Minnesota Joins Growing List in Whistleblower Case Against Insys

• Posted on: Jul 13 2018

On May 30, 2018, Minnesota became the most recent state to join the list of states filing lawsuits in whistleblower litigation against Arizona-based Insys Therapeutics, Inc. (“Insys”) (INSY.O): Arizona, New Jersey, New York, and North Carolina. Previous cases have been settled by Oregon, New Hampshire, Illinois, and New Hampshire for $9.45 million.

The Minnesota action, which was filed in Hennepin County District Court in Minneapolis, comes as state attorneys general are seeking to hold pharmaceutical companies responsible for the opioid epidemic sweeping the nation.  According to the U.S. Centers for Disease Control and Prevention, in 2016 opioids, including heroin and prescription painkillers, contributed to 42,249 deaths. 

The Minnesota lawsuit accuses Insys of encouraging doctors to prescribe Subsys, the powerful fentanyl-based pain medication, which was approved by the FDA only for treating cancer patients who suffered from severe nerve pain. According to the complaint, internal emails showed that Insys encouraged its sales force to “camp out” in doctor’s offices to induce them into prescribing the drug. The company allegedly paid “bonuses” of up to $3,000 to increase sales and paid two physicians “speaker fees” totaling $43,000.  The complaint further alleges that the 36 speaking events at which they were paid were “shams” to bypass state laws prohibiting payments by drug companies to doctors.

“I’ve see[n] a lot of greedy conduct by pharmaceutical companies in this office,” Swanson said at a news conference. “This conduct in this case is as brazen as anything you could imagine a pharmaceutical company doing.”

The Minnesota Board of Pharmacy, which joined in the Minnesota lawsuit, also commenced an administrative action seeking civil penalties.

Swanson said her office is continuing to investigate other opioid manufacturers and distributors and their alleged misrepresentations about the safety of prescribing opioids to patients. “Stay tuned for that,” Swanson said. “We are knee-deep in that investigation.”

On the same day that the Minnesota lawsuit was filed, Michelle Breitenbach, a former Insys sales representative, pleaded guilty in a superior court in New Jersey, to participating in a scheme to bribe physicians to prescribe Subsys.  Breitenbach faces up to five years in prison for a second-degree charge of conspiracy to commit commercial bribery.

The Whistleblower Action

In 2013, Maria Guzman, a former Insys sales representative, commenced a qui tam action in the United States District Court for the Central District of California (No. CV 13-5861), in which she alleged that the company was engaged in illegal sales and marketing practices of its opioid drug, Subsys.  The lawsuit was brought under the False Claims Act (“FCA”). The FCA allows private whistleblowers to sue on behalf of the government and share in any recovery. [Ed. Note: for an overview of the FCA, click here.]

Guzman contended that Insys engaged in a nationwide scheme to defraud Medicare and Medicaid by inducing doctors through kickbacks that ranged from cash to favors to sex, to prescribe large doses of Subsys for federally insured patients who never should have received the drug.  Using a mantra of “pain is pain,” Guzman alleged that Insys illegally pushed the prescription of Subsys for lesser off-label conditions, such as back pain and migraines. Guzman was fired in 2013 after objecting to the scheme to defraud.

The U.S. Department of Justice (“DOJ”)  subsequently intervened in Guzman’s qui tam action, saying that it would take over part of the litigation, specifically the claims against Insys for kickbacks, off-label marketing, and false claims about patients’ conditions. 

The Federal Charges

The government intervention comes on the heels of related criminal cases against various former sales representatives, executives, and practitioners who were employed by Insys, as well as its billionaire founder, John Kapoor (“Kapoor”).  

Kapoor was arrested and charged with several counts of conspiracy; in particular, conspiracy to commit mail and wire fraud, RICO conspiracy, and conspiracy to violate the Anti-Kickback law.

“In the midst of a nationwide opioid epidemic that has reached crisis proportions, Mr. Kapoor and his company stand accused of bribing doctors to overprescribe a potent opioid and committing fraud on insurance companies solely for profit,” acting U.S. Attorney William D. Weinreb said in a statement. “Today’s arrest and charges reflect our ongoing efforts to attack the opioid crisis from all angles. We must hold the industry and its leadership accountable – just as we would the cartels or a street-level drug dealer.”

The government charges stem from a superseding indictment that was unsealed by the U.S. Attorney’s office in Massachusetts.  That office had arrested and charged six former company executives in December 2016 with, among other things, conspiracy to defraud health insurers.  The six former executives are: Michael Babich, Chief Executive Office; Alec Burlakoff, Vice President of Sales; Richard M. Simon, National Director of Sales; Sunrise Lee and Joseph A. Rowan, Regional Sales Directors; and Michael J. Gurry, Vice President of Managed Markets.

The DOJ alleged that Kapoor and the six executives conspired to bribe doctors around the country to prescribe Subsys.  The indictment also alleged that the defendants conspired to defraud and mislead health insurance providers, who declined approval of payments when physicians prescribed Subsys for off-label conditions.

“As alleged, these executives created a corporate culture at Insys that utilized deception and bribery as an acceptable business practice, deceiving patients, and conspiring with doctors and insurers,” Harold H. Shaw, special agent in charge of the Federal Bureau of Investigation, Boston field division, said in a statement.

Insys is attempting to resolve the federal charges. The company, which is under new management and has claimed to have taken “necessary and appropriate steps to prevent past mistakes from happening in the future,” estimates that a resolution could cost at least $150 million.

Doctors Get Swept Up In Criminal Charges

Last month, a Florida doctor admitted that he received kickbacks from Insys. Dr. Michael Frey (“Frey”) pleaded guilty to conspiring to receive kickbacks from a medical equipment provider and a pharmaceutical sales representative in exchange for writing prescriptions for Subsys. Frey admitted that Insys paid him kickbacks to participate in bogus speaking engagements to induce him to prescribe Subsys.

“This was an alarming case of a physician who abused his position of trust for money,” U.S. Attorney Chapa Lopez for the Middle District of Florida said in a statement.

Frey agreed to cooperate with authorities and to pay $2.8 million as part of a related civil settlement.