The founder of Insys Therapeutics Inc. was arrested Thursday and charged with allegedly bribing doctors to improperly prescribe Insys drugs containing the powerful opiate Fentanyl — the biggest arrest in a nationwide crackdown that’s already netted two convictions in Mobile.
John N. Kapoor, 74, was arrested in his home state of Arizona Thursday 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. To date, Kapoor is the most prominent pharmaceutical executive to be charged in any drug conspiracy.Kapoor, the former Executive Chairman of the Board and CEO of Insys, founded the company in the late 1990s.
He resigned after six former Insys executives were indicted in December 2016, though he has remained an active board member and majority owner of the company.
The month after those indictments, the Department of Justice turned its attention to Mobile, where Dr. John Patrick Couch and Dr. Xiulu Ruan — owners and operators of Physicians Pain Specialists of Alabama — were being tried on many of the same charges Kapoor himself now faces.
After a seven-week trial, Ruan and Couch became the first medical professionals in U.S. history to be convicted on federal RICO charges that were originally intended to combat organized crime. They were each sentenced to at least 20 years in federal prison, and the federal government has since seized millions of dollars in cash, cars and property from both.
What ties the two local pain docs to Kapoor are the drugs that his company produced and marketed, most notably the fentanyl-based product Subsys. Intended and FDA approved to treat “breakthrough pain in Cancer patients,” Ruan and Couch were accused of prescribing the drug to non-cancer patients without a legitimate medical purpose.
While it’s not illegal to write off-label prescriptions — prescriptions issued to patients outside of their FDA-approved use — a former Insys sales rep who worked exclusively with PPSA in Mobile testified that Ruan and Couch directed patients to fill off-label prescriptions at C&R Pharmacy, which they co-owned in Mobile.
In turn, the pair billed federally funded and private health insurance providers to the tune of $572,000 for those expensive, unnecessary and dangerously addictive drugs — all while collecting hundreds of thousands of dollars in “speaking fees” from Insys to encourage other doctors to write off-label prescriptions for Subsys as well.
During the local trial, Assistant U.S. Attorney Christopher Bodnar said Ruan and Couch were “very important” to Insys — claiming that top executives from the company had traveled from Arizona to meet the doctors in Mobile on more than one occasion.
The trial in Mobile relied heavily on testimony from former PPSA employees and associates who accepted plea agreements in exchange for cooperating with prosecutors; Ruan and Couch were denied that offer after pushing their case to trial.
When asked whether the doctors might assist the government in their ongoing cases involving Insys and its former employees, Defense Attorney Dennis Knizley seemed to suggest that ship might have sailed during the pretrial phase of the case.
As for the man at the top of the alleged nationwide conspiracy, Kapoor appeared in federal court in Phoenix, Arizona for the first time on Thursday but will face his charges in Boston, where the previous six Insys executives were indicted in late 2016.
The former Insys executives currently charged in the scheme include: Kapoor; Michael L. Babich, 40, of Scottsdale, Arizona, former CEO and president of the company; Alec Burlakoff, 42, of Charlotte, North Carolina, former vice president of sales; Richard M. Simon, 46, of Seal Beach, California, former national director of sales; former Regional Sales Directors Sunrise Lee, 36, of Bryant City, Michigan, and Joseph A. Rowan, 43, of Panama City, Florida; and former Vice President of Managed Markets, Michael J. Gurry, 53, of Scottsdale, Arizona.
All are facing various charges that allege a nationwide conspiracy to bribe practitioners in multiple states — many of whom, like Ruan and Couch, operated pain clinics — in order to get them to prescribe Subsys and other fentanyl-based pain medications. In exchange for bribes, kickbacks and “speaking fees,” the practitioners allegedly wrote large numbers of prescriptions for patients, most of whom were not diagnosed with cancer.
The indictment also alleges 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 dedicated “reimbursement unit” within Insys for 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,” Acting United States Attorney for the District of Massachusetts, William D. Weinreb, said. “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.”
The investigation that has led to the indictment of Kapoor, other Insys executives and a doctors in multiple states touches multiple arms of the federal government including the FDA, DEA, FBI, Department of Health and Human Services, Defense Criminal Investigative Service (DCIS) of the Department of Defense, U.S. Postal Service, U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) and the Department of Veterans Affairs (VA).
If convicted, Kapoor faces at least 20 years for the RICO charge, which does not include the potential sentences associated with his charges for fraud and the conspiracy to violate anti-kickback statues. If the government treats his case like Ruan and Couch’s, Kapoor — a billionaire — could see any asset gained as a result of the alleged conspiracy seized by the Feds.
However, it doesn’t appear that Kapoor is entertaining the idea of a guilty plea just yet. On Thursday, his defense attorney, Brian T. Kelly, told national news outlets that Kapoor was “not guilty of these charges” and “intends to fight [them] vigorously.”
Kelly, a high-profile Boston lawyer, was a former federal prosecutor for the same office that has brought the charges against Kapoor. Kelly made a name for himself in 2013 when he successfully led the prosecution of the notorious Boston mobster James “Whitey” Bugler.
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