INSY - Alabama Doctors Convicted in Health-Care Fraud Case
By Joseph Walker
Two Alabama doctors were convicted Thursday of health-care fraud, taking kickbacks from pharmaceutical companies including Insys Therapeutics Inc. and prescribing opioid painkillers for no medical purpose, among other crimes.
John Couch and Xiulu Ruan were each convicted on more than 10 criminal counts brought by the U.S. attorney's office in Mobile, Ala.
A federal jury delivered the verdict after a nearly two-month trial that included often-emotional testimony from the doctors' former patients who became addicted to pain medications and former Insys sales representatives who worked closely with the doctors.
The verdict represents a victory for U.S. law-enforcement agencies that have sought to crack down on illegal prescribing of opioids, which along with street drugs like heroin have contributed to soaring rates of addiction and death in recent years.
The doctors were convicted of taking $115,000 in kickbacks from Insys, the Chandler, Ariz.-based manufacturer of a powerful fentanyl spray called Subsys. Prosecutors said Insys disguised the kickbacks as legitimate fees paid to the doctors for promoting Subsys at speaking events. During the trial, prosecutors depicted an unusually close relationship between the doctors and Insys sales representatives and executives.
Dr. Ruan intends to appeal the conviction on grounds he wasn't permitted to present evidence of patients who received "exemplary treatment," and that would've shown a "completely different type of physician" than the one described by prosecutors, according to his lawyer, Dennis Knizley. Nor was the defense permitted to show jurors video captured by an undercover law-enforcement agent in which Dr. Ruan refused to improperly prescribe opioids, Mr. Knizley said.
Dr. Couch also plans to appeal the conviction, his attorney, Jackson Sharman, said.
Insys didn't immediately respond to a request for comment.
Prosecutors said the doctors dispensed Subsys directly to their patients from a pharmacy they owned, enabling them to profit from each prescription they wrote. Many of the prescriptions were written for patients who didn't suffer from cancer pain, the only use approved by the U.S. Food and Drug Administration.
The doctors prescribed Subsys to patients without cancer "because of their own financial self-interest," Christopher Bodnar, assistant U.S. attorney in Mobile, said after the verdict.
The doctors are scheduled to be sentenced in May, and they each face prison sentences of five years to 20 years or more. They agreed on Thursday to forfeit $5 million each in illicit profits, as well as property purchased with illicitly gained funds. Dr. Ruan agreed to forfeit more than 20 luxury sports cars, including two Ferraris and two Lamborghinis that were seized by the government.
The trial provided the most detailed look yet at the evidence amassed by the Justice Department in its continuing investigation into the business practices of Insys. At least 10 former Insys employees, including former CEO Michael Babich, have been arrested on federal criminal charges that include racketeering, insurance fraud and paying kickbacks to doctors. Mr. Babich and the other former employees have pleaded not guilty to the allegations.
Insys has said it is cooperating with all ongoing investigations and is committed to complying with laws and regulations.
Natalie Perhacs, a former Insys sales representative who pleaded guilty to participating in the Alabama kickback scheme involving Drs. Couch and Ruan, testified in January that Mr. Babich and former Insys Executive Chairman John N. Kapoor visited with the doctors in Mobile in 2014.
The Alabama jury also convicted the doctors of taking kickbacks from Galena Biopharma Inc., maker of a rival fentanyl drug called Abstral. The company paid the kickbacks in the form of rebates to the doctors' pharmacy on their Abstral purchases, prosecutors said. As part of a conspiracy to distribute Abstral outside of normal medical practice, Drs. Couch and Ruan bought a combined $1.6 million of Galena stock, and prescribed high volumes of Abstral with the aim of pushing the company's stock price higher, prosecutors said.
Galena sold the rights to Abstral to another pharmaceutical company in 2015.
A former Galena sales director, David Corin, testified in January that Dr. Ruan once complained that Galena wasn't providing him with as many paid speaking engagements as Insys was.
Galena said in a statement that it cooperated with prosecutors' investigation into the Alabama doctors, including by supplying documents in response to a subpoena and reimbursing Mr. Corin's attorney fees.
Write to Joseph Walker at joseph.walker@wsj.com
(END) Dow Jones Newswires
February 23, 2017 18:49 ET (23:49 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.- - 06 49 PM EST 02-23-17
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