Opioid Lawsuit News: Former Insys CEO to Admit Guilt in Subsys Spray Kickback Case

Published on January 3, 2019 by Sandy Liebhard

The former CEO of Insys, Inc. will admit to his role in a kickback scheme involving Subsys Spray, an under-the-tongue version of a powerful opioid called fentanyl.

According to a January 2nd filing in the U.S. District Court, District of Massachusetts, Michael Babich has agreed to plead guilty to conspiracy and mail fraud charges. Federal prosecutors have requested a January 9th plea hearing.

The terms of Babich’s deal have not been disclosed, so it’s not clear what penalties he will face or if he will testify against other Insys executives.

Subsys Spray and Opioid Addiction

The U.S. Food & Drug Administration (FDA) approved Subsys Spray in 2012. By 2015, sales of the fentanyl spray had grown to roughly $329 billion.

Fentanyl is a highly-addictive opioid that’s 80-times stronger than morphine and 50-times more powerful than heroin. For this reason, the FDA only approved Subsys Spray to treat breakthrough pain experienced by adult cancer patients who have developed a tolerance to other opioid painkillers. In addition, the drug can only be prescribed by a medical practitioner registered with the Drug Enforcement Administration.

Because of its high price-tag, most insurers will not cover Subsys Spray without prior authorization or for off-label uses.

Yet according to a growing number of opioid lawsuits, many patients became addicted to fentanyl after they were prescribed Subsys Spray for back pain, headaches, and other non-cancer indications.

Insys Executives Allegedly Used Kickbacks, Fraud to Drive Opioid Sales

Since 2016, seven high-ranking Insys executives have been indicted on federal criminal charges ranging from racketeering to fraud.

Prosecutors allege that from 2012 to 2015, the executives conspired to pay kickbacks to induce physicians to prescribe Subsys Spray “without regard to the medical needs of … Subsys patients.”  The government also claims that the executives defrauded insurers to obtain reimbursement for off-label prescriptions.

According to a U.S. Senate report issued in September 2017, Insys employees would call insurers using carefully worded scripts intentionally designed to leave the impression that the caller worked for a doctor’s office. The scripts also allowed Insys employees to suggest that Subsys was being prescribed to cancer patients without explicitly saying so.

Insys also masked its outgoing phone number so that it wouldn’t appear on caller IDs, and “reportedly provided a 1-800 number manned by another Insys representative — instead of contact information for the prescribing physician.”

Indicted Insys Executives Head to Trial Later this Month

Alec Burlakoff, the former head of sales at Insys, plead guilty to a single count of racketeering conspiracy last November.

Five other Insys executives, including founder John Kapoor, have plead not guilty. They are scheduled to go on trial later this month.

According to Reuters, Michael Babich is married to Natalie Babich, a former Insys sales representative. In 2017, she plead guilty to paying doctors kickback to prescribe Subsys Spray and agreed to testify against other Insys executives.

Last August, Insys agreed to settle a related U.S. Justice Department probe for at least $150 million.

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