Opioid suits lead Insys to file for bankruptcy—and other drugmakers could follow

Insys Therapeutics on Monday filed for Chapter 11 bankruptcy protection, just days after the drugmaker agreed to pay $225 million to settle allegations that it paid kickbacks to physicians to encourage them to prescribe its highly addictive opioid.

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According to North Country Public Radio, Insys could be the first of a string of pharmaceutical companies to declare bankruptcy as a result of opioid-related lawsuits.

Insys agrees to $225M global resolution to settle criminal and civil investigations

The Department of Justice (DOJ) in April 2018 intervened in five lawsuits that allege Insys violated the federal False Claims Act by the way it marketed Subsys. For instance, the lawsuits alleged that executives and individuals at Insys offered bribes to doctors so they would write a significant number of prescriptions for Subsys, even though the drug is intended only to treat cancer patients with severe pain. In addition, the lawsuits alleged that Insys employees conspired to mislead and manipulate health insurers so they would cover Subsys when it was prescribed to individuals who did not have cancer.

DOJ said the settlement agreement requires Insys to "enter into a deferred prosecution agreement" with the federal government to settle the criminal allegations. As part of that agreement, Insys' operating subsidiary will plead guilty to five counts of mail fraud, and Insys will pay a $2 million fine and "$28 million in forfeiture," DOJ said. DOJ added that Insys also will release "a detailed statement of facts outlining its criminal conduct with respect to the illegal marketing of Subsys."

In addition, Insys will pay $195 million to settle the civil allegations that it violated the False Claims Act, DOJ said. The department said Insys also will "ente[r] into an unprecedented 5-year Corporate Integrity Agreement … and Conditional Exclusion Release" with the federal government that include "several novel provisions, including enhanced material breach provisions, designed to protect federal health care programs and beneficiaries."

Insys files for bankruptcy

But Insys filed for Chapter 11 bankruptcy protection just days after DOJ announced the settlement—a move that could instigate "a battle for cash between federal authorities who blamed the company for fueling addiction and the lawyers who are defending its former executives," the Wall Street Journal reports.

According to the Journal, Insys CEO Andrew Long said the company's revenue was not high enough to cover the mounting costs of investigations into and lawsuits filed against the company over its opioid marketing practices. It is unclear how much of the $225 million the federal government now will be able to collect, the Journal reports.

According to the Washington Post, Insys has said it will use cash to continue operating while it works to sell assets to help cover the settlement. Long in a release said, "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." He added, "We believe this process will provide us with a forum to negotiate an equitable resolution with our creditors and represents the best opportunity for our people and our business."

More drugmakers could file for bankruptcy over opioid allegations

According to the Journal, Insys' bankruptcy filing "marks the first corporate bankruptcy directly linked to the nation's opioid crisis, but more are possible as corporations struggle to dig out from under liabilities stemming from accusations that they profited from addiction."

For instance, Purdue Pharma, which also is facing lawsuits over its opioid marketing practices, has indicated it could file for bankruptcy because of the suits (Brickley/Kellaher, Wall Street Journal, 6/10; Balsami/Durkin Richer, Associated Press, 6/5; Stempel, Reuters, 6/5; Telford, Washington Post, 6/10; NCPR/NPR, 6/10; DOJ release, 6/5).

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