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

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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 reimbursed for overprescribing its opioid painkiller, Subsys, in a fraudulent manner.

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

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.

The doctors regularly wrote prescriptions for highly addictive opioids without a legitimate reason. Although the FDA only approved Subsys and Abstral for cancer pain, they 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.

11 Insys Executives Arrested in 2016

In 2016, 11 former executives and managers (including the 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 to unnecessarily prescribe Subsys to non-cancer patients through payments disguised as marketing events and speaker fees.

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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This article was written by Mark Maulden for https://technical420.com/cannabis-article/can-insys-survive-legal-onslaught-they-are-about-face on .

This article published in collaboration with Scutify, the best app for traders and investors. Download the Scutify iOS App, the Scutify Android App or visit Scutify.com.

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