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Trouble Brewing for Insys Therapeutics (INSY)

Jun 26, 2015 • 1:03 PM EDT
2 MIN READ  •  By Michael Berger
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On Tuesday, Heather Alfonso pled guilty in United States District Court in Hartford to having received $83,000 in kickbacks from Insys Therapeutics (INSY) during January 2013 through March 2015. Alfonso said the money influenced her prescribing a particular drug, according to the United States Attorney’s Office in Hartford, Connecticut.

Although Insys and the drug were not named in the indictment, in court a prosecutor revealed that the case involved Subsys and Insys Therapeutics.

Illegal sales practices occurred on a regular basis

Prescription records from the Federal Medicare program in 2013 show that Alfonso was among the 10 highest prescribers of Subsys in the United States. Although the Food and Drug Administration (FDA) approved Subsys only for cancer patients, the indictment says she had prescribed it to patients suffering from chronic pain who did not have cancer.

In 2012, Alfonso was among the top 10 Schedule II prescribers in the country. She was the highest prescriber in Connecticut in 2013, writing $2.7 million in prescriptions.

Insys also paid Alfonso about $1,000 per event to speak at more than 70 dinner programs. The United States Attorney’s determined that only Alfonso and an Insys sales representative attended these dinner programs. On many occasions, Alfonso’s office staff and friends attended the dinner programs. These attendees did not have required licenses to prescribe controlled substances.

The U.S. Attorney’s office said, “For the majority of these dinner programs, Alfonso did not give any kind of presentation about the drug at all.”

A concerning trend

During the last two years, several physicians who received speaking fees from Insys were disciplined or arrested for improperly prescribing Subsys. Last year, Dr. Gavin Awerbuch was arrested after federal prosecutors said he defrauded Medicare of $7 million and improperly prescribed Subsys to patients. Dr. Awerbuch was paid speaker’s fees by Insys, Another Insys speaker, Dr. Jerrold Rosenberg, was reprimanded last September for inappropriately prescribing Subsys and other painkillers.

The charge associated with the receipt of kickbacks in relation to a federal health care program carries a maximum term of five years in jail and a fine of up to $250,000. Alfonso’s sentencing is currently scheduled for September.

Where does Insys go from here?

Yesterday, INSY was down over 12% at one point before shares rallied back and ended the day down 7.7%. Shares of INSY are trading above its average Wall Street price target and this leads us to believe that the selloff is not over yet. INSY is up over 69% during 2015 but shares are down 16.2% from its all-time high which the company set on June 23rd. Investors should proceed with caution! 

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Authored By

Michael Berger

Michael Berger is Managing Partner of StoneBridge Partners, LLC and Founder of 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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