Insys Chandler

Some employees at Insys' Chandler headquarters have been implicated by the state Attorney General in a lawsuit over the way the firm marketed opioids.

Former executives of Chandler-based Insys Therapeutics are the subject of more civil litigation for allegedly deceiving insurance companies into covering the costs of opioid prescriptions.

A lawsuit by the state Attorney General is the latest legal woe to befall the company as it continues to navigate financial troubles and bankruptcy proceedings.

Arizona Attorney General Mark Brnovich announced last month that his office had filed a consumer lawsuit in Maricopa County Superior Court against John Kapoor, the founder of Insys who was found guilty in May in a Boston federal courtroom of conspiring with others in a nationwide bribery scheme. 

After a 10-week trial, a jury ruled Kapoor and several others conspired to bribe doctors into prescribing his company’s powerful painkiller and then tricking insurance companies into covering the drug’s expense. 

The government claims Insys made millions in profits for years, while society was crippled by a growing opioid epidemic. 

Brnovich’s office alleges Kapoor’s scheme violated the Arizona Consumer Fraud Act and makes him subject to civil penalties. Michael Babich, the company’s former CEO, and Michael Gurry, Insys’s former vice president of managed markets, were listed as co-defendants. 

The attorney general is asking a court to compel the three defendants to pay $875 million in restitution — the amount of revenue Insys allegedly made through committing “unlawful” acts. 

The state’s lawsuit details how Insys tricked insurance companies through a system of lies and deception.   

When doctors would prescribe Subsys, the company’s expensive and potent painkiller, an insurance company would have to grant authorization before agreeing to cover its cost.

This process involved doctors submitting information to insurers on a patient’s medical history and treatment plan. 

If a patient’s condition was severe enough, the insurer would typically authorize the prescription. 

Insurers covered only about one-third of requests for Subsys prescriptions.

So, Kapoor and other Insys executives conjured up a scam in 2012 to boost authorizations, according to the government’s lawsuit.

This scam included Insys workers in Chandler allegedly calling insurance companies and pretending to be employees from a doctor’s office. 

The callers were allegedly given scripts and instructions on what to tell insurers that would guarantee authorization. 

Kapoor and his co-conspirators took steps to cover their tracks by blocking the phone numbers Insys workers used to call insurance companies.   

On some occasions, Insys employees allegedly implied patients were being treated for cancer, when they actually weren’t. 

In other cases, the lawsuit claims Insys workers lied about patients not being able to swallow pills, thus requiring them to use a nasal spray like Subsys. 

Patty Nixon, a former Insys employee, told reporters in 2017 most of the prescriptions she tried to obtain authorization for were to treat knee pain or menstrual cramps. 

She claims she was instructed to mention a patient’s nonexistent oncology records as means of persuading insurance companies. 

“It was a complete bold-faced lie,” Nixon told NBC News. 

During the time this scheme allegedly took place, Subsys sales were generating up to $52 million in revenue from prescriptions written in Arizona.

Three doctors who wrote many of these prescriptions would later come under the scrutiny of state regulators. 

Steve Fanto, Nikesh Seth and Sheldon Gingerich were all named as defendants in a lawsuit filed by Brnovich’s office in 2017.

 The three physicians were accused of accepting thousands of dollars in “speaker fees” in exchange for writing an unusually high number of Subsys prescriptions. 

For example, the government claims Seth’s prescriptions for Subsys skyrocketed from two in 2013 to 341 the following year after Insys executives started paying him large speaking fees. 

“Kapoor and Babich intended the speaker fees Insys paid to Seth to be a reward for Seth’s previous Subsys prescriptions and an incentive for Seth to write additional Subsys prescriptions,” the lawsuit states. 

Insys’s executives allegedly pressured its sales people to aggressively go after doctors they think they can win over with speaker fees, comparing their practice to riding a racehorse. 

“If you want to win, it is time to start cracking the whip,” one executive allegedly told employees in a text message.

Brnovich’s latest lawsuit is one of several pieces of litigation filed in the last couple years that involve Insys andtits employees. Eight former employees have been convicted of various crimes and multiple states have filed lawsuits. 

The crackdown on Insys has been seen as a forceful response from authorities to the large number of opioid-related overdoses reported across the country in recent years.

 The epidemic escalated so much in Arizona that Gov. Doug Ducey declared a health emergency in 2017. 

Last month, Insys agreed to pay $225 million in restitution to the federal government to resolve various criminal and civil matters. 

This large settlement has led to financial trouble for the company, prompting Insys to voluntarily file for Chapter 11 bankruptcy on June 10. 

Insys reported a drop in revenue of about $16 million during the first quarter of 2019.

“The company has experienced recurring and increasing losses from operations over the previous 18 months due to significant declines in the (fentanyl) market and significant legal expenses resulting from the investigation by the U.S. Department of Justice and other significant litigation matters to which we are subject,” Insys executives wrote in a press release. 

In response to questions about the company’s future in Chandler, an Insys spokesperson referred to a statement outlining the company’s plans to utilize cash it had on-hand to maintain operations.

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