Opioid manufacturers, distributors, pharmacies and prescribers are facing a deluge of lawsuits that involve criminal and civil claims in both federal and state courts. On May 2, 2019, a federal jury in Boston, Massachusetts, found John Kapoor, the self-made billionaire and founder of Insys Pharmaceuticals, along with four other executives, guilty of RICO conspiracy for their roles in Insys' scheme to bribe medical practitioners and defraud Medicare and private insurance carriers.1 The verdict followed a 10-week trial during which jurors heard testimony concerning the plan Insys employed to market Subsys, a highly powerful fentanyl spray.2 Kapoor and his former colleagues are scheduled to be sentenced in September.3 Each defendant faces to up to 20 years in prison for their crimes.4
The fallout for Insys did not end with these convictions. On June 5, 2019, Insys agreed to pay $225 million dollars, plead guilty to five counts of mail fraud and admit violations of the False Claims Act to settle civil and criminal federal investigations into the Subsys scheme.5 The Department of Justice (DOJ) celebrated the settlement as a major victory.6 However, the celebration was short-lived: The government will likely recover only a fraction of the settlement amount.7 On June 10, 2019, Insys filed for Chapter 11 bankruptcy protection in which the company declared assets worth $175 million and debts of $262 million.8 This marks the first time a pharmaceutical company has filed bankruptcy because of opioid-related litigation costs.9
The pharmaceutical industry, private attorneys and prosecutors are closely watching the opioid litigation playing out in forums across the country. Plaintiffs' lawyers are fond of drawing comparisons between the opioid litigation and the tobacco litigation in the 1990s in which tobacco companies were spurred to accept the largest civil litigation settlement in history, in the very early stages of the proceedings.10 Yet, there is a major problem in comparing opioids with tobacco: Few doctors would dispute that opioids are "essential medication, the most effective drugs for the relief of pain and suffering."11
The necessity of these drugs and the flood of recent litigation over their abuse have raised many legal questions concerning the roles of industry members and the judicial system. Where is the line between marketing and racketeering? Between physician education and bribery? Are the recent headlines signs of a future uptick in criminal and civil prosecutions against corporations? What about against individual executives? This article explores the criminal and civil liability involved in the Insys scandal and the implications for the pharmaceutical industry in an age where prescription opioids are not going anywhere.
Insys Therapeutics and Subsys
John Kapoor, now 74, founded Insys in 2002.12 Kapoor was already extremely wealthy, and he personally bankrolled Insys for years before Subsys was approved by the FDA in early 2012.13 Subsys belongs to a class of fentanyl products known as TIRF drugs, which have been approved by the FDA exclusively for use by adult cancer patients who are already receiving around-the-clock opioid therapy and are experiencing "breakthrough" pain.14 TIRF drugs are incredibly valuable and necessary to those patients with extreme pain. They also happen to be lucrative—a single patient taking Subsys could produce up to $19,000 in revenue per month.15
When Subsys launched in 2012, the Insys board, led by Kapoor, selected Michael Babich, a thirty-six-yearold with negligible industry experience, to serve as CEO.16 Kapoor was disappointed reportedly with the sales of Subsys during its first months on the market, and there was high turnover of sales personnel, who were also almost all young and inexperienced.17 To resolve these problems, Babich brought in Alec Burlakoff.18 Burlakoff had experience in the industry, but his previous sales tactics had led him into trouble.19 In 2002, the Florida Attorney General's Office investigated him for mailing unsolicited pills to potential consumers.20 He was thereafter fired by his employer, Eli Lilly, whom Burlakoff then sued, claiming the plan was orchestrated by management.21
With Burlakoff at the wheel, Insys quickly ramped up its sales efforts, including its now-infamous "speaker program."22 Only high-volume opioid prescribers, referred to by Insys sales representatives as "whales," were recruited to participate in the speaker program.23 Top prescribers of Subsys were paid four figures to speak over fancy dinners to audiences of their friends and family, none of whom were qualified to become prescribers themselves.24 At least one whale even received a lap dance from an Insys sales representative in an attempt to secure him as a speaker.25 Insys quadrupled the budget for the speaker program to more than $10 million by 2014.26 Prosecutors would later present evidence that the Insys executives had even calculated the potential return on investment for each of the speakers."27 Burlakoff also encouraged sales representatives to push doctors into prescribing higher doses of Subsys than the recommended, onlabel dose of 100 mcg.28 Sales representatives were threatened through emails with "immediate negative consequences" if they failed to comply with his orders.29 Fortunately for prosecutors, top executives, including Kapoor, were copied on these emails.30
Burlakoff and Babich eventually struck deals to testify against Kapoor and their former colleagues, which resulted in some of the most powerful testimony for prosecutors.31 According to Burlakoff, Insys was "up front" with doctors about the bribery scheme, and Kapoor would regularly ask interviewees whether they preferred "loyalty" or "integrity" to determine whether they would be willing to "go along with our scheme to bribe doctors to prescribe Subsys."32
1 See Founder and Four Executives of Insys Therapeutics Convicted of Racketeering Conspiracy, U.S. DEP'T OF JUSTICE (May 2, 2019), https://www.justice.gov/usao-ma/ pr/founder-and-four-executives-insys-therapeutics-convicted-racketeeringconspiracy; Taylor Telford, Insys becomes first drugmaker to file for bankruptcy to cover opioid penalties, WASHINGTON POST (June 10, 2019), https://www.washingtonpost.com/ business/2019/06/10/insys-becomes-first-drugmaker-file-bankruptcy-cover-opioid-penalties/.
2 See Telford, supra note 1.
3 United States v. Michael Babich, Alec Burlakoff, Richard Simon, Sunrise Lee, Joseph Rowan, and Michael Gurry, John Kapoor, Docket 16-cr-10343-ADB, https://www.justice.gov/ usao-ma/victim-and-witness-assistance-program/united-states-v-
5 See Opioid Manufacturer Insys Therapeutics Agrees to Enter $225 Million Global Resolution of Criminal and Civil Investigations, U.S. DEP'T OF JUSTICE (June 5, 2019), https:// www.justice.gov/opa/pr/opioid-manufacturer-insys-therapeutics-agrees-enter-225- million-global-resolution-criminal.
7 See Robert Field & Vincent Buccola, Opioid Settlements: Why Insys Is the Tip of the Iceberg, KNOWLEDGE@WHARTON (June 18, 2019), https://knowledge.wharton.upenn. edu/article/opiod-settlements-is-insys-the-tip-of-the-iceberg/.
10 James K. Holder, Opening the Door Wider? Opioid Litigation and the Scope of Public Nuisance Law, 13 No. 2, IN-HOUSE DEF. Q. 33 (2018).
11 Andrew Rosenblum, et al., Opioids and the Treatment of Chronic Pain: Controversies, Current Status, and Future Directions, J. EXPERIMENTAL & CLINICAL PSYCHOPHARMACOLOGY (2008).
12 See Matthew Herper, An Opioid Spray Showered Billionaire John Kapoor In Riches. Now He's Feeling The Pain, FORBES (October 25, 2016), https://www.forbes.com/sites/ matthewherper/2016/10/04/death-kickbacks-and-a-billionaire-the-story-of-adangerous- opioid/.
13 See Evan Hughes, The Pain Hustlers, NEW YORK TIMES (May 2, 2019), https:// www.nytimes.com/interactive/2018/05/02/magazine/money-issue-insys-opioidskickbacks. html.
14 See Opioid Manufacturer Insys Therapeutics Agrees to Enter $225 Million Global Resolution of Criminal and Civil Investigations, supra note 4.
15 Chris Villani, Ex-Insys Execs Found Guilty in RICO Opioid Bribe Scheme, LAW360 (May 2, 2019, 2:42 PM EDT), https://www.law360.com/articles/1148719/ex-insys-execsfound- guilty-in-rico-opioid-bribe-scheme.
16 See Herper, supra note 12.
19 See Hughes, supra note 13.
25 Alexandria Hein, Former stripper-turned-drug exec gave doctor lap dance while pitching painkiller, witness testifies, FOX NEWS (January 30, 2019), https://www.foxnews. com/us/former-stripper-turned-drug-exec-gave-doctor-lap-dance-while-pitchingpainkiller- witness-testifies.
26 Indictment, ¶ 64.
27 See Hughes, supra note 13.
28 Indictment, ¶ 81.
29 Id. at ¶ 85.
31 See Villani, supra note 15.
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