The Oct. 26, 2017 arrest of John Kapoor, Insys Therapeutics’ founder, CEO and majority owner on federal fraud and conspiracy charges was rich with irony: It happened the same day the Trump administration formally proclaimed a stance against opioids.
The Chandler, Arizona-based company manufactures and markets the extremely potent fentanyl spray Subsys, as well as the synthetic-THC spray Syndros.
Update: On May 2, 2019, Kapoor and four others were found guilty of a racketeering conspiracy after a 10-week trial in Boston federal court. The jury deliberated for 15 days. Kapoor faces a potential 20-year sentence.
The 2017 Federal Insys Indictment
Kapoor – a self-made Indian-American pharmaceutical billionaire – and six former Insys executives were charged with “RICO conspiracy, as well as other felonies, including conspiracy to commit mail and wire fraud… and conspiring to bribe practitioners in various states, many of who operated pain clinics, in order to get them to prescribe a fentanyl-based pain medication (‘Subsys’), a powerful narcotic intended to treat cancer patients suffering intense breakthrough pain,” the Department of Justice stated. “In exchange for bribes and kickbacks, the practitioners wrote large numbers of prescriptions for the patients, most of whom were not diagnosed with cancer.”
The indictment also alleged that Kapoor and the six others 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.
Kapoor was arrested in Massachusetts as part of a whopping 79-count indictment that sought both prison time for Insys executives and civil forfeiture from the company and its execs for their ill-gotten gains. Insys execs and sales reps are also being investigated in Alabama, Arizona, Illinois and Oregon.
DAVID AMSELLEM: “This is a really, really egregious example of a pharmaceutical company with no moral compass.”
Kapoor came up with the idea of Subsys after his wife died of breast cancer in 2005. The company received approval for it in 2012. By 2015, it was selling almost $300 million a year of Subsys, 99% of its total revenue.
Subsys was intended for late-stage cancer patients, but Insys soon realized that they die off too fast to make much use of the drug. Before long, the company devised a kickback scheme where doctors and prescribing nurses were rewarded for writing prescriptions. Insys staffers were instructed to lie to insurers and medical personnel to the point of fabricating oncology records and patient diagnoses.
“This is a really, really egregious example of a pharmaceutical company with no moral compass,” Piper Jaffray analyst David Amsellem told Bloomberg. “There’s a lot of scrutiny and investigation into companies that manufacture opioids, but I look at Insys as an extreme example.”
Once considered a hot stock, Insys has taken a big tumble. It dropped 23% on the day of Kapoor’s October arrest, and he resigned as CEO three days later. Insys’ stock closed at $4.15 on the NASDAQ, a $1.6% decline, after the verdict was announced.
How Insys Helped Sink the 2016 Marijuana Legalization Effort in Arizona
Insys was one of the biggest contributors to the No on 205 campaign. In August 2016, the drugmaker contributed $500,000 to the Arizonans for Responsible Drug Policy PAC to help defeat Arizona’s Proposition 205 ballot initiative, the Legalization and Regulation of Marijuana Act.
After massive fundraising efforts by Governor Doug Ducey and a misinformation campaign directed by county prosecutors Sheila Polk and Bill Montgomery via their “nonprofit organization” MATFORCE, Prop 205 lost by a 4% margin, giving it the dubious distinction of being the only pro-cannabis measure on state ballots in November 2016 to fail.
“That the No on 205 campaign got in bed with Insys is telling of just how desperate they were to fight the trend of common-sense marijuana-law reform sweeping the country,” Prop 205 campaign manager Adam Kinsey told Freedom Leaf at the time.
In March 2017, Insys announced it had received preliminary approval from the Drug Enforcement Administration for the Syndros spray to be classified as a Schedule II legal cannabinoid product.