Insys Settles Kickback Case, Files for Bankruptcy

The U.S. Department of Justice announced on June 5 that Arizona-based opioid manufacturer Insys Therapeutics agreed to pay $225 million to settle civil and criminal kickback charges. Last month, Insys’s founder and former CEO John Kapoor was found guilty on federal racketeering charges arising out of a bribery scheme that rewarded the company’s sales managers for paying kickbacks to physicians to boost sales of the company’s fentanyl spray, Subsys.

The fraud scheme involved sham “speaker programs” that were supposedly intended to increase brand awareness and utilization of Subsys through peer-to-peer educational presentations, but actually included paying bribes and taking referring practitioners to expensive dinners and strip clubs. The former head of the program and numerous other company executives were also implicated in the fraud scheme, along with doctors, nurses and physician assistants who received kickbacks. Federal prosecutors said the scheme exacerbated the country’s opioid epidemic.

The $225 million settlement included $195 million to settle whistleblower lawsuits brought by former Insys sales reps alleging violations of the False Claims Act. The former reps will receive an as-yet undetermined share of the $195 million. Insys also entered into a five-year corporate integrity agreement requiring future compliance with federal laws governing drug sales and marketing.

Insys filed for Chapter 11 bankruptcy on June 10 and will now seek to sell almost all of its assets within 90 days without interrupting normal company operations. Insys said it is defending more than 1,000 lawsuits, including cases filed by 10 state attorneys general, local municipalities, numerous insurance companies and self-funded health plans, and personal injury plaintiffs. The company already owes more than $19 million to its law firms who are creditors in the bankruptcy.