×

UPDATE 1-Billionaire Insys founder charged in U.S. opioid bribe case

(Adds details on charges)

BOSTON, Oct 26 (Reuters) - The billionaire founder of Insys Therapeutics Inc was arrested on Thursday on U.S. charges that he participated in a scheme with other executives to bribe doctors to prescribe a fentanyl-based cancer pain drug and to defraud insurers.

John Kapoor, 74, who stepped down as chief executive of Insys in January, was charged with having engaged in conspiracies to commit racketeering, mail fraud and wire fraud in an indictment filed in federal court in Boston.

He was arrested in Arizona, where Insys is based, and added as a defendant in a previously filed case against six former Insys executives and managers, including former Chief Executive Michael Babich, prosecutors said.

Brian Kelly, Kapoor's lawyer, said in an email: "My client is innocent and he intends to fight these charges vigorously."

Insys, which has been in settlement talks with the U.S. Justice Department in connection with the probe, declined to comment. Its stock price fell 4.56 percent to $7.08 in midday trading on Thursday.

The charges marked a major escalation of the ongoing investigations of Insys related to Subsys, an under-the-tongue spray that contains fentanyl, a highly addictive synthetic opioid.

Those probes have come amid a national opioid abuse epidemic. According to the U.S. Centers for Disease Control and Prevention, opioids were involved in over 33,000 deaths in 2015. The death rate has continued to rise, according to estimates.

Kapoor, who founded Insys in 2002 and remains a board member, stepped down in January as the companys chairman and chief executive, a role he took on in November 2015.

He is currently the chairman of drugmaker Akorn Inc and president of investment firm EJ Financial Enterprises Inc.

According to the indictment, following the launch of Subsys in 2012, Kapoor and Babich grew dissatisfied with the drug's success in its initial three months on the market.

It says they, with others, devised a scheme to pay bribes in the form of speaker fees and food and entertainment to medical practitioners to prescribe Subsys and to increase the dosage and volume of existing prescriptions.

They also sought to mislead and defraud insurers who were reluctant to approve payment for Subsys when it was prescribed to patients who did not have cancer, the indictment said.

(Reporting by Nate Raymond in Boston; Editing by Scott Malone and Dan Grebler)