Insys Therapeutics (INSY) announced Monday it had filed for bankruptcy and will sell most of its assets, just days after agreeing to pay $225 million to settle charges of bribing doctors to boost prescriptions of its addictive painkiller.
The filing, which was widely signaled, also comes weeks after a federal jury in Boston convicted Insys founder and former billionaire John Kapoor, along with four other former executives, of racketeering charges that contributed to the opioid crisis ravaging the U.S.
The move marks a striking reversal of fortunes for a company that reportedly was responsible for the best-performing initial public stock offering in 2013. However, its controversial business practices — which federal prosecutors charged were engineered by Kapoor — have led to its undoing.
Intensifying legal woes prompted plans earlier this year to seek a buyer for the company’s Subsys painkiller, which contains fentanyl, a powerful and addictive opioid. Last year, the nasal spray, which had been a franchise product, generated nearly all of $82 million in companywide sales, which was down from $141 million in 2017 and $242 million the year before that. Losses in 2018 totaled $124.3 million.
Insys stock was down 68% in pre-market trading.
“After conducting a thorough review of available strategic alternatives, we determined that a court-supervised sale process is the best course of action to maximize the value of our assets and address our legacy legal challenges in a fair and transparent manner,” Insys chief executive Andrew Long said in a statement. For the time being, the drug maker plans to use existing cash on hand and operating cash flows to support operations, including paying employees. Recently, Insys has kept busy developing cannabinoid products.
Overdoses involving opioids killed more than 47,000 people in 2017, and 36% of those deaths involved prescription opioids, according to the Centers for Disease Control and Prevention. Subsys was approved only for use in patients with cancer who were already using opioids to control their pain, but Insys marketed the drug to patients who did not have cancer, according to federal prosecutors.
To boost Subsys prescriptions, the drug maker used speaker programs that were supposedly intended to educate doctors about the medicine, an under-the-tongue spray. But prosecutors called those “sham” events, because the meals — some of which were described as lavish — were really designed as inducements to increase prescriptions.
As an example, prosecutors pointed to a physician’s assistant who practiced in a Somerworth, N.H., pain clinic and, in May 2013, joined the speaker program. Until then, the physician’s assistant had not written any prescriptions for Subsys, but afterward wrote nearly 700 prescriptions for his patients — many of which prosecutors charged were medically unnecessary — and received $44,000 in kickbacks from Insys.
Prosecutors alleged that the kickbacks also involved jobs for relatives and friends of health care providers who prescribed the drug, and that Insys lied to insurers about patient diagnoses in order to arrange for reimbursement for people enrolled Medicare and Tricare. “For years, Insys engaged in prolonged, illegal conduct that prioritized its profits over the health of the thousands of patients who relied on it,” said Andrew Lelling, the U.S. Attorney in Boston, in a statement. The government probe stemmed from five whistleblower lawsuits.
[UPDATE: Attorneys representing the local and state governments that filed lawsuits accusing Insys and other opioid makers of improperly marketing their medicines and downplaying the risks, later released a statement saying that “we will actively pursue full financial disclosure for Insys and any other defendant that files for bankruptcy. Bankruptcy and restructuring does not necessarily mean that a company is insolvent.
“The goal of the litigation is not to bankrupt these opioid companies, but to abate the current opioid epidemic and seek long-term, sustainable solutions. If any defendant files for bankruptcy, we will work through all legal avenues to see that our clients’ end goal of abating the crisis is met.”]