Mon, Jan. 20

Drug company founder indicted for pushing opioids

PHOENIX -- The founder of a Chandler manufacturer of opioids who was indicted last week is stepping down from his seat on the board of directors.

“I am confident that I have committed no crimes and believe I will be fully vindicated after trial,’’ John Kapoor wrote Sunday to members of the board of Insys Therapeutics.

“Nevertheless, I realize that my continued involved with Insys will only serve to draw unnecessary attention to the company and its employees,’’ he wrote. Kapoor, who has been on the board since its incorporation in 1990 and owns about two thirds of the company’s shares, also said the indictment would “distract the management team from my primary goal when I founded Insys -- helping patients.’’

The news comes as the company announced Monday it is awaiting regulatory approval to resume trading of its stock.

In a release, Insys reported that trading was placed on hold after the close of the market on Thursday.

That followed the indictment of John Kapoor, a Scottsdale resident, by a federal grand jury on various felony charges related to how the company has marketed its fentanyl spray. Other former Insys officials also are charged with various crimes.

The news release says the company received a “series of questions’’ from NASDAQ but did not provide specifics. Insys said only that the questions “have been addressed.’’

“The company is awaiting response from NASDAQ regarding the resumption of trading,’’ it says.

In the meantime, the company stock, which had been trading close to the $15 range less than six months ago, ended up at $5.74 before trading was suspended.

Kapoor, 74, and the others are charged with overly aggressive and illegal marketing of Subsys, the company’s spray form of fentanyl, a opioid narcotic many times more powerful than heroin.

According to the indictment, the executives used bribes and kickbacks to get doctors to issue new prescriptions for Subsys, which at the moment is one of the company’s two available products. They also are charged with using speaker fees, food and entertainment to get doctors to increase not only the number of prescriptions they were writing but also to write prescriptions at higher doses than appropriate.

Kapoor, in his letter, said he will continue to have a long-term commitment to the company as a stockholder, though he is putting his shares in a trust “to be controlled independently.’’

In yet another release this weekend, the company provided investors with a glance of what it thinks a separate Department of Justice civil investigation will end up costing.

According to that release, the company had accrued $150 million in reserves by the end of September. It said that figure “represents the company’s best estimate of the minimum liability exposure the company expects to pay over five years in connection with this matter.’’

“This estimate reflects a minimum exposure at which management has determined a willingness to settle these matters,’’ the release states. “The Department of Justice has not accepted management’s offer, and there can be no assurance that future discussions with the government to resolve these matters will be successful.’’

More to the point, it says “the ultimate amount of potential liability may materially exceed the $150 million accrual the company has established.’’

In yet another announcement Sunday, Insys announced that Patrick Fourteau had resigned from the board for “personal reasons.’’ He has been on the board since 2011.

Among the allegations against Kapoor and the others is that they were actively trying to get doctors to prescribe the drug for purposes for which it was not intended.

The very powerful narcotic, which is administered by spraying it under the tongue, was approved by the U.S. Food and Drug Administration for “breakthrough pain’’ like that being suffered by those who have cancer.

What Insys was doing, the indictment charges, is getting insurers into approving payment

for the drug by misleading them into believing that was the patient’s need. In fact, the legal papers charge, both the doctors who were allegedly getting the kickbacks and bribes and Insys employees knew the patient’s actual condition was something less serious.

William Weinreb, the acting U.S. Attorney for Massachusetts who brought the indictment, acknowledged that once the FDA has approved a drug for one use, it’s not a crime for doctors to have “off-label’’ uses, prescribing it for any other use.

But Weinreb told Capitol Media Services that has to be “in the normal course of their medical practice and according to their medical judgment.’’ He said that’s not what happened here.

“It is illegal for a company to distribute the drug for an unapproved use,’’ Weinreb said. “And it’s illegal for doctors to prescribe it not because patients need it but simply to line their own pockets.’’

Kapoor was released from custody Friday after posting $1 million cash bond. A federal magistrate in Phoenix also ordered him to wear a location-monitoring device and forbid him from leaving Maricopa County except to go to his arraignment next month in federal court in Boston.

On Twitter: @azcapmedia

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