The federal government, which has been accused of failing to hold drug companies to account for the nation’s deadly opioid epidemic, hopes to dispel that impression Monday when the first criminal trial of pharmaceutical executives who marketed a painkiller begins.
John N. Kapoor, a onetime billionaire and founder of Arizona-based Insys Therapeutics, is scheduled to go on trial in US District Court in Boston along with four former company executives on charges that they acted more like mobsters than pharmaceutical executives when they sold a brand of fentanyl, a powerful and addictive opioid.
In a trial expected to last up to three months, federal prosecutors will try to convince a jury that the five defendants paid bribes and kickbacks to physicians in a nationwide racketeering conspiracy. The payments allegedly induced doctors to prescribe Subsys, an under-the-tongue fentanyl spray approved to treat severe cancer-related pain, for patients who hadn’t been diagnosed with cancer.
The case features several explosive allegations. Prosecutors say that Insys set up a sham “speakers program” to funnel cash to doctors, adjusted payments based on how many prescriptions doctors wrote, misrepresented patients’ medical histories to dupe insurers into covering Subsys for people without cancer, and even hired a woman who was a former stripper and escort service manager as a key sales executive.
Former Insys employees, in federal whistle-blower lawsuits filed around the country, have described a macho, high-pressure sales operation in which deception was encouraged.
One former executive allegedly told sales representatives that “The Wolf of Wall Street,” the 2013 film about a corrupt stock broker, was “the best sales training video in history,” according to one suit.
The criminal case marks a rare instance of the government using the criminal Racketeer Influenced and Corrupt Organizations Act, or RICO, to go after corporate executives. The statute was approved in 1970, chiefly to prosecute organized crime figures.
“Any time criminal RICO is applied to something that would appear to be a legitimate business or enterprise, it’s always somewhat unusual,” said Brad Bailey, a Boston criminal defense lawyer and former federal and state prosecutor who is not involved in the matter. In this instance, he said, the government wants to prove that Insys’s marketing of the painkiller was nothing less than a “top-to-bottom fraudulent scheme.”
In contrast, lawyers for the former Insys executives are expected to argue that the case is an egregious example of government overreach. In a recent court filing, defense attorneys wrote that the prosecutors have failed to satisfy legal requirements for bringing RICO charges and want to “tar and feather [the defendants] based on drug-dealing allegations at the height of the opioid crisis.”
Prosecutors say the alleged scheme affected how some doctors prescribed Insys across the country, but the charges were brought by the US attorney’s office in Massachusetts, which for years has played a leading role nationally in prosecuting health care fraud.
The case certainly marks a shift in how the Justice Department has treated the makers of opioid-based drugs.
Purdue Pharma, a privately held drug company in Stamford, Conn., has drawn far more criticism during the opioid epidemic, which federal officials say killed nearly 400,000 people from 1999 to 2017. But in comparison to the Insys prosecution, Purdue has been treated mildly by the government.
Owned by the Sackler family, Purdue markets OxyContin, a time-release opioid painkiller that has dominated headlines in the crisis. Purdue launched the drug in 1996 and mounted an aggressive marketing campaign to primary-care doctors, presenting OxyContin as a safe treatment for backaches and joint pain.
In fact, OxyContin — which reached blockbuster status in 2000 by achieving $1.1 billion in annual sales — was highly addictive and easily abused. When patients could no longer renew prescriptions, many turned to heroin, which is cheaper and easier to acquire on the street.
In 2007, as fatal opioid overdoses surged across the country, Purdue admitted to a felony of lying about OxyContin’s potentials for abuse and addiction, and three current and former Purdue executives pleaded guilty in Virginia to a federal misdemeanor charge of misbranding.
Purdue and the three men paid $634.5 million in fines. But no one went to jail.
As it turned out, federal prosecutors in Virginia had wanted to pursue charges that could have sent the executives to jail, according to a document made public last year. But the Justice Department balked after lobbying by lawyers on behalf of Purdue, including former New York City mayor Rudolph Giuliani, who is now a lawyer for President Trump.
Twelve years later, Kapoor and the other four Insys defendants face decidedly higher stakes. If convicted of racketeering conspiracy, they could be sentenced to up to 20 years in prison. That would satisfy some critics of drug companies that promoted opioids.
“For corporations to be able to kill people in their pursuit of profit and simply pay a fine is not adequate,” said Dr. Andrew Kolodny, codirector of opioid policy research at Brandeis University’s Heller School for Social Policy and Management. “Otherwise, it could be seen as the cost of doing business.”
Although Kolodny welcomed the prosecution, he said Insys’s marketing tactics were not that different from those of Purdue and other makers of opioid-based painkillers.
“Being made an example of — that’s the point of deterrence,” he said.
Kapoor is the most prominent of the five Insys defendants. A 75-year-old shaggy-haired entrepreneur who was raised in India, lives in Phoenix, and was — until recently — on Forbes magazine’s list of billionaires, Kapoor founded Chandler, Ariz.-based Insys in 1990. For more than a decade, he largely funded it out of his own pocket.
He guided Subsys to government approval — motivated, he said, by seeing his wife, Editha, suffer before she died of metastatic breast cancer in 2005.
Subsys was one of a handful of potent and highly regulated prescription fentanyl brands intended for cancer patients suffering from “breakthrough pain” — that is, pain not quelled by doses of other opioids. Fentanyl is up to 100 times stronger than morphine, according to the Drug Enforcement Administration.
After Subsys was approved in 2012, Insys boomed. The company went public in 2013 and was the nation’s best-performing IPO that year. By 2015, revenue from Subsys had approached $500 million.
Much of that, however, was the result of criminal acts, according to prosecutors. Kapoor and his fellow defendants allegedly identified doctors who might be receptive to prescribing large amounts of Subsys. They then paid them to write prescriptions for patients who didn’t have cancer but wanted pain relief, prosecutors say.
Insys is accused of disguising payoffs as speaking fees for spreading the word about the drug’s benefits.
Insys also allegedly paid the salaries of office staffers of doctors who prescribed Subsys. And the company set up an “Insys Reimbursement Center” in Arizona that allegedly misrepresented patients’ histories to fool insurers, including Medicare and Medicaid, into covering the cost of the painkiller, even though most patients didn’t have cancer, prosecutors say.
The four other defendants are Michael Gurry, the former vice president of managed markets; Sunrise Lee, a former regional director; Joseph Rowan, a former regional director; and Richard Simon, a former national director of sales.
Lee is a former Florida strip club dancer and onetime manager of an escort service who was hired as a sales executive despite having no academic degree, according to one of several whistle-blower lawsuits filed against Insys.
Alec Burlakoff, a former Insys vice president who pleaded guilty to a count of racketeering conspiracy in November and agreed to cooperate with prosecutors, defended her hiring, according to one of the suits, saying, “Doctors really enjoyed spending time with her and found Sunrise to be a great listener.” He added, “She’s more of a closer.”
Earlier this month, Michael Babich, the former CEO of Insys, pleaded guilty to a count of conspiracy and a count of mail fraud for his role in the alleged scheme. He has also agreed to cooperate with prosecutors.
The criminal investigation began after several former Insys employees filed whistle-blower lawsuits that alleged executives seemed indifferent to the harm Subsys posed to patients without cancer.
One former sales representative said she was told “these patients would not get worse as a consequence of unnecessarily taking Subsys. . . . They were already addicts and their prospects were already rock-bottom,” according to a suit filed in a federal court in California.
That same representative, who filed her complaint anonymously, said she was told to “behave more sexually” and stroke the hands of doctors while “literally begging” them to prescribe more Subsys.
Doctors who wrote prescriptions for Subsys are expected to testify at trial. It’s unclear whether the jury will hear evidence of patients who overdosed or became addicted.
Several physicians who received payoffs in exchange for writing Subsys prescriptions have been convicted elsewhere of federal charges. They include Dr. Jerrold Rosenberg, of North Providence, who pleaded guilty last year in federal court in Providence to creating false patient records and to taking more than $188,000 in kickbacks disguised as speaker fees. He was sentenced to more than four years in prison.
Insys is still in business but is focusing on developing synthetic cannabinoids. The company has undergone a “significant transformation” since a new management team arrived in 2017, said spokeswoman Jackie Marcus.
A “modestly sized team” still markets Subsys, she said.