Kapoor’s Insys files for bankruptcy after $225 million settlement with US government

John kapoor

indica News Bureau-


Drugmaker Insys Therapeutics filed for bankruptcy protection Monday, June 10, citing mounting expenses, just days after the company agreed to pay $225 million to settle civil and criminal investigations with the US Justice Department.


Insys CEO Andrew Long stated, “After conducting a thorough review of available strategic alternatives, we determined that a court-supervised sale process is the best course of action to maximize the value of our assets and address our legacy legal challenges in a fair and transparent manner.”


The bankruptcy filing follows the conviction of majority shareholder John N. Kapoor, the Indian American billionaire and founder and former executive chairman of Insys, by a federal jury for bribing medical practitioners to prescribe the company’s opioid-based medication Subsys.


In May 2019, a jury found 76-year-old Kapoor guilty of bribing doctors to prescribe Subsys, a highly addictive sublingual fentanyl spray intended for cancer patients experiencing breakthrough pain and that he had also defrauded Medicare and private insurance carriers. Kapoor was convicted for bribing doctors through monetary and sexual courtesies to prescribe the highly addictive drug to patients by the thousands, even those who had no sign of cancer. The date for Kapoor’s sentencing has not been set, but a charge of RICO conspiracy provides for a sentence of up to 20 years in prison.


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 company 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.  They did 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, IRC employees posed as employees of the practitioner and used “the spiel” – a script of false and misleading representations about patient diagnoses – 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 true diagnosis of the patient.


The company 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.


They 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. They 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 effort to stop Insys’ efforts was initiated by the war veteran Jeff Buchalter, who was prescribed the drug by his doctor when he faced spinal injuries after being hit with multiple IEDs and found the substance consuming his life, along with former Insys employee Patty Nixon and attorney Richard Hollawell.


The Defense Department said they remain concerned about services personnel and their families suffering in the fallout of the opioid crisis.


“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 in the press release.


The Centers for Disease Control and Prevention reported there were 47,000 deaths from opioids in 2017, and prescription medications accounted for more than 33% of those. Still, no pharmaceutical executive has been convicted on a criminal count. More than 7,000 deaths have reported for people who were prescribed Subsys, according to the U.S. Food and Drug Administration’s Adverse Events Reporting System. According to the CDC, fentanyl is fifty times stronger than heroin.


According to a government source, shares from the drugmaker will be removed from the NASDAQ on June 19th.

In a document for the Securities and Exchange Commission (SEC), Insys wrote, “Nasdaq has determined that the Company’s securities will be delisted from Nasdaq. Accordingly, unless the Company requests an appeal of this determination, trading of the Company’s securities will be suspended at the opening of business on June 19, 2019.”

Insys listed USD 175.1 million and US$262.5 million in debt in a bankruptcy petition, with Kapoor owning 63.2% of the firm. It also said its recovery sum was capped at US$195 million out of an unsecured claim of US$243 million for bankruptcy.



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