Life Science Compliance Update

October 30, 2017

Founder and Owner of Insys Arrested

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Late last week, John N. Kapoor, the founder and majority owner of Insys Therapeutics, Inc., was arrested and charged with leading a conspiracy to profit by using bribes and fraud to cause the illegal distribution of a Fentanyl spray intended for cancer patients experiencing breakthrough pain.

The superseding indictment includes allegations of RICO conspiracy, conspiracy to commit mail and wire fraud, and conspiracy to violate the Anti-Kickback law. It also includes additional allegations against former Insys executives and managers who were initially indicted in December 2016.

The Justice Department claims that Kapoor and other Insys executives offered bribes in the form of kickbacks to doctors who wrote “large numbers of prescriptions” for patients, many of whom did not have cancer. The Department also alleged that the executives defrauded insurers by forming a “reimbursement unit” dedicated to obtaining prior authorization from insurers who were reluctant to pay for the drug.

Insys allegedly encouraged doctors to write more prescriptions by hiring their friends and family members to serve as “business liaisons’’ and “business-relation managers,’’ prosecutors said. These support-staff employees worked in the doctors’ offices but were paid by Insys in what the indictment called bribes and kickbacks. The company even made a video featuring a sales rep dressed as a giant fentanyl spray bottle, rapping and dancing to a song that pushed the idea of getting doctors to prescribe higher doses, prosecutors said.

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. 

Charged with racketeering conspiracy and other felonies, Kapoor is the highest-ranking pharma executive to be accused of an opioid-related crime, and his arrest may portend charges against companies far larger than Insys, which has a modest $417 million market capitalization.

In Connecticut, prosecutors have begun a criminal probe of Purdue Pharmaceutical Inc.’s marketing of OxyContin. Scores of states, cities and counties have sued companies including Purdue, Endo International Plc, and  Janssen Pharmaceuticals, alleging they triggered the opioid epidemic by minimizing the addiction and overdose risks of painkillers such as Percocet.

The charges of conspiracy to commit RICO and conspiracy to commit mail and wire fraud each provide for a sentence of no greater than 20 years in prison, three years of supervised release and a fine of $250,000, or twice the amount of pecuniary gain or loss.  The charges of conspiracy to violate the Anti-Kickback Law provide for a sentence of no greater than five years in prison, three years of supervised release and a $25,000 fine. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.

Insys Reaction

A spokesman for Arizona-based Insys said this week that the company is under new management and has replaced nearly all its original sales staff. It says it takes responsibility for the actions of its former employees.

"We have taken necessary and appropriate steps to prevent past mistakes from happening in the future, and are committed to conducting business according to high ethical standards and the interests of patients," the company said in a statement Wednesday. "We also continue to work with relevant authorities to resolve issues related to the misdeeds of former employees."

Kapoor Defense Lawyer Reaction

"He is not guilty of these charges, he intends to fight it vigorously," defense attorney Brian T. Kelly said outside court. Kelly is a high-profile Boston lawyer and former federal prosecutor who successfully tried imprisoned gangster James "Whitey" Bulger.

Government Reaction

As the investigation spanned – and used the resources of – many government agencies, multiple agencies had a comment on the investigation and charges. Some of the comments are below.

“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.”

“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, John Kapoor and other top executives committed fraud, placing profit before patient safety, to sell a highly potent and addictive opioid.  EBSA will take every opportunity to work collaboratively with our law enforcement partners in these important investigations to protect participants in private sector health plans and contribute in fighting the opioid epidemic,” said Susan A. Hensley, Regional Director of the U.S. Department of Labor, Employee Benefits Security Administration, Boston Regional Office.

Congressional Reaction

Insys has also been the subject of an investigation by Sen. Claire McCaskill (D-Mo.). After Kapoor's arrest on Wednesday, McCaskill said "anyone, including top executives, who potentially violated criminal law should be aggressively prosecuted."

"Evidence from our investigation suggests that Insys was engaged in systemic fraud and took actions that directly harmed their own customers and public health as a whole. This company has repeatedly gotten away with fines that amounted to a slap on the wrist for actions that helped fuel a nationwide epidemic that's claimed hundreds of thousands of American lives," she said.

Getting Serious About Fraud - The DOJ Charges 412

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With the new administration, there appears to be a renewed commitment to enforcing anti-kickback rules against healthcare providers committing fraud against the government insurance programs. In July 2017, the Department of Justice and Department of Health and Human Services announced the largest-ever fraud takedown in the health care arena. This article outlines the announcement, and what it may mean for the future of health care.


It has long been a topic of discussion among life science compliance professionals that when it comes to anti-kickback enforcement, the government favors prosecuting manufacturers and healthcare institutions over individual providers. The speculation was that those two categories were favored because of their deep pockets. However, that old rubric just may have changed.

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October 27, 2017

Aegerion Resolves Criminal and Civil Actions

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Aegerion recently finalized a $40.1 million settlement that resolves civil and criminal charges over its marketing of JUXTAPID®. We previously published an article outlining agreements in principle with the Department of Justice (DOJ) and Securities and Exchange Commission (SEC), following inquiries into the company to determine whether the company’s commercial activities violated laws and regulations.

The $40.1 million settlement is split between cases brought by the DOJ and the SEC – with $36 million resolving cases by the DOJ and $4.1 million resolving an SEC lawsuit. Sales representatives were trained to tell doctors and patients that JUXTAPID® would “take patients out of harm’s way” and prevent “impending” heart attacks and strokes, despite the lack of data supporting those claims, prosecutors alleged.

On September 22, 2017, Aegerion agreed to plead guilty to two misdemeanor counts of violating the Federal Food, Drug, and Cosmetic Act (FD&C Act) regarding the introduction of misbranded JUXTAPID® into interstate commerce. The criminal information alleged that JUXTAPID® was misbranded because Aegerion failed to comply with the requirements of the JUXTAPID® Risk Evaluation and Mitigation Strategy (REMS) program and because the labeling lacked adequate directions for all of the prescription’s intended uses.

The FDA approved JUXTAPID® in 2012 to treat high cholesterol in patients with a rare genetic disease called homozygous familial hypercholesterolemia. Prosecutors have said that Aegerion managers and sales staff touted JUXTAPID® as a treatment for high cholesterol generally, and failed to give healthcare providers sufficient information to safely prescribe the drug.

Aegerion and one of its senior vice presidents, Charles M. Gerrits, agreed to enter into a consent decree of permanent injunction with the United States. The consent decree includes a comprehensive compliance program and legal tools for the FDA to ensure that the defendants comply with the law, subject to judicial oversight.

As alleged in court documents filed by the DOJ, instead of following the REMS requirement to distribute JUXTAPID® for the narrow indication for which it was approved, Aegerion sought to include the diagnosis of homozygous familial hypercholesterolemia (HoFH), a rare disorder that that causes high cholesterol levels and early cardiovascular disease, as vague and indefinite as possible in order to extend the product use to additional patient populations.

As part of the required REMS, Aegerion failed to give health care providers complete and accurate information about HoFH and how to properly diagnose it. Aegerion also filed a misleading REMS assessment report to the FDA in which the company failed to disclose that it was distributing JUXTAPID® using a definition of HoFH that was inconsistent with Aegerion’s pre-approval filings with the FDA and that did not correspond to any peer-reviewed clinical standard for diagnosing HoFH. With these actions, Aegerion failed to comply with the required elements under the REMS to assure safe use of JUXTAPID®, in violation of the FD&C Act. In addition, Aegerion management and sales personnel also distributed JUXTAPID® not only for the treatment of HoFH, but also as a treatment for high cholesterol generally, without adequate directions for such use.

The SEC’s complaint alleges that Aegerion told investors that the number of unfilled prescriptions for JUXTAPID® was not material and the “vast majority” of patients receiving prescriptions ultimately purchased the drug. The SEC alleges that Aegerion’s records reflect that it was actually around 50 percent of prescriptions that resulted in actual drug purchases.

Once entered by the court, the plea and consent decree will be part of a global resolution of multiple government investigations into Aegerion’s conduct with respect to the marketing and distribution of JUXTAPID®. This resolution was the result of a coordinated effort by the DOJ and other government agencies.

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