Kapoor settlement:

File photo of John Kapoor, the founder of Insys Therapeutics, speaking at TiEcon 2015 in Santa Clara, Calif. In January 2020, the Indian American entrepreneur was sentenced to five-and-a-half years in federal prison. As part of his sentencing, a multi-million dollar monetary obligation was imposed on Kapoor, which he owes jointly and severally with his co-defendants. (India-West/Sameer Yagnik photo)

New Jersey Attorney General Gurbir S. Grewal Jan. 21 announced an anticipated $5 million settlement with Insys Therapeutics Inc. founder John N. Kapoor to resolve allegations that Kapoor unlawfully orchestrated the payment of bribes to New Jersey doctors as part of a nationwide kickback scheme to boost sales of the company’s flagship opioid drug Subsys.

After the state is reimbursed costs from the lawsuit, most of the recovery will be used to fund the state’s efforts to combat the opioid epidemic. The remainder will be divided among state agencies affected by the alleged fraudulent scheme, as required by law, according to the attorney general’s news release.

The settlement resolves a civil lawsuit filed by the attorney general and the Division of Consumer Affairs against Kapoor in 2017, asserting violations of the New Jersey Consumer Fraud Act and False Claims Act, the release said.

The Kapoor settlement is the first settlement in any of the state’s civil lawsuits against corporations and executives involved in manufacturing and fraudulently marketing opioid drugs.

The settlement does not resolve the state’s claims against Insys itself, which has declared bankruptcy and filed a plan of liquidation, or the state’s claims against other companies that engaged in misconduct involving the sale of opioids, according to the release.

“We are committed to holding accountable anyone whose bad conduct has helped fuel the opioid epidemic, whether they pushed drugs from a board room, an exam room, or a street corner,” Grewal said in a statement.

“With (the Jan. 21) settlement, we’ve recovered a substantial sum from one individual who used his perch in a corporate board room to sell addictive drugs through bribes and fraud.

“We are looking forward to additional recoveries from other opioid manufacturers and distributors, who also are responsible for helping New Jersey overcome and heal from the epidemic they unleashed,” Grewal added.

The state’s 2017 complaint alleged that Kapoor directed and approved a campaign to fraudulently market Subsys – a sublingual fentanyl spray approximately 50 times stronger than heroin and one hundred times more potent than morphine – to boost sales in New Jersey and elsewhere.

Although the U.S. Food and Drug Administration approved Subsys only for the narrow purpose of treating breakthrough pain in opioid-tolerant cancer patients, the state alleged that Kapoor arranged for Insys to bribe healthcare professionals to write Subsys prescriptions for other purposes and at higher doses than appropriate, the attorney general’s office said.

The state also alleged that the Indian American founder directed and approved a scheme to lie to insurance carriers and pharmacy benefit managers about patients’ diagnoses and treatment histories to secure payment for unwarranted prescriptions, it adds.

According to the state’s complaint against Kapoor, Kapoor’s conduct contributed to a flood of improper Subsys prescriptions, many of which resulted in payments from the state’s public employees’ health benefit and workers compensation insurance programs, the release notes.

In May 2019, a federal jury in Boston convicted Kapoor and four other Insys executives of racketeering conspiracy in connection with the nationwide Insys bribery scheme.

In January 2020, Kapoor was sentenced to five-and-a-half years in federal prison. As part of his sentencing, a multi-million dollar monetary obligation was imposed on Kapoor, which he owes jointly and severally with his co-defendants, it said.

Under the terms of the Final Consent Judgment filed in Superior Court in Middlesex County Jan. 21, Kapoor agreed to make an upfront, lump sum payment of $1 million within 10 days, followed by an additional payment – anticipated to be $4 million – following satisfaction of the monetary obligation imposed in the criminal case.

The settlement also permanently bars Kapoor from managing or owning any business organization within New Jersey and from serving as an officer, director, trustee, member of an executive board or similar governing body, principal, manager, or stockholder owning 10 percent or more of the aggregate outstanding capital stock of all classes of any corporation doing business in New Jersey.

Since 2018, the state also has taken action against numerous doctors who indiscriminately prescribed Subsys to non-cancer patients after receiving monetary payments from Insys, which disguised its payments as compensation for sham speaking and consulting work.

The State Board of Medical Examiners has barred five of those doctors from practice in New Jersey, and administrative actions are pending against four more, the release adds.

Those doctors’ patients collectively suffered at least two overdoses and one overdose-related death, while other patients were placed at heightened risk of addiction, overdose and death.

Law360 reports that Kapoor and five of his former underlings can put off reporting to prison until April after U.S. District Judge Allison D. Burroughs granted a seventh postponement Jan. 25, citing the ongoing COVID-19 pandemic, and suggesting this delay will be the last.

Burroughs granted the latest motions to continue filed by Kapoor, Michael Gurry, Joe Rowan, Rich Simon, Sunrise Lee and Michael Babich, the report said.

The judge said in a brief docket entry that the same grounds on which she granted the prior motions — namely, the health emergency and the risks to those behind bars — provide the basis for the latest delay.

But Judge Burroughs added, "further continuances are highly unlikely," according to the report.

The latest order extends the prison reporting dates to April 6.

Kapoor, Gurry, Rowan, Simon and Lee were all convicted in May of 2019 in the first successful prosecution of pharmaceutical executives linked to the opioid epidemic. Babich, the former Insys CEO, pled guilty on the eve of trial and testified against his former colleagues, according to the report.

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