John N. Kapoor, the founder of Arizona-based cannabinoid pharmaceutical company Insys Therapeutics (INSY,) was arrested this morning. Kapoor is charged with offering bribes and kickbacks to doctors for writing prescriptions for a very potent opioid cancer medication to patients who did not have cancer and for allegedly trying to defraud health insurers when they were reluctant to pay for those prescriptions. (See also: Top 4 Marijuana Stocks to Watch)
“In the midst of a nationwide opioid epidemic that has reached crisis proportions, Mr. Kapoor and his company stand accused of bribing doctors to overprescribe a potent opioid and committing fraud on insurance companies solely for profit,” Acting United States Attorney William D. Weinreb said in a statement.
News of Kapoor's arrest comes as media reports suggest that President Trump is on the cusp of declaring opioid addiction as a public health emergency.
At the center of this matter lies Subsys, a powerful fetanyl-based, sub-lingual spray manufactured by Insys that was approved in 2012 by the Food and Drug administration (FDA) for use by adult cancer patients with breakthrough pain. This is not the first time that either the company or its 74-year old founder have courted controversy for offering kickbacks and bribes to prescribe this product.
In fact, Kapoor stepped down as Executive Chair of the company in January 2017 after the arrest and indictment of six (now former) company officials, including two former CEOs. The Department of Justice indictment alleged that Kapoor and others conspired to bribe practioners who ran pain clinics to prescribe this drug to non-cancer patients. Further, not only were health insurers misled when they expressed reluctance to pay for these prescriptions, it is alleged that the company set up a mechanism for obtaining prior insurance authorization directly from insurers and pharmacy benefit managers.
The Nasdaq-listed stock was down almost 20% intra-day after this news as of the time of this writing. The stock has been volatile for most of the year. Kapoor owns 59% stake in the company indirectly through a trust and directly has ownership of 447,523 shares, as per the company's proxy filings earlier this year. Forbes estimated his net worth at $1.7 Billion.