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Bribing Doctors, Making Millions

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ARCHIVE: John Kapoor has been arrested today in Arizona. He was basically accused of helping to fuel the opioid epidemic… Billionaire accused of pumping a powerful opioid, 50 times more powerful than heroin into our community… This is rare. It’s not everyday you see billionaires being arrested.

 

ARONSON: In 2017, federal agents launched a raid on the Arizona home of John Kapoor.

 

ARCHIVE: Kapoor’s company makes Subsys, a fentanyl spray medication approved only for severe cancer pain… Several charges. Accused of racketeering conspiracy, wire fraud… 

 

ARONSON: Kapoor and his employees were accused of defrauding insurers, and bribing doctors to prescribe a potent opioid drug at dangerously high doses.

 

The drug has been linked to hundreds of deaths. 

 

And today, Insys executives, including Kapoor, have become the first big pharma players to be sentenced to prison time for their role in America’s opioid epidemic.

 

TOM JENNINGS: This story has, from the early days for us, has always been a microcosm of something much bigger. 

 

ARONSON: Tom Jennings is director of a new FRONTLINE film about Insys releasing on PBS today. The film explores the rise and fall of the company and its role in the nation’s opioid crisis.

 

I spoke with Tom — and also reporter Hannah Kuchler of the Financial Times, our partners in this new documentary. 

 

I’m Raney Aronson, executive producer of FRONTLINE, and this is The FRONTLINE Dispatch. 

 

FUNDER: The FRONTLINE Dispatch is made possible by the Abrams Foundation committed to excellence in journalism. And by the WGBH Catalyst Fund. Support for The FRONTLINE Dispatch also comes from the Massachusetts General Hospital Cancer Center. Early detection is key to catching and treating many cancers. You can learn more about the innovative programs at mass-general-dot-org-slash-cancer. Mass General Cancer Center: everyday amazing.

 

ARONSON: Hannah and Tom, thanks for joining me on The Dispatch.

 

HANNAH KUCHLER: Thanks for having me.

 

TOM JENNINGS: Sure.

 

ARONSON: Hannah, I want to start with you. Can you tell me why is the Financial Times so dedicated to this story? What was it about this story?

 

KUCHLER: So I think the opioid epidemic has totally shaped America. And, you know, we know that it has caused, you know, huge loss of life. But it's also shaped America's politics and its economics. And we're at this important moment where we're going to see, you know, who is held accountable for it. And I think the thing about Insys was, it was the first company where pharmaceutical executives are getting prison time for the opioid epidemic and their role in it. And so we really wanted to dig in and understand what happened inside this business. But we also wanted to ask broader questions about how they were able to do this for so long and in particular, they were funded by Wall Street. They were the best performing IPO of 2013. So why was Wall Street not paying attention to the effect they were having in the world?

 

ARONSON: Right, like why were they going for something that we were then consequently found out was a company that was really going too far?

 

KUCHLER: Yeah, completely.

 

ARONSON: So Tom, you know, you've made multiple films for FRONTLINE. And one thing that you do really well is you tell a story about a character. I'm thinking of ‘A Perfect Terrorist’ and many of these, you know, great portraits of a person. So I want you to tell me a little bit about who runs Insys.

 

JENNINGS: Yeah, it is a story that is a lot of like what we do a lot at FRONTLINE and what I've done in the past with FRONTLINE as well, which is to tell stories about people who are not accessible in a lot of ways. And so the person who was not accessible in this instance was John Kapoor, who's the founder and CEO of Insys Therapeutics. So we had to find ways around that. And once you decide to take something like that on, you go deep and try to find the people who were there to witness this kind of history that unfolded at Insys. So we went and found this guy, who was a senior VP of sales, named Alec Burlakoff. And as it turns out, Alec Burlakoff is an amazing character. I think you can stand back and look at him and have a tremendous amount of moral judgment about somebody like this. But one thing that's really undeniable and is wonderful for people like us, is that he just pops out as an individual. He's a tremendous character and that means a lot for what we do. Storytelling, we need these kinds of people and he delivered in spades.

 

ARONSON: You know, one of the things that I felt was really interesting about him was your interview and I want to talk about that. So you're sitting across from Burlakoff, he's telling you these things that he did, I mean, are you getting upset as he's telling you this? I mean, how are you responding to, you know, some of these tales he's telling you that really are about, you know, bribing doctors and leading to really a sort of culture inside the company inside the Insys company that led to, you know, what the film and the reporting unfolds?

 

JENNINGS:  Yeah, this guy I mean, that interview was really fascinating and it came about in such strange circumstances in some ways. It was the very first thing that we did on this film. We were in this studio in this section of, of Boston, Somerville. And he came accompanied with the feds, you know, the federal prosecutor. Not just the feds, but Fred Wyshak, who is this mafia killer. And it was just the most amazing scene to walk into. But then to sit down with him, and like you're saying, Raney, the things that he talks about this, the tales that he tells are, you know, jaw dropping. 

 

ALEC BURLAKOFF: The only thing that mattered was the bottom line. Before you broached the subject of bribing a physician, you need to do a whole lot of homework. How much money is enough? There is no amount. If and when push came to shove, and someone with Insys Therapeutics had a conscience, might raise an alarm, it just disappeared. 

 

JENNINGS: And it's hard to kind of contain yourself when you're an interviewer listening to this kind of stuff and not just say, ‘Hold on, wait a minute. Can you repeat that? Can you tell me again? Did you just say bribery?’

 

JENNINGS: Correct me if I’m wrong, but that doesn’t… you’re saying bribery? Like you’re kind of…

 

BURLAKOFF: Yes I am. 

 

JENNINGS: Back then did you think, ‘Oh I’m going to go bribe people’?

 

BURLAKOFF: Yes.

 

JENNINGS: Remember, this is our first interview, the first thing that we did on this production. I was really like, the moral universe just suddenly went out the window, everything was upended.

 

ARONSON: Right. You definitely feel that in the documentary. You feel like you can’t believe that he’s saying what he’s saying, certainly on camera. You know, maybe whispering in someone’s ear you might admit that you did that I guess if you were him. But the fact that he's sitting there telling you this. And so, where is Burlakoff right now and what's happening with him?

 

JENNINGS: Alec Burlakoff right now is sitting in a federal prison in Florida. He's there for two and a half years. He should be there for two and a half years. He might get out a little bit earlier. We went down, we interviewed Alec two times. The first time was that one in Boston. Like we were saying, it was under the guise of the federal prosecutor. And what I wanted to do was get an interview under the belt without that, without that sense of overlay. And it was a tremendously different interview. And when we went down to visit him in Florida in his home outside of West Palm Beach he was waiting to, it was after he'd been sentenced and he was waiting to go to jail.  

 

ARONSON So I want to understand the case a little bit better. So Hannah, help me understand what happened to Insys?

 

KUCHLER: Well, it's a long story. But, Insys isn't a big pharma company, right? They’re this small company in Arizona and they make this tiny, but really powerful, fentanyl spray. What really interests me about them is that actually they, you know, they get this drug approved in 2012, which is a really long time into the opioid crisis, right? Officially the crisis began in the late ‘90s. So they get it approved despite a lot of knowledge about, you know, how damaging opioids are being in the U.S. and how they are being over-prescribed and mismarketed but they managed to get it. But then when they get it on the market, the sales are just not doing very well. And Kapoor wants his investment back. He's very frustrated. And so he ends up turning to Burlakoff with, according to Burlakoff, a fairly explicit understanding that, you know, he was being hired to bribe people.   

 

ARONSON: And with that in mind, Tom, can you tell me about John Kapoor, the CEO of Insys. And also, you know, how he relates to Alec Burlakoff. What's their relationship like?

 

JENNINGS: Sure. John Kapoor is originally from a small Indian city, North India. He's now in his 70s, he came to the United States to go to college in the 1960s. And he went to the University of Buffalo. He got a graduate degree in pharmaceutical sciences, a chemistry degree, actually. And he took that degree and he went into business. And he clearly had this tremendous entrepreneurial drive from a very early age that just blossomed right after he got out of college. And he started a series of companies. One of the first... The first company that he was hired to and then took over was called LyphoMed. And it was one of more than a dozen companies that he ended up starting or investing in. And over the next 20, 25 years he really developed this amazing reputation for developing what's called specialty pharma drugs, which are focused drugs on one particular kind of ailment. And they usually have a high amount of revenue and then he would add a little twist to it. And that twist would be a marketing thing, a gimmick almost. But it would be effective, it would be real science but it would still separate his products from anything else that was out there on the market. And one of the things that he developed was a spray like a spray version of the drug. So he starts out with a heart drug, and then it was very successful for angina. And then he got the idea, after his wife who had metastatic breast cancer, apparently died a very difficult death.  He was motivated to help her by developing a pain killing drug and he gravitated towards fentanyl and turned it into a spray. And then he came to market with that. That was the basis of Insys, the Insys Therapeutics, and the drug was called Subsys. So that's, that's the foundation, that's the origin story of Insys and this drug, Subsys. Where Alec Burlakoff comes in is after the launch of Subsys, in 2012, when it doesn't meet expectations.

 

BURLAKOFF: I’m coming in there, people are getting fired left and right.

 

JENNINGS: But why are they getting fired?

 

BURLAKOFF: My basic understanding is lack of sales results.

 

JENNINGS: So they’re not making the money that Kapoor wants them to make?

 

BURLAKOFF: Correct, they’re hurting real bad. They’re on a fast track to going under.

 

JENNINGS: And he says, ‘I want my money back. And I want at least a two-to-one return on my investment.’ Now, that's an almost impossible task. But Alec Burlakoff is up to it because he comes from the pharma industry and he knows how pharma works.

 

BURLAKOFF: My taking on this task is right up my alley, quite frankly. Because I looked at it as gambling, and back then I was a compulsive gambler. I loved to gamble. I saw what Dr. Kapoor was presenting to me as the biggest gamble of my life. Show that we can get a minimum return on investment of two-to-one, minimum, and do not lose his money, or get fired.

 

KUCHLER: So what they did is they use this system of speakers’ fees. Speaker programs are supposed to be a way of doctors finding out about new drugs and treatments for their patients. And so pharmaceutical companies pay doctors to speak at educational events where they say, you know, ‘This is a drug  I've been using, I found it works especially well for these kinds of patients, etc.’ but what Insys did just crossed every line in the book, sort of brought it very clearly into illegality because what they asked was, they said, ‘We pay you a little money and sometimes we don't even hold the events. And we expect you therefore, to prescribe more.’ And they even had this spreadsheet and where they you know, which the prosecutors called the smoking gun, where they put on the return on investment. You know, this is how much we paid in fees. This is how much we're getting out in prescriptions. 

 

JENNINGS: And it is dramatically successful. The speaker program just has a huge consequence for Insys and it goes through the roof Subsys sales just spike upward.

 

ARONSON: What's really devastating about the story is the people who are the victims, right? The people who actually ended up dying taking Subsys. And I was hoping that, Hannah, you could talk about how you open your story, the story of Sarah Fuller.

 

KUCHLER: So, I spoke to Deborah Fuller, who is the mother of Sarah Fuller, who was 32 when she died in 2016. And, you know, it's just a really sad case. You know, Sarah was preparing to get married. She had been addicted to opioids in the past. She had had fibromyalgia and a couple of car crashes that had left her with neck and back injuries. And then she'd managed to get off them. She was a nursing assistant, she'd managed to get off opioids, and she went back because she was still experiencing the pain. She went to a new doctor, she went in there with her dad, and there was an Insys sales rep in the appointment with the doctor. And so not only was she put back on, you know, regular opioids, she was put back on Subsys and her dose was escalated really fast. And to the point where, you know, she ended up overdosing and I think, this is a drug that was officially approved for cancer patients, but the people that we spoke to, We spoke to a man who had been a printer and was sort of suffering from, you know, a whole life on his feet in carrying heavy things. So back pain, there were people who had car crashes. And these people, they go to their doctors thinking that they're going to get help, but actually, you know, the doctors, whether or not they took speaker fees, when they prescribed Subsys, they are prescribing something that turned out to be incredibly addictive and there was some really quite rapid spirals where people overdosed within months of being put on the drug.

 

ARONSON: I mean, I think that's why I wanted to talk about the consequences of this story. You know, it's one thing to tell these stories about, you know, these men who essentially went off the tracks, right? And they made a ton of money before they were caught and we're going to talk about that too, but just the consequence of this is so severe and so shocking.

 

KUCHLER: I think that it's really interesting just how people are able to disconnect their actions from the consequences, especially in business. And I think we saw that in the Burlakoff interview where he basically said, ‘I didn't think about the people suffering. I thought it was a widget. You know, I sold it as if it was anything else that one sells.’

 

BURLAKOFF: I thought I was being a good soldier. I thought that I needed to compartmentalize these different things — the opioid epidemic, the people suffering, the deaths, all these lives that are being affected, I managed to successfully compartmentalize that in some part of my brain where it wasn’t in the forefront on a daily basis because it if was then I would not be able to do my job. 

 

ARONSON: So, Hannah, of course, the Financial Times, you know, in most of the big investigative reporting you guys do, you're always looking for what the financial angle is. Can you just help us understand Wall Street at the center of this story and how Wall Street itself actually helped propel the success of Insys.

 

KUCHLER: Yes, we very much believe in following the money and with Insys, you know, one of the things that was really fascinating to me from the start, was just how quickly it was embraced by Wall Street. How well it did on the markets. In 2013 it had the best performing IPO of the year, despite the fact that actually on the first day it listed didn't do that well at all. But by the end of the year, the stock was up 400%. And it just shows how analyst investors are just laser-focused on the numbers and the sales figures were fantastic. And of course they were, we now know, because behind them was this scheme. But they focused on those and they totally ignored really quite early warning signs. You know, by the end of 2013 you see the company having to announce its first investigation into it. 2014, you see doctors being arrested for prescribing Subsys. The evidence seems to be piling up and yet if you do what I did, and you go through and you read every earnings call transcript, and every you know, analyst’s note, you see that there's this picture of people dismissing this and, you know, we have spoken in the past, you know, a fair bit about executives dismissing the potential of fines as a sort of cost of doing business, but that stretches to their investors too. And you know, I was really surprised. Some really quite stark things said in analysts’ notes that suggested that they really just thought, ‘Well, no matter if they do have to pay a fine you know, they've got the money for it, and they'll carry on doing business the way they are.’

 

ARONSON: We’ll come back to the conversation after this quick message. 

 

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ARONSON: Tom I want to understand the case a little bit more, so how do the feds start to understand that something is going on here and what kind of playbook do they follow to investigate? 

 

JENNINGS: Yeah, the timing of it is fascinating. The drug goes to market in the spring of 2012. There's an IPO about a year later. And within months of the IPO, the whistleblowers are just coming out of the woodwork and the feds are starting to hear enough noise there that they've launched an investigation and are already issuing subpoenas against the company by the end of 2013. So really within a few months of the IPO, the feds are full bore underway with their investigation. And they start with a kind of a classic approach. This is the federal government. They have a broad reach and they can go to a vast array of different sources, their own offices across the country, you know? And it wasn't just the Justice Department, it was Health and Human Services investigative unit as well that was doing investigations and others and, you know, the DEA was involved. Suddenly there were arrests being made of doctors who were on the take by Insys and within, you know, months of their investigation starting, they're already making arrests of these doctors who are over prescribing Subsys, the same doctors who are taking lots of money from Insys. And so they go from doctor to doctor and they just start building up their case. And what's so fascinating is when you talk to the assistant U.S. attorneys, who were the ones investigating it, they brought on the FBI, they brought in the HHS, they brought in the DEA and they coalesce all this information and start identifying bad actors. And by, you know, really, you know, right from the start, they know that there's this guy named Alec Burlakoff who seems to be the common link between all these whistleblowers. And they target him early. And so that's when they kind of get the idea that this might actually be kind of a classic you know racketeering operation that goes across the country that’s a broad group of actors who are working together and in concert to defraud people and bribe people. And it's person by person, sales rep by sales rep, moving up the ladder that they slowly but methodically get, finally, to John Kapoor.

 

ARCHIVE: Federal agents have arrested the founder and former CEO of a pharmaceutical company with alleged ties to the opioid crisis. John Kapoor was arrested on charges including racketeering, conspiracy and fraud...they do believe that this trial which used RICO conspiracy statues traditionally used to prosecute mob bosses against the company and its executives will make a positive difference in future prosecutions of opioid cases...

 

ARONSON: So it's a classic prosecution except it’s of a drug company. I mean, it's just so interesting to hear how they use those techniques to then investigate Insys. You know, I was wondering, can you guys put this in context — do we know of any other big companies that are being investigated this thoroughly?

 

KUCHLER: I think not yet. But I think that it is a warning signal to people who are in these companies that they, you know, their own liberty may be on the line rather than their company's cash. We are seeing a huge number of lawsuits in cases around opioid makers because of the fallout from the crisis. Primarily, these are civil cases. So thousands of counties and pretty much every state across the country is bringing   a case against opioid makers because they want compensation. You know, they say, understandably, they have huge bills from health care and from law enforcement because of this crisis. But there are signs that there will be criminal prosecution. Some of the big opioid makers have had to do what Insys back in 2013 and declare in their financial filings that they have received subpoenas.

 

ARONSON: So, what’s the latest in the case?

 

JENNINGS: So the latest in the case is that the principals have been convicted. 

 

ARCHIVE:… a judge sentenced Insys Therapeutics founder John Kapoor to five and a half years for his role….called Subsys, John Kapoor getting 66 months in prison, about five and a half years for his role there, former billionaire...

 

JENNINGS: John Kapoor, five other individuals who were his associates have been convicted, not including Alec Burlakoff and the former CEO Mike Babich, who turned as prosecution witnesses and took plea deals. They're all facing jail time. In fact, Alec Burlakoff he’s the first one to actually go to prison and the others are scheduled to go to prison in July. I think there's some questions about if corona, the virus, is going to impact that. But John Kapoor, it should also be said, has probably the best counsel that money can buy, the best legal counsel. And they've been very effective at delaying and pushing things off. So it might be a while before he actually shows up for prison.

 

ARONSON: I'm gonna ask you both this question. What does this tell you about the larger opiate crisis that’s still going on? And clearly coronavirus is overshadowing everything right now, but what about that? And Hannah, you know, what are your thoughts on that?

 

KUCHLER: I think it tells us it wasn't an accident. You know, the crisis wasn't caused by Insys. As I said, it's actually, you know, not one of the biggest players in the whole opioid market, but it shows that a lot of the time, it was mis-marketing by companies that deliberately meant that doctors put people on this. And now we might talk a lot about illegal opioids, because there has been a real crackdown in the prescription opioids. But so many of these people who are suffering from opioid abuse disorder are people who started off because their doctors put it on them and their doctors were not operating in a vacuum. They were not following, you know, just because they thought it was good medical practice. Some of them were doing it for financial incentives and people made money out of it.

 

JENNINGS: Right, and contextualizing it all for me is that this story has from the early days for us has always been a microcosm of something much bigger. It is the Purdue story. It is the Johnson & Johnson story, but told in a frame that is very, very tight and understood and accessible.

 

ARONSON: I could honestly talk about this all day, so I’ll wrap this up now. Hannah, thanks for joining us and for this collaboration that’s been so fruitful. And Tom, you too, thanks for everything.

 

KUCHLER: Thank you.

 

JENNINGS: Thanks.

 

ARONSON: Opioids, Inc. is streaming in full at FRONTLINE DOT ORG. You can read more of Hannah’s reporting on Insys for the Financial Times at F-T DOT COM.

 

Our podcast producers are Max Green and James Edwards. 

 

Our production assistant is Lucie Sullivan. Production help from Maxwell Carter. 

 

Katherine Griwert is our editorial coordinating producer. 

 

Pam Johnston is FRONTLINE’s senior director of strategy and audience.

 

Our senior editors are Lauren Ezell and Sarah Childress.

 

Frank Koughan is senior producer.

 

Andrew Metz is our managing editor.

 

I’m Raney Aronson, executive producer of FRONTLINE. 

 

Music by Stellwagen Symphonette. 

 

The FRONTLINE Dispatch is produced at WGBH and powered by PRX.

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