at the center of the most eye-popping piece of evidence in Kapoor’s trial when he appeared in an internal marketing video with other sales team members rapping about boosting Subsys sales and capitalizing on opioid titration, or boosting dosages for patients who develop a tolerance to the drug.
In April, Burkaloff agreed to pay $9.5 million and turn state’s evidence in a separate Arizona state investigation alleging Insys executives drove the marketing kickback scheme from the top down. As part of his agreement, Burkaloff agreed to help the state pursue charges against both Kapoor and Burkaloff, both of whom are still under investigation.