(Bloomberg) -- Insys Therapeutics Inc. founder John Kapoor was convicted of a racketeering conspiracy that drove sales of a highly addictive opioid while contributing to a nationwide epidemic.
Kapoor is the first chief executive officer of an opioid maker to be convicted at a trial, with a verdict that is certain to echo through his industry. Signaling that the public is willing to hold executives accountable for the U.S. crisis, it comes as thousands of state and local governments press civil lawsuits against drugmakers to recover billions of dollars spent combating the epidemic.
“A conviction will embolden prosecutors in other cases,†Paul Kalb, a partner at Sidley Austin LLP who specializes in health-care fraud, said in an interview before the verdict. “Kapoor will be plainly portrayed as one of the instigators of the the opioid crisis. But the truth is this is a very complex problem that was not caused by any single person or company.â€
Federal jurors in Boston found that Kapoor conspired with four other Insys executives to bribe doctors to pump up sales of Subsys and duped insurers into covering shady prescriptions. Former vice president Michael Gurry, ex-national sales director Richard Simon, former regional sales director Joseph Rowan and one-time stripper turned Insys sales manager Sunrise Lee were also convicted.
15 Days
The jury returned the verdict against Kapoor on the 15th day of deliberations following a 10-week trial. It marks a steep downfall for Kapoor, who worked his way from modest means in India to start what would turn into a multibillion-dollar drugmaker. Still Insys’s controlling shareholder, he will be forced to sell his shares and may face huge financial penalties.
Kapoor looked down as the verdict was read, his hands folded in front of him. Afterward, the judge denied a U.S. request that Kapoor be placed under house arrest.
Prosecutors took jurors deep into the inner workings of Insys while putting on display some of its more sensational practices. Some of the government’s 39 witnesses offered racy testimony about how the company lured doctors into writing more Subsys prescriptions with sexy sales reps, lap dances and lavish dinners at restaurants that Kapoor owned. Prosecutors said Kapoor and his subordinates used a speaker’s program to bribe doctors who pushed their drug.
In closing statements, Assistant U.S. Attorney Nathaniel Yeager pointed to emails from former Insys Chief Executive Officer Michael Babich, who pleaded guilty and testified for prosecutors in a bid for leniency, in which he told underlings the company “owned†doctors who were heavy Subsys prescribers.
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“Pill mills, for us, meant dollars,†another government witness, Alec Burlakoff, the former head of sales, testified.
Defense lawyers took aim at the prosecution’s case through aggressive questioning of government witnesses, seeking to show that the case was weak. The defense case took just two days and featured a handful of their own witnesses, including a patient who vouched for the benefits of Subsys.
Neither Kapoor nor the other defendants testified.
Kapoor’s attorney, Beth Wilkinson, told jurors that that her client was already so rich he didn’t need more money. He came up with the idea of powerful painkiller after watching his wife in agony while dying of cancer, she said.
“He’s kept his money in this business because he believes†Subsys was a force for good, Wilkinson argued. “He had every reason to believe that this was good for patients.â€
Built Case
Prosecutors -- including Assistant U.S. Attorney Fred Wyshak, who made his name targeting organized-crime figures in Boston -- methodically built their case over the years, bringing their first charges in 2015 against lower-level executives before charging Kapoor in 2017. The defense painted the government’s witnesses as the real villains, saying it was Burlakoff who came up with the idea of shoveling money to doctors while keeping that information away from Kapoor.
In 2014, according to Symphony Health Solutions, Subsys had a 41.6 percent share of the rapid onset opioid market for drugs that act quickly to treat moderate to severe pain. Insys reached a valuation of $3.2 billion in July 2015, almost 10 times higher than its current one.
The jury’s verdict is likely to register in drugmakers’ board rooms. Companies including Teva Pharmaceutical Industries Ltd., Purdue Pharma LP, Johnson & Johnson and Endo International Plc are preparing to face trials over allegations by states and local governments that their sales campaigns fueled a crisis which is costing billions of dollars annually.
Meanwhile, efforts to use the legal system to hold executives accountable for an epidemic that claims more than 100 Americans’ lives daily are gaining speed. The Sackler family, Purdue’s billionaire owners, is facing a new wave of lawsuits over its role in the marketing of OxyContin. They, like the companies, deny wrongdoing.
Read More: Beards Grow Long During Wait for Jury Verdict in Opioid Trial
“This is a really, really egregious example of a pharmaceutical company with no moral compass,†said Piper Jaffray analyst David Amsellem in an interview before the verdict. “There’s a lot of scrutiny and investigation into companies that manufacture opioids, but I look at Insys as an extreme example.â€
Kapoor faced a single charge of a racketeering conspiracy. The first person in his family to attend college, he earned a doctorate in medicinal chemistry at the University of Buffalo in 1972, according to a work-history the school posted.
He was a plant manager at Invenex Laboratories in New York and later became chief executive officer of LyphoMed, a hospital-products company. He sold LyphoMed to Fujisawa Pharmaceuticals and formed a venture capital firm that invested in health-care companies.
In 2010, he merged privately held Insys with NeoPharm Inc. to get access to technology to develop pain drugs for cancer patients. Even though he has stepped down as Insys’s chairman and CEO, he still holds more than 60 percent of its stock.
Other opioid cases are on the horizon. On April 10, federal prosecutors in Virginia accused U.K. drugmaker Indivior Plc of deceiving doctors about the dangers of its addiction treatment. Indivior denies the allegations, saying the company engaged in “an extensive education campaign†to teach doctors about recommended dosing limits.
“Working in healthcare is a public trust,†said Peter Pitts, the president of the Center for Medicine in the Public Interest and a former Food and Drug Administration associate commissioner. “If companies choose to sell drugs inappropriately to increase profits, the FDA and courts will step up to the plate and make sure they’re not able to do so.â€
The case is U.S. v. Kapoor, 16-cr-10343, U.S. District Court, District of Massachusetts (Boston).
(Updates with others convicted in fourth paragraph.)
To contact the reporters on this story: Janelle Lawrence in Boston federal court at [email protected];Jef Feeley in Wilmington, Delaware at [email protected];Riley Griffin in New York at [email protected]
To contact the editors responsible for this story: David Glovin at [email protected], Joe Schneider
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