The Black World Of Insys Therapeutics

Slowly but surely answers to the many riddles of how Insys Therapeutics (INSY) could achieve its mercurial success are beginning to emerge.

The Scottsdale, Ariz.-based pharmaceutical company has only one commercial offering, Subsys, a sublingual Fentanyl formulation whose sales growth has managed to double the market’s size, according to executives at rival companies, to more than $500 million from an estimated $225 million since its approval and launch in March 2012. In turn, the upward march of the company’s share price has turned its growing legion of supportive brokerage analysts and money managers into minor geniuses. (Southern Investigative Reporting Foundation readers will recall Insys from an April 24 investigation of the drug’s mounting number of lethality cases and the company’s unusual marketing efforts.)

Therein lies the rub.

Subsys is approved only for breakthrough cancer pain, a market estimated to have an annual growth rate of about 10 percent in the spring of 2012, according to former Insys sales staff and rival pharmaceutical executives. Instead, within two years of the drug’s launch, on March 21, 2014, Subsys managed to nose past Cephalon’s Actiq, then a leader in this narrow category, in number of prescriptions written, according to IMS Health data obtained by SIRF; last September Subsys took the lead for good.

These opioid drugs are so potent that the Food and Drug Administration created a stringent prescription protocol for them (known as TIRF-REMS), with multiple steps for a patient to go through before a prescription is dispensed.

Yet according to Medicare Part D records for 2013, no oncologists appear on the list of Subsys’ biggest prescribers.

Given this apparent lack of support from oncologists, it has been odder still that insurance companies seem to have embraced Subsys, continually approving its reimbursement at a level none of its competitors can obtain. A leading Subsys prescriber told the Southern Investigative Reporting Foundation that in his estimation, “Insurers cover over 90 percent of [Subsys prescriptions] for at least one [90-day] cycle,” whereas rival drugs appear to hover at a 33 percent approval rate. The doctor’s account of a chasm between how insurers treat Subsys and its rivals was corroborated by a senior executive at an Insys rival and three former Insys sales staff members.

But it was not until records in the Center for Medicare and Medicaid Services Open Payments database were released in October 2014 -- covering the last five months of 2013 -- that a linkage could be more easily detected between the volume of Subsys prescriptions and payments to doctors.

As Insys’ share price continued to trend upward, Wall Street’s brokerages found it easy to promote the company’s business practices, as a Jefferies research report from December shows.

But now federal prosecutors are peeling back the veil to reveal a black world behind Insys’ earnings. The initial results suggest they do not like what they are seeing.

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Dr. Gordon Freedman, a 55-year-old anesthesiologist, is in every way imaginable a member of New York’s medical establishment, with a busy two-office practice and, until very recently, a faculty appointment at the Mount Sinai School of Medicine.

A graduate of the Sackler School of Medicine, Dr. Freedman resides in Irvington, N.Y., a pretty village along the Hudson River just 20 miles north of Manhattan. This seems to be the perfect capstone to a life that outwardly evinces the virtues of taking initiative and pursuing hard work.

But in life, as in medicine, the mechanics of how the system works matter. And for Dr. Freedman, the road to success has been paved with lots of Insys’ cash.

The June 30 update to the Center for Medicare and Medicaid Services Open Payments database included the full amounts of pharmaceutical company payments in 2013 and 2014 to doctors for entertainment and speaking at corporate events and for research. The database revealed that in the last two years Insys spent almost $204,000 on Dr. Freedman, with more than $147,000 of that being for speaking programs last year in 52 separate payments of $2,400 to $3,750, not including food and travel expenses; none of the money was for research.

Was paying Dr. Freedman so much a good investment for Insys? Probably.

Medicare Part D records show that in 2013, the most recent year for which data is available, Dr. Freedman ranked as the 15th-highest Subsys prescriber as measured by dollar amount, having written 35 prescriptions that cost Medicare $393,961. The Southern Investigative Reporting Foundation, via a database tracking TIRF-REMS prescriptions, identified 60 Subsys prescriptions that Freedman wrote from March 2012 (when Insys obtained FDA approval to sell the drug) to the end of December 2013.

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Disclosure: Neither SIRF nor its employees, contractors, board members or advisors has any economic stake in what we report on, before or after the release of the investigation. No one sees or is ...

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Old Time Investor 4 years ago Member's comment

Yup, read between the lines. INSY going up