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Can Insys Survive The Legal Onslaught They Are About To Face? - Mushroomstocks | Mushroomstocks
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Can Insys Survive The Legal Onslaught They Are About To Face?

Jul 14, 2017 • 1:04 PM EDT
4 MIN READ  •  By Michael Berger
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Things could start getting ugly (uglier) for Insys Therapeutics (INSY)…

The shares are trading lower this morning after health insurer Anthem Inc. (ANTM) filed a lawsuit against the biotech firm, alleging that Insys was fraudulently reimbursed for overprescribing its opioid painkiller Subsys.

The lawsuit states that Insys paid kickbacks to doctors (true) and lied to Anthem about patients’ diagnoses (true) for reimbursements (also true). The lawsuit was filed in federal court in Arizona.

Doctor Involved in Scandal Sentenced to 20 Years

The doctors regularly wrote prescriptions for highly addictive opioids without a legitimate reason. Although the FDA only approved Subsys and Abstral for cancer pain, physicians prescribed these drugs for off-label uses to treat neck, back and joint pain.

The prosecution said the doctors received illegal kickbacks from Insys in exchange for prescribing Subsys and became among the top prescribers in the country.

In late May, one of the doctors tied to Insys’ overprescribing scandal was sentenced to 20 years in prison after being found guilty of racketeering amongst other felonies.

11 Insys Executives Arrested in 2016

In 2016, 11 former executives and managers (including ex-CEO Michael Babich) were arrested and charged for their role in the company’s opioid over-prescribing scandal.

For many years, Insys’ engaged in a well-orchestrated scheme where doctors were paid to promote and over-prescribe Subsys. Prosecutors said that Babich and others led a conspiracy to bribe medical practitioners through payments disguised as marketing events and speaker fees to unnecessarily prescribe Subsys to non-cancer patients.

Insys is paying for its actions. In August 2015, the company agreed to a $1.1million settlement with Oregon’s attorney general for deceptively marketing and selling Subsys to doctors for off-label uses. They were also sued by Illinois’ attorney general for the same reason and agreed to pay $3.4 million to resolve an investigation by New Hampshire’s attorney general.

Is Insys Dead?

While the new CEO Saeed Motahari said the firm has been working to improve its compliance practices and was focused on resolving a Justice Department probe related to this scheme, this situation can get ugly.

Although Motahari added four pharmaceutical industry veterans to the management team, the company is at the center of one of the worst epidemics that America has ever faced, opioids. Not to mention, Insys has been and will continue to get sued by state attorney generals and health insurers.

The combination of the lawsuit settlements, legal fees, and future law suit settlements are becoming overwhelming for the company and we are very cautious in the near term.

The move by Anthem today may start a trend that turn an ugly situation to catastrophic for Insys.


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Important Investor Disclosures 

This report was authored by and is property of Mushroomstocks.  All information and data relied upon in drafting this report is publicly available.  The author believes and considers its sources to be reliable, but does not guarantee the accuracy or completeness of any information contained in this report.  Any and all information, data, analyses and opinions are provided for informational purposes only and is not intended, in any manner, as investment advice.  Any projections or other information generated by Mushroomstocks regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.  None of the material contained in this report is intended as a solution or offer to sell or purchase a specific stock or any other investment.  This report is not directed to, or intended for distribution or use by, any person or entity that is a citizen, resident or located in any municipality, state, country or other jurisdiction where the distribution, publication, availability, or use of this report is contrary to any governing law or regulation.  The securities discussed in this report may not be eligible for purchase and/or sale in certain jurisdictions or by particular individuals.  It is important that you check any and all governing laws and/or regulations that may be applicable in your jurisdiction.  Investing in securities of issuers organized outside of the United States, including ADRs, entail certain risks.  The securities of non-United States issuers may not be registered with, nor be subject to the reporting requirements of the United States Securities and Exchange Commission.  Please contact a Financial Advisor for professional advice regarding any and all securities investments.  This report is intended for informational purposes only

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Authored By

Michael Berger

Michael Berger is Managing Partner of StoneBridge Partners, LLC and Founder of Mushroomstocks.com. Prior to entering the cannabis industry, Michael was an Equity Research Analyst at Raymond James Financial covering the Energy Sector. Michael has been featured in publications such as The Street, Bloomberg, US Money News, and hosts various cannabis events across North America.


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