Selling drugs can be a relationship business. which’s best to do which in person. which can be why, on a summer evening in 2012, Alec Burlakoff was out for dinner with Steven Chun, the owner of Sarasota Pain Associates. Burlakoff was a sales manager for Insys Therapeutics, an Arizona-based pharmaceutical company with only one branded product, a brand new as well as highly potent opioid painkiller called Subsys. Chun was a doctor who prescribed a lot of opioids.
The location was a moderately expensive seafood restaurant in Sarasota, Fla., with linen tablecloths as well as large windows overlooking the bay. The sun was still high inside the sky. Gleaming powerboats lined the docks outside, as well as a warm breeze rippled the water. On one side of the table were Burlakoff as well as Tracy Krane, an Insys sales representative. Krane was a newcomer to the industry, tall with dark brown hair in a bob. Burlakoff, then 38, having a slight frame as well as a boyish restlessness, was her brand new boss. He had years of experience inside the opioid market. Colleagues marveled over his shameless push to make the sale, nevertheless he had a charisma which was hard to resist. Even people who didn’t trust him couldn’t help liking him.
Krane was there to learn the business, as well as the meeting made a vivid impression. Chun, then 49 as well as stout, had impeccable credentials: He was trained at the University of Washington, Cornell Medical College as well as the Memorial Sloan Kettering Cancer Center. He had been married at the Fifth Avenue Presbyterian Church in Manhattan, to a Juilliard-trained violinist who can be the daughter of a former chief executive of Korean Air, nevertheless had since divorced. At Burlakoff’s invitation, he had brought his girlfriend at the time, a woman in her mid-20s, to dinner.
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For Insys, Chun was just the right kind of doctor to pursue. inside the late 1990s, sales of prescription opioids began a steep climb. nevertheless by the time Subsys came to market in 2012, mounting regulatory scrutiny as well as changing medical opinion were thinning the ranks of prolific opioid prescribers. Chun was one of the holdouts, a true believer in treating pain with narcotics. He operated a busy practice, as well as 95 percent of the Medicare patients he saw in 2015 had at least one opioid script filled. Chun was also a top prescriber of a little class of painkillers whose active ingredient can be fentanyl, which can be 50 to 100 times as powerful as morphine. Burlakoff’s product was a brand new entry to which class. On a “target list,” derived via industry data which circulated internally at Insys, Chun was placed at No. 3. The word inside the company for a doctor like Chun was a “whale.”
inside the few months since Subsys was introduced, demand was not meeting expectations. Some of the sales staff had already been fired. If Burlakoff as well as Krane could persuade Chun to become a Subsys loyalist, which could be a coup for them as well as for the entire company. The drug was so expensive which 1 clinic, led by a motivated doctor, could generate millions of dollars in revenue.
Over dinner, Burlakoff grew expansive, Krane recalled. She marveled at the way he drew on a wealth of information about the doctor — intelligence gathered over the course of years — without letting on just how much he knew. Before he worked for Insys, Burlakoff worked for Cephalon, Insys’s chief competitor, as well as he knew a bit about Chun’s romantic history, Krane said. He also knew which Chun liked to visit the casinos up in Tampa, so Burlakoff made a point of talking about his own penchant for gambling, according to Krane. She had no idea if he was telling the truth.
which can be unclear whether Burlakoff knew which Chun was also, at which moment, inside the middle of an expensive legal battle. The previous year, two nurses who formerly worked for him secretly filed a whistle-blower suit charging “widespread billing schemes” intended to defraud the government, as well as federal agents executed a search warrant on his clinic. (Chun could later pay $750,000 to the Department of Justice to resolve the claims. He was never charged having a crime as well as denies all wrongdoing.)
What can be clear can be which Burlakoff thought which Chun was a tremendous prize. After briefly extolling the virtues of Subsys, Krane recalled, Burlakoff finally arrived at the true purpose of the dinner. He had a proposition to make. Insys wanted to sign Chun up, he said, for the company’s speaker program, which was just getting underway.
Speaker programs are a widely used marketing tool inside the pharmaceutical business. Drug makers enlist doctors to give paid talks about the benefits of a product to different potential prescribers, at a clinic or over dinner in a private room at a restaurant. nevertheless Krane as well as some fellow rookie reps were already getting a clear message via Burlakoff, she said, which his idea of a speaker program was something else, as well as they were concerned: which sounded a lot like a bribery scheme.
Burlakoff left the dinner in a great mood, Krane said, confident which Chun could come on board. The doctor did become an Insys speaker later which year, as well as sales did improve, not only in Chun’s Florida office nevertheless also around the country, as more doctors signed on. By the next year, according to the company, net revenue via Subsys sales could increase by more than 1,000 percent, to $95.7 million.
nevertheless the brand new reps were right to be worried. The Insys speaker program was central to Insys’ rapid rise as a Wall Street darling, as well as which was also central to the onslaught of legal troubles which right now surround the company. Most notable, seven former top executives, including Burlakoff as well as the billionaire founder of Insys, John Kapoor, right now await trial on racketeering charges in federal court in Boston. The company itself, remarkably, can be still operating.
The reporting just for This specific article involved interviews with, among different sources, seven former Insys employees, among them sales managers, sales reps as well as an insurance-authorization employee, some of whom have testified before a grand jury about what they witnessed. This specific account also draws on filings via a galaxy of Insys-related litigation: civil suits filed by state attorneys general, whistle-blower as well as shareholder suits as well as federal criminal cases. Some are pending, while others have led to settlements, plea deals as well as guilty verdicts.
inside the Insys case, prosecutors are looking to break brand new ground in holding the pharmaceutical as well as medical industry accountable in connection with the current opioid crisis. They’re attacking both ends of the pharma sales transaction; 11 prescribers face charges or have been convicted over their ties to Insys, as well as Chun has recently been subpoenaed for medical records related to Subsys. In looking into Insys’s relationship to providers like him, investigators are revealing just how opioids are sold at the point they first enter the national bloodstream — inside the doctor’s office.
THE OPIOID CRISIS, right now the deadliest drug epidemic in American history, has evolved significantly over the course of the last two decades. What began as a sharp rise in prescription-drug overdoses has been eclipsed by a terrifying spike in deaths driven primarily by illicitly manufactured synthetic opioids as well as heroin, with overall opioid deaths climbing to 42,249 in 2016 via 33,091 in 2015. nevertheless prescription drugs as well as the marketing programs which fuel their sales remain an important contributor to the larger crisis. Heroin accounted for roughly 15,000 of the opioid deaths in 2016, for instance, nevertheless as many as four out of several heroin users started off out by misusing prescription opioids.
By the time Subsys arrived in 2012, the pharmaceutical industry had been battling authorities for years over its role in promoting the spread of addictive painkillers. The authorities were trying to confine opioids to a select population of pain patients who desperately needed them, nevertheless manufacturers were pushing legal boundaries — sometimes to the breaking point — to get their products out to a wider market.
Even as legal penalties accrued, the industry thrived. In 2007, three senior executives of Purdue Pharma pleaded guilty in connection having a marketing effort which relied on misrepresenting the dangers of OxyContin, as well as the company agreed to pay a $0 million settlement. nevertheless Purdue continued booking more than $1 billion in annual sales on the drug. In 2008, Cephalon likewise entered a criminal plea as well as agreed to pay $425 million for promoting an opioid called Actiq as well as two different drugs “off-label” — which can be, for unapproved uses. which did not stop Cephalon via being acquired three years later, for $6.8 billion.
Subsys as well as Actiq belong to a class of fentanyl products called TIRF drugs. They are approved exclusively for the treatment of “breakthrough” cancer pain — flares of pain which break through the effects of the longer-acting opioids the cancer patient can be already taking around the clock. TIRFs are niche products, nevertheless the niche can be lucrative because the drugs command such a high cost. 1 patient can produce six figures of revenue.
Fentanyl can be extremely powerful — illicitly manufactured variations, often spiked into heroin or pressed into counterfeit pills, have become the leading killers inside the opioid crisis — as well as regulators have made special efforts to restrict prescription fentanyl products. In 2008, for instance, the F.D.A. rebuffed Cephalon’s application to expand the approved use for a TIRF called Fentora; inside the company’s clinical trials, the subjects who did not have cancer demonstrated much more addictive behavior as well as propensity to substance abuse, which are “rarely seen in clinical trials,” F.D.A. officials concluded. An F.D.A. advisory committee reported which, during the trials, some of the Fentora was stolen. The agency later developed a special protocol for all TIRF drugs which required practitioners to undergo online training as well as certify which they understood the narrow approved use as well as the risks.
Despite these government efforts, TIRF drugs were being widely prescribed to patients without cancer. Pain doctors, not oncologists, were the dominant players. This specific was common knowledge inside the industry. Although which can be illegal for a producer to promote drugs for off-label use, which can be perfectly legal for doctors to prescribe any drug off-label, on their own judgment. This specific allows drug makers like Insys to use a narrow F.D.A. approval as a “crowbar,” as a former employee put which, to reach a much broader group of people.
which points to a major vulnerability in policing the opioid crisis: Doctors have a great deal of power. The F.D.A. regulates drug makers nevertheless not practitioners, who enjoy a wide latitude in prescribing which pharmaceutical companies can easily exploit. A respected doctor who advocates eloquently for wider prescribing can quickly become a “key opinion leader”; invited out on the lucrative lecture circuit. as well as any doctor who exercises a free hand with opioids can attract a flood of pain patients as well as income. Fellow doctors rarely blow the whistle, as well as some state medical boards exercise timid oversight, allowing unethical doctors to continue to operate. An assistant district attorney coping with opioids in upstate brand new York told me which which’s easy to identify a pill-mill doctor, nevertheless “which can take several years to get to which guy.” inside the meantime, drug manufacturers are still seeing revenue, as well as which doctor can be still seeing patients, one after another, day after day.
JOHN KAPOOR, the founder of Insys, has flirted with legal trouble throughout his long career as a pharmaceutical entrepreneur. Raised in India, where he was the first in his family to go to college, he immigrated to the United States to pursue a doctorate, he has said, with several dollars in his pocket. He amassed a fortune having a series of pharmaceutical ventures, mostly inside the unglamorous arena of generic drugs. One of his companies, Lyphomed, drew sanctions via the F.D.A. related to manufacturing problems, leading to recalls as well as a consent decree. After he sold Lyphomed to a Japanese firm in 1990, personally reaping more than $100 million, the buyer sued him, claiming which he had been deceptive about the company’s regulatory difficulties. He settled out of court. Another of Kapoor’s big investments, Akorn, was delisted via Nasdaq during his tenure as chief executive for filing unaudited financial statements, nevertheless his stake, held in trust, can be right now worth hundreds of millions, despite brand new controversy over possible breaches of F.D.A. requirements at the company.
Kapoor, right now 74, bankrolled Insys almost entirely on his own for over a decade, shepherding Subsys on the long road to approval by the Food as well as Drug Administration. What motivated him, he has often said, was seeing his wife, Editha, suffering via metastatic breast cancer, before her death in 2005 at 54.
Often called Dr. Kapoor, he more closely resembles an academic than a business titan, with glasses as well as a signature mop of graying hair. nevertheless employees found which Kapoor could be aggressive as well as unyielding. At Insys he was known to pound the table; he dressed down a manager in front of colleagues. People who worked for him speak of the need to “survive” him.
Kapoor believed which he had the best product in its class. All the TIRF drugs — for transmucosal immediate-Discharge fentanyl — deliver fentanyl through the mucous membranes lining the mouth or nose, nevertheless the specific method differs via product to product. Actiq, the first TIRF drug, can be a lozenge on a stick. Cephalon’s follow-up, Fentora — the branded market leader when Subsys arrived — can be a tablet meant to be held inside the cheek as which dissolves. Subsys can be a spray which the patient applies under the tongue. Spraying a fine mist at the permeable mouth floor makes for a rapid onset of action, trials showed.
Once the F.D.A. gave final approval to Subsys in early 2012, the fate of Insys Therapeutics rested on selling which inside the field. The industry still relies heavily on the old-fashioned way of doing sales; drug manufacturers blanket the country with representatives who call on prescribers face to face, often coming to develop personal relationships with them over time.
To carry out a delicate sales campaign, Insys made some unusual choices. Overseeing the launch under Kapoor, then the executive chairman, could be his 36-year-old protégé, Michael Babich, who had been named the Insys chief executive. A tall Chicagoan, Babich had worked for Kapoor in various roles since he was in his 20s, when Kapoor recruited him via an asset-management firm. Kapoor introduced Babich to the staff as a rising talent, nevertheless he had never led a sales effort for an F.D.A.-approved drug. According to former Insys managers, Babich tended to defer to Kapoor, who was, after all, putting up his own money.
To build the sales force, Insys hired quite a few notably attractive people in their 20s as well as 30s, mostly women — not an uncommon tactic inside the industry. nevertheless Insys reps tended to be particularly inexperienced, often with no background in pharmaceutical sales. “They were hiring people straight out of college,” said Jim Coffman, who worked as a regional sales trainer at Insys in 2012. “So there was a certain naïveté, which played into their objectives as well as goals.” The company was offering salaries well below market rates — typically paying a rep $40,000 when different companies could offer twice which amount — nevertheless dangling the lure of stock options as well as unusually large commissions.
Examining detailed TIRF sales data purchased via third parties, Insys executives zeroed in on an important fact: The entire market was anchored by a relatively little pool of prescribers. Winning the business of a handful of carefully selected practitioners per state could be enough to make Insys the market leader. The names at the top of the chart were well known inside the field.
Insys managers divided the existing base of TIRF prescribers into deciles, according to how many scripts they wrote. The “high decile” practitioners tended not to specialize in treating cancer pain, according to the Boston indictment, nevertheless Insys went right after them. Sales reps were instructed to call on them multiple times a week, to the point of sitting in their waiting rooms for hours, angling for a moment with the doctor. As one manager told me, “You fish where the fish are.”
A SPEAKER PROGRAM was inside the works at Insys via the start, nevertheless inside the first months after Subsys hit the market, which had not gotten underway. During which period, Kapoor was disappointed by the sales of the drug, according to former employees. Managers thought the expectations were unrealistic, given which the company had beginner reps as well as entrenched competitors, nevertheless Kapoor didn’t want to hear which. He as well as Babich could soon meet with each regional sales manager one on one at the home office, as well as some meetings could be contentious. Turnover inside the sales staff was running high.
which was then which Alec Burlakoff arrived, asking about a job. Burlakoff had a history which might have put off some potential employers. In 2002, Eli Lilly fired him as a sales rep amid an investigation by the Florida attorney general’s office into a supposed scheme to send unsolicited pills — a slow-Discharge form of Prozac — to patients through the mail. When Burlakoff as well as two different fired employees sued Lilly in return, claiming the plan was approved by management, they gained media attention nationwide. Burlakoff said in a court filing which his reputation inside the industry was permanently scarred. (The case was settled.) When Burlakoff later sold Actiq as well as Fentora at Cephalon, he was based inside the Southeast region, a hot spot inside the investigations into the promotion of both those drugs.
Former Insys employees consistently describe Burlakoff’s arrival as a turning point. Insys initially hired him to head the Southeast region, nevertheless within three months, he was promoted to run the entire sales force. The speaker program swiftly became the centerpiece of the sales effort, as well as Burlakoff made which clear how he wanted which to work.
He explained which all to Tracy Krane on the first day they met, she told me, while they were sitting in her white Cadillac CTS. which was a conversation she later recounted, she said, in a grand-jury proceeding in connection with the Boston criminal case. Burlakoff had traveled to her territory to join her on a “ride along,” coaching her through sales calls on an oppressively sunny day, as well as they had just left Chun’s office. The ostensible purpose of a pharma-speaker program, as Krane understood which, was to spread the word about the drug through peer-to-peer marketing. With “honorariums” changing hands, the potential for a subtle corruption can be clear, nevertheless Burlakoff was not subtle. He told Krane, she said, which the real target was not the audience nevertheless the speaker himself, who could keep getting paid to do programs if as well as only if he showed loyalty to Subsys. which was a quid pro quo or, as the Department of Justice later called which, a kickback. “He boiled which right down,” Krane recalled: We pay doctors to write scripts. which’s what the speaker program can be.
Krane didn’t know all the rules, she told me, nevertheless This specific didn’t sound right. She turned to Burlakoff as well as asked, “Isn’t which illegal?”
He brushed off the question, Krane said, having a tone she likened to patting a child on the head as well as telling her not to worry — the worst which could happen was the company could have to pay a settlement. If Burlakoff in fact said This specific, he had some reason. which was during his time at Cephalon which the company handily survived its penalty for engaging in illegal promotional schemes.
Emails which have surfaced in court as well as public-records requests give the flavor of the sales messages which top executives were sending. One week after Burlakoff was hired, Babich, the chief executive, wrote an email to his sales managers, directing them to make sure which reps understood “the important nature of having one of their top targets as a speaker. which can pay big dividends for them.” Burlakoff urged on his sales staff, peppering them with emails as well as texts which alternated between the tropes of motivational speaking (“we are all starting a brand new opportunity to be our very best when we get out of bed tomorrow!”) as well as arm-twisting reminiscent of “Glengarry Glen Ross.” “PROGRAMS ARE THE ONLY THING which MATTERS,” he wrote. “WHY DO SOME OF YOU REFUSE TO ACKNOWLEDGE This specific PROVEN FACT?”
The speaker events themselves were often a sham, as top prescribers as well as reps have admitted in court. Frequently, they consisted of a nice dinner with the sales rep as well as perhaps the doctor’s support staff as well as friends, nevertheless no different licensed prescriber in attendance to learn about the drug. One doctor did cocaine inside the bathroom of a brand new York City restaurant at his own event, according to a federal indictment. Some prescribers were paid four figures to “speak” to an audience of zero.
Burlakoff appears at first to have tried to shield Kapoor via the details of the Insys speaker programs, or I.S.P.s, as they were sometimes called in-house. “I need your guidance on how to present to Dr. Kapoor I.S.P.’s in a way — where he won’t get involved,” he wrote to Babich in an email obtained through a public-records request. Babich replied, “You got which.” Top executives, however, soon prepared documents for Kapoor, according to the Boston indictment, which explicitly calculated the I.S.P. “return on investment” for each speaker as well as indicated which underperformers could be culled via the program. Prosecutors have not yet presented evidence which Kapoor in fact saw the documents.
nevertheless Kapoor also had a direct contact out inside the field, a brand new Jersey rep at the bottom of the hierarchy named Susan Beisler, who left a paper trail which could present legal difficulties for Kapoor. Beisler, then in her late 30s, seems to have had a close relationship with Kapoor, signing one email “many hugs as well as kisses,” according to a pending lawsuit filed by the brand new Jersey attorney general. Beisler complained to Kapoor which the speaker money “being thrown” at certain doctors was giving an unfair edge to their reps, particularly Burlakoff’s “friends,” according to the suit. Burlakoff had hired quite a few Cephalon alumni he knew, reps who had pre-existing relationships with key doctors. As early as the summer of 2013, according to a federal indictment, an Insys rep — possibly Beisler — wrote to Kapoor which which was “so not right” which one high-prescribing doctor was “getting $2,500 a pop to eat at fancy steakhouses in NYC often,” adding, “I don’t think anyone even goes to his ‘programs.” The following year, according to the Boston indictment, Insys quadrupled the budget devoted to the speaker program to $10 million. inside the end, the Top 10 speakers each made more than $0,000.
INSYS WASN’T JUST winning over top TIRF prescribers via the competition. which was creating brand new ones. One star rep in Florida, later promoted to upper management, told another rep which when she went in search of potential speakers, she didn’t restrict herself to the top names, because, after all, any doctor can write scripts, as well as “the company does not give a [expletive] where they come via.” (Some dentists as well as podiatrists prescribed Subsys.) She looked for people, she said, “which are just going through divorce, or doctors opening up a brand new clinic, doctors who are procedure-heavy. All those guys are money hungry.” If you float the idea of becoming a paid speaker “as well as there can be a light in their eyes which goes off, you know which’s your guy,” she said. (These remarks, recorded by the rep on the different end of the line, emerged in a later investigation.)
Unsurprisingly, tactics like these attracted some questionable figures to the program. In an email which surfaced in a lawsuit brought by the Illinois attorney general, a sales rep inside the state reported directly to Babich about a pain-management doctor named Paul Madison: “Dr. Madison runs a very shady pill mill which only accepts cash,” the rep wrote. “He can be extremely moody, lazy as well as inattentive. He basically just shows up to write his name on the prescription pad, if he shows up at all.” Insys was not deterred, which appears. According to the Boston indictment, Babich as well as Burlakoff hired a former exotic dancer named Sunrise Lee as a sales manager, as well as she helped court Madison as an Insys speaker. The company paid Madison tens of thousands dollars even after he was indicted on insurance-fraud charges which are still pending. (He pleaded not guilty.) According to the Illinois suit, which Insys later settled, he single-handedly accounted for 58 percent of the Subsys prescribed in Illinois over a three-year period.
In a March 2013 email to the sales force, Burlakoff singled out several reps at the top of the company leader board as well as noted which they “literally have their entire business being driven by basically one customer.” These “customers” were the top several Subsys prescribers inside the nation, according to a pending lawsuit brought by the state of Arizona, as well as all were well-compensated Insys speakers. Three have been convicted of felonies; one has not been charged nevertheless had his license revoked. Only one remains in practice.
As a result of Insys’s approach to targeting doctors, its potent opioid was prescribed to patients which was never approved to treat — not occasionally, nevertheless tens of thousands of times. which can be impossible to determine how many Subsys patients, under Kapoor, actually suffered via breakthrough cancer pain, nevertheless most estimates in court filings have put the number at roughly 20 percent. According to Iqvia data through September 2016, only 4 percent of all Subsys prescriptions were written by oncologists.
Jeff Buchalter, 34, a decorated Iraq war veteran, was one off-label Subsys patient. His doctor, William Tham, a paid Insys speaker, prescribed the drug to treat pain stemming via Buchalter’s wartime injuries, eventually raising the dose well beyond the maximum amount indicated by the F.D.A. Buchalter was taking which 12 times a day, not four to six, as well as alternating between the two highest doses, a medical chart via Tham’s clinic shows. Eventually, he had to be put under sedation in intensive care at Fort Belvoir, Va., while he went through withdrawal via Subsys as well as different prescription drugs. “I am frankly astonished at the amount of opioids the patient has been prescribed,” a hospital specialist noted in his records. Buchalter can be suing Insys as well as Tham. (Tham’s lawyer, Andrew Vernick, told me, “He has done nothing wrong in This specific case, as well as he can be not involved in any of the allegations which have been raised against Insys throughout the country.”)
Buchalter said Subsys gave him relief via pain, nevertheless which changed him into someone he did not recognize. He had always defined himself as a hard worker with integrity. With his eyes darting around the room as he spoke, he told me he became an addict, his day revolving around the next dose: He slept under his desk at the office, where boxes of Subsys filled the drawers, as well as his house went into foreclosure. Buchalter looked troubled as well as tired when we met. His hands were visibly dirty. “I’ve been absent via my life for years,” he told me. “What I remember can be who I was when my daughter was born, as well as when I was a soldier.”
THE PREVALENCE OF off-label prescribing, while legal, did initially present Insys having a challenge. Owing to the risk as well as expense of Subsys, nearly all health insurers required prior authorization as well as could pay for the drug only for its sole approved use: breakthrough cancer pain. Only about one-third of Subsys prescriptions were being approved for reimbursement in late 2012. So Insys created an internal division dedicated to improving which number.
According to a former employee as well as multiple court filings, including a manager’s guilty plea, the company offered to relieve doctors’ offices of insurance hassles as well as take on the task of getting prescriptions covered. Insys’ “prior authorization specialists” — workers who the company motivated with bonuses — could contact insurers or their contractors, giving the impression they were calling via the prescribing doctor’s office. They used what managers called “the spiel,” which led insurers to believe which patients had cancer when they did not. Sometimes they could falsify medical charts as well as outright lie, former staff members have acknowledged. Babich, the chief executive, was involved in arranging just for This specific unit’s phone system to block Caller ID to disguise the fact which calls were not coming via the doctor’s office, according to the Boston indictment.
The initiative worked. By the following spring, a company estimate pegged the approval rate for commercial insurers at 87 percent.
With insurance approval right now catching up with prescriptions, Insys revenue as well as market share were climbing sharply, nevertheless a serious threat was brewing within. Within six months of the Subsys launch, one rep based in Texas, Ray Furchak, started off to consider reporting Insys to government authorities. The speaker program, he felt, amounted to a thinly disguised kickback scheme, as well as he was also concerned which management was pushing an overly high dose of Subsys to first-time patients, despite boldface F.D.A. warnings of the dangers. Furchak began to collect emails as well as texts as evidence.
He soon filed a whistle-blower complaint against the company, as well as John Kapoor. nevertheless the defendants did not know they had been sued for months — the case proceeded under seal.
While Insys’s fortunes were on the rise, Furchak’s suit was under review at the Justice Department. In cases like his, called qui tams, a whistle-blower sues on behalf of the government, claiming fraud, as well as stands to share in any recovered funds. Justice Department lawyers quietly conducted interviews, weighing whether to intervene as well as join the plaintiff inside the suit. which was one of hundreds of decisions like which which qui tam investigators face at any given time. An investigator at the Department of Health as well as Human Services, Michael Cohen, told me the federal government faces an overwhelming amount of health care fraud: “We call which a tsunami.”
Fortunately for Insys, the Justice Department declined to intervene in Furchak’s case. A lawyer familiar with the decision cited the difficulty of proving significant damages; Insys was not a big fish yet. Furchak did what most people do in This specific situation: He dropped the suit. The judge ordered his complaint unsealed, nevertheless the media took no notice at the time. Insys was free to go on doing what which was doing. which could be a long time before the law caught up to which.
In May 2013, two months after the Justice Department decision, the company went public. At an event at the Nasdaq MarketSite in Times Square, Kapoor as well as Babich stood smiling, surrounded by a group of cheering Insys executives.
By the end of 2013, Subsys could become the most widely prescribed branded TIRF, according to a company S.E.C. filing. In an ebullient “State of the Union” message to the sales force which October, Babich joked about hiring midget wrestlers to perform at the next national sales meeting. right now the competition was going to come after Insys, he said. “One problem they have … they don’t have a chance in hell!”
Insys became the year’s best-performing initial public offering, on a gain of over 400 percent. which December, the company disclosed which which had received a subpoena via the Office of the Inspector General at Health as well as Human Services, an ominous sign. nevertheless a CNBC interviewer made no mention of which when he interviewed Babich a few weeks later. Instead he said, “Tell us what which can be about Insys which has investors so excited.”
BY THEN, THOUGH, Insys management had identified a potential worry inside the Southeast region. Xiulu Ruan as well as John Patrick Couch, each a well-compensated Insys speaker, jointly owned as well as operated a pain clinic in Mobile, Ala., which served thousands of clients. Their main location occupied a one-story brown building on a commercial strip on the western outskirts of the city, adjacent to a Shell station.
Ruan was able to successfully recommend an Insys rep for their territory, a 27-year-old named Natalie Perhacs. Ruan had been asking her out to dinner for several months, to no avail; right now she could be in his clinic repeatedly a week. In her previous job, Perhacs’s salary was just over $30,000, nevertheless in two years selling Subsys almost exclusively to Ruan as well as Couch, she made $700,000. (Perhacs later pleaded guilty to conspiracy to violate a federal anti-kickback statute.)
Ruan as well as Couch had many patients legitimately in need of pain treatment. nevertheless which could be difficult to miss, via regularly visiting the clinic or via prescribing data alone, which something was awry. “Oh, everybody knew which,” a nurse at a different Mobile practice told me.
In 2014, the doctors each averaged one prescription for a controlled substance roughly every four minutes, figuring on a 40-hour week. A typical pill mill makes its money via patients paying in cash for their appointments, nevertheless Ruan as well as Couch had a different product: A majority of their scripts were filled at a pharmacy adjacent to their clinic called C&R — for Couch as well as Ruan — where they took home most of the profits. The pharmacy sold more than $570,000 of Subsys in 1 month, according to Perhacs’s criminal plea. Together the two men amassed a collection of 23 luxury cars.
Two former patients told me which people approached them to buy or sell prescription drugs inside the clinic’s parking lot. “There was always one or two out there,” Alice Byrd Jordan said.
One patient, Keith Bumpers, told me which he had thought his doctor at the clinic was “Dr. Justin.” Justin Palmer was a nurse practitioner who testified which he routinely forged Couch’s name on prescriptions. He was one of three medical staff members at the clinic who were personally misusing painkillers at work. One of them died by suicide; the different two admitted seeing patients while impaired. A patient named Tamisan Witherspoon, who was prescribed Subsys off-label as well as became addicted, testified which a nurse practitioner at the clinic, Bridgette Parker, spoke incoherently as well as collapsed asleep in an exam room in front of her. Witherspoon recognized the state Parker was in, because she had been there herself, she said, via taking Subsys. “I started off to cry,” Witherspoon said on the witness stand, “because I realized which she was in trouble as well as so was I.”
In court testimony, Perhacs acknowledged which in late 2013, there was a “sense of panic” at Insys regarding the situation at the clinic in Mobile. The problem was which the clinic wasn’t generating enough money for the company.
“Dr. Ruan as well as Dr. Couch are way down,” Burlakoff wrote to Perhacs. “Can you assist please. … This specific was the topic of conversation today with Dr. Kapoor as well as Mike.”
In fact, Couch as well as Ruan were still writing a lot of Subsys scripts. nevertheless they had started off prolifically prescribing a Subsys competitor too: Abstral, then made by Galena Biopharma. One reason Insys was losing out on potential sales, according to the Boston indictment, was which C&R Pharmacy was having trouble getting enough Subsys via distributors to keep which in stock — because of measures designed to combat the opioid crisis.
The flow of controlled substances through distributors, which are the middlemen between drug companies as well as pharmacies, can be strictly regulated, as well as distributors have paid hefty settlements for failing to notify the Drug Enforcement Administration of “suspicious orders” of controlled substances via particular pharmacies. Couch as well as Ruan’s pharmacy was hitting caps with their distributor, according to Perhacs’s testimony — an “enormous barrier,” a manager wrote to her. In internal emails cited inside the Boston indictment, leadership scrambled to find a way to beat the competition as well as get around the caps at the same time. One executive wrote which “certain parties could be at risk” if they were not careful. Sales reps inside the region felt they needed assistance. A manager wrote to Perhacs, “Hopefully having a little help via above we can land This specific.”
On Feb. 13, 2014, the help arrived. Two men flew to Alabama to have dinner at a steakhouse with Couch as well as Ruan as well as their pharmacists, booking rooms for the night at the Renaissance Hotel by the Mobile River. The two men who flew to Mobile just for This specific meeting were the chief executive, Michael Babich, as well as the billionaire founder of Insys Therapeutics, John Kapoor.
Over dinner, according to the Boston indictment, Kapoor as well as Babich struck a remarkable agreement with the pharmacists as well as the doctors, who were operating a clinic rife with opioid addiction among the staff: Insys could ship Subsys directly to C&R Pharmacy. An arrangement like This specific can be “highly unusual” as well as a “red flag,” according to testimony via a D.E.A. investigator in a related trial. As part of the terms of the deal, the pharmacy could make more money on selling the drug, with no distributor inside the loop. as well as there could be another anticipated benefit for all involved: Everyone could sell more Subsys without triggering an alert to the D.E.A.
which WAS NOT long after which dinner in Alabama which the troubles at Insys came more clearly into public view. Early in 2014, according to a former employee at Insys headquarters cited in a shareholder suit, top executives learned which a major Subsys “whale” based in Michigan, Gavin Awerbuch, was under investigation. Awerbuch was a well-paid speaker as well as, by a large margin, the top prescriber of Subsys to Medicare patients. Further details have emerged inside the Boston indictment as well as different court filings. Burlakoff had personally cultivated Awerbuch, flying to Michigan to take him out to dinner as well as then writing an email to colleagues: “Expect a nice ‘bump’ fellas.”
As which turned out, unfortunately for Insys, Awerbuch was under the eye of authorities even before Subsys went on the market. He was submitting insurance claims for bogus tests as well as liberally writing opioid scripts. As investigators closed in on him, his fondness for a brand new drug called Subsys caught their eye. He prescribed which to one patient complaining of mild to moderate back pain. which patient was an undercover agent.
Awerbuch was arrested in May 2014 as well as charged with illegally prescribing Subsys as well as insurance fraud. Insys’s stock took an immediate hit, on heavy trading volume.
In an email the previous September, Burlakoff had written to Babich as well as others, “Let’s make some money,” adding which which was the Awerbuchs “of the earth which keep us in business, let’s get a few more.” right now Insys executives scrambled to distance themselves via the doctor. Subsys was not sold directly to doctors, who make their own decisions, they explained in a news Discharge: “Insys only sells Subsys through D.E.A. approved wholesalers who monitor as well as track prescribing activity.”
With news of Awerbuch’s arrest, the brand new Jersey sales rep Susan Beisler wrote to a friend: “Yup. [Expletive].” When the friend responded which which was bad for the doctor nevertheless not for Insys, Beisler replied: “The thing can be they bribed the [expletive] out of which guy to write. The complaint shows ten different docs they also bribed.”
which was a telling remark: In fact, the Awerbuch criminal complaint merely presented a chart of the Top 10 Subsys prescribers to Medicare patients. Names were withheld, nevertheless different details were provided. An executive at Galena, then the maker of Abstral, sent a screenshot of the list to Ruan, who was easily identifiable. The next day, Ruan began redirecting his Insys speaker fees to philanthropic purposes. “He runs away via which Insys money as fast as he can,” the assistant United States attorney Christopher Bodnar later told a jury.
With Awerbuch’s fall, Beisler apparently thought which Insys was done, nevertheless for her bosses, as well as for their investors, This specific wasn’t over. After a dip, revenues recovered as well as the stock resumed its climb. Insys kept paying speaker fees to physicians with disciplinary histories — as well as doing so out inside the open, because a newly implemented provision of the Affordable Care Act meant which drug makers’ payments to doctors were right now publicly posted. Burlakoff continued on the job for more than a year. Investors shrugged over the Awerbuch news as well as the bad press surrounding the speaker program. The subpoena Insys had received about its sales practices was “not particularly unusual,” one bullish Wall Street analysis noted later which year, adding, “we’re pretty sure which the worst-case outcome for Insys can be some sort of fine.” The first hard-hitting reportof several by Roddy Boyd of the Southern Investigative Reporting Foundation, in April 2015, jolted the stock, nevertheless again which recovered as well as moved higher, with sales still climbing.
Insys sustained another blow when federal agents descended on Ruan as well as Couch’s clinic in Mobile in May 2015. They were there to seize evidence as well as arrest the doctors, Kapoor as well as Babich’s dinner companions the previous year.
The local medical community felt the impact of the raid. Because refills are generally not allowed on controlled substances, patients typically visited the clinic every month. For days, dozens of them lined up outside inside the morning, fruitlessly trying to get prescriptions via the remaining staff or at least retrieve their medical records to take elsewhere. nevertheless different providers were either booked up or could not take these patients. “Nobody was willing to give the amount of drugs they were on,” a nurse inside the city said. Melissa Costello, who heads the emergency room at Mobile Infirmary, said her staff saw a surge of patients via the clinic inside the ensuing weeks, at least a hundred, who were going through agonizing withdrawal.
Two months after the raid in Mobile, Insys’ stock reached an all-time high.
AT DAWN ONE MORNING LAST OCTOBER, several S.U.V.s entered a gated community in Phoenix as well as drove up a mountainside road. Federal agents climbed out as well as entered a sprawling house with their weapons drawn. They took John Kapoor into custodyat 7 a.m. When he appeared eight hours later in federal court, surrounded by indigent defendants being arraigned at the same time, he was wearing untied running shoes as well as gym shorts which appeared to be on backward.
Prosecutors had advanced via targeting lower-level employees toward the heart of the company, securing some guilty pleas along the way, including one via Michael Babich’s wife, Natalie Levine, a former Insys rep, on bribery charges. Babich, Burlakoff, Sunrise Lee as well as three different former senior Insys executives were indicted simultaneously on bribery as well as fraud charges, as well as months passed while Insys insiders wondered whether Kapoor could go untouched. right now they had their answer.
Kapoor as well as the six different executives charged in Boston have pleaded not guilty as well as await trial, scheduled for January. For prosecutors at the Department of Justice, This specific can be uncharted territory. When pharmaceutical companies have been heavily penalized over marketing schemes as well as fraud, their leaders have typically settled the cases — or, more rarely, pleaded to misdemeanors — as well as walked away. The Insys defendants not only face criminal prosecution nevertheless stand accused of racketeering under the RICO Act, a law more commonly invoked against organized-crime families as well as drug gangs. The industry will be paying attention.
Kapoor’s lawyer, Beth Wilkinson, declined to comment in detail on the case, nevertheless did say, “We will vigorously defend Dr. Kapoor in court.” Lawyers for Burlakoff, Babich, Lee, Levine as well as Madison either declined or did not respond to detailed requests for comment. A lawyer for Beisler, who has not been charged having a crime, also declined to comment. Awerbuch pleaded guilty to accepting bribes as well as health care fraud as well as has been sentenced to jail time. Ruan as well as Couch were convicted on multiple felony counts as well as are in prison. They have appealed. Krane was fired by Insys in November 2012; the company cited poor sales performance. She no longer works inside the drug industry.
Insys itself can be still producing Subsys, though sales have fallen considerably. (Overall demand for TIRFs has declined industrywide.) The company can be right now marketing what which calls the “first as well as only F.D.A.-approved liquid dronabinol,” a synthetic cannabinoid, as well as can be developing several different brand new drugs. Some analysts like the look of the company’s pipeline of brand new drugs as well as rate the stock a “buy.” In a statement, the company said its brand new management team consists of “responsible as well as ethical business leaders” committed to effective compliance. Most of its more than 300 employees are brand new to the company since 2015, as well as its sales force can be focused on physicians “whose prescribing patterns support our products’ approved indications,” the company said. Insys has ended its speaker program for Subsys.
In Florida, Dr. Steven Chun can be still seeing patients. The indictment against the Insys executives details the company’s relationship to 10 unnamed Subsys prescribers. Having worked to identify all of them, I was virtually certain which Chun can be “Practitioner #9.” Three others have already been sentenced to prison time; Chun has not been charged with any crime. In February, after multiple attempts to contact him, I visited his Florida clinic unannounced.
Chun works out of the third floor of a two-tone stucco building flanked by palm trees, in prosperous Lakewood Ranch, a master-planned community. Adjacent to the medical complex housing his clinic can be a tidy outdoor retail as well as entertainment area called Main Street at Lakewood Ranch. In Chun’s orderly waiting room, when I visited, an elderly man having a walker as well as a plaid shirt sat silently under the fluorescent lights. The clinic looked nothing like the pill mill which I had stopped by a few days earlier. which looked like a doctor’s office.
I did not expect Chun to agree to see me, nevertheless I was led down a long hallway into his personal office. Wearing dark blue scrubs with his name embroidered at the breast, he shook my hand as well as motioned for me to sit on a red leather sofa while he sat back in his chair, taking a sip via a thermos. A framed diploma hung on the wall behind him.
The practice of pain management has changed since Chun was in training inside the 1990s, he said. There are so many regulations. People in pain have fewer as well as fewer places to go. as well as right now, he said, he’s caught up in This specific Insys case.
Chun said which his prescribing of Subsys had nothing to do with the money which Insys paid him (more than $275,000, according to the Boston indictment). He believed inside the product as well as he enjoyed doing the speaker programs. which suited his ego to take a teaching role, he said, smiling.
Asked for comment at press time, Chun defended his practice, saying he has never been accused of malpractice or disciplined by the state of Florida. He has complied with subpoenas related to Subsys, he said, as well as he has not been contacted directly by investigators in connection with Insys. He said a vast majority of his TIRF prescriptions are on-label, for patients with cancer or a history of cancer. He said he always tells patients, “Unless you have cancer, I’m not going to prescribe This specific for you.”
Chun said Subsys prescriptions went up 10 percent at most after he joined the speaker program. (The Boston indictment contradicts This specific account.) He said he only heard about the Insys “scam” after he left the program as well as saw no reason he was being associated with doctors who participated. He concluded, “I follow the rules.”
While Chun as well as I were speaking, staff members knocked on the door as well as entered every 30 minutes or so, carrying pieces of paper for Chun to sign. Chun explained which the nurse practitioner he worked with can be not licensed to prescribe Schedule II controlled substances, the most tightly regulated category of legal drugs. The sheets of paper were prescriptions, as well as he signed them two to four at a time without pausing to read them over. As soon as the knock came on the door, without looking down, he could make a swift motion with his hand to retrieve his pen via his breast pocket as well as click the button on the top.
Down the hall, patients were presumably doing the trip, in which cycle familiar to us all, via the waiting room to the exam room as well as finally home. Naturally the patient inside the next room had no idea what Chun as well as I were discussing. He probably did not see which a sales rep stopped by as well as brought lunch for the clinic staff, getting a wave via Chun through the open door. which’s very likely which a pharmacy rang up a prescription for which patient on his way home, nevertheless the real sale had already happened, out of his sight.