Ex-Boca school counselor used exotic dancer, models to push fentanyl

A PALM BEACH POST INVESTIGATION


Alec Burlakoff once worked as a guidance counselor and basketball coach at a private Boca Raton prep school, but then he jumped into the cutthroat world of pharmaceuticals. It would never be the same.

As national sales chief for Insys Therapeutics, he helped direct the hiring of a former exotic dancer from West Palm Beach, models and even a reality TV star who posed for Playboy to peddle one of the most dangerous drugs doctors can prescribe: a spray form of fentanyl.

Now, he stands charged as the sales mastermind, the chief driver of what federal prosecutors call a national criminal conspiracy to catapult sales for the fentanyl spray called Subsys by bribing doctors to prescribe it through a “sham” speakers program.

Insys’ alleged pay-for-scripts plan may indeed have been birthed in Palm Beach County. Before the company hired Burlakoff, he plied his trade slinging another fentanyl drug here, targeting some of the same doctors for a pharmaceutical company that also employed a speakers’ program.

The Arizona-based company blatantly played to doctors’ libidos to get them to prescribe the fentanyl spray, which is up to 100 times stronger than morphine and approved by the FDA only for cancer treatment, criminal indictments claim. A regional sales manager for the Wall Street wunderkind referred to these doctors in a lawsuit as “speaker whores.”

“I’ve seen pharmaceutical companies engage in greedy and unethical tactics, but I think Insys may have set a new bar in sliminess,” said Dr. Andrew Kolodny, co-director of the Opioid Policy Research Collaborative at Brandeis University.

More than 80 percent of the prescriptions written during Burlakoff’s three-year tenure at Insys were for off-label treatments and did not go to cancer patients suffering breakthrough pain — pain so severe no other painkillers work, court records state.

Only 1 percent of doctors who prescribed Subsys were oncologists treating patients for cancer, a shareholder lawsuit states. Many of the doctors paid by Insys were neurologists and pain medicine specialists.

Sales reps embedded themselves in doctors’ offices, delved into patient files to find Subsys candidates and sat with doctors and patients to sell the drug to their patients. The Top 10 prescribers in the nation include a Palm Beach County physician.

Insys left nothing about its profit to chance. It set up a boiler room in which telephone operators from Arizona, pretending to be workers in the doctors’ offices, told insurers that patients had cancer when they didn’t in order to get prescriptions approved, criminal and civil court documents contend.

Insys’ stock price went through the roof. Top executives cashed out. And patients treated for ailments other than cancer turned into addicts — if they didn’t die.

At least 908 deaths in which Subsys is a primary suspect were reported in five years to the FDA as “serious adverse events” associated with the drug, a Palm Beach Post analysis of raw data sent to the agency by Insys found.

It’s not clear how many deaths were cancer-related.

The FDA uses the data as an alert system to trigger investigations of possible safety problems with devices or drugs it regulates.

An Insys spokesperson said the numbers are misleading because determining what caused the person’s death requires a deep dive into each case. The company said it found only a few deaths from 2012 through nine months of 2017 attributed directly to the fentanyl spray but refused to say how many.

“Some of the higher doses of fentanyl spray have more in common with a lethal weapon than a medicine,” said Kolodny. “One squirt of 800 micrograms of Subsys spray could easily cause an overdose in a person not used to taking opioids.”

What is fentanyl?


A synthetic painkiller 50 times more potent than heroin, fentanyl is a chief reason the opioid epidemic is killing so many people. The street version is mixed with or substituted for heroin. Fentanyl killed the singer/songwriter Prince.

Whether it’s in prescription form or made in a clandestine Chinese lab, a tiny dose the size of a grain of salt can be lethal. First responders have been warned about encountering even small amounts. Carfentanil, an analog of fentanyl normally used to sedate elephants, is another killer in the opioid crisis.


Fentanyl may have a role in the operating room or for palliative care, but it is not a drug that should be prescribed for chronic pain, he added.

Take the case of Jeffrey Buchalter. The veteran survived two tours in the Iraq War only to be imprisoned by a Subsys addiction. In September, he testified at a congressional hearing on Insys that he was prescribed the equivalent of 5,000 Percocet pills a day.

Buchalter said Subsys turned him into a full-blown opioid addict. “I’m fortunate, for somehow I made it, unlike others,” he said. “The scars from Subsys always remain. The prospect of recovery remains uncertain.”

Carolyn “Susie” Markland, a grandmother in Jacksonville, and Sarah Fuller, newly engaged in New Jersey, didn’t make it.

“Every day of my life, I must live with the realization that Sarah is gone because of Insys’ greed,” her mother, Deborah Fuller, testified at the September Senate hearing. “I believe that Sarah’s death certificate should be changed to indicate her death was a homicide, and the cause of death should be corporate greed.”

Boca Raton charmer 

Today, if Insys Therapeutics was a patient, it would be bleeding out. There are indictments of former executives like Burlakoff, plea bargains for sales staff and prison time for doctors. There are lawsuits by patients and their families, lawsuits by infuriated stockholders, lawsuits by insurance companies, even lawsuits by states, counties and cities.

In the numerous court actions, one name shows up more than any other — more than the company’s founder or even the CEO. The name is Alec Burlakoff.

Burlakoff, 44, was a Boca Raton charmer who rode a start-up pharmaceutical company to the top of a niche market. In an industry known for plying doctors with branded knickknacks and elaborate conference junkets, Burlakoff’s sales force lured doctors with so much more: cold hard cash, court documents attest.

READ: Master salesman Burlakoff mixes ‘Wolf of Wall Street’ with Big Pharma

Insys paid doctors $16.3 million over nearly 2½ years, thwarting the FDA’s efforts to keep a lid on highly addictive, highly dangerous fentanyl medicines, prosecutors say.

And Insys did it when the nation struggled in the grip of an unparalleled opioid crisis.

“The conduct alleged in our lawsuit is nothing short of evil,” said New Jersey Attorney General Christopher Porrino in announcing his state’s action against Insys in October.

Eight states have sued, claiming fraud on taxpayer-supported health care programs. Other states, such as Florida, are investigating.

Burlakoff is one of several former Insys executives charged in a federal criminal racketeering case out of Massachusetts. Among them are founder John Kapoor, CEO Michael Babich and Midwestern regional sales director Sunrise Lee, who once danced at Rachel’s Gentlemen’s Club in West Palm Beach, according to news reports.

In addition to them, seven former sales reps and managers have been charged with or pleaded guilty to health-care fraud or engaging in a kickback scheme. Fourteen Insys prescribers — none in Florida — have been charged with fraud, taking kickbacks or illegal prescribing in connection with Subsys. Two have been convicted, and five have pleaded guilty.

The FBI is on a national hunt for victims and has listed 10 unidentified physicians as co-conspirators in the racketeering indictment against former Insys executives.

The city of Delray Beach sued Insys and other pharmaceutical companies in December, contending that their deceptive marketing practices have played a key part in the burgeoning opioid epidemic, which is putting a financial burden on the city. Broward County did the same in March. Palm Beach County followed Thursday.

READ: Veteran, would-be lawyer, mom left dead or addicted after Subsys

With so many pending lawsuits and criminal cases, most doctors and former Insys employees were reluctant to talk. Neither Burlakoff, now living in Charlotte, N.C., nor his attorney returned calls or emails for comment.

The reams of court documents examined by The Post over nine months, however, speak volumes about what prosecutors describe as a criminal enterprise masquerading as a pharmaceutical company.

These days, Insys claims it is beyond its sordid past and is a good corporate citizen, replacing 90 percent of its key staff and cooperating with investigations. It says it looks to the future with a number of drugs in its research pipeline that could help children plagued by seizures and seniors suffering from Alzheimer’s disease.

“While understandable, it’s disingenuous to repeatedly demonize a company that has made a firm and sincere commitment and is taking all the necessary steps to conduct business according to high ethical standards,” the statement read. 

“It’s also unfair to the company’s current employees, most of whom are new to Insys and had no involvement in the past misdeeds.”

‘Titanic greed’ 

One person not letting Insys off the hook is U.S. Sen. Claire McCaskill, who has accused Insys and the pharmaceutical industry as a whole of exploiting the opioid crisis to get patients hooked on its products. The Missouri Democrat held a hearing in September in which families and former Subsys patients spoke about how they or their loved ones were unwittingly prescribed the product for routine pain.

“This epidemic is the direct result of a calculated sales and marketing strategy major opioid manufacturers have allegedly pursued over the past 20 years to expand their market share and increase dependency on powerful — and often deadly — painkillers,” she wrote Insys in March 2017 seeking documents.

In 2016, about 40 percent of all U.S. opioid deaths involved prescription drugs, about 17,000 overdose deaths, according to the CDC. And that doesn’t even take into account deaths from heroin or fentanyl sold on the street.

Insys says it is not responsible for the opioid crisis, saying Subsys amounted to a fraction of 1 percent of all opioid prescriptions in Florida, for example, during the height of the medication’s use in 2015.

“There is no doubt there were misdeeds by former employees, but Subsys is probably not the cause of the opioid epidemic based on the numbers,” said company spokesman Joe McGrath.

Former Subsys patient Angela Cantone of Greenville County, S.C., isn’t ready to give Insys a pass and has sued the company after her physician put her on the medication for pain from an intestinal ailment. Dr. Aathirayen Thiyagarajah was paid more than $200,000 by Insys in nearly 2½ years as a speaker.

“That’s like Budweiser saying, ‘We don’t contribute to alcoholism,’” Cantone said. “But they have a stake in the game, so they do contribute to it.”

Porrino, the New Jersey attorney general, said that “titanic greed and corporate irresponsibility” meant Insys cared little that its product could exacerbate the opioid crisis.

It wouldn’t be the first pharmaceutical company to push off-label use of a dangerous opioid medication.

WHAT DOES OFF-LABEL MEAN?


The prescribing of medications for uses not approved by the U.S. Food and Drug Administration. They can include using the medication for an unapproved illness, age group, dosage level or how it is taken. It is illegal for a pharmaceutical company to promote an off-label use of medicine. However, a doctor can prescribe a medicine off-label, such as the use of anti-seizure medications to treat bipolar illness.


The U.S. Justice Department fined OxyContin’s manufacturer, Purdue Pharma, $634.5 million in 2007 for off-label marketing to doctors, misleading them with false studies and lying to them about the drug’s risk of addiction. Three former executives pleaded guilty to misdemeanors.

A year later, Burlakoff’s previous employer, Pennsylvania-based Cephalon, settled with the Justice Department for $425 million for pursuing off-label prescriptions of its fentanyl lollipop and two other drugs through a speakers program for doctors. The company pleaded guilty to a misdemeanor charge of misbranding drugs.

Insys has not been criminally charged as a company.

Richard Hollawell, the attorney for Sarah Fuller’s family, said the pharmaceutical companies view these fines as the cost of doing business — and that certainly wasn’t lost on Insys.

“This is a playbook that they took from Cephalon where Burlakoff came from,” he said.

‘Not addicted if (patient) is in pain’

Alec Burlakoff’s own words bear out a sell-at-any-cost culture at Insys.

“If you keep (patients) on (Subsys) for four months, they’re hooked. … Then they’ll be on it a year, maybe longer,” he told his reps at a 2013 training class, according to shareholder lawsuits.

A salesperson afterward took Burlakoff aside and asked whether he intended to get people addicted. Burlakoff coyly responded: 

“It’s not addicted if (patient) is in pain.”

Burlakoff worked like the wizard behind the curtain, directing his “young and naive” salespeople to thwart FDA restrictions on Subsys, shareholders allege.

The agency, to control powerful fentanyl drugs, placed Subsys along with five others in a special category called TIRF-REMS. Doctors, pharmacists, patients and distributors of the drugs must enroll in the program so they are educated on the risks. The drugs are to be prescribed only for breakthrough cancer pain, and they must be given only to “opioid-tolerant” patients so the risk of fatal overdose is reduced.

For Insys, the FDA’s restrictions were hardly a prescription for big profits in a small, crowded market.

While the company is barred from marketing the drugs for uses outside FDA approval, doctors are free to prescribe them “off-label.” The FDA has no authority over doctors. Physicians prescribe off-label all the time and with great success, including antidepressants for menopause, blood-pressure medication for anxiety and an anti-convulsive pill for bipolar disorder.

“Insys devised a subversive and illegal plan to promote Subsys for uses beyond the sole, narrow indication for which it sought and received FDA approval,” the New Jersey lawsuit states.

The company started its aggressive marketing push when Burlakoff came aboard in June 2012 as Southeast regional sales manager, lawsuits state. He used a tried-and-true method of Big Pharma — having doctors host speaking engagements to get other physicians on board in prescribing Subsys.

Insys’ dinners, however, were often “shams,” according to federal prosecutors, attended only by staff, friends and family. Names of doctors who weren’t present were forged on the attendance sheet, documents state.

Burlakoff told his sales reps the program was about getting “money in the doctor’s pocket,” according to court documents.

At Burlakoff’s urging, sales reps told doctors that if they wanted to get future speaking engagements, they needed to prescribe more and more of the dangerous drug at increasingly higher dosages, court documents say. As a result, the company’s profits mushroomed and sales reps reaped extravagant bonuses.

But Burlakoff threatened to fire any rep who could not get their doctors to write at least one script per day, according to a federal lawsuit. The higher the dose, the more money Insys made for a drug that costs $1,800 retail for 30 spray bottles at its lowest strength and as much as $6,000 at its highest dosage.

He also told his sales staff that marketing to cancer doctors — the physicians most likely to prescribe Subsys — were “small potatoes,” according to a stockholder lawsuit.

Three months after he was hired at Insys, Burlakoff rose to vice president of sales.

‘Speaker whores’

Doctors across the country pocketed $16.3 million from Insys from August 2013 through 2015, according to ProPublica’s analysis of data from the Centers for Medicare and Medicaid Services. Nearly 50 made more than $100,000, mostly through the speaker program.

The Sunshine State played a huge role in Insys’ ascent. Florida led the nation in Subsys prescriptions paid for by Medicare, costing taxpayers $28 million in 2015, according to ProPublica.

Two physicians from Florida are included in the list of 10 “co-conspirator” doctors in the federal criminal case against Insys executives.

A district sales manager, Karen Hill, who pleaded guilty in Alabama to participating in a kickback scheme involving Insys, gives insight into how the company lured doctors.

Her plea agreement quotes Hill, on phone calls, twisting the arms of colleagues to find out what doctors want so that they can be turned into what she called “speaker whores.”

“It’s not selling a doctor on Subsys, it’s not you know, anything except finding what a doctor wants,” Hill said. “Some of my guys want money, and that motivates them to speak. Some of my guys want me to hang out with them after hours, and I do. Um, some of my guys want dark chocolate as weird as that sounds. … Anything. You just got to find out what his hot-button is.”

Hill worked with Burlakoff at Cephalon, which had its own speaker program. Her region at Insys included South Florida.

The top Insys doctor in Palm Beach County, pain specialist Bart Gatz of Greenacres, was in the Top 10 nationwide from August 2013 through 2015 as both a prescriber of Subsys billed to Medicare and as a recipient of speakers’ fees. Boca Raton neurologist Lisa Banchik and Lake Worth pain specialist Anthony Rogers were among the top 20 speakers in Florida.

Gatz was seventh in the nation in speakers’ fees, pulling in $229,000 from August 2013 through 2015. Banchik pocketed nearly $72,000, and Rogers was paid nearly $78,000.

Dr. Steven Chun, a pain specialist in Bradenton and Sarasota, pulled in $270,000 over nearly 2½ years, tops in Florida and No. 3 in the country.

None of the above Florida physicians has been charged or sued in connection with Insys. Gatz said he believes he is one of the unidentified prescribers cited in the racketeering indictment against Insys executives but says he never conspired to commit a crime. Another unidentified practitioner in the indictment received about the same amount of money as Chun.

Gatz said most of his Subsys prescriptions were for cancer pain and that his presentations on behalf of the product were legitimate. Chun, in a brief statement, said, 

“We did everything by the book.”

Banchik and Rogers did not return messages left at their practices seeking comment.

While no Florida doctors have faced criminal charges, federal authorities have arrested prescribers in Alabama, Rhode Island, Nevada, Connecticut, New Hampshire, New York and Michigan.

Alabama’s Dr. Xiulu Ruan and John Patrick Couch stand apart for their role in promoting Subsys. They are serving 21- and 20-year prison sentences, respectively, for illegal prescribing as well as running a pill mill and receiving kickbacks from Insys. Ruan and Couch not only were paid $270,000 in speaker fees between them, they sent the prescriptions through their own pharmacy.

They prescribed $4.9 million worth of Subsys to Medicare patients in 2013 and 2014, federal data show.

Ruan and Couch bought 21 high-end cars: Ferraris, Porsches, Bentleys. One car bore the license plate “PAIN M.D.” As a result of their ill-gotten gains, the two physicians were the subject in March of a segment of CNBC’s “American Greed.”

And the charges are coming fast now. Just in March, five New York doctors — one nicknamed “Freedo” — were indicted. One physician used marijuana and cocaine at or before speaking engagements, prosecutors said.

Insys knew how to get doctors into the fold. Sales reps offered physicians “tequila parties” and outings to strip clubs, as well as tickets to sporting events, court documents show.

In the remarkable New York indictment, prosecutors spell out how Insys paid for meals at Manhattan restaurants, outings to area casinos, even an office Christmas party for the doctors. Insys hired one doctor’s girlfriend as his sales representative and she earned about $180,000 in bonuses over nine months, largely based on his prescribing.

Playboy model, Publix cashier

To ply physicians, Burlakoff as head salesman for the company, brought in a new breed of sales reps. Between 80 percent and 90 percent of the sales force under Burlakoff had no pharmaceutical sales experience, according to court records. One regional trainer said the sales reps were not trained in the fact that “Subsys is a severely restricted opioid.”

“Most of Insys’ sales representatives were extremely attractive women,” a stockholder lawsuit in Arizona claims.

Many were models, cheerleaders and cocktail waitresses, according to LinkedIn profiles.

One hire was Amanda Corey Emhof, who has her own IMDb page and posed nude for Playboy magazine. She appeared in the reality TV series, “The Search for the Hottest Girl in America” and another dubbed “Beauty and the Geek.” She was also a plaintiff on the “Judge Judy” show.

Another saleswoman joined the company during Burlakoff’s tenure after working as a Phoenix cocktail waitress. Before that, she was a beautician at a hairdressing academy. 

Other attractive women with little or no pharmaceutical experience as “oncology sales specialists” came from former employers, such as UmbrellaGirlsUSA, a “motorsports modeling agency.”

Gatz told The Post that among the red flags that led him to stop prescribing Subsys was the fact that his sales rep’s prior job was running a cash register at Publix.

But when it comes to dramatically changing careers, few can top Sunrise Lee.

The rise of the exotic dancer from Rachel’s

Lee joined Insys in August 2012 as regional sales manager for the Mid-Atlantic region of the United States. She’d go on to head the Central and Western regions. Four years later, she found herself under federal indictment along with Insys’ top brass.

Before Insys, Lee danced in nightclubs. Her ex-husband, Daniel Lee, told a Michigan court during a custody dispute that “she works late at night at various topless nightclubs.”

She had family ties in Palm Beach County and in 2009 set up her own business, Sensuous Entertainment, in Delray Beach. It provided a website for “traveling adult entertainers.”

News reports say that in West Palm Beach she worked for Rachel’s, a high-end gentlemen’s club that features nude dancers. A photo of her obtained by the Southern Investigative Reporting Foundation for its investigative piece on Insys shows her wearing a T-shirt with the club’s logo.

At Insys, Lee played a crucial role in landing a suburban Chicago pain specialist. The sales rep was having trouble getting him on board in prescribing Insys, saying in an email that the doctor “ran a shady pill mill” but was “extremely moody, lazy and inattentive,” according to a lawsuit filed by Illinois.

Lee was called in to seal the deal and set up a lunch with the physician — identified in the criminal indictment as Practitioner No. 6.

“At the conclusion of the lunch, Lee handed her business card to Practitioner No. 6 and told him to call if he wanted to discuss the fentanyl spray ‘in private,’” according to the indictment. 

A few days later, she met the doctor for drinks at a popular rooftop bar and returned with the news: The physician would start prescribing Subsys.

Between February 2013 and July 2015, Practitioner No. 6 wrote about 1,600 fentanyl spray prescriptions.

Burlakoff, before his indictment, described Lee to the Southern Investigative Reporting Foundation as the company’s “closer,” known for her “empathy” and “holistic approach.”

Sales rise 3,200 percent

After Burlakoff’s hiring, Insys’ profits soared.

Nationwide, Insys made nearly $200 million in 2014 and more than $300 million in 2015. In Burlakoff’s time at Insys, Subsys sales rose 3,200 percent.

Forbes reported in October 2016 that Insys’ founder John Kapoor was worth $2.1 billion. “I always believed in marketing,” Kapoor said. “You might have a great thing, but if you don’t know how to market, then you can’t succeed.”

As doctors ratcheted up prescriptions, not only did the company’s bottom line grow but so did the bonuses for sales reps.

Burlakoff wrote to regional sales director Joe Rowan of Panama City, Fla., that he could make $22,000 a quarter in bonuses if a targeted physician wrote one Subsys script a day. “If he does two-a-day, straight quarter, you would make at least 40 grand for the quarter!” he wrote.

Rowan, Kapoor and Burlakoff are co-defendants.

Burlakoff directed sales staff on the art of the hard sell, telling them to pick an office and “pack your bags — move in — don’t leave until you have seen the Subsys prescription you need on a daily basis ‘with your own two eyes,’” according to the Illinois lawsuit.

How far would Insys sales reps go?

In one case, a sales rep boasted that he took care of a pain doctor who got around in a wheelchair, helping him change his socks and making sure the doctor got his own regular doses of Subsys. In another, a doctor on Insys’ dole and his saleswoman commenced a consensual relationship.

Mentioned in a footnote in one lawsuit filed in Arizona: a patient who died after a sales rep visited the patient’s hospital room and pressed the patient to increase the Subsys dosage. 

“Apparently, visiting hospital rooms and instructing patients how to titrate up was standard operating procedure for many Insys sales representatives,” the lawsuit states.

Prescription numbers were not the only metric Insys managers were watching. It was also about upping the dosages. 

Sales reps coined the phrase: “Start them high and hope they don’t die,” according to stockholder litigation.

A warning ignored

One salesman at Insys pushed back at Burlakoff’s tactics.

Ray Furchak of Texas filed a whistleblower lawsuit in 2012, early on in the Insys saga, but the Justice Department declined to back him and the suit died. Neither Furchak nor the Justice Department returned phone calls for comment.

Furchak’s lawsuit says Burlakoff was brought in when it became apparent the company wasn’t generating expected sales in mid-2012.

When Burlakoff came aboard, Insys reported about $16 million in revenue. In three years, Insys’ profit soared and it cornered the TIRF-REMS niche market of six brand-name fentanyl medicines which can be life-threatening at any dose.

In one photo from an Insys sales conference posted on Facebook, some reps dressed up for group photos like they were in a picture booth at a wedding flanked by the sign, “Protect Your TIRF.”

Furchak learned how far Insys was willing to go. One of his clients refused to venture outside FDA restrictions.

“He seriously needs to start writing or it’s going to make us look bad,” Burlakoff is quoted in the suit as saying to Furchak.  “He should have written much more after our dinner program.”

Furchak’s immediate supervisor Rowan told Furchak that if a doctor was “not putting pen to paper, we need to get rid of him,” according to the whistleblower complaint.

Another concern for Furchak was the dosing. If a doctor started a patient at the lowest dosage available as required by the FDA, then salespeople had to report back to Burlakoff in 24 hours “on WHY the low dose was used and HOW the doctor plans to titrate the patient to an effective dose,” the lawsuit stated.

The FDA cautions in its black-box warning that high doses of Subsys could cause patients to stop breathing.

Doctors who ramped up their prescribing received invitations to the speakers program, Furchak alleged. Insys typically paid doctors between $2,400 and $4,700 per dinner presentation, according to the Arizona lawsuit.

Stockholders contend in litigation that because the Justice Department failed to intervene in Furchak’s lawsuit, Insys “increased the intensity of their improper sales and marketing tactics.”

In that litigation, a confidential Insys sales rep describes the company as having a form of “corporate schizophrenia” where if some sales were done by the book, “then your (district and regional) managers would pull you aside and tell you, ‘Don’t worry about that. Just sell. Do what you need to do.’”

‘He gets Taco Bell’

Burlakoff had little use for doctors receiving money who weren’t writing Subsys prescriptions. When Arizona’s Dr. Steve Fanto wasn’t meeting his quota, Burlakoff said the physician “needs to start cranking or he gets Taco Bell.”

Saleswoman Brianna Smith had a “consensual relationship” with Fanto, and the company took no action. Instead, it gave her a $5,000 raise, court documents show.

Fanto went on to become the fifth-highest paid speaker for Insys in the country and received more than $234,000 in payments.

Not all doctors fell for Insys’ sales tactics.

Oregon’s attorney general went into detail in a court document related to its suit against Insys about a doctor whose son had been hired by Insys as leverage. Salesperson Beth McKey had called the physician for “tequila dates,” the suit said.

The son, unidentified in the Oregon lawsuit, warned his father that McKey was a “cougar” — a woman who seeks sexual activity with significantly younger men. His father declined to prescribe Subsys outside FDA restrictions and the son quit after a few months.

“I don’t want to get down like a rabbit hole of speculation,” the son is quoted in Oregon’s action. 

“But, you know, she — you know, (is an) attractive lady. She thought she could use that to kind of sway doctors to write, and so she would send my dad text messages like that.”

Some physicians allowed sales reps access to patient records to “identify potential candidates” for Subsys. They ignored, as in Sarah Fuller’s case, hospital recommendations to take patients off Subsys and prescribed others, like Iraq veteran Buchalter, extraordinary amounts of fentanyl.

“This gives medical malpractice a new name,” McCaskill said at September’s hearing.

Buchalter’s attorney, Aaron Moore, said the Insys case is a symptom of a deeper disease in the U.S. pharmaceutical industry.

“How does this happen? Where is the corporate compliance program that is supposed to be in place to stop this?” Moore said. “Hopefully with the prosecution of Insys’ top executives, this will stop.”

Boiler room operation 

One of Insys’ key operations was a boiler room-like operation near its headquarters in Chandler, Ariz., the same type of phone bank often used to deploy high-pressure sales tactics.

Babich, the CEO who brought in Burlakoff, monitored the prior authorization department, where employees worked to hoodwink insurance and pharmacy management companies to approve Subsys prescriptions, several lawsuits contend. The employees pretended to work for doctors’ offices, masking the caller ID of their Arizona phone numbers.

If the patient had had cancer 20 years earlier, it came back. They said the patient had “breakthrough pain” when Subsys was approved for only “breakthrough cancer pain.” In fact, when a real cancer patient came along, the phone operators were “stoked” because it was so rare, according to a stockholders’ suit.

Employees in the department shared in bonuses for each prescription. A net paycheck for two weeks could be as high as $2,200, more than double the employees’ base pay, according to the class-action lawsuit. 

Elizabeth Gurrieri, manager of the department, pleaded guilty in June to conspiracy to defraud insurers.

Patty Ray Nixon, who worked in the department, said in an affidavit that founder Kapoor met with Gurrieri weekly. Nixon said she was directed not only to lie but to alter patients’ electronic medical charts to get approval for prescriptions.

“We were rewarded with substantial financial bonuses for misleading insurers,” Nixon said.

Fast money

Shareholder litigation claims Insys insiders knew of illegal sales tactics and sold $34 million worth of stock at its peak.

Insys’ common stock skyrocketed in less than three years, hitting a high on July 31, 2015, at nearly $45 per share. It has tumbled mightily since, hovering around $6 a share.

In December 2013, when the company issued a press release announcing it had received a subpoena from the Department of Health and Human Services, the stock lost 16 percent of its value.

The next month, Babich and the company’s chief financial officer at the time, Darryl Baker, announced Insys would seek to expand approved uses of Subsys. The stock rose 24 percent in one week and Baker, according to a shareholders’ lawsuit, sold 30,000 shares of Insys, pocketing $1.4 million.

In March 2014, Insys announced extraordinary earnings, which exceeded analysts’ expectations, and a 3-for-2 stock split. Babich, executing a number of trades at that price, netted $21.1 million.

Former Chief Medical Officer Larry Dillaha did the same, making $10.7 million, before announcing his resignation. Neither Baker nor Dillaha has been charged with wrongdoing.

In May 2014, Dr. Gavin Awerbuch, a Michigan neurologist, was arrested on fraud charges after he prescribed $6.9 million worth of Subsys to Medicare beneficiaries. Awerbuch wrote a staggering 1,283 Subsys prescriptions in less than two years — 20 percent of the company’s Medicare prescriptions. He was sentenced to 2½ years in prison in February.

Awerbuch was the first domino to fall in what eventually would lead to the stock’s plummet.

But the company is not giving up.

“Over the past several years, Insys has actively taken the appropriate steps to place ethical standards of conduct and patient interests at the heart of our business decisions,” Insys’ president and CEO Saeed Motahari wrote McCaskill in September.

A COMPANY UNDER FIRE


STATES: Insys Therapeutics of Arizona settled lawsuits with four states: Oregon ($1.1 million), New Hampshire ($2.9 million), Massachusetts ($500,000), Illinois ($4.5 million). Arizona, New Jersey, North Carolina and New York have sued. An investigation by the Florida Attorney General is ongoing.

INVESTIGATIONS: Insys has received subpoenas from Connecticut, Michigan, Florida (Jacksonville), Kansas, Pennsylvania, New Hampshire, New Jersey, California, Rhode Island, Ohio, Alabama, Texas, Maryland, Delaware and New York. The Department of Health and Human Services’ Office of the Inspector General is also investigating.

PATIENTS: Lawsuits from patients or their families are filed in Florida, Maryland, New Jersey, New Hampshire, South Carolina, Arkansas, Rhode Island and Kansas.

STOCKHOLDERS: Suits filed in Arizona, New York and Delaware.

INSURANCE: Anthem insurance company filed a lawsuit, claiming $19 million in fraud. Aetna filed a complaint in Pennsylvania, claiming Insys defrauded it of “tens of millions of dollars.” Humana sued in August in Pike County, Kentucky.

CRIMINAL: Insys executives or employees face or haved face criminal charges in Massachusetts, Alabama, New York and Connecticut.

DOCTORS: Fourteen physicians face or have faced charges in Alabama, New York, New Hampshire, Rhode Island, Connecticut, Michigan and Nevada.

LOCAL SUITS: Delray Beach, Palm Beach and Broward counties.

Since that time, Insys has paid millions to states that have filed suits alleging fraud, including $4.5 million to Illinois and $2.9 million to New Hampshire. Illinois initially sought to ban the company from doing business within the state.

Insys updated investors in October about open investigations by HHS over patient privacy and other potential violations: The company is negotiating with the Justice Department and there appears to be $150 million in potential liability.

Subsys remains on the market, while Insys is looking to capitalize on a new product: Syndros, a synthetic marijuana. It spent $500,000 to keep natural marijuana illegal in Arizona. The referendum to legalize pot was defeated in 2016.

Insys says its synthetic cannabinoids will treat a variety of ailments, including pediatric epilepsy, anorexia in cancer patients and agitation in Alzheimer’s disease.

The DEA’s approval places Syndros in Schedule II of the Controlled Substances Act, meaning the medicine has a high potential for abuse.

Fuller family attorney Hollawell said Insys shouldn’t be operating in any capacity, much less marketing another drug with addictive properties, considering its history with Subsys.

“This company was killing people and they are allowed to gain approval for another drug,” he said. “That is disturbing.”

It’s time, one lawmaker said, to put pharmaceutical executives behind bars. No longer will fines suffice.

U.S. Sen. Kamala Harris, a Democrat from California, came of age as a prosecutor during the crack epidemic of the 1990s.

She told the September Senate roundtable that the opioid crisis is similar but with one key difference: “Back then, drug companies were not boosting their profits often by illegal means at the expense of lives.

“There is nothing like the threat of having to bring your toothbrush when you show up in court to encourage better behaviors,” she said.

PAY TO PRESCRIBE? THE FENTANYL SCANDAL

Part 1

Ex-Boca school counselor used exotic dancer, models to push fentanyl

Master salesman Burlakoff mixes ‘Wolf of Wall Street’ with Big Pharma

Veteran, would-be lawyer, mom left dead or addicted after Subsys

How we got the story

Part 2: Coming April 11

Data reporters Mike Stucka and Mahima Singh, staff researcher Melanie Mena and digital editor Michele Kelley contributed to this story.




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