Indictment Charges Drug Company Manager with Engaging in a Kickback Scheme Related to Fentanyl Spray Prescriptions

Deirdre M. Daly, United States Attorney for the District of Connecticut, today announced that on February 8, 2017, a federal grand jury in New Haven returned an indictment charging JEFFREY PEARLMAN, 49, of Edgewood, N.J., with engaging in a kickback scheme that defrauded federal healthcare programs.

According to the indictment, from approximately September 2012 until December 2015, PEARLMAN was employed by Insys Therapeutics, an Arizona-based pharmaceutical company that manufactured and sold Subsys, a fentanyl-based sublingual spray that was approved by the Food and Drug Administration solely for the management of breakthrough pain in cancer patients. The company first hired PEARLMAN as a sales representative and subsequently promoted him to the position of District Sales Manager (DSM). As a DSM, PEARLMAN was responsible for managing the company’s sales representatives who called on licensed healthcare providers in Connecticut, New York, New Jersey and Rhode Island.

The indictment alleges that PEARLMAN and the sales representatives he managed induced certain physicians, advanced practice registered nurses (APRNs) and physicians’ assistants to prescribe Subsys by paying them to participate in hundreds of sham “Speaker Programs.” The Speaker Programs, which were typically held at high-end restaurants, were ostensibly designed to gather licensed healthcare professionals who had the capacity to prescribe Subsys and educate them about the drug. In truth, the events were usually just a gathering of friends and co-workers, most of whom did not have the ability to prescribe Subsys, and no educational component took place. “Speakers” were paid a fee that ranged from $1,000 to several thousand dollars for attending these dinners. At times, the sign-in sheets for the Speaker Programs were forged, with PEARLMAN’s knowledge, so as to make it appear that the programs had an appropriate audience of healthcare professionals.

The indictment alleges that Insys Therapeutics paid one Connecticut healthcare provider who participated in these sham Speaker Programs a total of approximately $83,500 in illegal kickbacks in order to induce the provider to prescribe the company’s fentanyl spray over similar medications. PEARLMAN authorized these payments.

It is alleged that PEARLMAN personally profited from this scheme through inflated quarterly bonuses he received that were based in large part on the sales results of the sales representatives he managed.

It is further alleged that this illegal kickback scheme caused millions of dollars of losses to federal healthcare programs.

The indictment charges PEARLMAN with one count of conspiracy to violate the anti-kickback law, an offense that carries a maximum term of imprisonment of five years and a fine of up to $250,000.

PEARLMAN was arrested a criminal complaint on September 29, 2016. He is released on a $200,000 bond.

U.S. Attorney Daly stressed that an indictment is not evidence of guilt. Charges are only allegations, and a defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt.

This ongoing investigation is being conducted by the U.S. Department of Health and Human Services Office of the Inspector General and the Federal Bureau of Investigation, with the assistance of the Drug Enforcement Administration’s Tactical Diversion Squad. The case is being prosecuted by Assistant U.S. Attorneys Douglas P. Morabito and Richard M. Molot.

U.S. Attorney Daly encouraged individuals who suspect health care fraud to report it by calling the Health Care Fraud Task Force (203) 785-9270 or 1-800-HHS-TIPS.