Former CEO of Insys Therapeutics Sentenced for Racketeering Scheme

BOSTON – The former CEO and President of Insys Therapeutics was sentenced today in federal court in Boston for bribing practitioners to prescribe Subsys, a fentanyl-based pain medication, often when medically unnecessary.

Michael Babich, 43, of Scottsdale, Ariz., was sentenced to 30 months in prison, three years of supervised release, and ordered to pay restitution and forfeiture to be determined at a later date. In January 2019, Babich pleaded guilty to one count of conspiracy to commit mail fraud and wire fraud and one count of mail fraud, and agreed to cooperate with the government.

From May 2012 to December 2015, Babich along with the founder of Insys Therapeutics, John Kapoor, and others conspired to bribe practitioners, many of whom operated pain clinics, in order to induce them to prescribe Insys’ fentanyl-based pain medication, Subsys, to patients often when medically unnecessary. Subsys is a powerful, rapid-onset opioid intended to treat cancer patients suffering intense breakthrough pain.

Babich and others used pharmacy data to identify practitioners who either prescribed unusually high volumes of rapid-onset opioids, or had demonstrated a capacity to do so, and bribed and provided kickbacks to the practitioners to increase the number of new Subsys prescriptions, and to increase the dosage and number of units of Subsys. Babich and his co-conspirators also measured the success by comparing the net revenue earned from targeted practitioners with the total value of bribes and kickbacks paid. The defendants used this information to reduce or eliminate bribes paid to practitioners who failed to meet satisfactory prescribing requirements.

Babich, who was called by the government as a witness at the trials of Kapoor and his co-defendants, testified over the course of five days. During his testimony, Babich described the inner workings of the conspiracy in detail. The trial resulted in the conviction of Kapoor; as well as the company’s Vice President of Managed Markets, Michael Gurry; the company’s National Director of Sales, Richard Simon; and two of the company’s Regional Sales Directors, Joseph Rowan and Sunrise Lee. 

United States Attorney Andrew E. Lelling; Joseph R. Bonavolonta, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division; Phillip Coyne, Special Agent in Charge of the U.S Department of Health and Human Services, Office of the Inspector General; Judy McMeekin, Pharm.D. Acting Associate Commissioner for Regulatory Affairs of the U.S. Food and Drug; Brian D. Boyle, Special Agent in Charge of the Drug Enforcement Administration, Boston Field Division; Leigh-Alistair Barzey, Special Agent in Charge of the Defense Criminal Investigative Service, Northeast Field Office; Carol S. Hamilton, Acting Regional Director of the U.S. Department of Labor, Employee Benefits Security Administration, Boston Regional Office; Joseph W. Cronin, Inspector in Charge of the U.S. Postal Inspection Service’s Boston Division; Matthew Modafferi, Special Agent in Charge of the U.S. Postal Service Office of Inspector General, Northeast Area Field Office; Jeffrey K. Stachowiak, Acting Special Agent in Charge of the Department of Veterans Affairs, Office of Inspector General; and Thomas W. South, Deputy Assistant Inspector General for Investigations of the Office of Personnel Management made the announcement.

Assistant U.S. Attorneys K. Nathaniel Yeager, Fred M. Wyshak and David G. Lazarus prosecuted the case for Lelling’s Health Care Fraud Unit.