DOJ Intervenes in False Claims Act Case Against Insys Therapeutics

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The Department of Justice (DOJ), recently intervened in a civil False Claims Act (FCA) case filed against Insys Therapeutics, Inc. (Insys) in the Central District of California that alleges FCA violations arising from the payment of kickbacks in violation of the Anti-Kickback Statute (AKS) as well as other fraudulent activities. Insys is an embattled Arizona-based pharmaceutical manufacturer of a highly-addictive sublingual opioid spray known as Subsys, and is currently the subject of a number of criminal and civil suits ongoing across the country (certain of which were consolidated into this case in connection with DOJ’s intervention). 

DOJ’s complaint in intervention describes how Insys allegedly paid kickbacks to physicians and nurse practitioners to induce providers to prescribe Subsys for their patients, including by allegedly (i) operating an extensive speaker’s bureau program that was in fact a sham designed to funnel payments to the speakers, (ii) hiring relatives and friends of providers to induce prescriptions of Subsys, and (iii) providing lavish meals and entertainment to providers to induce increased prescribing activities. DOJ also alleges that although Subsys was only approved by the FDA in narrow clinical circumstances for patients with “breakthrough cancer pain,” Insys “targeted its marketing efforts for Subsys to promote the drug  to treat patients who do not have cancer” and established an internal unit “dedicated to facilitating the process of obtaining prior authorization of Subsys prescriptions” from third party payors in order to increase sales by “l[ying] or making deliberately misleading statements… about material facts in order to obtain federal reimbursement for Subsys prescriptions that otherwise would not have been approved.”

The complaint further notes that a provision within the 2010 Patient Protection and Affordable Care Act revised the AKS to provide that any claims that include items or services resulting from a violation of the AKS constitute false or fraudulent claims actionable under the FCA. The complaint also expressly states that compliance with the AKS “is a material condition of payment by the Medicare program,” which could be read as an acknowledgment of the heightened importance of pleading evidence of materiality in an FCA case following the Supreme Court’s 2016 Escobar decision.

Interestingly, the DOJ complaint in intervention contains a rehashing of a series of recent criminal indictments and convictions of providers for allegedly receiving kickbacks from Insys, including cases against physicians in Alabama, Michigan, Rhode Island, and New York, as well as cases against non-physician practitioners with prescriptive authority (see here for our previous analysis of one of those cases). The complaint references 19 examples of providers receiving fees for sham speaking events from Insys, but not all of those providers appear to have been prosecuted. The complaint lists the amount of speaking fees allegedly paid to certain providers, as well as the amount paid by federal health care programs such as Medicare and TRICARE for Subsys prescriptions written by such providers during the same time period.

Finally, although DOJ (along with six states) intervened in part in the pending FCA actions, in its order unsealing certain of the cases the district court concurrently granted a request from the parties to stay the consolidated case pending “the resolution of” five criminal actions that relate to this FCA case (certain of which are described in the DOJ complaint). As a result, the case will be on hold until further order of the court while the criminal cases related to Insys move forward.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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