Ex-Insys CEO Gets 30 Months in Prison for Opioid Fraud Role (1)

The former Insys Therapeutics Inc. chief executive officer who testified against colleagues accused of arranging bribes for doctors to prescribe more opioid drugs was sentenced to 30 months in prison for his role in the conspiracy.

Michael Babich presided over daily calls with Insys founder John Kapoor and other executives as they began the scheme and closely tracked sales of the company’s highly addictive painkiller, Subsys, prosecutors said. Kapoor and the executives were convicted in May after a trial that included Babich outlining the plot to the jury.

While prosecutors said Babich’s cooperation plea played a crucial role in their investigation, U.S. District Judge Allison D. Burroughs said he and other top executives were “co-architects of this thing.” The fraud wouldn’t have happened without them, which makes Babich equally responsible, she said.

“I don’t actually think you were a model citizen before this,” Burroughs told Babich Wednesday at the sentencing hearing in Boston. “In many ways you were living the me-me-me life.”

The judge postponed her decision on the government’s request that Babich forfeit $43 million in salary and stock options for his role in the conspiracy.

Insys managers are being punished for actions the government says helped fuel a U.S. opioid-addiction epidemic that killed thousands. Earlier in the day, former stripper Sunrise Lee, who became a regional sales manager for Insys, was sentenced to a year in prison. Last week, Michael Gurry, 56, a former vice president who ran a call center for the Arizona-based company, got 33 months.

The same judge this week sentenced former regional sales manager Joseph Rowan to 27 months in prison and gave former national sales director Richard Simon 33 months.

Prosecutors are seeking 15 years for founder and former chief executive officer Kapoor, 76, who will be sentenced Thursday.

Read More: How the Opioid Crisis Evolved

At the hearing Wednesday, prosecutors asked the judge to give Babich a 24-month sentence -- down from an earlier request of 66 months. His cooperation allowed the government to “penetrate the boardroom” as it investigated a case of health-care fraud, federal prosecutor Fred Wyshak told Burroughs.

In an earlier court filing, the government said Babich’s “sheer greed” as a young executive drove him to disregard patient safety and fall in line with Kapoor’s demands for ever increasing profits through illegal means.

Babich told the judge on Wednesday he “could not be more sorry for what I’ve done.”

The former CEO said he was “in over my head” at the company. “I had a boss who called me 20 times a day and a head of sales that could not be controlled,” Babich said. “I’ve asked myself why I wasn’t a stronger person. I was scared of failure and thought I could handle it all.”

Kapoor tapped Babich in 2011 to succeed him as CEO precisely because his protege was “inexperienced and would follow his directives,” Babich’s defense lawyers told the court. Babich had been a financial manager for Kapoor and hadn’t previously worked in pharmaceutical sales.

Former Stripper

At her sentencing hearing before Burroughs, Lee claimed she was exploited by Insys and that she didn’t know that the company’s policies were wrong.

Hiring strippers at Insys was “the next unethical but logical step toward pharmaceutical dystopia” in an industry known for recruiting attractive college co-eds to work as sales reps after graduation, Lee’s attorney, Peter Horstmann, said in a court filing.

Lee told Burroughs she was just following the direction of her bosses and was “easily taken advantage of.” She added, “I traveled and, yeah, I danced, but I took care of my kids.”

Lee broke down in tears. “What I experienced at that company and what these guys did to me and a lot of other girls, they pushed me in that direction,” she said.

Horstmann told the judge that Lee grew up in poverty, though details of her childhood were filed with the court under seal. “I’ve never had a client who was on the back of a milk carton,” he said.

(Updates with comments from hearing and background on case.)

To contact the reporter on this story:
Janelle Lawrence in New York at jlawrence62@bloomberg.net

To contact the editors responsible for this story:
David Glovin at dglovin@bloomberg.net

Steve Stroth, Anthony Lin

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