Insys Founder Gets 5 1/2 Years in Prison for Opioid Fraud
Kapoor’s sentencing is a step forward for governments seeking to hold executives accountable for the ongoing opioid crisis.
(Bloomberg) -- Insys Therapeutics Inc. founder John Kapoor -- the first top executive of an opioid maker convicted of crimes tied to the painkillers -- was sentenced to 5 1/2 years in prison for leading a conspiracy that helped spawn a U.S. crisis over the highly addictive medicines.
Sentencing for the former billionaire chief executive officer came after six of his managers were ordered to serve time behind bars for their roles in a racketeering scheme featuring sham speakers’ fees for doctors who ramped up their prescriptions of Subsys, the company’s opioid-based pain medicine.
Prosecutors described Kapoor, 76, as the “fulcrum” of the conspiracy to generate billions of dollars in Subsys sales by seducing doctors into wrongfully broadening use of a drug intended only to manage severe cancer pain. Kapoor also was convicted of blessing the creation of a call center designed to dupe insurance companies into covering the shady prescriptions.
“I never wanted Subsys to be prescribed for patients who did not need it,” Kapoor said in federal court in Boston on Thursday. “Some people now think of me as wanting to cause addiction, or as not caring about them. It is a stain that will never be washed away. But it’s not who I am.”
But U.S. District Judge Allison Burroughs said Kapoor “certainly was one of the central players” and one of the “co-equals at the top” of the management team that oversaw the scheme. She ordered the Insys founder to begin serving his sentence in March, she said.
Prosecutors had asked for as long as 15 years, arguing that Kapoor “ran Insys without a moral compass, without any concern his strategies would harm people.”
Earlier in the hearing Thursday, several victims urged the judge to impose a maximum sentence.
“Kapoor and his capos are no different than mobsters,” said Deborah Fuller, whose daughter Sarah, 32, died in 2016 after being prescribed Subsys for chronic pain. “They killed Sarah and others like her and ruined the lives of so many.”
Kapoor’s sentencing is a step forward for governments seeking to hold pharmaceutical executives accountable for the ongoing opioid crisis. It comes as thousands of state and local governments move ahead with lawsuits against drugmakers seeking to recover billions of dollars spent combating the epidemic.
A jury convicted Kapoor and several other Insys executives last year at a trial. On Wednesday, Burroughs sentenced Michael Babich, Kapoor’s protege and successor as CEO, to 30 months in prison -- six more than prosecutors recommended -- after noting he was one of the “co-architects” of the conspiracy.
Drug-Bottle Costume
Babich and Alec Burlakoff, the former head of sales, pleaded guilty before trial and testified against their colleagues. Burlakoff, who infamously donned a costume representing a bottle of Subsys and then danced and rapped in a internal sales video, was sentenced Thursday to 26 months, after Burroughs described his actions as an “offense of greed.”
It was Burlakoff who hired stripper Sunrise Lee as an Insys sales manager. Testimony showed she gave a Chicago doctor a lap dance to encourage him to keep writing lots of Subsys prescriptions. Lee and former executives Michael Gurry, Richard Simon and Joseph Rowan were sentenced to terms ranging from about one year to almost three years.
Massachusetts U.S. Attorney Andrew Lelling expressed disappointment Thursday at the sentences for Kapoor and the other executives.
“My view is that the public interest demanded higher sentences,” Lelling said outside the courthouse. “We think the trial evidence was pretty clear that John Kapoor ran the ship.”
Insys, founded by Kapoor in 1990, became the first opioid maker to file for bankruptcy after Kapoor and his colleagues were charged with racketeering and conspiracy. Earlier this month, a judge approved the company’s Chapter 11 plan. Creditors are getting pennies on the dollar for their claims.
More Profits
During a 10-week trial in May, prosecutors took jurors deep into Insys’s inner workings, where Kapoor was portrayed as a driven executive who tongue-lashed subordinates to come up with ways to generate more Subsys profits, according to Babich’s testimony.
The key to the case -- according to prosecutors -- was an internal memo charting the company’s returns on payments to doctors who participated in Insys’s sham speakers programs. Physicians were paid to attend dinners, supposedly to talk-up Subsys to their colleagues, even if no other doctors showed up.
Burlakoff, the former sales chief, told the judge on Thursday that his drive to succeed had made him ignore “how unethical what we were doing was. The only thing I could think was how could I keep up with the fast and furious pace necessary to get ahead.”
Kapoor’s lawyers sought to persuade Burroughs that the health-care entrepreneur should spend no more than a year and a day in prison. The judge should take into account his age, charitable works and status as a first-time, non-violent offender in setting his penalty, they said in court filings.
They urged Burroughs to see Kapoor “as a person and not a caricature.” They also said the former billionaire’s net worth “now stands at well below $200 million.”
‘So Sorry’
After listening to the testimony of Subsys victims in court, Kapoor said, “I listened to you, and from my heart to you and your families I am so sorry for your suffering.”
Besides jail time, the government sought more than $306 million in restitution from Kapoor and the other executives for insurers and other victims. In addition, the government seeks forfeiture of the former executives’ salaries and stock profits. For example, prosecutors want to take $43 million from Babich.
The judge hasn’t made a decision on the forfeiture and restitution requests.
The case is U.S. v. Kapoor, 16-cr-10343, U.S. District Court, District of Massachusetts (Boston).
To contact the reporters on this story: Jef Feeley in Wilmington, Delaware at jfeeley@bloomberg.net;Janelle Lawrence in New York at jlawrence62@bloomberg.net
To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Steve Stroth, Joe Schneider
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