Five former executives of Insys Therapeutics, including its founder, onetime billionaire John N. Kapoor, were convicted Thursday of racketeering conspiracy for bribing doctors to prescribe a highly addictive painkiller to patients who didn’t need it and tricking insurers into paying for it.
In what was believed to be the first criminal trial of pharmaceutical executives who marketed an opioid painkiller since the nation’s deadly epidemic began, a federal jury in Boston found the former executives of the Arizona drug company engaged in a nationwide scheme to pay off doctors at pain clinics to prescribe Subsys. The under-the-tongue fentanyl spray was approved in 2012 for cancer pain.
On their 15th day of deliberations, jurors issued a decisive verdict. Four of the five defendants were each found to have committed at least 15 acts of racketeering conspiracy — only two acts were required for a conviction.
“Today’s convictions mark the first successful prosecution of top pharmaceutical executives for crimes related to the illicit marketing and prescribing of opioids,” said US 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,’’ Lelling said.
Specialists said the conviction, conducted under the federal racketeering statute, sent a message that pharmaceutical executives would be held accountable for their role in fueling the opioid epidemic.
“I’m hopeful that we will see more criminal prosecutions against opioid manufacturers,” said Dr. Andrew Kolodny, codirector of Opioid Policy Research at Brandeis University’s Heller School for Social Policy and Management. “Paying a fine or even civil litigation is inadequate if we want to deter corporations from killing people in their pursuit of profit.”
Each defendant faces up to 20 years in prison. They will remain free while they await sentencing. Kapoor’s lawyers vowed to “continue the fight to clear Dr. Kapoor’s name” by appealing the verdict, saying in a statement that it was “far from an open-and-shut case.”
Kapoor, 76, left the courtroom looking stone-faced and ignored questions from reporters.
A half-dozen jurors declined to comment in the lobby of the courthouse. The length of deliberations had startled some in the legal community but racketeering cases are notoriously complex; the verdict form was seven pages long.
After the verdict, a prosecutor in the case, Assistant US Attorney David G. Lazarus, was teary-eyed but beaming as colleagues hugged him.
One of the defendants, Sunrise Lee, a sales executive and former stripper who allegedly performed a lap dance for a doctor to get him to prescribe Subsys, fought back tears as she left the courthouse with her mother and her stepfather.
“She’s strong, and this is wrong,” her mother said.
Prosecutors said the five defendants ran Insys like mobsters, displaying “brazen audacity.” They pressured sales staff to persuade doctors to prescribe higher and costlier doses of Subsys, and got physicians to abandon their duty to “first, do no harm.” Most patients who were prescribed Subsys didn’t have cancer, according to the government, and some got addicted.
As part of the conspiracy, prosecutors said, eight doctors and medical practitioners got more than $1.1 million disguised as “speaking fees.” Insys also set up a reimbursement center where employees allegedly lied to health insurers about patients’ symptoms to get them to cover Subsys for people without cancer.
But defense lawyers said their clients were railroaded by the real culprits: former co-workers who cut plea deals with prosecutors and testified for the government. They also said Insys was a bit player in the opioid crisis.
None of the defendants testified.
In a statement, a company spokesperson attributed the crimes to “a select few former employees” and said there was a new management team.
At trial, the government relied heavily on internal e-mails and testimony by several former Insys employees who cooperated as a result of the plea deals or agreements granting them immunity.
Among the most jaw-dropping pieces of evidence was a thumping rap video that Insys made for its sales staff in 2015 to prod employees to get more doctors to prescribe Subsys, and in higher doses.
In the slickly produced five-minute video, two young Insys salesmen, who alternately wore hoodies and spiffy black suits, danced next to a giant Subsys spray bottle with a label marked 1,600 micrograms, the maximum dosage for the painkiller.
“Insys Therapeutics, that is our name,” the salesmen sang. “We’re raising the bar and we’re changing the game. To be great it takes a decision to be better than the competition.”
In another extraordinary piece of government evidence, two former Insys sales representatives testified that they saw Lee, the former stripper and onetime escort service manager who served as a regional sales director at Insys, perform a lap dance for Dr. Paul Madison at a Chicago nightclub. The doctor accounted for the majority of Subsys sales in Illinois.
But Lee’s lawyer, Peter Horstmann, said in his closing argument that the prosecution had exaggerated an incident that “was probably pretty funny.” He contended that the government had seized on the anecdote to smear Lee, who he said played a relatively modest role at Insys.
Madison was convicted of federal charges last year in an unrelated health insurance fraud case. Several other doctors and practitioners, from Florida to Michigan to Rhode Island, have been convicted of federal charges in connection with the Insys kickback scheme and sentenced to prison.
The government case against the Insys executives featured two star witnesses who pleaded guilty to criminal charges shortly before the trial. One was the former CEO, Michael Babich, the other the former senior vice president of sales, Alec Burlakoff.
Babich, a protege of Kapoor, testified that the founder was disgusted with the rollout of Subsys in 2012. Kapoor, he said, told underlings that doctors weren’t prescribing high enough dosages to keep patients on the addictive drug. Kapoor was desperate to penetrate a market shared by four other fast-acting fentanyl products, he said.
Babich pleaded guilty in January to conspiracy to commit mail and wire fraud and to mail fraud and faces up to 20 years in prison.
Burlakoff, a pharmaceutical marketing veteran, testified that he was hired in 2012 to galvanize sales of Subsys, and that’s what he did. He got sales staff to identify doctors who already had a history of prescribing competing fentanyl products — “whales,” he called the physicians — and persuaded them to switch to Subsys through a sham speaking program.
Matter-of-factly calling the payments bribes, Burlakoff said Kapoor insisted that each practitioner generate at least twice as much money for Insys from prescriptions each wrote than he or she got in payoffs. Burlakoff said Kapoor’s leadership team meticulously kept track of each whale’s return on investment, and cut off payments if a doctor fell below the 2-to-1 level.
Burlakoff pleaded guilty to a count of racketeering conspiracy in November. He also faces a sentence of up to 20 years in prison.
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.
After Subsys was approved by the Food and Drug Administration 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.