A convictionon federal fraud, racketeering and kickback charges could send JohnKapoor and four other ex-Insys managers to prison for as long as 25years. (Photo: Shutterstock)

The first prosecution of a pharmaceutical company chiefexecutive tied to opioid overdoses begins this week, when InsysTherapeutics Inc.'s John Kapoor goes on trial. The fallout may joltan industry facing steep penalties for its own role in the crisis.

Kapoor, 75, is accused of masterminding illegal marketing tactics that contributed to anepidemic of addiction and death. A onetime billionaire who rosefrom modest means in India, he's on trial for using speakers' fees,dinners and cash to lure doctors into prescribing a highlyaddictive opioid painkiller meant solely for cancer patients.

Related: The opioid epidemic claims its first corporatevictim

The case will be heard in Boston, but the verdict may echo inthe boardrooms of the nation's pharmaceutical companies. More than1,500 local governments have sued opioid makers and distributors torecoup the billions of dollars spent fighting the crisis. The clashcould serve as a test-drive for how jurors weigh claims of industrywrongdoing.

“It's a real advantage for the local governments' lawyers to getjury feedback on the Insys marketing evidence,'' said RichardAusness, an expert on mass-tort law at the University of KentuckyCollege of Law. “It will help them build their conspiracy casesagainst all the companies involved in the opioid litigation.”

A conviction could turn Kapoor into the face of the opioidcrisis.

The first person in his family to attend college, he became ahealth-care entrepreneur after earning a doctorate in medicinalchemistry at the University of Buffalo in 1972. He worked as adrugmaker's plant manager and later became CEO of ahospital-products company. After forming a venture-capital firmthat invested in health-care companies, he merged closely heldInsys with NeoPharm Inc. in 2010 to get access to technology todevelop pain drugs for cancer patients.

He remains Insys's majority shareholder, controlling about 60percent of its shares, according to company filings. They've fallenby about one-third since his October 2017 indictment.

A conviction on federal fraud, racketeering and kickback chargescould send Kapoor and four other ex-Insys managers to prison for aslong as 25 years. They're accused of bribing doctors to prescribeSubsys, an opioid painkiller approved in 2012 for late-stage cancerpatients. Prosecutors say Kapoor oversaw a scheme in which doctorsgot sham speaker's fees in return for issuing more prescriptionsand subordinates lied to insurers about the type of patientsreceiving the fentanyl-based drug, they said.

Doctors were allegedly seduced with jobs for relatives, lavishmeals and, in one case, a $1,000 private champagne-room session ata strip club. As the bribes generated Subsys sales, Kapoor pumpedmore money into speakers' fees, with spending jumping to $10.5million in 2014 from $550,000 two years earlier, prosecutorssay.

“We will have testimony from doctors who said, 'I would not haveprescribed this if I wasn't being bribed or paid,”' Assistant U.S.Attorney Fred Wyshak said in court this month.

Also on trial is Sunrise Lee, a former stripper who, as an Insyssales manager, enticed physicians into writing more prescriptions,prosecutors said. “Doctors really enjoyed spending time with herand found Sunrise to be a great listener,” another manager, AlecBurlakoff, told colleagues, according to court filings.

Burlakoff is among at least half-dozen current and formeremployees who may testify for the government. Former CEO MichaelBabich pleaded guilty this month and agreed to cooperate in a bidfor leniency.

The other defendants are former vice president Michael Gurry,ex-national sales director Richard Simon and former regional salesdirector Joseph Rowan. The accused deny wrongdoing.

Wyshak, who helped send Boston gangster James “Whitey” Bulger toprison, will be squaring off in court against defense lawyer BethWilkinson, whose clients have included Pfizer Inc. and MicrosoftCorp. She may cast blame on Babich and Burlakoff, saying theyoversaw the speaker's program central to the alleged plot, saidRobert Mintz, a defense attorney with McCarter & English who'snot involved in the case.

'Financial interests'

“She could very well argue the wrongdoing was committed by theselower-level executives, who had their own financial interests inpushing sales of the drug,'' said Mintz, a former prosecutor. “Shemay tell the jury they are now throwing their former boss under thebus to save themselves.''

Wilkinson might also blame other Insys directors, said LarryHamermesh, executive director of the Institute of Law and Economicsat the University of Pennsylvania and an expert on corporate law.“The defense may argue that Kapoor's fellow board members knewabout wrongdoing and didn't make any effort to stop it,'' hesaid.

The trial, which could last three months, may be the year's mostdramatic case involving the opioid epidemic, but it won't be theonly one.

In May, the Oklahoma Attorney General's suit against opioidmakers including Purdue Pharma LP and Johnson & Johnson is setfor trial. Three dozen other states have also sued thecompanies.

And in September, a federal judge in Cleveland will hear thefirst cases brought by U.S. cities and counties, which accuseopioid makers and distributors of conspiring to understate therisks of prescription opioids and overstate their benefits, and offailing to halt suspiciously large shipments to pharmacies.

Lawyers for the municipalities may highlight the marketingtactics revealed at Kapoor's trial as part of their conspiracyclaims, said Carl Tobias, a University of Richmond law professor.Joe Rice, one of the lawyers in the case, declined to comment.

“It's rare for plaintiffs' lawyers to get a kind of dressrehearsal for their evidence in a case, but it looks like they mayget one here,'' Tobias said. “It could provide a road map for howto present this material.”

The case is U.S. v. Kapoor, 16-cr-10343, U.S. District Court,District of Massachusetts (Boston).

More updates on the opioidepidemic: 

• Florida AG targets Walgreens, CVS in amended opioidlawsuit
• The tech industry wades into the fight againstopioid abuse
• There's a new, more powerful opioid on themarket

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