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Exclusive - Prosecutors identify Insys founder as unindicted co-conspirator in opioid case
September 14, 2017 / 7:01 PM / 6 days ago

Exclusive - Prosecutors identify Insys founder as unindicted co-conspirator in opioid case

FILE PHOTO: A box of the Fentanyl-based drug Subsys, made by Insys Therapeutics Inc, is seen in an undated photograph provided by the U.S. Attorney's Office for the Southern District of Alabama. U.S. Attorney's Office for the Southern District of Alabama/Handout via REUTERS ATTENTION EDITORS - THIS IMAGE WAS PROVIDED BY A THIRD PARTY/File Photo

BOSTON (Reuters) - U.S. prosecutors have identified Insys Therapeutics Inc’s (INSY.O) billionaire founder as an unindicted co-conspirator in a case accusing six former executives and managers of participating in a scheme that involved bribing doctors to prescribe a fentanyl-based drug, according to a court document.

John Kapoor, who stepped down as chief executive of Insys in January, was among 80 people prosecutors described as unindicted co-conspirators in an exhibit filed by prosecutors last week in federal court in Boston.

“He’s done nothing wrong, he hasn’t been charged, and he’s made extensive efforts to improve the situation at the company,” said Kapoor’s lawyer, Brian Kelly, at the law firm Nixon Peabody.

Kelly said his client’s inclusion on the list was a “meaningless evidentiary tactic” to enable prosecutors to introduce statements made by Kapoor at the trial of former CEO Michael Babich and the other five defendants.

An unindicted co-conspirator is someone prosecutors claim participated in a criminal scheme but who has not been charged.

Reasons can include insufficient evidence, pragmatic concerns, a person’s cooperation or evidentiary strategy, according to Robert Bloom, a professor at Boston College Law School.

A spokesman for the U.S. Attorney’s Office declined to comment.

Chandler, Arizona-based Insys declined to comment for this article.

Amid a national opioid epidemic, Subsys, an under-the-tongue fentanyl-based spray made by Insys and intended for cancer patients, has become the focus of several federal and state investigations.

Federal prosecutors claim Babich and the other defendants participated in a scheme to pay doctors speaker fees in exchange for prescribing Subsys and to mislead insurers into paying for the drug even when it was prescribed to non-cancer patients.

Besides Babich, the defendants include former Insys Vice Presidents Alec Burlakoff and Michael Gurry; former national sales director Richard Simon; and former regional sales directors Sunrise Lee and Joseph Rowan.

All six have pleaded not guilty. They are scheduled to face trial in October 2018.

Lee’s lawyer declined to comment. Attorneys for the other defendants did not respond to requests for comment.

Insys has previously said that it has taken steps to strengthen its compliance programme amid probes related to former employees. It has also stressed that Subsys represented less than 1 percent of all opioid prescriptions in 2016.

Insys has also disclosed that it is in talks with the U.S. Justice Department to reach a settlement.

Kapoor’s name appeared in an exhibit attached to a motion filed by prosecutors on Sept. 6, which asked a judge to weigh in on whether one of the defendant’s lawyers had a potential conflict of interest.

The exhibit, a Feb. 2 letter prosecutors sent to defence lawyers, was later sealed, but Reuters viewed it while it was publicly available.

Kapoor, who founded Insys in 2002 and remains a board member, stepped down in January as the company’s chairman and chief executive, a role he took on in November 2015.

He is currently the chairman of drugmaker Akorn Inc (AKRX.O) and president of investment firm EJ Financial Enterprises Inc.

In addition to the Boston case, charges have been filed against former Insys employees and medical practitioners by federal prosecutors in states including Alabama, New York and Connecticut.

Reporting by Nate Raymond in Boston; Editing by Noeleen Walder and Jonathan Oatis

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