John Kapoor, billionaire founder of opioid spray manufacturer Insys Therapeutics, was arrested in Phoenix on Thursday morning and charged with RICO conspiracy, conspiracy to commit mail and wire fraud, and conspiracy to violate the Anti-Kickback law. FORBES reached out to Insys on Thursday morning but has not heard back yet. An attorney for Kapoor told CBS News, that Kapoor “is innocent of these charges and intends to fight the charges vigorously.”
“In the midst of a nationwide opioid epidemic that has reached crisis proportions, Mr. Kapoor and his company stand accused of bribing doctors to overprescribe a potent opioid and committing fraud on insurance companies solely for profit,” acting U.S. attorney William D. Weinreb said in statement. “Today’s arrest and charges reflect our ongoing efforts to attack the opioid crisis from all angles. We must hold the industry and its leadership accountable – just as we would the cartels or a street-level drug dealer.”
This arrest and charges were announced just as reports surfaced that President Trump is going to declare the country’s opioid crisis a public health emergency later today. More directly, the charges come out of a superseding indictment that was unsealed Thursday by the U.S. Attorney’s office in Massachusetts that had arrested and charged six other former Insys executives in December 2016. At that time, the six arrested were former CEO Michael Babich as well as Alec Burlakoff, 42,the former Vice President of Sales; Richard M. Simon, 46, the former National Director of Sales; former Regional Sales Directors Sunrise Lee, 36, and Joseph A. Rowan, 43; and former Vice President of Managed Markets, Michael J. Gurry, 53.
The DOJ alleges that Kapoor, 74, and the six other executives conspired to bribe doctors in states around the country to get them to prescribe Insys’ powerful fentanyl-based pain medication, Subsys, which was approved by the FDA only for treating cancer patients who suffered from severe nerve pain. The indictment also alleges that Kapoor and the other six executives conspired to defraud and mislead health insurance providers, who didn’t want to approve payments when Subsys was prescribed for non-cancer patients.
“As alleged, these executives created a corporate culture at Insys that utilized deception and bribery as an acceptable business practice, deceiving patients, and conspiring with doctors and insurers,” Harold H. Shaw, special agent in charge of the Federal Bureau of Investigation, Boston field division, said in a statement.
Kapoor, who has a $1.8 billion net worth, stepped down from his role as CEO and chairman in January, though he remained on the Board of Directors and still holds a roughly 70% stake in the company, which has seen its stock drop 34% in the last year. Kapoor also holds a stake in generic drug manufacturer Akorn Pharmaceuticals.
Kapoor was the subject of a FORBES profile last year, which investigated his habit of founding companies and allowing them to push legal and ethical limits.
“My involvement is I am an investor,” Kapoor told FORBES in an interview for the article last year. “As an investor I’m on a board. As a board member and an investor you are involved, but you are not involved in day-to-day operations, and that’s where the problems come in.”