Former Insys CEO to plead guilty in opioid kickback case

[January 09, 2019]  By Nate Raymond

BOSTON (Reuters) - The former chief executive of Insys Therapeutics Inc <INSY.O> is expected on Wednesday to plead guilty to participating in a scheme to pay doctors bribes in exchange for prescribing an addictive opioid medication.

Michael Babich, who resigned as the Arizona-based drugmaker's CEO in 2015, is scheduled to appear in federal court in Boston and plead guilty to conspiracy and mail fraud charges, according to court papers.

His plea comes weeks before a five former Insys executives and managers including John Kapoor, the company’s founder and former chairman, are scheduled to face trial over what prosecutors said was their roles in the wide-ranging scheme.

The terms of Babich's plea deal have not been disclosed, leaving it unclear whether he has agreed to cooperate with prosecutors and testify at that trial. Kapoor and his co-defendants have pleaded not guilty to racketeering conspiracy.

Insys in August said it had agreed to settle a related U.S. Justice Department probe for at least $150 million. The company has said it is now under new management, which has taken steps to ensure it operates legally going forward.

Babich's attorney declined to comment.

The case centers on Subsys, Insys' under-the-tongue spray for managing severe pain in cancer patients. It contains fentanyl, an opioid 100 times stronger than morphine.

Prosecutors allege that from 2012 to 2015, Kapoor, Babich and others conspired to bribe doctors in exchange for prescribing Subsys. Prosecutors said they also defrauded insurers into paying for the pain treatment.

A box of the Fentanyl-based drug Subsys, made by Insys Therapeutics Inc, is seen in an undated photograph provided by the U.S. Attorney's Office for the Southern District of Alabama. U.S. Attorney's Office for the Southern District of Alabama/Handout via REUTERS

Prosecutors allege Insys paid doctors kickbacks in the form of fees to participate in speaker programs ostensibly meant to educate medical professionals about Subsys that were actually sham events.

The case is a major example of their efforts to combat the nation's opioid addiction epidemic, prosecutors said. According to the U.S. Centers for Disease Control and Prevention, opioids were involved in a record 47,600 overdose deaths in 2017.

Babich's expected plea comes after Alec Burlakoff, Insys' former vice president of sales, pleaded guilty in November and agreed to testify as a government witness.

Babich, 42, is married to a former Insys sales representative, Natalie Babich, who in 2017 pleaded guilty to conspiring to pay kickbacks and became a government witness.

She testified last month at the trial of Christopher Clough, a former physician assistant in New Hampshire accused of accepting kickbacks from Insys. A federal jury in Concord, New Hampshire convicted Clough on Dec. 18.

(Reporting by Nate Raymond in Boston, Editing by Alexia Garamfalvi and Bill Berkrot)

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