Former Insys sales exec to shell out $9.5M in opioid spray kickback scheme

Insys’ former VP of sales has settled and turned state's evidence in an Arizona kickback suit alleging an executive-driven scheme to buy scripts for the company’s powerful opioid spray, Subsys.

Alec Burkaloff, who pleaded guilty in a Boston courthouse in November on federal racketeering charges, agreed Wednesday to forfeit $9.5 million and admit his role in a plan to induce physicians to write scripts for the company’s under-the-tongue fentanyl spray as part of a paid speaker program he personally managed.

"Individuals like Alec Burkaloff used unlawful business practices to earn millions of dollars and to fan the flames of opioid addiction," said Arizona Attorney General Mark Brnovich in a release. "This ‘profits-over-patients’ attitude has had a devastating impact on individuals and families throughout this state."

As part of his settlement, Burkaloff agreed to cooperate with the state in a continuing investigation against former Insys CEO Michael Babich and founder John Kapoor, who directed the company’s sales team to award speaker fees in return for Subsys scripts, Arizona prosecutors said.

The Arizona case runs parallel to a federal whistleblower suit that ensnared Burkaloff, Babich and Kapoor and led to the indictment of five New York doctors for accepting kickbacks.

At Kapoor’s federal trial currently underway in Boston, prosecutors presented an internal video showing Burkaloff and another sales rep rapping about courting physicians and capitalizing on opioid titration, or boosted dosages for patients who form a tolerance to the drug.

"To be great, it takes a decision to be better than the competition," the reps rapped. "Get a speaker you can meet with over supper. We can come to your office. We can go and bring some lunch in. While your staff is getting fed we can start discussing Subsys."

The video was a particularly poignant piece of evidence in a slew of accusations against the company, including holding sham promotional events to pay doctors back for subscriptions, treating doctors with trips to strip clubs and lavish dinners and offering jobs to physicians’ relatives.

Federal prosecutors have tied those aggressive sales tactics to pressure from the top. Babich testified in February that Kapoor was so hell-bent on driving sales that he instituted a bonus program for reps to convince doctors to prescribe high amounts of Subsys spray.

Kapoor has pleaded not guilty on federal charges.

Insys’ speaker program delivered $7.50 in revenue per $1 invested—a total of $4.1 million—by the end of 2012, Bloomberg reported, citing evidence presented in court. Babich, who pleaded guilty to federal conspiracy and mail fraud charges in January, is awaiting sentencing as Kapoor’s trial continues. Babich resigned from the Insys CEO post in 2015.

Two sales reps pleaded guilty to federal kickback charges last year.

With Kapoor, Babich and Burkaloff off the payroll, Insys agreed to a $150 million settlement with the U.S. Department of Justice in August, which will be paid out over five years.

The Insys lawsuits present a rare case when C-level executives of pharma companies have faced charges for their alleged roles in mismarketing drugs. However, amid the nation’s booming opioid addiction crisis, a wave of state and federal lawsuits questioning Purdue’s OxyContin marketing could threaten top-level executives and the company’s billionaire backers, the Sackler family.

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