Arizona-based CEO Charged with Conspiracy and Mail Fraud for Bribing Doctors
In a federal courtroom in Boston, former pharmaceutical CEO Michael Babich, 42, pleaded guilty on Wednesday to conspiracy and mail fraud. Babich could serve up to 25 years in prison for bribing doctors to prescribe opioids to cancer patients in a nationwide kickback scheme that allegedly defrauded insurance companies and illegally reimbursed doctors for writing certain prescriptions. However, Babich is expected to receive some leniency with prosecutors after making a deal to cooperate and could testify at trial for Insys Therapeutics Inc. founder and billionaire, John Kapoor.
The bribes and kickbacks took multiple forms.
In August of 2018, Insys agreed to pay a $150 million settlement after a battle with the U.S. Justice Department. Federal investigators accused the company of providing kickbacks veiled as “speaking engagement fees” to doctors and allegedly paid the salaries of office staff for “certain targeted practitioners.” Insys allegedly defrauded insurance companies when insurers paid for prescriptions that came as a result of bribes and kickbacks.
Former sales representative and whistleblower, Patty Nixon, reported the company was bribing doctors to prescribe highly-addictive opioids to patients who didn’t need it. After missing work due to her guilt, Nixon said she was fired.
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Bribing Doctors to Prescribe Unnecessary Fentanyl
Prosecutors in Babich’s trial argue that under the direction of Kapoor from 2012 to 2015, Babich conspired to pay doctors for writing Subsys prescriptions specifically.
Subsys is a sublingual (or under-the-tongue) pain relief spray containing fentanyl and intended for cancer patients. Fentanyl is an analog of prescription opioids like morphine, only 100 times stronger. The deadly opioid became infamous for causing a spike in overdose deaths due to its extreme potency. Fentanyl seizures by law enforcement increased sevenfold from 2012 to 2014. In 2017, 47,600 overdose deaths involved opioids.
So far, Babich is the highest-ranking executive from the Arizona-based pharmaceutical company to plead guilty. Previously in November, vice president of sales, Alec Burlakoff, pleaded guilty and agreed to testify in order to receive sentencing leniency. In addition to Burlakoff, Babich’s wife and former Insys sales representative, Natalie Babich pleaded guilty in 2017 to conspiracy. She also testified in December at the trial of former New Hampshire physician’s assistant, Christopher Clough, that he had taken kickbacks from her company. Clough was convicted by a federal jury on December 18.
In a few short weeks, five of Insys’ former executives (including erstwhile chairman, Kapoor) will go to trial for the same allegations. After Babich’s hearing on January 9, Kapoor’s lawyer, Beth Wilkinson, had no comment.