Insys Therapeutics files for Chapter 11 bankruptcy

Cheryl Sanders
June 13, 2019

Drugmaker Insys Therapeutics filed for bankruptcy protection Monday, June 10, citing mounting expenses, just days after the company agreed to pay $225 million to settle civil and criminal investigations with the US Justice Department.

John Kapoor, the billionaire founder of Insys Therapeutics Inc, leaves the federal courthouse in Boston, Massachusetts, U.S., March 13, 2019.

"After conducting a thorough review of available strategic alternatives, we determined that a court-supervised sale process is the best course of action to maximize the value of our assets and address our legacy legal challenges in a fair and transparent manner", Insys CEO Andrew G. Long said in an emailed statement. According to the petition filing, founder John Kapoor owns 63.2% of the company. In court filings on Monday, the company valued its assets at between US$100 million and US$500 million.

Kapoor is the first head of a drug company to face prison time for his role in the nationwide opioid crisis, which kills 130 Americans a day, according to the Centers for Disease Control and Prevention.

In addition, the company will also be forced to pay $195 million to settle allegations it breached the federal False Claims Act by defrauding the federal government through health care programs such as Medicare.

"For years, Insys engaged in prolonged, illegal conduct that prioritized its profits over the health of thousands of patients who relied on it", Andrew E. Lelling, the USA attorney for the District of MA, said in a news release.

In bankruptcy, the government will become one more of the company's creditors. The spray is mainly used to alleviate pain in cancer patients.

Kapoor and four other top executives at the company were found guilty of widespread racketeering conspiracy last month.

In March 2012, Insys began using "speaker programs", purportedly meant to increase brand awareness of Subsys through peer-to-peer educational lunches and dinners.

The announcement that the company would file for bankruptcy arrives after the company had experienced year-on-year losses, which saw the company post a full-year EBITDA loss of $28.7m for 2018, following a $11.5m loss the previous year.

Insys and its executives' prosecution comes as the latest example of federal governments making active efforts to hold drug makers accountable for opioid epidemic now plaguing the nation.

According to the Centers for Disease Control and Prevention, nearly 400,000 people in the United States died from overdoses involving prescription or illicit opioids over the past two decades.

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