Rx Hall of Shame Update: Former Insys employee pleads guilty in US opioid drug probe; case against ex CEO Michael Babich, others, in pre-trial mode.

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The News:

A former employee of Insys Therapeutics Inc. (Chandler AZ) pleaded guilty last week to having conspired to defraud insurers into paying for an expensive fentanyl-based drug that is at the heart of an investigation into the company.

Former employee of Insys Therapeutics pleaded guilty to defraud insurers for #fentanyl-based drug Click To Tweet

Elizabeth Gurrieri, a former manager of reimbursement services for Arizona-based Insys, entered her plea in federal court in Boston to one count of wire fraud conspiracy as part of deal to cooperate with US authorities, according to Reuters.

Gurrieri’s cooperation could result in her testifying at a later trial of six ex-Insys execs and managers, including former CEO Michael Babich, who prosecutors say participated in a scheme to bribe doctors to prescribe the drug, Subsys.

Insys has been working toward a settlement with the US Justice Department in a probe focused on Subsys, an under-the-tongue spray intended for cancer patients that contains fentanyl, a highly addictive and regulated synthetic opioid.

As US authorities have sought to combat opioid abuse, Subsys has become the subject of federal and state investigations amid allegations that the drug was marketed and sold to non-cancer patients.

Prosecutors alleged in December that Babich and others led a conspiracy to bribe medical practitioners to unnecessarily prescribe Subsys through payments disguised as marketing events and speaker fees.

Other 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 defendants have pleaded not guilty. The case against Gurrieri related to what prosecutors said was a deliberate plan by Insys to get insurers to cover the price of Subsys, which in 2013 cost about $2,340 for 60 units.

In court, Assistant US Attorney Nathaniel Yeager said that Gurrieri from 2012 to 2015 worked with others to deceive insurers and pharmacy benefit managers to obtain payment authorization for Subsys.

“Ms. Gurrieri specifically directed employees to lie using a number of different methods to mislead insurers,” Yeager said.

In court papers, prosecutors said Insys employees were taught to mislead insurers about the diagnosis of patients and whether they had tried and failed other preferred medications.

A Status Conference hearing on the Babich, et al, case was held June 15, 2017, before Magistrate Judge Jennifer C. Boal (pdf). Defendants typically do not attend status conference hearings. There will be several status conference hearings scheduled over several months before a trial date is set.

The cases in U.S. District Court, District of Massachusetts, are U.S. v. Babich et al, No. 16-cr-10343, and U.S. v. Gurrieri, No. 17-cr-10083.

Steve’s Take:

Many years ago I did a stint as a government lawyer at the US Treasury Department (IRS). One of the things I learned back then is that the government seldom (but not always) brings a case like this one without some pretty damning evidence. We didn’t like to lose; didn’t look good on our resumes.

Since the news release about the arrests of Michael Babich and his cronies back in December of last year, I’ve thought about how a fundamentally drug trafficking ring was able to operate to the degree of success Insys achieved. Just how were they able to get licensed medical doctors, of all people, to write phony prescriptions for an incredibly dangerous medicine, all for personal gain?

Yes, the defendants are absolutely innocent until proven guilty.

But the evidence set forth so far by the government points to what by all accounts is simply a modern, organized criminal enterprise akin to the type of law-breaking generally thought to have begun in Italy in the late Nineteenth Century. That’s right. I’m talking about the secretive Sicilian group La Cosa Nostra, along with other Sicilian mafia, which were more  powerful than the whole Italian government in the early twentieth century.

Bottom Line:

As I wrote back in December, what a banner year 2016 was for pharma scandals: GlaxoTenetMylanValeant, and Theranos just to name a few candidates for my “Rx Hall of Shame.”

But Insys take the cake. The company itself is under Justice Department investigation for its Subsys marketing. RBC Capital Markets analysts said the arrests highlighted the importance of a potential settlement for Insys, adding that the company could afford to pay for one if it’s “reasonable.” Jefferies previously concluded that the company could see a fine of about $150 million or less “based on historical precedent.”

According to the DOJ, among other groups, the FBI, HHS, FDA Office of Criminal Investigations and DEA contributed to the investigation. (Back in my day, such cooperation wasn’t quite as esprit de corps, but it did exist to some degree.)

What fascinates yet also confounds me is how easy Insys execs found it to be that by bribing doctors with cash, strippers, and fancy meals, they could multiply their few legitimate sales in order to make hundreds of millions of dollars a year, according to the TAF (Taxpayers Against Fraud Education Fund). In the end, more than 95% of Subsys prescriptions were written for patients who did not have cancer.

Does this sound reminiscent of classic mob wrongdoing from the last century?

Patrick Burns of the TAF Education Fund applauded the arrests. He told The New York Times that people pushing powerfully addictive drugs from corporate offices have been given the “Big Wink” for far too long.

“It’s just like bank fraud and mortgage fraud–no one in the big companies ever seems to go to jail. If this is the start of a real change in how we deal with corporate crooks, it’s a very big deal,” Burns added.

Apparently, the Insys execs also (allegedly) believed that if caught bribing physicians to write dodgy prescriptions, perhaps they’d be fined but they wouldn’t do hard time.

That was then; this is now. The question currently is will the newly minted (and weekly metamorphosing) Department of Justice shift the focus away to or from individuals involved in corporate crimes?

The answer appears to be “no,” for now as Attorney General Jeff Sessions, former senator from Alabama, has recently hired his own outside counsel, litigator Charles Cooper, to represent him in the legal debacle that’s been escalating for months in the Trump Administration.

Steve's Take: Scoundrels such as Michael Babich, et al, should serve hard time Click To Tweet

President Trump has softened some of his harsh rhetoric against big pharma execs, having initially accused them of “getting away with murder.” Now with the media circus, oh, I mean trial, of Pharma Bro Martin Shkreli having begun this past week, it would serve the public interest if he and such scoundrels as Michael Babich, et al, are prosecuted and, if found guilty, actually serve the appropriate jail time.

Unlike 2016, here’s hoping the 2017 Rx Hall of Shame goes begging for new members.