Arizona AG files lawsuit vs. former executives of opioid company Insys
The Arizona Attorney General’s Office has filed a fraud lawsuit against three former executives of opioid manufacturer Insys Therapeutics of Chandler, extending their legal challenges.
The lawsuit alleges that the three named defendants engaged in a marketing scheme designed to increase the sales of a highly addictive prescription drug called Subsys.
John Kapoor, the company’s founder and former CEO, was named along with Michael Gurry, the company’s former vice president of managed markets, and Michael Babich, a former Insys CEO.
Kapoor formerly was listed as one of the wealthiest billionaires in Arizona by Forbes magazine. He served as both CEO and executive chairman of Insys.
Mounting legal woes
Kapoor and other top executives were found guilty of related charges in federal court in May, while mounting losses, negative cash flow and the prospect of more legal battles have cast in doubt on Insys’ future status as a “going concern.”
The company filed for bankruptcy last month. Insys stock, which once traded above $46 a share, closed at 24 cents a share on Wednesday.
All three individuals either have pleaded guilty or have been found guilty of federal felony charges tied to conduct cited in the Arizona complaint.
“When pharmaceutical companies engage in unethical and greedy behavior that helps fuel the opioid crisis in our state, they must be held accountable,” said Mark Brnovich, Arizona’s attorney general, in a prepared statement. Insys has admitted that it bribed doctors and pleaded guilty to federal criminal charges, the Attorney General’s Office noted. Brnovich’s office in April reached a consent judgment with another former executive, onetime vice president of sales Alec Burlakoff, who agreed to disgorge $9.5 million to the state and cooperate in related investigations.
Basis of Arizona’s lawsuit
In the lawsuit filed July 17, Arizona charged Kapoor, Babich and Gurry with violating an Arizona anti-fraud law by directing Insys employees to provide insurers with false and misleading information to obtain prior authorization for Subsys prescriptions.
This included misleading insurers into believing that some patients prescribed for Subsys had cancer, when they did not.
The lawsuit also alleges Kapoor and Babich directed employees to bribe health care professionals with lucrative “speaker fees” in exchange for writing more prescriptions of Subsys. To date, Insys has sold more than $1 billion worth of Subsys prescriptions.
The lawsuit alleges that the actions of the three defendants drove sales and “fanned the flames” of the opioid epidemic.
Brnovich’s office is seeking restitution for consumers, disgorgement of all profits from the alleged conduct and a ban against the three defendants from marketing or selling pharmaceuticals in Arizona.
An Insys representative said the company was unable to comment on litigation involving former employees. The Republic has not yet been able to reach attorneys for any of the three men named in the lawsuit.