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Drug manufacturing process, Subsys

Former Opiate Manufacturer Arrested in Subsys Kickback Scheme

The billionaire former CEO of the opiate manufacturing firm Insys Therapeutics, Inc., was arrested last month on charges of fraud, racketeering and violating federal anti-kickback laws. Jonathan Kapoor, 74, of Phoenix, Arizona, was charged with heading a nationwide conspiracy in which company executives bribed physicians to prescribe the company’s sublingual fentanyl preparation, Subsys, for off-label use.

Subsys is only approved for breakthrough cancer pain in opiate-tolerant patients. It carries a black-box warning and is subject to a strict TIRF-REMS requirements that include prescriber education and a signed statement that the physician understands the use for which the drug is approved. But, according to federal prosecutors, Kapoor’s company provided bribes and kickbacks which induced doctors to write multiple prescriptions for Subsys for patients who did not have cancer, some of whom were opiate-naive.

One case involved a young, developmentally disabled woman named Sarah Fuller, 32, whose doctor prescribed Subsys for chronic pain. According to Sarah’s parents, an Insys representative talked to them about the drug, describing it as an approved treatment for chronic pain. Dr. Vivienne Matalon, an internal medicine physician, prescribed the medication, instructing Fuller to take it every 4 hours, six times each day.

Fifteen months later, Sarah died after suffering an “adverse reaction” to Subsys and aprazolam. The New Jersey State Board of Medical Examiners subsequently suspended Matalon’s license after Sarah’s story and those of two other patients, both of whom stopped taking Subsys, came to light.

Sarah’s parents have filed a lawsuit against Matalon, the mail-order distributor of the drug, and Insys.

A Compelling Case

The case against the former Insys CEO is compelling. The company has been the subject of multiple investigations since it began marketing Subsys in 2012. For example, in 2015 the state of Oregon brought a lawsuit against Insys alleging that it paid doctors who were not qualified in pain management to write prescriptions for Subsys and promote the drug for the use of “mild pain.” The company settled the suit for $1.1 million, according to the Oregonian.

And in December 2016, federal prosecutors in New York indicted six former Insys executives on charges of violating the federal Antikickback Statute and insurance fraud. The fraud charges stemmed from an elaborate scheme in which company representatives induced insurers to pay for the drug by saying they worked for a doctor’s office and were requesting the drug for patients who had cancer, even when they did not. 

Bribes Disguised as Speaking Fees

Despite multiple investigations in various states, to date few of the doctors involved in the Subsys kickback scheme have been prosecuted, in part because most of the bribes were disguised as speaking fees. According to CMS records, Insys paid doctors $6.3 million in 2015, mostly for attending dinners and speaking to other physicians to promote the drug. Four doctors received fees of over $100,000, according to Forbes. And 11 more received $75,000 or more.

But collecting speaking fees for promoting a drug is not illegal, unless the speaker is promoting it for off-label use. Nonetheless, as of this writing at least one provider has been convicted of violating federal antikickback laws in connection with Subsys. In June 2015,  Heather Alfonso, a nurse practitioner who worked at a headache and pain management clinic, plead guilty to accepting $83,000 in illegal payments for prescribing $1.6 million of Subsys, mostly to people who didn’t have cancer. Given the broad scope of the ongoing investigation, it’s possible that more indictments will be forthcoming this year.

Learn More

The federal Antikickback Statute is broad and unforgiving. It provides for strict penalties to both sides of any prohibited transaction, which the law defines as “an exchange (or offer to exchange) anything of value in an effort to induce (or reward) the referral of any federal healthcare program business.” A conviction for a single violation carriers heavy penalties, including a fine of up to $25,000 and up to five years imprisonment. The federal government may also impose civil penalties, which can result in treble damages plus $50,000 for each violation. Convicted persons are also prohibited from participating in any federal healthcare programs, including Medicare and Medicaid.

We at the Carmoon Group know our physician clients are ethical, law-abiding practitioners. Nevertheless, unsuspecting victims are caught up in nefarious schemes every day. That’s why it’s absolutely essential that you work with a knowledgeable risk management professional who can help you stay on the right side of state and federal law. Don’t wait until something untoward occurs. Just give us a call to set up an appointment for a free consultation to discuss your business insurance needs. Or reach out to us online and we’ll get back to you at a convenient time.

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Floyd Arthur

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