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Insys Founder Arrested, Charged With Racketeering

October 26, 2017
John Kapoor, the 74-year-old founder and majority owner of Insys Therapeutics Inc., was arrested today and charged with leading a nationwide conspiracy to profit by using bribes and fraud to cause the illegal distribution of a fentanyl spray intended for cancer patients experiencing breakthrough pain.

'These Insys executives allegedly fueled the opioid epidemic by paying doctors to needlessly prescribe an extremely dangerous and addictive form of fentanyl.
Phillip Coyne, federal agent

Kapoor was arrested this morning in Arizona and charged with RICO conspiracy, as well as other felonies, including conspiracy to commit mail and wire fraud and conspiracy to violate the Anti-Kickback Law, according to a Department of Justice press release. Kapoor, the former Executive Chairman of the Board and CEO of Insys, will appear in federal court in Phoenix today. He will appear in U.S. District Court in Boston at a later date.

Leafly reported last year that Insys donated half a million dollars to the campaign to defeat adult-use cannabis legalization in Arizona.

Fentanyl is the synthetic opioid, cheaper and stronger than heroin, that’s turning North America’s opioid crisis into a catastrophe. Fentanyl is the drug that killed Prince. It’s up to 50 times more powerful than heroin. Pockets of the Midwest and Northeast are getting shredded by fentanyl. In July alone, the town of Akron, Ohio, documented nearly 300 overdoses and two dozen deaths linked to the drug. A surge in fentanyl-related overdose deaths last year forced officials in British Columbia to declare a public health emergency.

Last year federal agents arrested two Insys officials in New York state for allegedly carrying out a kickback scheme that paid physicians to encourage their patients to use fentanyl. That indictment came four months after an Insys regional manager pleaded guilty to similar charges of rigging a doctor kickback scheme in the South.


Why Did Fentanyl Maker Insys Give $500K to Defeat Legalization?


Other state attorneys general continue to investigate the company’s practices. Meanwhile, Insys has continued to report record revenues.

Cannabis Cutting Into Profits

Many saw Insys’ donations to defeat adult-use cannabis legalization—which failed in Arizona last November—as a way to keep a competing (and safer) drug out of the market. A reported 28,647 Americans died from opioid-related overdoses in 2014. In the past century, the number of people who died from cannabis overdoses is exactly zero.

In recent years, researchers have documented a clear phenomenon: In states that legalize medical marijuana, opioid usage and overdose rates decline dramatically. Patients seeking relief from chronic pain are finding medical cannabis to be a safer, cheaper, more reliable form of relief that comes without the side effects of physical addiction and possible death. Castlight Health, a California health information and technology company, found in a recent report on opioid abuse that “states with medical marijuana laws have a lower opioid abuse rate than those that don’t.”


The Biology of Cannabis vs. Opioids for Pain Relief

Other Insys Officials Charged

The federal indictment unsealed today in Boston also includes additional allegations against several former Insys executives and managers who were initially indicted in December 2016.

Kapoor and Insys execs stand accused of bribing doctors and defrauding insurers.

The superseding indictment charges that Kapoor; Michael L. Babich, 40, of Scottsdale, Ariz., former CEO and President of the company; Alec Burlakoff, 42, of Charlotte, N.C., former Vice President of Sales; Richard M. Simon, 46, of Seal Beach, Calif., former National Director of Sales; former Regional Sales Directors Sunrise Lee, 36, of Bryant City, Mich., and Joseph A. Rowan, 43, of Panama City, Fla.; and former Vice President of Managed Markets, Michael J. Gurry, 53, of Scottsdale, Ariz., conspired to bribe practitioners in various states, many of whom operated pain clinics, in order to get them to prescribe a fentanyl-based pain medication.  The medication, called “Subsys,” is a powerful narcotic intended to treat cancer patients suffering intense breakthrough pain.  In exchange for bribes and kickbacks, the practitioners wrote large numbers of prescriptions for the patients, most of whom were not diagnosed with cancer.

The indictment also alleges that Kapoor and the six former executives conspired to mislead and defraud health insurance providers who were reluctant to approve payment for the drug when it was prescribed for non-cancer patients.  They achieved this goal by setting up the “reimbursement unit,” which was dedicated to obtaining prior authorization directly from insurers and pharmacy benefit managers.


In White House’s Quest to End Opioid Crisis, Where’s Cannabis?

“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,” said Acting United States Attorney William D. Weinreb. “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.”

Corporate Culture of Deception, Bribery

“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,” said Harold H. Shaw, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division. “The allegations of selling a highly addictive opioid cancer pain drug to patients who did not have cancer, make them no better than street-level drug dealers. Today’s charges mark an important step in holding pharmaceutical executives responsible for their part in the opioid crisis.   The FBI will vigorously investigate corrupt organizations with business practices that promote fraud with a total disregard for patient safety.”


Fentanyl Maker Insys Is Running CBD Clinical Trials

“These Insys executives allegedly fueled the opioid epidemic by paying doctors to needlessly prescribe an extremely dangerous and addictive form of fentanyl,” said Phillip Coyne, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services.  “Corporate executives intent on illegally driving up profits need to be aware they are now squarely in the sights of law enforcement.”

“As alleged, Insys executives improperly influenced health care providers to prescribe a powerful opioid for patients who did not need it, and without complying with FDA requirements, thus putting patients at risk and contributing to the current opioid crisis,” said Mark A. McCormack, Special Agent in Charge, FDA Office of Criminal Investigations’ Metro Washington Field Office. “Our office will continue to work with our law enforcement partners to pursue and bring to justice those who threaten the public health.”

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Leafly Staff

Leafly is the world’s largest cannabis information resource, empowering people in legal cannabis markets to learn about the right products for their lifestyle and wellness needs. Our team of cannabis professionals collectively share years of experience in all corners of the market, from growing and retail, to science and medicine, to data and technology.

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  • turnipmagee

    That’s the mode of operation for most companies. Why lament every time it happens. Why don’t we simply disallow Corporations to bribe our Representatives, which is in fact and practice, very legal today. What else is a lobbyist? Otherwise we have what we see today, which is clearly not a goverment of the people, by the people, for the people. Abe would be pissed even after two joints.




    Why is it surprising that a multi-million dollar Corp. behaves like any other cartel. They all want to insure that the money keeps coming.
    So how do we improve the problem???
    I think that addicts will always use until they find a better way to ‘be alright’. So if deaths are the focus then provide access to known pharmaceutical grade meds-what is deadly is injecting an unknown strength substance.

  • Devon Phillips

    He’s no different than any other corporation they are all the same all they care about is money and nothing else it makes me sick how many people get away with s#/t like this and continue to

  • William

    There is a lot of drama and demonizing of a flower; Papaver somniferum. Yes, there is an opioid crisis. Nearly 100 thousand people will die this years from alcohol abuse; perhaps more. 480 thousand people will die from tobacco. 99 thousand people will die from HAI, Hospital Acquired Infection; over 200 thousand people will die from psychiatric meds. (CDC, FDA). You would need a wheelchair just to read my MRI. (joke, not funny) I am using CBD, and find it helpful for muscle spasms, and other problems caused by the injuries I have, and their symptoms, including hellish neuropathy. Cannabis works. I have smoked cannabis since the 60’s (I now make tea). Another flower, opioid, is serious, ancient medicine. There is a problem with its abuse. But its use should not be demonized, when used under a doctor’s care. Remember that bike accident you had as a child? The auto accident you had later? You, too may need the flower called opioid one day. Let’s stop demonizing one flower to promote another. Opium is the substance given Jesus on the cross. It is a good bet that sponge had hashish in it too. With mercy, we provide opioid to the dying; why can we not provide opioid to the living. Thank God for both of these flowers.
    “Pain is a scourge unto mankind worse than even death itself” Albert Scweitzer

  • Rainey

    Insys’ contribution to the opioid epidemic is Subsys nasal spray, a popular item on the darknet drug market websites. But the major contributors to the epidemic are fentanyl manufacturers in China. A grand jury in North Dakota has indicted two Chinese nationals for fentanyl sales and distribution here in the US, according to National Public Radio. But as China doesn’t have an extradition agreement with the US, the chances of bringing the two to trial are slim.
    The increasing number of opioid-related deaths is causing physicians and their employers to sharply reduce opiate prescriptions to chronic pain patients with documented physical injuries. Yet many of these medical professionals still oppose legalizing cannabis, even (or especially?) for medical use.

    • Gary Craig

      Some, not all, drs have stopped giving any pain med Rx’s. This is no doubt because of the threats AG Sessions has sent out. “Sorry pain patients. No pain meds for you, or marijuana. Suffer is what you’ll do!”