Pharmaguy's Insights Into Drug Industry News

The former district manager at Insys Therapeutics was irate. Several doctors were not prescribing enough of the company’s Subsys painkiller, which contains fentanyl, a powerful and addictive opioid.

So the manager, Jonathan Roper, wrote his sales team a pointed email, saying that “we invest a lot of time, money, blood, sweat, and tears on ‘our guys,’ ” — a reference to doctors who were paid to speak to other physicians about the medicine. “We hire only the best of the best to be a part of our speaker bureau and dropping script counts is what we get in return? This is a slap in the face to all of you and is a good indication as to why NONE of you are climbing in the rankings this quarter.”

Last Thursday, Roper and a former Insys sales rep named Fernando Serrano were arrested and charged with violating federal kickback laws. They allegedly ran a scheme between October 2013 and June 2015 in which doctors were paid thousands of dollars to participate in “sham educational programs” designed to boost Subsys prescriptions, according to Preet Bharara, the federal attorney for New York. The email from Roper two years ago was part of the indictment.

The arrests come amid intensifying controversy over the abuse and misuse of prescription painkillers and the extent to which these are appropriately prescribed. Federal health officials recently released new guidelines urging doctors to restrict their prescribing and some lawmakers want to pressure the Chinese government to toughen its laws to stop the illicit export to the United States.

This is not the first time that Insys has been named in connection with illegal activities designed to boost prescriptions for Subsys, which was approved in 2012 to treat cancer pain and generated nearly $330 million in sales last year (see here).

For instance, the company arranged “social gatherings at high-end restaurants in Manhattan” that were supposed to involve teaching doctors about Subsys but did not really involve any education. Doctors were enlisted to speak at these events, but often “lacked an appropriate audience of health care professionals,” according to the indictment. To make them appear legitimate, sign-in sheets were sometimes forged by adding names of doctors who did not attend.

Serrano and other reps received bonuses based, in large part, on the volume of Subsys prescriptions written by the doctors they were assigned to work with, according to the indictment. Serrano received a $70,000 bonus in the first quarter of 2014, which was the eighth-largest bonus among Insys reps at the time. In the fourth quarter of 2013, his bonus was about $100,000, the fifth-largest among Insys reps.

A former sales manager for Insys Pharmaceuticals, which manufactures a highly addictive painkiller (Sunsys Fentanyl - 100X more powerful than morphine) and is under investigation in multiple U.S. states, has pleaded guilty to charges of fraud.

Former Insys sales manager Natalie Reed Perhacs recently pleaded guilty to conspiracy to commit health care fraud including engaging in kickback schemes in the United States District Court for the Southern District of Alabama (Southern Division). 

Insys was the subject of a CNBC investigation in November which revealed that two physicians in Mobile, Alabama, Dr. Xiulu Ruan and Dr. John Couch, partners at a practice, received over $210,000 from Insys Therapuetics in 2013 and 2014 for things like speaking fees, travel and meals.

The agreement with the Insys sales rep, filed on Feb. 17 and obtained by CNBC, states that Perhacs was hired by Insys as a kickback to Dr. Ruan, who became fond of her and "went out of his way" to try to get her hired as a sales representative with a pharmaceutical company. 

In an e-mail sent on November 7, 2012, Dr. Ruan asked Perhacs,"Well, I want to ask you a personal question and hopefully you would not be offended. Are you involved with someone now? . . . You don't have to answer any of these if you do not feel comfortable."

The plea agreement states that Perhacs was not hired because of her knowledge or experience working with controlled substances like Subsys; but rather, she was hired to "induce, and in exchange for, Dr. Ruan continuing to prescribe Subsys."

"Perhacs had a strong financial incentive to do so, and to turn a blind eye to illegal kickbacks being paid by Company A [Insys] to Dr. Ruan and Dr. Couch. Despite earning a base salary of only $40,000.00 per year, commissions from off-label prescriptions written by Dr. Ruan and Dr. Couch resulted in Perhacs making over $700,000.00 between April 2013 and the doctors' arrests on May 20,2015."