Kapoor Deserves 15 Years for Opioid-Crisis Role, U.S. Says

(Bloomberg) -- John Kapoor should serve 15 years in prison for leading a racketeering conspiracy that helped fuel the national opioid crisis with bribes to boost prescriptions of a highly addictive painkiller, federal prosecutors said.

Four other former executives at Insys Therapeutics Inc., who were convicted at trial along with Kapoor, the former chief executive officer, deserve prison terms ranging from six to 11 years, the U.S. said in a court filing on Wednesday. Kapoor, 76, was the first CEO convicted in a federal opioid trial.

Kapoor Deserves 15 Years for Opioid-Crisis Role, U.S. Says

“Sheer greed caused each of the defendants in this case not only to participate in a massive campaign of bribery and fraud, but to ignore the dangers of a drug that is 70 to 100 times more potent than morphine,” the government said in its sentencing memo, filed in federal court in Boston. “The criminal agreement at the heart of this case was driven by that greed, and it destroyed the health and safety of patients throughout the United States.”

Michael Babich, Kapoor’s protege and his successor as CEO, and Alec Burlakoff, the ex-vice president of national sales, who both pleaded guilty and testified against their former colleagues, should serve 5 1/2 and five years, respectively, prosecutors said.

The seven are scheduled to face sentencing in January. The court intends to sentence Kapoor on Jan. 10, with the others earlier in the week.

Kapoor deserves leniency for a lifetime of hard work, philanthropy and caring for others, his attorneys said in a 66-page filing. The defense presented 72 letters of support from Kapoor’s friends, family and business associates.

Prosecutors wrongly portrayed Kapoor as operating the company like a mob boss, his lawyers said, when it was the government’s own witnesses, Babich and Burlakoff, who cashed out with more than $45 million in stock sales. Kapoor himself “never realized any profit” from the $80 million he invested in launching the fentanyl-based painkiller, Subsys, they said.

Kapoor Deserves 15 Years for Opioid-Crisis Role, U.S. Says

“None of this is to say that Dr. Kapoor is blameless for what happened at Insys,” according to the memo. “He hired and promoted Babich and Burlakoff to leadership positions. Burlakoff unquestionably bribed doctors, and did so with the relish and gall of a born hustler and confidence man.”

“If a captain should go down with his ship,” the lawyers said, “then Dr. Kapoor accepts that he must face consequences for what happened at Insys.”

During a 10-week trial in May, prosecutors took jurors deep into the inner workings of the Phoenix-based company, where Kapoor demanded more and more profit, according to Babich’s testimony. The jury deliberated for almost four weeks.

The smoking gun, the government said, was an internal company document charting the company’s rate of return on its investment in doctors and other health practitioners paid for being part of Insys’s phony speakers’ program. Sales representatives’ bonuses were tied to the dosage of Subsys prescribed. Jurors viewed a video shown at a national sales meeting in 2015 in which an executive, dressed as a giant bottle of the drug, danced and rapped about the virtues of increasing doses.

Some of the government’s 39 witnesses said the company lured doctors into writing more Subsys prescriptions with sexy sales reps and lavish dinners at a restaurant Kapoor owned. One of the former executives, Sunrise Lee, a regional sales manager who previously had worked as a stripper, once gave a lap dance to one of the doctors, a former employee testified.

Several doctors involved in thescheme were sentenced to prison, including key trial witness Gavin Awerbuch, 61, who testified that he pocketed more than $130,000 from Insys for his role in the speakers’ program.

“It was just easy money for me,” Awerbuch said on the stand. “I got paid $1,600 to show up, have a nice meal and go home.”

He is scheduled for release in May after serving about a year, according to Federal Bureau of Prisons records.

In addition to bribing doctors, Insys developed an in-house call center whose representatives duped insurance companies into covering the costs of Subsys by falsely claiming patients were suffering from cancer pain -- the intended use for Subsys. Jurors heard hours of recorded calls in which Insys employees misrepresented patient records.

Kapoor developed the powerful liquid opioid after witnessing his wife’s painful death from cancer.

The U.S. wants Michael Gurry, former vice president of managed markets, and Richard Simon, former national director of sales, to each serve 11 years in prison. Former regional sales director Joseph Rowan should serve 10 years, while Lee should serve six years, prosecutors said.

Lawyers for Burlakoff, who testified against his colleagues for seven days, asked the court to sentence him to five years’ probation and a $4,000 fine, arguing he “accepts full responsibility not only for the conduct to which he pleaded guilty, but also for the severe consequences that his actions have had on patients, on his family, and on himself.”

Babich’s lawyers told the court their client should receive leniency through a period of home confinement, in recognition of his “critical” testimony against Kapoor and Gurry. His crimes stemmed from his own lack of experience in pharmaceuticals and his naivete in hiring, his defense said. Babich was a manager of some of Kapoor’s personal investments when Kapoor became his mentor, sent him to graduate school and eventually elevated him to CEO when Babich was in his 30s.

“Mike now recognizes that he failed in a fundamental responsibility to insist upon compliant behavior and stand up to Dr. Kapoor’s ever-increasing pressure to increase sales,” his attorneys said in a filing.

Insys filed for bankruptcy protection from creditors in June in the face of lawsuits and investigations over its handling of Subsys. The filing came just after the company agreed to pay hundreds of millions of dollars to settle a probe by U.S. prosecutors over its marketing of the drug.

The case is U.S. v. Kapoor, 16-cr-10343, U.S. District Court, District of Massachusetts (Boston).

©2019 Bloomberg L.P.

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