Dr. John Kapoor Insys Therapeutics

As Insys Therapeutics prepares to close up shop in Chandler, founder Dr. John Kapoor faces sentencing early this year in a federal court in Boston. Prosecutors are seeking a 15-year prison term and $306 million in restitution.

Chandler’s Insys Therapeutics, manufacturer of a potent painkiller, appears to be winding down operations after enduring years of lawsuits and criminal trials.

The company filed for bankruptcy last summer after it agreed to pay the government $225 million to settle allegations of bribery and racketeering. 

Court filings in the bankruptcy case indicate the company began selling off its assets and scaling down its business in Arizona.  

“As a result of the sales transactions, the debtors no longer possess an operating business and they are in the process of winding down their estates in order to distribute their remaining assets for the benefit of creditors,” the company wrote in a Dec. 24 court filing.

John Kapoor, the company’s founder, and six other former executives were found guilty last year in a federal court in Massachusetts of bribing doctors into prescribing his company’s product.

Kapoor faces up to 15 years in federal prison, and sentences ranging from five to 11 years are being sought against the other executives for their conviction on bribery and drug-related charges.

Federal prosecutors are also seeking restitution from Kapoor totaling $306 million – including $137 million in restitution to Medicare and the rest to private insurers.

 “The bribes were intended to incentivize prescriptions from “high-volume” prescribers,” the government charged in filings in the criminal case, adding:

“The defendants paid millions of dollars to doctors in exchange for prescribing greater quantities and dosages of one of the most potent opioids available for sale in the United States. …Their crime involved the conscious and reckless risk of death or serious injury.”

Prosecutors also stated in a presentence memo, “The impact of the conspiracy on the lives and health of patients was monumental; it is not speculative or hypothetical.”

Sentencing was delayed, as Kapoor was given until Jan. 3, to file a response to the government’s restitution demands.

More than 280 pages from 72 letters supporting Kapoor and asking for leniency also have been submitted to the court by professionals, cancer survivors and charities he supported.

The defense’s own presentence memo portrayed Kapoor as someone who “achieved the American dream” and invested $80 million of his own money into Insys without ever realizing a profit while two of his co-defendants cashed out their stock options and walked away with $45 million.

Kapoor’s lawyers said their client had been victimized by some of the co-defendants because he gave them free rein in running Insys’ affairs.

“From the moment he first made his fortune, Dr. Kapoor has given back to charity – more than $128 million in giving and countless hours of personal time and involvement – in pursuit of causes that mirror his own life’s path,” they said.

Because 90 percent of the company’s revenue came from selling opioids, Insys did not expect to survive the public backlash and massive litigation it has experienced in recent years. 

“These factors have caused a substantial cash drain on the company to the point where, despite the Debtors’ best efforts, they risk running out of cash in 2019,” said former Insys CEO Andrew Long in court documents filed last year.

Public records show the company’s also agreed to vacate its Chandler headquarters, located at 410 South Benson Lane, by the end of 2019. 

“The debtors are required to vacate their Chandler, Arizona headquarters by Dec. 31, 2019,” the company wrote in bankruptcy filings, “any personal property of the debtors remaining at the location shall be deemed abandoned.”

Insys did not respond to inquiries regarding the company’s future in Arizona.

Back in August, the company notified Chandler officials it was planning a mass layoff of nearly 100 employees by the end of 2019.  

 “Insys Therapeutics, Inc. will be winding down and closing its facilities over the next few months,” the company wrote in its letter to the city. Adding, “The closure or layoff is expected to be permanent and expected to take place on Oct. 8, 2019.” 

When Insys first came to Arizona in the late 2000s, it was praised for being able to rapidly expand its operations during the dark days of the recession. 

The company adopted an aggressive approach to sales that resulted in a 400 percent stock surge during the first year of its drug launch. 

“The key is finding the right people and keeping the entrepreneurial spirit. That will be the most important thing for our success,” former Insys CEO Michael Babich told the Arizona Republic in 2012. 

Babich, who resigned in 2015, and his wife have both pleaded guilty to conspiring with other Insys executives to bribing doctors into prescribing the company’s painkillers.  

The scheme came to light after a whistleblower in Florida exposed how Insys would offer kickbacks to doctors in exchange for their prescriptions. 

Maria Guzman alleges she lost her sales job at Insys in 2013, after she complained about the company’s tactics. In her whistleblower complaint, Guzman claimed Insys executives took doctors to strip clubs, bought expensive dinners and offered lucrative business deals. 

Some of these excursions allegedly took place at a Scottsdale strip club.

Guzman further alleged Insys would strategically hire young, attractive women as sales representatives in order to persuade male doctors to write more prescriptions. 

When a sales job opened up, Guzman claimed, her boss told her to look for applicants who were already “banging a doctor.” 

Other whistleblowers accused Insys of tricking insurance companies into covering prescriptions for its painkiller by pretending to be employees of a doctor’s offices.

The Insys employees would allegedly lie about a patient’s medical history to make them appear sicker and in need of stronger painkillers. 

In response to the whistleblowers, Insys publicly stated the company’s “completely transformed” by replacing most of its sales force. 

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