January 9, 2019 / 11:05 AM / in 10 days

Former Insys CEO pleads guilty to opioid kickback scheme

BOSTON (Reuters) - The former chief executive of Insys Therapeutics Inc (INSY.O) pleaded guilty on Wednesday to participating in a nationwide scheme to bribe doctors to prescribe an addictive opioid medication and has agreed to become a government witness.

Former chief executive of Insys Therapeutics Inc Michael Babich (C) leaves the federal courthouse after pleading guilty in Boston, Massachusetts, U.S., January 9, 2019. REUTERS/Brian Snyder

Michael Babich, who resigned as the Arizona-based drugmaker’s CEO in 2015, pleaded guilty in federal court in Boston to conspiracy and mail fraud charges after entering into a cooperation deal with prosecutors.

His plea comes less than three weeks before five former Insys executives and managers including John Kapoor, its onetime billionaire founder and former chairman, face trial after being charged with participating in the scheme.

Babich, 42, faces up to 25 years in prison. But the Arizona resident could receive a more lenient sentence by testifying at Kapoor’s Jan. 28 trial. Assistant U.S. Attorney Fred Wyshak in court said Babich committed his crimes at Kapoor’s direction.

Kapoor and his co-defendants have pleaded not guilty to racketeering conspiracy. Beth Wilkinson, Kapoor’s lawyer, had no comment after attending Wednesday’s hearing.

Prosecutors allege that from 2012 to 2015, Kapoor, Babich and others conspired to pay doctors bribes in exchange for prescribing Subsys, an under-the-tongue fentanyl spray for managing severe pain in cancer patients.

Fentanyl is an opioid 100 times stronger than morphine.

Prosecutors said 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.

Prior to working at Insys, Babich had worked at Kapoor’s venture capital firm.

Insys in August said it had agreed to pay at least $150 million as part of a settlement with the U.S. Justice Department. The company has said it has taken steps to ensure it operates legally going forward.

Prosecutors called the case a major example of their efforts to combat the nation’s opioid epidemic. 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 plea comes after Alec Burlakoff, Insys’ former vice president of sales, pleaded guilty in November and agreed to testify as a government witness.

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

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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