Law360 (November 24, 2021, 1:02 PM EST) — Federal prosecutors in the Insys Therapeutics Inc. opioid kickback case won a fight over how much the founder and former executives owe victims, as a Boston federal judge on Tuesday ordered up the $48.3 million restitution sum requested by the government.
The First Circuit’s opinion in August reopened the fight over restitution for the former Insys executives convicted of running a kickback scheme with co-conspirator doctors who would dish out prescriptions for the company’s fentanyl spray Subsys.
The appeals court told U.S. District Judge Allison D. Burroughs to take another look at the “insupportable” calculations that led the judge to order $59.8 million in restitution, largely for insurers who paid out claims for the drug.
Both sides agreed on a narrowed $48.3 million figure to cover Subsys prescriptions that went through the Insys Reimbursement Center. But the government stopped there, saying the call center was where Insys “lied all day, every day.” The executives, meanwhile, pressed for a second cut.
Admitting she “wrestled with how to implement” the First Circuit’s order, Judge Burroughs denied the defendants’ request to reduce the sum further, to $35.3 million, which would roughly exclude prescriptions that went through the call center but could have been for legitimate prescriptions.
“There is no explicit indication in the First Circuit’s opinion that it wanted this court to account for legitimate prescriptions from the thirteen co-conspirators that passed through the IRC,” Judge Burroughs said.
Insys founder John Kapoor and his former underlings Michael Gurry, Joe Rowan and Rich Simon said a second reduction to 73% of the government’s request was needed to account for legitimate, on-label Subsys prescriptions that went through the call center for cancer patients who needed the drug.
The judge said the executives’ distinction between cancer patients and non-cancer patients was “misplaced.”
“The fact that 27% of the prescriptions were for patients with reported cancer, however, does not mean that those prescriptions were legitimate,” Judge Burroughs said.
The judge backed up her decision with a quote from the appeals court’s opinion that said all prescriptions that the call center handled were “tainted by fraud.”
Prosecutors argued during a blockbuster 2019 trial that the company set up a sham speaker program that was ostensibly meant to educate doctors about the drug, but in actuality served as a means to line the pockets of crooked doctors with cash and other perks, so they would keep writing Subsys prescriptions.
After a Boston jury convicted Kapoor, Gurry, Rowan, Simon and Sunrise Lee on a racketeering charge, Judge Burroughs set aside part of the verdict that had said the five violated the Controlled Substances Act, effectively labeling them white collar drug dealers.
The First Circuit’s opinion found that the jury got it exactly right, reinstating the CSA conviction and rejecting claims that patients’ testimony about the horrors of their addiction to Subsys tainted the case. The appellate court left the executives’ prison terms intact, which ranged from a year for Lee to five and a half years for Kapoor.
Counsel for Kapoor, Simon, Rowan and the government declined to comment on the order when reached Wednesday. Representatives for Gurry were not immediately available for comment.
The government is represented by K. Nathaniel Yeager and Alexandra W. Amrhein of the U.S. Attorney’s Office for the District of Massachusetts.
Kapoor is represented by Beth A. Wilkinson, Kosta S. Stojilkovic and Chanakya A. Sethi of Wilkinson Stekloff LLP, and Brien T. O’Connor and Aaron M. Katz of Ropes & Gray LLP.
Simon is represented by William W. Fick and Daniel N. Marx of Fick & Marx LLP.
Rowan is represented by Alexandra Gliga of White & Case LLP.
Gurry is represented by Tracy A. Miner and Megan A. Siddall of Miner Siddall LLP.
The case is U.S. v. Babich et al., case number 1:16-cr-10343, in the U.S. District Court for the District of Massachusetts.
–By Brian Dowling with additional reporting by Chris Villani. Editing by Alyssa Miller