Pharmaceutical Executives Charged in Racketeering Scheme

“BOSTON – Several pharmaceutical executives and managers, formerly employed by Insys Therapeutics, Inc., were arrested today on charges that they led a nationwide conspiracy to bribe medical practitioners to unnecessarily prescribe a fentanyl-based pain medication and defraud healthcare insurers. 

“The indictment alleges that Michael L. Babich, 40, of Scottsdale, Ariz., the former CEO and President of the company; Alec Burlakoff, 42, of Charlotte, N.C., former Vice President of Sales; Richard M. Simon, 46, of Seal Beach, Calif., former National Director of Sales; former Regional Sales Directors, Sunrise Lee, 36, of Bryant City, Mich. and Joseph A. Rowan, 43, of Panama City, Fla.; and former Vice President of Managed Markets, Michael J. Gurry, 53, of Scottsdale, Ariz., conspired to bribe practitioners in various states, many of whom operated pain clinics, in order to get them to prescribe a fentanyl-based pain medication.  

“The medication, called ‘Subsys,’ is a powerful narcotic intended to treat cancer patients suffering intense episodes of breakthrough pain.  In exchange for bribes and kickbacks, the practitioners wrote large numbers of prescriptions for the patients, most of whom were not diagnosed with cancer. 

“The indictment also alleges that the now former corporate executives charged in the case conspired to mislead and defraud health insurance providers who were reluctant to approve payment for the drug when it was prescribed for non-cancer patients.  They achieved this goal by setting up the “reimbursement unit” which was dedicated to obtaining prior authorization directly from insurers and pharmacy benefit managers…

“The defendants were arrested [December 8^th] in their respective states and will appear in U.S. District Court in Boston at a later date.  Babich is charged with conspiracy to commit racketeering, conspiracy to commit wire and mail fraud and conspiracy to violate the Anti-Kickback Law; Burlakoff, Simon, Lee and Rowan are charged with RICO conspiracy, mail fraud conspiracy and conspiracy to violate the Anti-Kickback Law; Gurry is charged with RICO conspiracy and wire fraud conspiracy. 

“The indictment also alleges that the conspiracy to bribe practitioners and to defraud insurers generated substantial profits for the defendants, their company, and for the co-conspirator practitioners… The details contained in the indictment are allegations.  The defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt.”  

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