Score:   1
Docket Number:   D-MA  1:19-cr-10191
Case Name:   USA v. Insys Therapeutics Inc. et al
  Press Releases:
BOSTON – The former Vice President of Sales of Insys Therapeutics was sentenced today in federal court in Boston for his role in a nationwide conspiracy to bribe medical practitioners to unnecessarily prescribe a fentanyl-based pain medication and defraud healthcare insurers.

Alec Burlakoff, 46, of West Palm Beach, Fla., was sentenced by U.S. District Court Judge Allison D. Burroughs to 26 months in prison, three years of supervised release, and ordered to pay restitution and forfeiture to be determined at a later date. In November 2018, Burlakoff pleaded guilty to one count of racketeering conspiracy and agreed to cooperate with the government. 

In May 2019, five top executives including the Founder of Insys, John Kapoor, were convicted by a federal jury of racketeering conspiracy.

From May 2012 to December 2015, Burlakoff and his co-conspirators used various methods to bribe medical practitioners, many of whom operated pain clinics, to prescribe Subsys to patients, often when medically unnecessary. Subsys, a drug owned and manufactured by Insys Therapeutics, Inc., is a powerful, fentanyl-based pain medication approved to treat cancer patients suffering intense breakthrough pain.

One method employed by Burlakoff and his co-conspirators was the Insys Speaker Program (ISP), which was used as a vehicle to bribe doctors and other clinicians to prescribe Subsys to their patients. Insys sales representatives targeted and promised medical professionals the opportunity to be paid as Insys speakers if they wrote prescriptions for Subsys. The more prescriptions written for Subsys – and the higher the dose – the more speaking opportunities were awarded and more money paid to the practitioners. In many instances, the programs were shams.

At trial, Burlakoff testified about the methods used at Insys to induce doctors and nurse practitioners to prescribe Subsys in exchange for bribe payments. Burlakoff also described Insys’ practice of targeting medical practices known for suspect prescribing standards, commonly referred to as “pill mills”:

“[P]ill mills for us meant dollar signs. That's what we saw, dollar signs. It was not run the other way. It was run to the pill mill.”

Burlakoff also testified about the internal tracking Insys conducted to measure the effectiveness of the bribe payments:

“‘Return on investment’ means a successful bribe, an increase in Subsys prescriptions based on the speaker money we have paid the doctor, the speaker.”

The defendants also conspired to mislead and defraud health insurance providers who were reluctant to approve payment for Subsys when it was prescribed for non-cancer patients. The defendants achieved this by setting up the “Insys Reimbursement Center,” (IRC) which was dedicated to fraudulently obtaining prior authorization for payment directly from insurers and pharmacy benefit managers.   

United States Attorney Andrew E. Lelling; Joseph R. Bonavolonta, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division; Phillip Coyne, Special Agent in Charge of the U.S Department of Health and Human Services, Office of the Inspector General; Judy McMeekin, Pharm.D. Acting Associate Commissioner for Regulatory Affairs of the U.S. Food and Drug; Brian D. Boyle, Special Agent in Charge of the Drug Enforcement Administration, Boston Field Division; Leigh-Alistair Barzey, Special Agent in Charge of the Defense Criminal Investigative Service, Northeast Field Office; Carol S. Hamilton, Acting Regional Director of the U.S. Department of Labor, Employee Benefits Security Administration, Boston Regional Office; Joseph W. Cronin, Inspector in Charge of the U.S. Postal Inspection Service’s Boston Division; Matthew Modafferi, Special Agent in Charge of the U.S. Postal Service Office of Inspector General, Northeast Area Field Office; Jeffrey K. Stachowiak, Acting Special Agent in Charge of the Department of Veterans Affairs, Office of Inspector General; and Thomas W. South, Deputy Assistant Inspector General for Investigations of the Office of Personnel Management made the announcement.

Assistant U.S. Attorneys K. Nathaniel Yeager, Fred M. Wyshak and David G. Lazarus prosecuted the case for Lelling’s Health Care Fraud Unit.

BOSTON – A former Regional Sales Director for Insys Therapeutics was sentenced today in federal court in Boston for bribing practitioners to prescribe Subsys, a fentanyl-based pain medication, often when medically unnecessary.

Sunrise Lee, 38, of Bryant City, MI, was sentenced by U.S. District Court Judge Allison D. Burroughs to 1 year and 1 day in prison, three years of supervised release, restitution to be determined at a later date and ordered to forfeit the proceeds of the offense (the exact amount to be determined at a later date). The government recommended a sentence of 72 months in prison.

In May 2019, Lee was convicted by a federal jury of racketeering conspiracy along with four other Insys executives.

Subsys, a drug owned and manufactured by Insys Therapeutics, Inc., is a fentanyl-based, rapid-onset opioid approved to treat cancer patients suffering intense breakthrough pain. From May 2012 to December 2015, Lee and her co-defendants conspired to bribe practitioners, many of whom operated pain clinics, in order to induce them to prescribe Subsys to patients, often when medically unnecessary. They also conspired to mislead and defraud health insurance providers who were reluctant to approve payment for the expensive drug when it was prescribed for patients without cancer. Medicare would not approve payment for the drug unless the patient was being treated for breakthrough cancer pain. 

Lee joined Insys as a District Sales Director, excelling at recruiting and cultivating high prescribers of Insys, including a pain management physician in Michigan and another physician outside Chicago. The prescribers bribed by Lee became some of the most prolific prescribers of the drug. Lee obtained agreements from the doctors to write significant quantities of Subsys prescriptions, and prescriptions in increasing dosages, in exchange for participation in the Insys speaker program, a vehicle used to pay kickbacks. Lee was promoted to Regional Sales Director in 2013. In that capacity, she was responsible for managing nearly a third of the company’s sales force.     

United States Attorney Andrew E. Lelling; Joseph R. Bonavolonta, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division; Phillip Coyne, Special Agent in Charge of the U.S Department of Health and Human Services, Office of the Inspector General; Judy McMeekin, Pharm.D. Acting Associate Commissioner for Regulatory Affairs of the U.S. Food and Drug; Brian D. Boyle, Special Agent in Charge of the Drug Enforcement Administration, Boston Field Division; Leigh-Alistair Barzey, Special Agent in Charge of the Defense Criminal Investigative Service, Northeast Field Office; Carol S. Hamilton, Acting Regional Director of the U.S. Department of Labor, Employee Benefits Security Administration, Boston Regional Office; Joseph W. Cronin, Inspector in Charge of the U.S. Postal Inspection Service’s Boston Division; Matthew Modafferi, Special Agent in Charge of the U.S. Postal Service Office of Inspector General, Northeast Area Field Office; Jeffrey K. Stachowiak, Acting Special Agent in Charge of the Department of Veterans Affairs, Office of Inspector General; and Thomas W. South, Deputy Assistant Inspector General for Investigations of the Office of Personnel Management made the announcement. 

Assistant U.S. Attorneys K. Nathaniel Yeager, Fred M. Wyshak and David G. Lazarus prosecuted the case for Lelling’s Health Care Fraud Unit.

BOSTON – A former Regional Sales Director for Insys Therapeutics was sentenced today in federal court in Boston for his role in conspiring to bribe practitioners to prescribe Subsys, a fentanyl-based pain medication.

Joseph A. Rowan, 45, of Panama City, Fla., was sentenced by U.S. District Court Judge Allison D. Burroughs to 27 months in prison, three years of supervised release, restitution to be determined at a later date and ordered to pay approximately $2 million in forfeiture. The government recommended a sentence of 120 months in prison.

In May 2019, Rowan was convicted by a federal jury of racketeering conspiracy along with four other Insys executives.

Subsys, a drug owned and manufactured by Insys Therapeutics, Inc., is a fentanyl-based, rapid-onset opioid approved to treat cancer patients suffering intense breakthrough pain. From May 2012 to December 2015, Rowan and his co-defendants conspired to bribe practitioners, many of whom operated pain clinics, in order to induce them to prescribe Subsys to patients. The defendants also conspired to mislead and defraud health insurance providers who were reluctant to approve payment for the expensive drug when it was prescribed for patients without cancer.  Medicare would not approve payment for the drug except to treat breakthrough cancer pain.  

Beginning in 2012, Rowan joined Insys as a sales representative working exclusively with a doctor in Alabama known to write prescriptions for fentanyl products. Rowan paid the doctor speaker honoraria in exchange for Subsys prescriptions, and was so successful that it became a model within Insys. Rowan was subsequently twice promoted, ultimately becoming a Regional Sales Manager. In this role, Rowan fueled the criminal scheme by approving the use of speaker programs to bribe doctors to write more Subsys prescriptions, and to write Subsys prescriptions at increasingly higher dosages.

In addition, Rowan stressed the importance of the success of the Insys Reimbursement Center (IRC) to sales representatives. During a national sales meeting, Rowan encouraged sales employees to assist the IRC and stated, “what I am saying is this. This is how you get paid…”

United States Attorney Andrew E. Lelling; Joseph R. Bonavolonta, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division; Phillip Coyne, Special Agent in Charge of the U.S Department of Health and Human Services, Office of the Inspector General; Judy McMeekin, Pharm.D. Acting Associate Commissioner for Regulatory Affairs of the U.S. Food and Drug; Brian D. Boyle, Special Agent in Charge of the Drug Enforcement Administration, Boston Field Division; Leigh-Alistair Barzey, Special Agent in Charge of the Defense Criminal Investigative Service, Northeast Field Office; Carol S. Hamilton, Acting Regional Director of the U.S. Department of Labor, Employee Benefits Security Administration, Boston Regional Office; Joseph W. Cronin, Inspector in Charge of the U.S. Postal Inspection Service’s Boston Division; Matthew Modafferi, Special Agent in Charge of the U.S. Postal Service Office of Inspector General, Northeast Area Field Office; Jeffrey K. Stachowiak, Acting Special Agent in Charge of the Department of Veterans Affairs, Office of Inspector General; and Thomas W. South, Deputy Assistant Inspector General for Investigations of the Office of Personnel Management made the announcement. 

Assistant U.S. Attorneys K. Nathaniel Yeager, Fred M. Wyshak, and David G. Lazarus prosecuted the case for Lelling’s Health Care Fraud Unit.

BOSTON – The former National Sales Director for Insys Therapeutics was sentenced today in federal court in Boston for his role in conspiring to bribe practitioners to prescribe Subsys, a fentanyl-based pain medication, often when medically unnecessary.

Richard Simon, 48, of Seal Beach, Calif., was sentenced by U.S. District Court Judge Allison D. Burroughs to 33 months in prison, three years of supervised release, restitution to be determined at a later date and ordered to pay approximately $2.3 million in forfeiture. The government recommended a sentence of 132 months in prison.

In May 2019, Simon was convicted by a federal jury of racketeering conspiracy along with four other Insys executives.

Subsys, a drug owned and manufactured by Insys Therapeutics, Inc., is a fentanyl-based, rapid-onset opioid approved to treat cancer patients suffering intense breakthrough pain. From May 2012 to December 2015, Simon and his co-defendants conspired to bribe practitioners, many of whom operated pain clinics, in order to induce them to prescribe Subsys to patients, often when medically unnecessary. The defendants also conspired to mislead and defraud health insurance providers who were reluctant to approve payment for the expensive drug when it was prescribed for patients without cancer.

In September 2012, Simon joined Insys as a District Sales Manager and began actively recruiting high prescribing doctors and engaging in quid pro quo agreements with doctors. When Simon was promoted to National Sales Director, he directed sales managers and sales reps to bribe prescribers and to reach specific and enforceable agreements with doctors to prescribe Subsys.

Ensuring that prescriptions were paid for by insurers was equally important to Simon. So he ordered the creation of the “Charts in Progress” (CIP) Report. The CIP reports, which tracked the progress that the Insys Reimbursement Center made in obtaining payment from insurers and provided it to sales managers, was one of the tools used at Insys to track the success of the criminal scheme. 

United States Attorney Andrew E. Lelling; Joseph R. Bonavolonta, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division; Phillip Coyne, Special Agent in Charge of the U.S Department of Health and Human Services, Office of the Inspector General; Judy McMeekin, Pharm.D. Acting Associate Commissioner for Regulatory Affairs of the U.S. Food and Drug; Brian D. Boyle, Special Agent in Charge of the Drug Enforcement Administration, Boston Field Division; Leigh-Alistair Barzey, Special Agent in Charge of the Defense Criminal Investigative Service, Northeast Field Office; Carol S. Hamilton, Acting Regional Director of the U.S. Department of Labor, Employee Benefits Security Administration, Boston Regional Office; Joseph W. Cronin, Inspector in Charge of the U.S. Postal Inspection Service’s Boston Division; Matthew Modafferi, Special Agent in Charge of the U.S. Postal Service Office of Inspector General, Northeast Area Field Office; Jeffrey K. Stachowiak, Acting Special Agent in Charge of the Department of Veterans Affairs, Office of Inspector General; and Thomas W. South, Deputy Assistant Inspector General for Investigations of the Office of Personnel Management made the announcement.  

Assistant U.S. Attorneys K. Nathaniel Yeager, Fred M. Wyshak, and David G. Lazarus prosecuted the case for Lelling’s Health Care Fraud Unit.

BOSTON – The former Vice President of Managed Markets for Insys Therapeutics was sentenced today in federal court in Boston for his role in conspiring to bribe practitioners to prescribe fentanyl-based pain medication, often when medically unnecessary.

Michael J. Gurry, 56, of Scottsdale, Ariz., was sentenced by U.S. District Court Judge Allison D. Burroughs to 33 months in prison, three years of supervised release, restitution to be determined at a later date, and ordered to pay approximately $3.6 million in forfeiture. The government recommended a sentence of 132 months in prison. In May 2019, Gurry was convicted by a federal jury of racketeering conspiracy along with four other Insys executives.

Subsys, a drug owned and manufactured by a company called Insys Therapeutics, Inc., is a powerful, rapid-onset opioid approved to treat cancer patients suffering intense breakthrough pain. From May 2012 to December 2015, Gurry and his co-defendants conspired to bribe practitioners, many of whom operated pain clinics, in order to induce them to prescribe Insys’ fentanyl-based pain medication, Subsys, to patients, often when medically unnecessary. The drug was expensive, and while bribes paid to prescribers succeeded in generating new prescriptions, insurers were reluctant to approve payment when Subsys was prescribed for patients without cancer. 

Within the criminal scheme, Gurry was responsible for creating and overseeing the Insys Reimbursement Center (IRC), which was dedicated to obtaining prior authorization for payment of Subsys prescriptions directly from insurers and pharmacy benefit managers. Beginning in October 2012, Gurry authorized employees of the IRC to lead insurers to believe that they were calling from the office of the prescriber. He also authorized the IRC employees to use a misleading script, known as “the spiel,” to trick insurers into believing that Subsys had been prescribed to the patient to treat breakthrough cancer pain, for which insurers were more likely to authorize payment. Gurry also authorized other tactics that had been found to be more successful in securing payment from insurers. This included citing a diagnosis of “dysphagia” – difficulty swallowing – even when patients were not suffering from the disorder and referencing a history of cancer to mislead insurers.

United States Attorney Andrew E. Lelling; Joseph R. Bonavolonta, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division; Phillip Coyne, Special Agent in Charge of the U.S Department of Health and Human Services, Office of the Inspector General; Judy McMeekin, Pharm.D. Acting Associate Commissioner for Regulatory Affairs of the U.S. Food and Drug; Brian D. Boyle, Special Agent in Charge of the Drug Enforcement Administration, Boston Field Division; Leigh-Alistair Barzey, Special Agent in Charge of the Defense Criminal Investigative Service, Northeast Field Office; Carol S. Hamilton, Acting Regional Director of the U.S. Department of Labor, Employee Benefits Security Administration, Boston Regional Office; Joseph W. Cronin, Inspector in Charge of the U.S. Postal Inspection Service’s Boston Division; Matthew Modafferi, Special Agent in Charge of the U.S. Postal Service Office of Inspector General, Northeast Area Field Office; Jeffrey K. Stachowiak, Special Agent in Charge of the Department of Veterans Affairs, Office of Inspector General; and Thomas W. South, Deputy Assistant Inspector General for Investigations of the Office of Personnel Management made the announcement.  

Assistant U.S. Attorneys K. Nathaniel Yeager, Fred M. Wyshak, and David Lazarus prosecuted the case for Lelling’s Health Care Fraud Unit.

BOSTON – Opioid manufacturer Insys Therapeutics agreed to a global resolution to settle the government’s separate criminal and civil investigations, the Department of Justice announced today. As part of the criminal resolution, Insys will enter into a deferred prosecution agreement with the government, Insys’s 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. As part of the civil resolution, Insys agreed to pay $195 million to settle allegations that it violated the False Claims Act.

Both the criminal and civil investigations stemmed from Insys’s payment of kickbacks and other unlawful marketing practices in connection with the marketing of Subsys.  Insys’s drug Subsys is a sublingual fentanyl spray, a powerful, but highly addictive, opioid painkiller. In 2012, Subsys was approved by the Food and Drug Administration for the treatment of persistent breakthrough pain in adult cancer patients who are already receiving, and tolerant to, around-the-clock opioid therapy. 

Today, the U.S. Attorney’s Office for the District of Massachusetts filed an Information charging Insys and its operating subsidiary with five counts of mail fraud. According to the charging document, from August 2012 to June 2015, Insys began using “speaker programs” purportedly to increase brand awareness of Subsys through peer-to-peer educational lunches and dinners. However, the programs were actually used as a vehicle to pay bribes and kickbacks to targeted practitioners in exchange for increased Subsys prescriptions to patients and for increased dosage of those prescriptions. One practitioner targeted by Insys was a physician’s assistant who practiced with a pain clinic in Somersworth, N.H.  During the first year that Subsys was on the market, the physician’s assistant did not write any Subsys prescriptions for his patients. In May 2013, the physician’s assistant joined Insys’s sham speaker program knowing that it was a way to receive kickbacks for writing Subsys prescriptions. After joining the sham speaker program, the physician’s assistant wrote approximately 672 Subsys prescriptions for his patients – many of which were medically unnecessary – and in turn, received $44,000 in kickbacks from Insys.

As part of the criminal resolution, Insys agreed to a detailed statement of facts outlining its criminal conduct with respect to the illegal marketing of Subsys. Insys will enter into a five-year deferred prosecution agreement, while Insys’s operating subsidiary will plead guilty to five counts of mail fraud pursuant to the plea agreement that will be filed in the District of Massachusetts. According to the terms of the criminal resolution, Insys will pay a criminal fine of $2 million and forfeiture of $28 million. The Court has not yet scheduled the plea hearing. Last month, five former Insys executives were convicted after trial of racketeering conspiracy in connection with the marketing of Subsys. In total, eight company executives have now been convicted by the U.S. Attorney’s Office in Massachusetts for crimes relating to the illegal marketing of Subsys.

In April 2018, the United States intervened in five qui tam lawsuits accusing Insys of violating the False Claims Act. In its civil complaint, the United States alleged that Insys, headquartered in Arizona, paid kickbacks to induce physicians and nurse practitioners to prescribe Subsys for their patients. Many of these kickbacks took the form of speaker program payments for speeches to physicians that were, in fact, shams; jobs for the prescribers’ relatives and friends; and lavish meals and entertainment. The United States also alleged that Insys improperly encouraged physicians to prescribe Subsys for patients who did not have cancer, and lied to insurers about patients’ diagnoses in order to obtain reimbursement for Subsys prescriptions that had been written for Medicare and TRICARE beneficiaries.

Insys also entered into a 5-year Corporate Integrity Agreement (CIA) and Conditional Exclusion Release with the U.S. Department of Health and Human Services, Office of Inspector General. Because of the extensive cooperation provided by Insys in the prosecution of culpable individuals and its agreement to enhanced CIA requirements, OIG elected not to pursue exclusion of Insys at this time. The CIA includes several novel provisions, including enhanced material breach provisions, designed to protect federal health care programs and beneficiaries.  In addition, Insys admitted to a Statement of Facts and acknowledged that the facts provide a basis for permissive exclusion. OIG did not release its permissive exclusion authority, as it generally does for CIA parties in False Claims Act settlements. Instead, OIG will provide such a release only after Insys satisfies its obligations under the CIA.

“This criminal resolution today with Insys, coupled with the convictions of the 8 executives, shows this Office’s resolve to hold both corporations and individuals accountable for their crimes,” said United States Attorney for the District of Massachusetts Andrew E. Lelling. “For years, Insys engaged in prolonged, illegal conduct that prioritized its profits over the health of the thousands of patients who relied on it. Today, the company is being held responsible for that and for its role in fueling the opioid epidemic.  This global resolution is the culmination of years of work by prosecutors and agents, and these successful prosecutions and civil enforcement efforts should be a model for confronting corporate criminal activity.”

“The opioid epidemic is a plague that has devastated communities and ravaged families across this country,” said Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division. “The Department of Justice is committed to using the legal tools at our disposal to combat the illegal marketing and distribution of opioids, including fentanyl. 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. I want to assure the families and communities ravaged by this epidemic that the Department of Justice will continue to act forcefully to hold opioid manufacturers accountable for their actions.”

 “Today’s settlement underscores our determination to hold opioid manufacturers accountable for pushing these highly addictive narcotics on the public via kickbacks to doctors and nurses, and other illegal means,” said United States Attorney for the Central District of California Nick Hanna. “Our goal is to bring about an end to the tragic epidemic of opioid addiction and to go after those who profit from that epidemic.”

“Paying bribes and providing other incentives to prescribe opioids with little regard to patient welfare surely signals a company is more concerned with profits than patients,” said Christian J. Schrank, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services.  “Today’s settlement reaffirms our commitment to ensuring that companies pay a very heavy price for attacking vital government health programs.”

“The announced settlement is a vivid example of the Department of Defense's dogged efforts to protect the integrity of the U.S. military’s health care system and its beneficiaries,” said Bryan D. Denny, Special Agent in Charge of the Defense Criminal Investigative Service, Western Field Office. “DCIS remains committed to working with its law enforcement partners and the U.S. Attorney’s Office to combat health care fraud, especially when pharmaceutical companies use taxpayers’ dollars to induce physicians with bribes and kickbacks to prescribe their drugs for unauthorized off-label usage that may very well endanger the recipient's health and safety.”

“I applaud the Department of Justice and the U.S. Attorney for their continued efforts to hold pharmaceutical companies accountable to the American taxpayer,” said Vice Adm. Raquel Bono, director of the Defense Health Agency. “The efforts of the Department of Justice safeguard the health care benefit for our service members, veterans and their families. The Defense Health Agency continues to work closely with the Justice Department, and other state and federal agencies to investigate all those who participated in fraudulent practices.”

The allegations resolved by the civil settlement stem from five lawsuits that were filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private citizens to bring suit on behalf of the United States for false claims and share in any recovery.  The lawsuits are: United States, et al., ex rel. Guzman v. Insys Therapeutics, Inc., et al., 13-cv-5861; United States ex rel. Andersson v. Insys Therapeutics, Inc., 14-cv-9179; United States ex rel. John Doe and ABC, LLC v. Insys Therapeutics, Inc., et al., 14-cv-3488; United States ex rel. Erickson and Lueken v. Insys Therapeutics, Inc., 16-cv-2956; and United States ex rel. Jane Doe, et al. v. Insys Therapeutics, et al., 16-cv-7937.  The whistleblowers’ share of the settlement announced today has not yet been determined.         

These matters were handled by the United States Attorney’s Office for the District of Massachusetts; the Justice Department’s Civil Division; the United States Attorney’s Office for the Central District of California; and the Department of Health and Human Services, Office of Inspector General. Investigations were conducted by the Federal Bureau of Investigation, Boston Field Division; the Food and Drug Administration, Office of Regulatory Affairs; the Drug Enforcement Administration, New England Field Division; Department of Defense, Defense Criminal Investigative Service; U.S. Department of Labor, Employee Benefits Security Administration, Boston Regional Office; U.S. Postal Inspection Service’s Boston Division; United States Postal Service, Office of Inspector General, Northeast Area Field Office; Department of Veterans Affairs, Office of Inspector General, Criminal Investigations Division; Office of Personnel Management, Office of Inspector General; and the Defense Health Agency. 

BOSTON – The founder and four former executives of Insys Therapeutics Inc. were convicted today by a federal jury in Boston in connection with bribing medical practitioners to prescribe Subsys, a highly-addictive sublingual fentanyl spray intended for cancer patients experiencing breakthrough pain, and for defrauding Medicare and private insurance carriers.

Insys founder and former Executive Chairman John N. Kapoor, 76, of Phoenix, Ariz.; Richard M. Simon, 48, of Seal Beach, Calif., the former National Director of Sales; Sunrise Lee, 38, of Bryant City, Mich., a former Regional Sales Director; Joseph A. Rowan, 45, of Panama City, Fla., a former Regional Sales Director; and Michael J. Gurry, 55, of Scottsdale, Ariz., the former Vice President of Managed Markets, were convicted by a federal jury of RICO conspiracy. Sentencing dates have not yet been set.

Prior to the start of the trial, two other high-level Insys executives pleaded guilty and testified during the trial: Michael Babich, of Scottsdale Ariz., the former CEO and President of the company, and Alec Burlakoff, of Charlotte, N.C., the former Vice President of Sales.

From May 2012 to December 2015, the defendants conspired to bribe practitioners, many of whom operated pain clinics, in order to induce them to prescribe Insys’ fentanyl-based pain medication, Subsys, to patients often when medically unnecessary. Subsys is a powerful, rapid-onset opioid intended to treat cancer patients suffering intense breakthrough pain.

The defendants used pharmacy data to identify practitioners who either prescribed unusually high volumes of rapid-onset opioids, or had demonstrated a capacity to do so, and bribed and provided kickbacks to the practitioners to increase the number of new Subsys prescriptions, and to increase the dosage and number of units of Subsys. The defendants also measured the success of their criminal enterprise by comparing the net revenue earned from targeted practitioners with the total value of bribes and kickbacks paid. The defendants used this information to reduce or eliminate bribes paid to practitioners who failed to meet satisfactory prescribing requirements, which they determined to be the net revenue equal to at least twice the amount of bribes paid to the practitioner.

The bribes and kickbacks took multiple forms. In March 2012, Insys began using “speaker programs” purportedly intended to increase brand awareness of Subsys through peer-to-peer educational lunches and dinners. However, the programs were used as a vehicle to pay bribes and kickbacks to targeted practitioners in exchange for increased Subsys prescriptions and increased dosage. In most instances, the programs were shams.

The defendants also conspired to mislead and defraud health insurance providers who were reluctant to approve payment for the drug when it was prescribed for non-cancer patients. The defendants conspired to achieve this by setting up the “Insys Reimbursement Center,” (IRC) which was dedicated to obtaining prior authorization for payment directly from insurers and pharmacy benefit managers. Beginning in October 2012, employees of the IRC posed as employees of the practitioner and used “the spiel” – a script of false and misleading representations about patient diagnoses in order to secure approval for the drug by the insurance provider. For example, since insurers were more likely to authorize payment for Subsys if a patient was being treated for cancer-related pain, IRC employees were instructed to mislead insurers regarding the true diagnosis of the patient.

“Today’s convictions mark the first successful prosecution of top pharmaceutical executives for crimes related to the illicit marketing and prescribing of opioids,” said United States Attorney Andrew E. Lelling. “Just as we would street-level drug dealers, we will hold pharmaceutical executives responsible for fueling the opioid epidemic by recklessly and illegally distributing these drugs, especially while conspiring to commit racketeering along the way.  I applaud the prosecutors and investigators who fought this case to the finish and won.  This is a landmark prosecution that vindicated the public’s interest in staunching the flow of opioids into our homes and streets.”

“These executives exploited vulnerable patients and cashed in on dishonest doctors by bribing them to prescribe one of the most powerful, addictive opioid painkillers to patients who should never have received it. Motivated by sheer greed, they lied to insurance companies and are no better than street level drug dealers,” said Joseph R. Bonavolonta, Special Agent in Charge of the FBI Boston Division. “Today's verdict marks an important step in holding pharmaceutical company executives responsible for their role in fueling the opioid epidemic. Rest assured, the FBI will continue to identify and bring to justice corrupt individuals and companies whose business practices promote fraud with a total disregard for patient safety.”

“Combating the opioid epidemic remains a top priority for HHS OIG. For too long executives have not been held accountable for corporate wrongdoing. These verdicts underscore our continued commitment to holding individuals and corporations accountable for their fraudulent conduct,” said Phillip Coyne, Special Agent in Charge, U.S Department of Health and Human Services, Office of the Inspector General. “No matter what the scheme or how elaborately disguised, we will follow the evidence where it takes us, including to the corporate ranks. HHS OIG and our law enforcement partners will continue to investigate and prosecute healthcare fraud to the fullest extent of the law.”

“The opioid epidemic is one of the largest public health tragedies our country has faced, and as the FDA continues to forcefully confront the opioid crisis, ensuring safe and appropriate use of these powerful medications remains a cornerstone of our efforts,” said Melinda K. Plaisier, FDA Associate Commissioner for Regulatory Affairs. “In this case, we’ve seen unacceptable behavior from the defendants who influenced health care providers to prescribe the most powerful type of opioid – an immediate release form of fentanyl – to patients who did not need it, putting them at serious risk of overdose and in some cases, death. The FDA has taken recent steps to strengthen our risk mitigation program for this specific class of products to better ensure the safe use of these products, and we will continue to work with our law enforcement partners to pursue and bring to justice those who place profits before the public health.”

“The reckless actions by these executives whose products included controlled medications increased the potential for diversion and addiction, which jeopardizes the public health and safety,” said DEA Special Agent in Charge Brian D. Boyle. “DEA pledges to work with our law enforcement and regulatory partners to ensure that rules and regulations are followed.”

“The integrity of TRICARE, the U.S. Defense Department's health care program for military members and their dependents, is a top priority for the Defense Criminal Investigative Service (DCIS),” stated Special Agent-in-Charge Leigh-Alistair Barzey, DCIS Northeast Field Office. “Today’s verdicts are the direct result of a joint effort by several agencies and is demonstrative of their commitment to investigate and prosecute individuals and companies that commit health care fraud. The DCIS will continue to work with its law enforcement partners and the U.S. Attorney's Office to protect the TRICARE program and ensure that TRICARE patients receive the excellent health care that they deserve.”

“This case shows that healthcare fraud will not be tolerated. The Employee Benefits Security Administration will work together with our law enforcement partners in these important investigations to protect participants in private sector health plans, detect and deter health care fraud, and contribute to fighting the opioid epidemic,” said Carol S. Hamilton, Acting Regional Director of the U.S. Department of Labor, Employee Benefits Security Administration, Boston Regional Office.

“Today’s verdict highlights our commitment to defending our mail system from illegal misuse and ensuring public trust in the mail,” said Inspector in Charge Joseph W. Cronin of the U.S. Postal Inspection Service’s Boston Division. “We are committed to investigating and bringing to justice those who contribute to the opioid abuse epidemic. We would not be successful in doing so without our fellow law enforcement partners and the U.S. Attorney’s Office.”

 “The verdict in this case sends a clear message to pharmaceutical companies that tactics like these will not be tolerated,” said Matthew Modafferi, Special Agent in Charge of the United States Postal Service Office of Inspector General in the Northeast Area Field Office. “This is a win for the public in the war against opioids. The Special Agents of the U.S. Postal Service Office of Inspector General will continue to work closely with the U.S. Attorney’s Office and our law enforcement partners to bring those to justice who commit these kind of offenses.”  

“Bribing doctors and misrepresenting patient’s medical conditions in order to boost profits by overprescribing a highly addictive opioid is reprehensible criminal conduct,” said Sean J. Smith, Special Agent in Charge of the Department of Veterans Affairs, Office of Inspector General, Criminal Investigations Division. “Today’s verdict is an important step in holding those in the industry that commit crimes accountable. Targeting veterans’ dependents in the CHAMPVA program with these corrupt practices is unacceptable and we are pleased to have contributed to this outstanding multi-agency criminal investigation.”

“Every day, millions of Americans struggle with opioid addiction,” said Thomas W. South, OPM Deputy Assistant Inspector General for Investigations. “These executives put the health and wellbeing of Federal employees, annuitants, and their families at risk in order to make a profit. I would like to recognize the incredible work done by the United States Attorney’s Office, OPM OIG agents, and our law enforcement partners to hold these executives accountable. The OPM OIG remains committed in working to stop such unscrupulous behavior.”

The charge of RICO conspiracy provides for a sentence of no greater than 20 years in prison, three years of supervised release and a fine of $250,000, or twice the amount of pecuniary gain or loss. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.

The U.S. Attorney’s Office would like to acknowledge the cooperation and assistance of the U.S. Attorney’s Offices around the country engaged in parallel investigations, including the District of Connecticut, Eastern District of Michigan, Southern District of Alabama, Southern District of New York, District of Rhode Island and the District of New Hampshire. The efforts of the Central District of California and the Justice Department’s Civil Fraud Section of the Department of Justice are also greatly appreciated. 

Assistant U.S. Attorneys K. Nathaniel Yeager, Chief of Lelling’s Health Care Fraud Unit, David Lazarus, Chief of Lelling’s Asset Recovery Unit, and Fred M. Wyshak, Chief of Lelling’s Public Corruption & Special Prosecutions Unit, are prosecuting the case.

BOSTON – The founder and majority owner of Insys Therapeutics Inc., was arrested today and charged with leading a nationwide conspiracy to profit by using bribes and fraud to cause the illegal distribution of a Fentanyl spray intended for cancer patients experiencing breakthrough pain. 

 

John N. Kapoor, 74, of Phoenix, Ariz., a current member of the Board of Directors of Insys, was arrested this morning in Arizona and charged with RICO conspiracy, as well as other felonies, including conspiracy to commit mail and wire fraud and conspiracy to violate the Anti-Kickback Law. Kapoor, the former Executive Chairman of the Board and CEO of Insys, will appear in federal court in Phoenix today.  He will appear in U.S. District Court in Boston at a later date. 

 

The superseding indictment, unsealed today in Boston, also includes additional allegations against several former Insys executives and managers who were initially indicted in December 2016.

 

The superseding indictment charges that Kapoor; Michael L. Babich, 40, of Scottsdale, Ariz., former CEO and President of the company; Alec Burlakoff, 42, of Charlotte, N.C., former Vice President of Sales; Richard M. Simon, 46, of Seal Beach, Calif., former National Director of Sales; former Regional Sales Directors Sunrise Lee, 36, of Bryant City, Mich., and Joseph A. Rowan, 43, of Panama City, Fla.; and former Vice President of Managed Markets, Michael J. Gurry, 53, of Scottsdale, Ariz., conspired to bribe practitioners in various states, many of whom operated pain clinics, in order to get them to prescribe a fentanyl-based pain medication.  The medication, called “Subsys,” is a powerful narcotic intended to treat cancer patients suffering intense breakthrough pain.  In exchange for bribes and kickbacks, the practitioners wrote large numbers of prescriptions for the patients, most of whom were not diagnosed with cancer.

 

The indictment also alleges that Kapoor and the six former executives conspired to mislead and defraud health insurance providers who were reluctant to approve payment for the drug when it was prescribed for non-cancer patients.  They achieved this goal by setting up the “reimbursement unit,” which was dedicated to obtaining prior authorization directly from insurers and pharmacy benefit managers. 

 

“In the midst of a nationwide opioid epidemic that has reached crisis proportions, Mr. Kapoor and his company stand accused of bribing doctors to overprescribe a potent opioid and committing fraud on insurance companies solely for profit,” said Acting United States Attorney William D. Weinreb. “Today's arrest and charges reflect our ongoing efforts to attack the opioid crisis from all angles. We must hold the industry and its leadership accountable - just as we would the cartels or a street-level drug dealer.”

 

“As alleged, these executives created a corporate culture at Insys that utilized deception and bribery as an acceptable business practice, deceiving patients, and conspiring with doctors and insurers,” said Harold H. Shaw, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division. “The allegations of selling a highly addictive opioid cancer pain drug to patients who did not have cancer, make them no better than street-level drug dealers. Today's charges mark an important step in holding pharmaceutical executives responsible for their part in the opioid crisis.   The FBI will vigorously investigate corrupt organizations with business practices that promote fraud with a total disregard for patient safety.”

 

“These Insys executives allegedly fueled the opioid epidemic by paying doctors to needlessly prescribe an extremely dangerous and addictive form of fentanyl,” said Phillip Coyne, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services.  “Corporate executives intent on illegally driving up profits need to be aware they are now squarely in the sights of law enforcement.”

 

“As alleged, Insys executives improperly influenced health care providers to prescribe a powerful opioid for patients who did not need it, and without complying with FDA requirements, thus putting patients at risk and contributing to the current opioid crisis,” said Mark A. McCormack, Special Agent in Charge, FDA Office of Criminal Investigations’ Metro Washington Field Office. “Our office will continue to work with our law enforcement partners to pursue and bring to justice those who threaten the public health.”

 

“Pharmaceutical companies whose products include controlled medications that can lead to addiction and overdose have a special obligation to operate in a trustworthy, transparent manner, because their customers’ health and safety and, indeed, very lives depend on it,” said DEA Special Agent in Charge Michael J. Ferguson.  “DEA pledges to work with our law enforcement and regulatory partners nationwide to ensure that rules and regulations under the Controlled Substances Act are followed.”

 

“Today’s arrest is the result of a joint effort to identify, investigate and prosecute individuals who engage in fraudulent activity and endanger patient health,” stated Special Agent in Charge Leigh-Alistair Barzey, Defense Criminal Investigative Service (DCIS) Northeast Field Office.  “DCIS will continue to work with the U.S. Attorney’s Office, District of Massachusetts, and our law enforcement partners, to protect U.S. military members, retirees and their dependents and the integrity of TRICARE, the Defense Department’s healthcare system.”

 

“As alleged, John Kapoor and other top executives committed fraud, placing profit before patient safety, to sell a highly potent and addictive opioid.  EBSA will take every opportunity to work collaboratively with our law enforcement partners in these important investigations to protect participants in private sector health plans and contribute in fighting the opioid epidemic,” said Susan A. Hensley, Regional Director of the U.S. Department of Labor, Employee Benefits Security Administration, Boston Regional Office.

 

“Once again, the United States Postal Inspection Service is fully committed to protecting our nation’s mail system from criminal misuse,” said Shelly Binkowski, Inspector in Charge of the U.S. Postal Inspection Service. “We are proud to work alongside our law enforcement partners to dismantle high level prescription drug practices which directly contribute to the opioid abuse epidemic.  This investigation highlights our commitment to defending our mail system from illegal misuse and ensuring public trust in the mail.”

 

"We are gratified to have contributed to this investigation and applaud the exceptional work of this investigative team for both protecting patient safety and program costs," said Eileen Neff, Special Agent in Charge  of the U.S. Postal Service, Office of Inspector General, Northeast Area Field Office. "Along with our law enforcement partners, the USPSOIG will continue to aggressively investigate those who engage in fraudulent activities intended to defraud federal benefit programs and the Postal Service." 

 

“The U.S. Department of Veterans Affairs, Office of Inspector General will continue to aggressively investigate those that attempt to fraudulently impact programs designed to benefit our veterans and their families,” said Donna L. Neves, Special Agent in Charge of the VA OIG Northeast Field Office.

 

The charges of conspiracy to commit RICO and conspiracy to commit mail and wire fraud each provide for a sentence of no greater than 20 years in prison, three years of supervised release and a fine of $250,000, or twice the amount of pecuniary gain or loss.  The charges of conspiracy to violate the Anti-Kickback Law provide for a sentence of no greater than five years in prison, three years of supervised release and a $25,000 fine. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.

 

The investigation was conducted by a team that included the FBI; HHS-OIG; FDA Office of Criminal Investigations; the Defense Criminal Investigative Service; the Drug Enforcement Administration; the Department of Labor, Employee Benefits Security Administration; the Office of Personnel Management; the U.S. Postal Inspection Service; the U.S. Postal Service Office of Inspector General; and the Department of Veterans Affairs.  The U.S. Attorney’s Office would like to acknowledge the cooperation and assistance of the U.S. Attorney’s Offices around the country engaged in parallel investigations, including the District of Connecticut, Eastern District of Michigan, Southern District of Alabama, Southern District of New York, District of Rhode Island, and the District of New Hampshire.  The efforts of the Central District of California and the Justice Department’s Civil Fraud Section of the Department of Justice are also greatly appreciated. 

 

Assistant U.S. Attorneys K. Nathaniel Yeager, Chief of Weinreb’s Health Care Fraud Unit, and Susan M. Poswistilo, of Weinreb’s Civil Division, are prosecuting the case.

 

The details contained in the charging documents are allegations.  The defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt.

 

Docket (0 Docs):   https://docs.google.com/spreadsheets/d/1dX22i4p9FSUsEYQx3GZHe85n49AmHsgJaCeEfxNmN24/edit#gid=0
  Last Updated: 2020-08-04 16:18:33 UTC
Description: The fiscal year of the data file obtained from the AOUSC
Format: YYYY

Description: The code of the federal judicial circuit where the case was located
Format: A2

Description: The code of the federal judicial district where the case was located
Format: A2

Description: The code of the district office where the case was located
Format: A2

Description: Docket number assigned by the district to the case
Format: A7

Description: A unique number assigned to each defendant in a case which cannot be modified by the court
Format: A3

Description: A unique number assigned to each defendant in a case which can be modified by the court
Format: A3

Description: A sequential number indicating whether a case is an original proceeding or a reopen
Format: N5

Description: Case type associated with the current defendant record
Format: A2

Description: A concatenation of district, office, docket number, case type, defendant number, and reopen sequence number
Format: A18

Description: A concatenation of district, office, docket number, case type, and reopen sequence number
Format: A15

Description: The status of the defendant as assigned by the AOUSC
Format: A2

Description: A code indicating the fugitive status of a defendant
Format: A1

Description: The date upon which a defendant became a fugitive
Format: YYYYMMDD

Description: The date upon which a fugitive defendant was taken into custody
Format: YYYYMMDD

Description: The date when a case was first docketed in the district court
Format: YYYYMMDD

Description: The date upon which proceedings in a case commenced on charges pending in the district court where the defendant appeared, or the date of the defendant’s felony-waiver of indictment
Format: YYYYMMDD

Description: A code used to identify the nature of the proceeding
Format: N2

Description: The date when a defendant first appeared before a judicial officer in the district court where a charge was pending
Format: YYYYMMDD

Description: A code indicating the type of legal counsel assigned to a defendant
Format: N2

Description: The title and section of the U.S. Code applicable to the offense committed which carried the highest severity
Format: A20

Description: A code indicating the level of offense associated with FTITLE1
Format: N2

Description: The four digit AO offense code associated with FTITLE1
Format: A4

Description: The four digit D2 offense code associated with FTITLE1
Format: A4

Description: A code indicating the severity associated with FTITLE1
Format: A3

Description: The FIPS code used to indicate the county or parish where an offense was committed
Format: A5

Description: The date of the last action taken on the record
Format: YYYYMMDD

Description: The date upon which judicial proceedings before the court concluded
Format: YYYYMMDD

Description: The date upon which the final sentence is recorded on the docket
Format: YYYYMMDD

Description: The date upon which the case was closed
Format: YYYYMMDD

Description: The total fine imposed at sentencing for all offenses of which the defendant was convicted and a fine was imposed
Format: N8

Description: A count of defendants filed including inter-district transfers
Format: N1

Description: A count of defendants filed excluding inter-district transfers
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Description: A count of original proceedings commenced
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Description: A count of defendants filed whose proceedings commenced by reopen, remand, appeal, or retrial
Format: N1

Description: A count of defendants terminated including interdistrict transfers
Format: N1

Description: A count of defendants terminated excluding interdistrict transfers
Format: N1

Description: A count of original proceedings terminated
Format: N1

Description: A count of defendants terminated whose proceedings commenced by reopen, remand, appeal, or retrial
Format: N1

Description: A count of defendants pending as of the last day of the period including long term fugitives
Format: N1

Description: A count of defendants pending as of the last day of the period excluding long term fugitives
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Description: The source from which the data were loaded into the AOUSC’s NewSTATS database
Format: A10

Description: A sequential number indicating the iteration of the defendant record
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Description: The date the record was loaded into the AOUSC’s NewSTATS database
Format: YYYYMMDD

Description: Statistical year ID label on data file obtained from the AOUSC which represents termination year
Format: YYYY

Data imported from FJC Integrated Database
F U C K I N G P E D O S R E E E E E E E E E E E E E E E E E E E E