White Collar Criminal Defense Group

Insys Therapeutics Executive Charged In Connection With Company’s Sale Of Fentanyl Spray

What Happened?

John Kapoor, the founder and chairman of Insys Therapeutics Inc. was indicted Thursday for allegedly bribing doctors to prescribe a fentanyl-based painkiller called Subsys for off-label use and defrauding insurance companies into pre-approving payment for the drug. 

The Rundown

Kapoor and six other former Insys executives were charged with racketeering conspiracy, mail fraud conspiracy, wire fraud conspiracy, and conspiracy to violate the anti-kickback law for their alleged scheme to bribe physicians across the country to prescribe Subsys and to defraud insurance providers who were hesitant to pay for Subsys for patients without cancer.

According to the indictment, Kapoor, who is said to be worth $2.1 billion, was dissatisfied with Subsys’s sales after the drug launched in 2012.  From May 2012 through December 2015, the indictment claims Kapoor devised a scheme to increase profits by using bribes and kickbacks to induce doctors to prescribe Subsys in higher volumes and for non-cancer patients.  The indictment alleges that these payments came in the form of speaker fees, honoraria for marketing events, food and entertainment, administrative support, and fees paid to pharmacies.  When Kapoor saw that private insurers were often unwilling to approve payment of the drug for non-cancer patients, he allegedly directed employees to defraud insurance providers by disguising the identity and location of their employer, misrepresenting patient diagnoses, the type of pain being treated, and the patient’s course of treatment with other medications.

The indictment also references multiple unidentified practitioners and pharmacy co-conspirators in various states who allegedly conspired with defendants in their criminal activity. 

 For the Record

An official from the Office of Inspector General of the U.S. Department of Health and Human Services stated in a DOJ press release issued Thursday that the Insys executives charged “allegedly fueled the opioid epidemic by paying doctors to needlessly prescribe an extremely dangerous and addictive form of fentanyl,” and added that “[c]orporate executives intent on illegally driving up profits need to be aware they are now squarely in the sights of law enforcement.” 

Kapoor’s attorney asserted in a statement to the press that Kapoor has “done nothing wrong and expects to be fully exonerated at trial.”

 What Happens Next?

Kapoor is scheduled to appear in federal court in Boston, Massachusetts on November 16.  Insys is also the target of ongoing civil litigation brought by state attorneys general.

Menendez, Government Argue Viability Of “Stream Of Benefits” Bribery Theory

What Happened?

In the trial of Senator Bob Menendez and Salomon Melgen, a Florida ophthalmologist, U.S. District Judge William H. Walls (D.N.J.) deferred ruling on whether a bribery conviction may rest on the “stream of benefits” theory until after the parties have had the opportunity to brief the issue.

The Rundown

After the prosecution rested its case, Menendez moved for judgment of acquittal, pursuant to Federal Rule of Criminal Procedure 29. In the course of the argument regarding that motion, Judge Walls questioned whether the “stream of benefits” theory is still valid in light of the U.S. Supreme Court’s ruling in McDonnell v. United States.

Under the “stream of benefits” theory, the government can establish the quid pro quo required for a bribery conviction by showing that bribes were made to retain an official’s services as-needed, without linking each bribe to a specific official act. Menendez, through counsel, argued that McDonnell requires a connection of the bribe to the act, or the quid to the quo.

The government contended that McDonnell’s holding merely curbed the definition of “official act” to a formal exercise of government power that is specific and focused. It noted that “stream of benefits” appears nowhere in the opinion and suggested that the Supreme Court would not overturn a longstanding means of proving bribery without doing so explicitly.

The Take-Home

The Court’s ruling could well determine the bribery charges advance to the jury. It is unclear that the government has another theory of culpability to support the charges – at least one that has an evidentiary basis. Menendez was also indicted for making false statements on his financial disclosure forms related to the alleged bribes he received.  Those counts will go forward in any event, the Court ruled.

What Happens Next?

The hearing on the Rule 29 motion will continue on Monday, October 16, 2017.