Insys files for bankruptcy after $225M settlement

In the aftermath of the settlement, Insys has filed for bankruptcy protection.

“After conducting a thorough review of available strategic alternatives, we determined that a court-supervised sale process is the best course of action to maximize the value of our assets and address our legacy legal challenges in a fair and transparent manner,” Insys CEO Andrew Long said in a statement.

Both the criminal and civil investigations resulted from Insys’ payment of kickbacks and other unlawful marketing practices in connection with the marketing of its fentanyl drug Subsys, a highly addictive narcotic intended for cancer patients suffering pain.

On June 5, the U.S. Attorney’s Office for the District of Massachusetts filed an information charging Insys and its operating subsidiary with five counts of mail fraud. According to the charging document, from August 2012 to June 2015, Insys began using “speaker programs” purportedly to increase brand awareness of Subsys through peer-to-peer educational lunches and dinners. In fact, the programs were used as a vehicle to pay bribes and kickbacks to targeted practitioners in exchange for increased Subsys prescriptions to patients and for increased dosage of those prescriptions.

One practitioner targeted by Insys was a physician’s assistant who practiced with a pain clinic in Somersworth, N.H. During the first year that Subsys was on the market, the physician’s assistant did not write any Subsys prescriptions for his patients.

In May 2013, the physician’s assistant joined Insys’ sham speaker program knowing that it was a way to receive kickbacks for writing Subsys prescriptions. After joining the sham speaker program, the physician’s assistant wrote approximately 672 Subsys prescriptions for his patients—many of which were medically unnecessary—and, in turn, received $44,000 in kickbacks from Insys.

Criminal and civil resolutions

As part of the criminal resolution, Insys agreed to a detailed statement of facts outlining its criminal conduct with respect to the illegal marketing of Subsys. Insys will enter into a five-year deferred prosecution agreement with the government while Insys’ operating subsidiary will plead guilty to five counts of mail fraud pursuant to the plea agreement that will be filed in the District of Massachusetts.

According to the terms of the criminal resolution, Insys will pay a criminal fine of $2 million and forfeiture of $28 million. The court has not yet scheduled the plea hearing. As part of the civil resolution, Insys agreed to pay $195 million to settle allegations that it violated the False Claims Act (FCA).

In May 2019, five former Insys executives were convicted after trial of racketeering conspiracy in connection with the marketing of Subsys. In total, eight company executives have now been convicted in Boston for crimes relating to the illegal marketing of Subsys.

In April 2018, the United States intervened in five qui tam lawsuits accusing Insys of violating the civil FCA. In its complaint, the United States alleged Insys paid kickbacks to induce physicians and nurse practitioners to prescribe Subsys for their patients. In addition to payments for sham speaker program speeches, the kickbacks also allegedly took the form of jobs for the prescribers’ relatives and friends and lavish meals and entertainment.

The United States also alleged Insys improperly encouraged physicians to prescribe Subsys for patients who did not have cancer and lied to insurers about patients’ diagnoses to obtain reimbursement for Subsys prescriptions that had been written for Medicare and TRICARE beneficiaries.

Corporate integrity agreement

Insys entered into what the government called an “unprecedented” five-year corporate integrity agreement (CIA) and conditional exclusion release with the Office of Inspector General. Because of the extensive cooperation provided by Insys in the prosecution of culpable individuals and its agreement to enhanced CIA requirements, OIG elected not to pursue exclusion of Insys at this time.

The CIA includes several “novel provisions,” according to the government, including enhanced material breach provisions, designed to protect federal healthcare programs and beneficiaries. In addition, Insys admitted to a Statement of Facts and acknowledged the facts provide a basis for permissive exclusion. OIG did not release its permissive exclusion authority, as it generally does for CIA parties in FCA settlements. Instead, OIG will provide such a release only after Insys satisfies its obligations under the CIA.

The allegations resolved by the settlement stem from five lawsuits that were filed under the qui tam, or whistleblower, provisions of the FCA, which permit private citizens to bring suit on behalf of the United States for false claims and share in any recovery. The whistleblowers’ share of the settlement has not yet been determined.

Bankruptcy filing

On June 10, Insys filed for Chapter 11 bankruptcy protection, less than one week after pleading guilty to the fraud charges. Insys announced it has filed voluntary cases under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court in the District of Delaware to facilitate the sale of substantially all of the company’s assets and address the company’s legacy legal liabilities.

Insys said it intends to continue operating its business in the ordinary course while it pursues these transactions through the court-supervised sale process.