Probes of drug firm center on opioids
6 former executives now face federal indictment
Limiting pain-pill fills, distributing overdose antidotes and declaring a public-health emergency are pillars of the state’s effort to attack an opioid epidemic that has killed an average of two Arizonans every day.
But Arizona so far has not joined the growing number of states that have filed lawsuits or pursued investigations against pharmaceutical companies that market opioid drugs.
This week, Missouri followed Ohio and Mississippi as states that have sued Purdue Pharma, Johnson & Johnson and Endo International over the sales and marketing of opioid drugs. A bipartisan group of other states, including Texas and Massachusetts, publicly announced an investigation of drug makers’ sales and marketing of pain pills.
Insys Therapeutics, a Chandlerbased company launched by billionaire John Kapoor, has faced multiple investigations by state and federal agencies over its sales and marketing practices for its opioid spray.
Ex-CEO Michael Babich and five other former Insys executives were indicted last December on federal charges they conspired to bribe doctors to prescribe a fentanyl spray, Subsys, that is 50 times more powerful than heroin.
Two states, Oregon and New Hampshire, have settled cases against the company over the sales and marketing of Subsys. Illinois alleges in a lawsuit
that the company violated the state’s consumer-fraud and deceptive-businesses law and seeks to bar the company from doing business in Illinois.
In filing the action, Illinois Attorney General Lisa Madigan said the company illegally pushed the powerful painkiller for uses the drug was not approved for or needed.
“The company’s irresponsible promotion of this highly addictive drug heinously fed the country’s dangerous opioid addiction epidemic,” Madigan said.
Attorneys general in Arizona and nine other states have submitted investigative demands or subpoenas to gather information about the company’s marketing tactics.
The company has answered the Arizona Attorney General’s Office’s query, but Arizona has not announced any action against Insys.
Although the Arizona Medical Board has sanctioned several doctors over the prescribing of opiates, none of those board actions involved doctors who prescribed Subsys, a review of board actions over the past two years found.
Subsys is approved by the U.S. Food and Drug Administration for cancer patients with “breakthrough” pain. The user sprays the drug beneath the tongue so it can be instantly absorbed, bringing immediate relief for pain spikes that aren’t controlled by other pain relievers.
The FDA’s approval means the company cannot legally market the drug to non-cancer patients. However, doctors are free to prescribe the drug “off label” for uses other than cancer.
Federal prosecutors contend the company’s former executive team aggressively promoted the drug to doctors and rewarded top prescribers with lucrative payments. Those marketing tactics reportedly included hiring a former exotic dancer as a sales representative and good “closer” with doctors, wining and dining doctors at expensive restaurants, and treating at least one doctor to a latenight foray at an Arizona club.
The U.S. attorney in Massachusetts alleges that the former Insys executives paid lucrative fees as “bribes and kickbacks” to doctors and other practitioners who “wrote large numbers of fentanyl spray prescriptions, most often for patients who did not have cancer.”
Federal prosecutors also said that a special unit at Insys’ headquarters in Chandler worked to obtain approval from insurers and pharmacy benefit managers. The unit’s employees were taught “how to mislead and deceive insurers regarding their employment, patient diagnoses, and tried and failed medications,” according to the indictment.
Besides Babich, the indicted former sales executives and managers were Alec Burlakoff, Michael J. Gurry, Richard M. Simon, Sunrise Lee and Joseph A. Rowan.
The former executives have pleaded not guilty to racketeering, mail fraud, wire fraud and conspiracy to violate anti-kickback laws. No trial date has been set.
While Insys itself does not face charges, the company said it is cooperating with ongoing government investigations.
“Insys continues to cooperate with all relevant authorities in its ongoing investigations and is committed to complying with laws and regulations that govern our products and business practices,” the company said.
The federal indictment lists examples of improper kickbacks paid to 10 doctors, physician assistants and advancedpractice nurses in Alabama, Arkansas, Connecticut, Florida, Illinois, Indiana, Michigan, New Hampshire and Texas.
No Arizona doctors or practitioners were listed in the indictment.
Data provided to ProPublica shows that 107 of 228 Medicare-paid claims for Subsys in 2014 were prescribed by Dr. Steve Fanto, a Scottsdale pain-medicine doctor. Fanto received $234,463 in payments from Insys from 2013 through 2015, according to the Centers for Medicare & Medicaid Services.
Fanto, who did not return calls seeking comment, also has been the subject of multiple complaints to the state medical board, although none have resulted in sanctions.
Medical board officials said there are four pending complaints against Fanto, but details of those complaints are made public only if they are discussed by the board. It is unclear whether any of those complaints involved prescribing Subsys, which represented a fraction of the 6,600-plus Medicare claims from his prescriptions in 2014, according to the ProPublica database.
Beyond the executives who faced criminal charges, former sales managers and top-prescribing doctors and nurses have been ensnared in the Insys investigation.
A federal jury this year convicted two Alabama pain-management doctors on racketeering conspiracy and other felonies. Xiulu Ruan was sentenced to 21 years, and his partner, John Couch, to 20 years.
Federal prosecutors contend that Insys paid the pain-management doctors kickbacks in exchange for becoming top prescribers of Subsys, mostly to noncancer patients who complained of back, neck and joint pain.
According to court documents, Insys officials referred to Ruan as one of “three whales” due to the large number of Subsys prescriptions he wrote to noncancer patients, including young adults. During parts of 2012 and 2013, he was the top prescriber of the drug in the nation, according to court documents.
The case was aided by two former Insys sales representatives, Lacy Fortenberry and Natalie Reed Perhacs, who testified against the doctors. In a plea agreement, Perhacs said she was hired at Insys based on the recommendation of Ruan, who frequently contacted her in an apparent attempt to strike up a romantic relationship.
“I want to ask you a personal question and hopefully you would not be offended,” Ruan wrote to Perhacs in one email, which was disclosed in her plea agreement. “Are you involved with someone now? … You don’t have to answer any of these if you do not feel comfortable.”
As a sales representative, Perhacs frequently set up and attended speaker programs that resulted in Insys paying fees paid to Ruan and Couch.
“The purpose of the speaker program was not to promote Subsys, but rather funnel kickbacks to high-volume Subsys prescribers,” court documents state.
The arrangement was lucrative for Perhacs, too. Although paid an annual base salary of $40,000, she collected more than $700,000 in commissions from the sales of Subsys to non-cancer patients between April 2013 and May 2015, according to court papers. She has not yet been sentenced.
Another former employee, Elizabeth Gurrieri of Queen Creek, has agreed to plead guilty to one count of wire fraud conspiracy, according to a court document filed by prosecutors in June.
When reached by phone by The Arizona Republic, Gurrieri hung up.
A criminal complaint alleges that Gurrieri and others conspired to defraud insurers and pharmacy benefit managers.
Gurrieri was hired by Insys in October 2012 as a “prior authorization specialist” who was assigned to a unit that called insurers and pharmacy benefit managers to obtain authorization on behalf of patients.
She earned a promotion within five months of being hired to oversee a team that sought to gain approvals from insurers.
According to a criminal complaint, Gurrieri and others trained Insys employees to mislead insurers and pharmacy benefit managers by pretending they worked for the doctor or prescribing practitioner.
The company blocked access to its phone numbers so insurers or pharmacy benefit managers did not know the callers were from a different area code. Gurrieri also instructed employees not to identify themselves as Insys employees when answering the phone, court documents allege.
The complaint alleges that Gurrieri instructed employees to assert patients had a cancer diagnosis even if the person was prescribed a drug for non-cancer-related pain.
Because insurers and pharmacy benefit managers often required patients try other drugs before approving reimbursement for Subsys, Gurrieri and others instructed employees to “routinely falsely confirm lists of tried and failed medications” to gain approval for Subsys, according to court documents.
In addition to criminal complaints, Insys has been sued more than a half-dozen times by the families of patients and investors.
Two of those lawsuits name Insys as a defendant in wrongful-death cases. One case involved Carolyn Markland, 58, a Jacksonville, Florida, woman who died hours after taking a dose of Subsys at her doctor’s office in July 2014.
The second lawsuit involved the death of a 32-year-old New Jersey woman, Sarah Fuller, whose doctor prescribed her Subsys along with opiates such as Percoset and Oxycontin.
In January 2015, the lawsuit states, her doctor arranged a meeting with Fuller, Fuller’s father and an Insys sales representative who convinced them that Insys could be used for her neck and back pain.
Within three weeks, the doctor tripled her Subsys dosage to 600 micrograms without explanation or medical justification, according to the lawsuit filed in New Jersey Superior Court in Middlesex County.
Nine months later, Fuller was hospitalized and later discharged with instructions to discontinue Subsys and to be weaned from Oxycontin.
The lawsuit alleges that Fuller’s doctor ignored recommendation of the hospital’s doctors and again prescribed Subsys, Oxycontin, Percoset and alprazolam, an anti-anxiety medication. Fuller died five months later due to a reaction from the combination of Subsys and alprazolam, according to the lawsuit.