Arizona Attorney General Files Fraud Suit Against Insys Founder

by Andrew Murray | July 25th, 2019

On July 11, 2019, the Attorney General of Arizona announced the filing of a suit against former executives of the Chandler-based opioid manufacturer, Insys Therapeutics, Inc. The lawsuit alleges violations of Arizona’s Consumer Fraud Act; specifically, that the accused were involved in a fraud scheme concerning the drug, Subsys. The Press Release states:

Arizona Attorney General Mark Brnovich filed an Arizona Consumer Fraud Act lawsuit today against three former executives of opioid manufacturer Insys Therapeutics Inc., which is based in Chandler. The lawsuit alleges that the three named defendants, including the founder of the company, engaged in a fraudulent marketing scheme designed to increase the sales of Insys’s flagship drug, Subsys, a highly addictive opioid prescription drug that contains fentanyl.

The three former executives of Insys named as defendants in the new lawsuit are Michael Gurry, Insys’s former Vice President of Managed Markets; Michael Babich, Insys’s former Chief Executive Officer; and John Kapoor, Insys’s founder, as well as its former President, Chief Executive Officer, and Executive Chairman of the Board of Directors.  All three individuals either have pleaded guilty or been found guilty of federal felony charges related to the conduct alleged in the State’s complaint.

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This lawsuit follows on the heels of Attorney General Brnovich’s 2017 lawsuit against Insys and two other former Insys employees.  Since then, Insys has admitted that it bribed doctors, pled guilty to federal criminal charges, and filed for bankruptcy.  Attorney General Brnovich’s office also reached a consent judgment with one of the previously sued employees, former Vice President of Sales Alec Burlakoff in April of 2019, who agreed to a consent judgment requiring him to disgorge $9.5 million to the State and fully cooperate in related investigations.

According to the lawsuit filed today, Kapoor, Babich, and Gurry are alleged to have violated the Arizona Consumer Fraud Act by directing Insys employees to provide insurers with false and misleading information to obtain prior authorization for Subsys prescriptions for patients. For example, Insys employees allegedly were instructed to mislead insurers into believing that patients who were prescribed Subsys had cancer, when in fact they did not.

The lawsuit also alleges that Kapoor and Babich directed Insys’s employees to bribe health care providers with lucrative “speaker fees” in exchange for those doctors writing more prescriptions of Subsys.  To date, Insys has sold over $1 billion worth of Subsys, and the lawsuit alleges that the actions of Kapoor, Babich, and Gurry drove these sales and fanned the flames of the opioid epidemic.

In the lawsuit, Brnovich is seeking remedies that include restitution for consumers, disgorgement of all profits from the alleged conduct, and an injunction to ban the three defendants from marketing or selling pharmaceuticals in Arizona.

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The compliant is available on the Attorney General’s website.

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