AG Brnovich Files New Consumer Fraud Lawsuit Against Insys Founder and Former Executives

PHOENIX – Arizona Attorney General Mark Brnovich filed an Arizona Consumer Fraud Act lawsuit today against three former executives of opioid manufacturer Insys Therapeutics Inc., which is based in Chandler. The lawsuit alleges that the three named defendants, including the founder of the company, engaged in a fraudulent marketing scheme designed to increase the sales of Insys’s flagship drug, Subsys, a highly addictive opioid prescription drug that contains fentanyl.

The three former executives of Insys named as defendants in the new lawsuit are Michael Gurry, Insys’s former Vice President of Managed Markets; Michael Babich, Insys’s former Chief Executive Officer; and John Kapoor, Insys’s founder, as well as its former President, Chief Executive Officer, and Executive Chairman of the Board of Directors.  All three individuals either have pleaded guilty or been found guilty of federal felony charges related to the conduct alleged in the State’s complaint.

“It's important that government doesn't interfere with doctor-patient relationships and the ability for individuals to adequately manage their pain,”  said Attorney General Mark Brnovich.  “However, when pharmaceutical companies engage in unethical and greedy behavior that helps fuel the opioid crisis in our state, they must be held accountable.”

This lawsuit follows on the heels of Attorney General Brnovich’s 2017 lawsuit against Insys and two other former Insys employees.  Since then, Insys has admitted that it bribed doctors, pled guilty to federal criminal charges, and filed for bankruptcy.  Attorney General Brnovich's office also reached a consent judgment with one of the previously sued employees, former Vice President of Sales Alec Burlakoff in April of 2019, who agreed to a consent judgment requiring him to disgorge $9.5 million to the State and fully cooperate in related investigations.

According to the lawsuit filed today, Kapoor, Babich, and Gurry are alleged to have violated the Arizona Consumer Fraud Act by directing Insys employees to provide insurers with false and misleading information to obtain prior authorization for Subsys prescriptions for patients. For example, Insys employees allegedly were instructed to mislead insurers into believing that patients who were prescribed Subsys had cancer, when in fact they did not.

The lawsuit also alleges that Kapoor and Babich directed Insys’s employees to bribe health care providers with lucrative “speaker fees” in exchange for those doctors writing more prescriptions of Subsys.  To date, Insys has sold over $1 billion worth of Subsys, and the lawsuit alleges that the actions of Kapoor, Babich, and Gurry drove these sales and fanned the flames of the opioid epidemic.

In the lawsuit, Brnovich is seeking remedies that include restitution for consumers, disgorgement of all profits from the alleged conduct, and an injunction to ban the three defendants from marketing or selling pharmaceuticals in Arizona.

The original consumer fraud lawsuit filed against Insys by the Arizona Attorney General's Office in August 2017 remains active.

Unit Chief Matthew du Mee, Senior Litigation Counsel Neil Singh, and Assistant Attorney General Andrija Samardzich are handling the case for the State.

For a copy of the complaint.