Opioid manufacturer Insys Therapeutics filed for Chapter 11 bankruptcy protections Monday, just days after pleading guilty to federal fraud charges and agreeing to pay $225 million to settle civil and criminal cases alleging it used kickbacks, bribes, and even a lap dance to sell its extremely potent painkiller.
Insys may be the first major opioid maker to go down in a deluge of lawsuits over the opioid epidemic—it faces more than 1,000 lawsuits from municipal governments. But the bankruptcy throws into question just how much the company will actually pay the federal government from the $225 million deal it made on June 5. Bankruptcy documents show that, as of March 31, Insys had just $175.1 million in assets and $262.5 million already in debt.
In an email to NPR, Insys CEO Andrew G. Long defended the bankruptcy decision, saying: “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.”
According to Boston’s US Attorney’s Office—which filed charging documents against Insys—the company will still be on the hook for a $28 million forfeiture that was part of the $225 million deal. That forfeiture links to the criminal case against Insys and is unaffected by any bankruptcy protections. But $195 million connected with the civil case is in limbo. (Insys also agree to a $2 million fine in the settlement.)
In both cases, prosecutors alleged that Insys used unlawful marketing practices to sell its potent opioid painkiller, Subsys. The drug is a fentanyl spray intended only for cancer patients with pain not alleviated by other powerful medications (aka “breakthrough pain”). A Congressional investigation from 2017 found that Insys duped insurers into covering the drug for non-cancer patients. Meanwhile, the company used bribes and kickbacks, including paying sham speaker fees, to get doctors to become prolific prescribers of the dangerous drug. Former Insys employees also testified that the company hired a former stripper to give a lap dance to a doctor the company was wooing.
Last month, a federal jury in Boston convicted Insys founder John Kapoor and four former executives on racketeering conspiracy in connection with Subsys marketing. They are all scheduled to be sentenced in September.
With the legal cases mounting against opioid makers in the wake of an epidemic of addictions and overdoses, Insys is not the only drug maker that has considered bankruptcy. Notorious OxyContin maker Purdue Pharma also reportedly explored the option.