Insys's Kapoor `Tightly Controlled' Bribe Scheme, U.S. Says

(Bloomberg) -- Billionaire John Kapoor “tightly controlled’’ a scheme to illegally pay doctors to help boost sales of his company’s opioid-based painkiller and attended a meeting where two physicians were offered bribes, prosecutors say.

Kapoor, founder and former CEO of Insys Therapeutics Inc., is facing racketeering and conspiracy charges tied to allegations he and other former executives bribed doctors to write more prescriptions for Subsys, a fentanyl-based drug designed to treat cancer pain. Subsys contains an opioid painkiller that’s 80 times more powerful than morphine.

Witnesses and emails will show the health-care entrepreneur knew subordinates were using speaker’s fees to bribe doctors and finding ways to evade the U.S. Drug Enforcement Agency’s reviews of suspicious drug orders, Assistant U.S. Attorney K. Nathaniel Yeager in Boston said in a court filing late Thursday. Kapoor pleaded not guilty to the charges.

“Kapoor attended a meeting in February 2014 at which two prescribers were explicitly offered bribes,’’ Yeager said.

The government says when he saw the bribes were generating more Subsys sales, Kapoor pumped more money into speakers’ fees. The bribery fund grew from $550,000 in 2012 to $10.5 million two years later, according to the filing.

‘Thin’ Case

It’s the first time prosecutors have laid out their case against Kapoor in detail. Others charged include Michael Babich, Insys’s former CEO, Alec Burlakoff, the ex-vice president of sales, and Richard Simon, once the company’s national sales director. They all deny wrongdoing.

Yeager’s filing came after Brian Kelly, Kapoor’s defense attorney, told a judge Thursday the government’s case against the billionaire was weak. “The indictment is really pretty thin on him,’’ Kelly said. “He intends to fight the case and he intends to be vindicated.’’

Kelly didn’t immediately return a call Friday for comment on the government’s filing.

Kapoor and his subordinates are accused of not only bribing doctors to prescribe the pain-killing spray, but also tricking insurers to cover it by misleading them about patients’ pain diagnoses and other drugs they’ve taken in the past, according to court filings.

Kapoor, who is free on bail and living in Phoenix, sought a judge’s blessing to shed an electronic-tracking bracelet because it makes it impossible for the 74-year-old businessman to jog. In the filing Thursday, prosecutors opposed Kapoor’s request to dump the tracking device, noting that he was worth $2 billion and had access to private planes. U.S. Magistrate Judge Jennifer Boal in Boston hasn’t ruled on the request.

The government is “concerned Kapoor will flee, as it is clear, given his resources, his flight from this country is much easier to accomplish and his ability to live a comparable lifestyle out of the United States is sustainable,’’ Yeager added in Thursday’s filing.

The case is U.S. v. Babich et al, 16-cr-10343, U.S. District Court, Massachusetts (Boston).

To contact the reporters on this story: Jef Feeley in Wilmington, Delaware at jfeeley@bloomberg.net, Janelle Lawrence in Boston at jlawrence62@bloomberg.net.

To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Elizabeth Wollman, Paul Cox

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