×

UPDATE 2-Billionaire Insys founder charged in U.S. opioid bribe case

(Adds details on case, comment from prosecutor, revised stock price)

BOSTON, Oct 26 (Reuters) - The billionaire founder of Insys Therapeutics Inc was arrested on Thursday on U.S. charges he participated in a scheme to bribe doctors to prescribe a fentanyl-based cancer pain drug, marking a step by authorities to fight the opioid epidemic.

John Kapoor, Insys' majority shareholder who stepped down as chief executive in January, was charged with engaging 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, in a statement said: "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 15.63 percent to a four-year low of $6.26 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. They came as U.S. President Donald Trump on Thursday declared the U.S. opioid crisis a public health crisis.

Acting U.S. Attorney William Weinreb said the charges reflected authorities' commitment to combat the opioid abuse epidemic. According to the U.S. Centers for Disease Control and Prevention, opioids were involved in over 33,000 deaths in 2015.

"We must hold the industry and its leadership accountable - just as we would the cartels or a street-level drug dealer," Weinreb said in a statement.

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 , which Fresenius SE & Co KGaA has agreed to buy, and president of investment firm EJ Financial Enterprises Inc.

Prosecutors said that after launching Subsys in 2012, Kapoor, Babich and others devised a scheme to pay speaker fees and other bribes to medical practitioners to prescribe Subsys.

They also sought to defraud insurers into approving payment for Subsys when it was prescribed to patients who did not have cancer, the indictment said.

The other defendants include former Insys Vice Presidents Alec Burlakoff and Michael Gurry; ex-national sales director Richard Simon; and former regional sales directors Sunrise Lee and Joseph Rowan. They have pleaded not guilty. (Reporting by Nate Raymond in Boston; Editing by Dan Grebler and Andrew Hay)