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Pharmaceutical Executives Charged in Racketeering Scheme
Department of Justice
U.S. Attorney’s Office
District of Massachusetts
BOSTON – Several pharmaceutical executives and managers, formerly employed by Insys Therapeutics, Inc., were arrested today on charges that they led a nationwide conspiracy to bribe medical practitioners to unnecessarily prescribe a fentanyl-based pain medication and defraud healthcare insurers.
The indictment alleges that Michael L. Babich, 40, of Scottsdale, Ariz., the former CEO and President of the company; Alec Burlakoff, 42, of Charlotte, N.C., former Vice President of Sales; Richard M. Simon, 46, of Seal Beach, Calif., former National Director of Sales; former Regional Sales Directors, Sunrise Lee, 36, of Bryant City, Mich. and Joseph A. Rowan, 43, of Panama City, Fla.; and former Vice President of Managed Markets, Michael J. Gurry, 53, of Scottsdale, Ariz., conspired to bribe practitioners in various states, many of whom operated pain clinics, in order to get them to prescribe a fentanyl-based pain medication. The medication, called “Subsys,” is a powerful narcotic intended to treat cancer patients suffering intense episodes of breakthrough pain. In exchange for bribes and kickbacks, the practitioners wrote large numbers of prescriptions for the patients, most of whom were not diagnosed with cancer.
The indictment also alleges that the now former corporate executives charged in the case conspired to mislead and defraud health insurance providers who were reluctant to approve payment for the drug when it was prescribed for non-cancer patients. They achieved this goal by setting up the “reimbursement unit” which was dedicated to obtaining prior authorization directly from insurers and pharmacy benefit managers.
“Patient safety is paramount and prescriptions for these highly addictive drugs, especially Fentanyl, which is among the most potent and addictive opioids, should be prescribed without the influence of corporate money,” said United States Attorney Carmen M. Ortiz. “I hope that today’s charges send a clear message that we will continue to attack the opioid epidemic from all angles, whether it is corporate greed or street level dealing.”
“As alleged, top executives of Insys Therapeutics, Inc. paid kickbacks and committed fraud to sell a highly potent and addictive opioid that can lead to abuse and life threatening respiratory depression,” said Harold H. Shaw, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division. “In doing so, they contributed to the growing opioid epidemic and placed profit before patient safety. These indictments reflect the steadfast commitment of the FBI and our law enforcement partners to confront the opioid epidemic impacting our communities, while bringing to justice those who seek to profit from fraud or other criminal acts.”
“We take allegations of paying kickbacks to physicians in exchange for prescribing medically unnecessary painkillers extremely seriously,” said Special Agent in Charge Phillip Coyne of the U.S. Department of Health and Human Services, Office of the Inspector General. “Working closely with our law enforcement partners, we will continue to protect the health of Medicare beneficiaries and the integrity of the nation’s healthcare system.”
The defendants were arrested this morning in their respective states and will appear in U.S. District Court in Boston at a later date. Babich is charged with conspiracy to commit racketeering, conspiracy to commit wire and mail fraud and conspiracy to violate the Anti-Kickback Law; Burlakoff, Simon, Lee and Rowan are charged with RICO conspiracy, mail fraud conspiracy and conspiracy to violate the Anti-Kickback Law; Gurry is charged with RICO conspiracy and wire fraud conspiracy.