UB donor arrested in opioid-marketing case

Billionaire UB grad arrested in opioid case

A wealthy University at Buffalo alumnus who has donated millions to the school was arrested early Thursday and charged with leading a conspiracy to profit by using bribes and fraud to market a powerful opioid narcotic, sometimes to inappropriate patients.

John Kapoor, 74, founder and majority owner of Chandler, AZ-based Insys Therapeutics Inc., was arrested and charged with the illegal distribution of a fentanyl spray intended for cancer patients and for violating anti-kickback laws, according to a statement from the U.S. Attorney's Office in Massachusetts.

The company's medication, Subsys, contains a narcotic that's 80 times more powerful than morphine.

The initial success of that medication turned Insys into one of Arizona's hottest stocks ever, but that was followed by a sharp downturn as the company's profits and revenue were scaled back as the investigations widened.

Kapoor ranked sixth last year on Forbes' list of wealthiest Arizonans with a net worth of $2.1 billion, but he dropped off this year's list owing to the declining stock price of Insys, in which he is a controlling shareholder.

Kapoor, who also served as the company's former executive chairman and CEO, was to appear in federal court in Phoenix on Thursday and in U.S. District Court in Boston at a later date.

The indictment unsealed in Boston includes additional allegations against several former Insys executives and managers who were initially indicted in December. The indictment names Kapoor and former CEO Michael Babich.

The others named in the indictment are Alec Burlakoff, Insys' former vice president of sales; Richard Simon, former national director of sales; former regional sales directors Sunrise Lee and Joseph Rowan; and the company's former vice president of managed markets, Michael Gurry.

Babich, 40, and Gurry, 53, are Scottsdale residents.

The officials are charged with conspiring to bribe medical practitioners in various states, many of whom operated pain clinics, to get them to prescribe Subsys, according to the announcement form the U.S. Attorney's Office. In exchange for bribes and kickbacks, the practitioners wrote large numbers of prescriptions for the patients, most of whom were not diagnosed with cancer, according to the allegations.

The indictment also alleges that Kapoor and the former executives conspired to mislead and defraud health insurers that were reluctant to approve payment for the drug when it was prescribed for non-cancer patients. They pursued this goal by obtaining prior authorization directly from insurers and pharmacy-benefit managers, according to the U.S. Attorney's Office.

“In the midst of a nationwide opioid epidemic that has reached crisis proportions, Mr. Kapoor and his company stand accused of bribing doctors to overprescribe a potent opioid and committing fraud on insurance companies solely for profit,” said Acting U.S. Attorney William Weinreb in a statement.


“Today's arrest and charges reflect our ongoing efforts to attack the opioid crisis from all angles. We must hold the industry and its leadership accountable — just as we would the cartels or a street-level drug dealer.”

Insys executives created a corporate culture that utilized "deception and bribery as an acceptable business practice, deceiving patients and conspiring with doctors and insurers,” said Harold Shaw, a special agent for the Federal Bureau of Investigation, in a statement.

Insys stock was sharply lower Thursday morning, trading down about 11 percent at $6.62 a share.

According to the University at Buffalo's website, Kapoor earned his doctorate from the School of Pharmacy and Pharmaceutical Sciences in 1972. He recently gave $5-million to UB to help build the new School of Pharmacy and Pharmaceutical Science building at UB South. It is named after him.

Thursday, UB told 2 On Your Side that it is aware of Kapoor's arrest and "... it would be premature to comment further or take any action until the university has more information. The building that is home to UB's School of Pharmacy and Pharmaceutical Sciences bears the name of Dr. Kapoor and his wife in recognition of their long-time philanthropic support of the school and the university."

Reach the reporter at russ.wiles@arizonarepublic.com or 602-444-8616.

© Gannett Co., Inc. 2017. All Rights Reserved


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