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Investigative Reporter

Roddy Boyd is an investigative reporter who has worked for Fortune Magazine, the New York Post, The New York Sun and Institutional Investor News. The Huffington Post named him one of the 25 most feared financial reporters in America. He also founded more

Insys Therapeutics And The New “Killing It”

Date: Monday, April 27, 2015 2:07 PM EST

On the evening of July 1, 2014 Carolyn “Suzy” Markland, a 58-year old Jacksonville, Florida resident suffering from a degenerative disc disease, took her prescribed medicine—a 400 microgram dose of a Fentanyl spray called Subsys— and went straight to bed.

Despite regular pain, Subsys was not an everyday drug for Markland.  She had had the prescription filled for several months but almost never took the stuff; her longtime family doctor and pharmacist had expressed plenty of no holds barred skepticism to her about it. On the three occasions she took Subsys, her family noticed that its sedative and respiratory effects were noticeably sharper than those of another strong painkiller she took, Exalgo.

The next day, July 2, Markland went to Dr. Orlando Florete, her pain management physician for the previous five years, for a scheduled injection in her lower spine. As part of her pre-procedure anesthesia mix, she received another Fentanyl dose. Unlike previous procedures however, she wasn’t up and moving around 20-30 minutes afterwards; this time it would take about hour to where her oxygen levels would allow her to be safely released.

Markland was tired for the balance of the day, and headed in to bed early, skipping her usual cup of pre-bed decaf.

She would never wake up.

Pronounced dead at 7:01 a.m. the next morning, July 3, the Jacksonville medical examiners report listed the cause of Markland’s death as “drug toxicity,” noting the presence of both Fentanyl and Exalgo. Her death would be classified “accidental.” The report noted her family doctor refused to sign the death certificate; Dr. Florete did.

Bob Markland, Carolyn’s husband of 19 years, declined to comment apart from providing a timeline of her Subsys use prior to her death.

The medical examiner’s report of the lethal combination of the stream of Fentanyl and other drugs in Carolyn Markland’s blood is both puzzling and sad, seemingly emblematic of a strain in modern American medicine where solutions for pain can be as scarce as the medication of the pain is abundant.

In another sense, Dr. Orlando Florete also represents a parallel strain of American medicine: the physician as compensated endorser. According to the Center for Medicare & Medicaid Services’ Open Payments database, which covers just the last five months of 2013 (2014’s figures are slated for release in June), Florete was paid $18,874.03 by the makers of Subsys, a small but rapidly growing pharmaceutical company called Insys Therapeutics Inc. (INSY), to travel and speak to fellow doctors.

Additionally, Dr. Florete, according to Freedom of Information Act documents obtained by SIRF, was paid $133,770.36 between January 1, 2013 and May 31, 2103 by TRICARE, the U.S. military’s primary health insurance plan, for writing 16 Subsys prescriptions.

Pharmaceutical companies compensating physicians for discussing their product--or even attending carefully-scripted seminars--is a longstanding, and legal, practice. To be certain, it has long been a concern of many within the medical community and starting in 2013, regulations were put in place to ensure disclosure of all physician payments. (Pro Publica has a wealth of information on the issue.)

A phone message seeking comment from Dr. Florete about his relation with Insys and his Subsys prescription writing was not returned as of the time of publication.

Like Dr. Florete's speaking engagements, another unremarked upon issue was the nature of Carolyn Markland's Subsys prescription: a drug indicated solely for breakthrough cancer pain was prescribed for a bad back. As with accepting pharmaceutical company payments, the law affords doctors great latitude in determining whether drugs can be prescribed for reasons other than what they are designed for. On the other hand, doctors writing prescriptions based on off-label marketing have been at the center of nearly two dozen False Claims Act legal settlements in the past 20 years, resulting in over $13 billion worth of pharmaceutical company fines and settlement payments.

In the case of Subsys, its official label--the folded paper insert with the impossibly small typeface that comes with the package--notes that it's contra-indicated for headache pain and for those who are not tolerant of the opioid class of drugs. According to the Center for Disease Control, 175,000 people died from some form of prescription opioid abuse between 1999 and 2010, compared to a combined 120,000 from heroin and cocaine overdoses.

Like Dr. Florete, Insys Therapeutics is doing pretty darn well. The company has had a remarkable level of financial success and its soaring stock price has made it a darling on Wall Street.

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But that level of growth ought to warrant a raised eyebrow; going to over $222 million sales from about $15.5 million in just two years without inventing something like a better search engine is no mean feat. Fentanyl, after all, has been around for many years and while Subsys is the only spray version available, several of Insys’s competitors are well-established and better capitalized, with sales forces that reach all 50 states.

While details on the particulars of the breakthrough pain medication market are hard to find, or at least details that aren't self-serving management estimates, veteran sales staff from Insys and other pharmaceutical companies put its growth prospects at roughly 10% a year. If that's true, and the company is selling to oncologists then growth possibilities for Insys should be a function of that plus whatever they can take away from its larger competitors. Many companies would be happy for those odds.

But Insys grew north of 100%, implying that whatever organic growth they are getting is being aided by a whole lot of doctors who have grown profoundly fond of an expensive drug that brings an acre of governmental red-tape with it and that one of the largest pharmacy benefit managers will no longer touch.

The question then becomes "How?" and "Why?"

A SIRF investigation into Insys reveals that this growth has come at a remarkable price: Food and Drug Administration data shows that Subsys is proving lethal to a growing number of patients, many of whom, like Carolyn Markland, are taking it for so-called off-label indications, such as headaches and back pain.

Finally, in reporting the story, SIRF repeatedly encountered former Insys employees who had received subpoenas requiring their appearance in front of a Department of Justice grand jury that has been empaneled in Boston. Still others had been interviewed by investigators conducting an investigation for the Department of Health and Human Services' Office of the Inspector General.

A company that has been killing it--at least financially--is clearly in a lot of trouble.


To understand Subsys the first thing you need to know is that it is literally a drug apart: a Schedule II spray administered below the tongue and dozens of times stronger than morphine, its effects are both profound, especially within the respiratory system, and virtually immediate. Which is the point, of course, given that many cancer patients suffer from nausea and cannot take pills.

To address the twin risks of addiction and overdose, in March 2012 the FDA began what it calls the Transmucosal Immediate Release Fentanyl Risk Evaluation and Mitigation Strategy, blessedly shortened to TIRF-REMS, in March 2012. At bottom, the program is designed to make obtaining a prescription for Subsys (and five other drugs) a very deliberate process, with built-in checks and balances, like confirmed opioid tolerance, signed patient statements and TIRF-certified doctors and pharmacists.

No one, in other words, is dropping a Subsys prescription off at the local CVS’ drive-through window.

Despite the unusual amount of federal guidelines designed to safeguard patients, Subsys is no stranger to adverse events.

SIRF asked Adverse Events, a California-based consultancy that collects and analyzes drug side effect data to analyze the FDA’s Adverse Event Reporting System instances of fatalities related to Subsys.

(In medical terms, an adverse event is defined as an undesirable outcome related to the drug’s use and includes categories other than death.)

Their analysis shows Subsys was referenced in 63 adverse event reports resulting in deaths since its January 2012 FDA approval. It bears noting that the FAERS database is voluntary — a prescribing physician might not learn of an adverse event related to a drug; others elect not to report them. Because of this, many in the medical industry argue—privately—that FAERS’ data skews towards the lowest potential occurrence rate.

Given the relatively sparse nature of additional FAERS data SIRF obtained (only age, gender and date of death are provided) placing the death of 63 Subsys users in a broader context is not so cut-and-dry. Certainly it’s reasonable to suppose a percentage of those prescribed Subsys have cancer and would naturally have a higher rate of mortality. Others entries list Subsys along with one or two additional drugs. Bear in mind, however, that dying of cancer isn’t usually considered an adverse pharmacological event; dying of respiratory failure when taking Subsys for a migraine is.

So how does Insys manage to grow exponentially?

The answer appears to have multiple parts: a truly unique sales force paired with a corporate speakers program that provides a stream of ready cash to frequent prescription writers.

Let’s start with sales. There’s no way around it: Insys’s sales force is very different from its competitors in the pharmaceutical industry. One reason is that a pharmaceutical sales background or even college science coursework isn’t required. Another is that if you appear to be driven and aggressive, the company will look past things that your local Starbucks might not. Scrolling through the LinkedIn profiles of Insys sales reps lends some credence to one of the assertions from an amended class action lawsuit filed against the company in October and which settled within the past week without disclosing terms: per three confidential witnesses, "most of Insys’s sales representatives were extremely attractive women." (To be fair, Merck and other leading pharmaceutical companies have long drawn attention for constructing sales forces with a large percentage of attractive women.)

Take the sales head of the New York region, Jeff Pearlman. Before becoming what his peers say is a highly productive salesmen of Class II opioids, he was the marketing and sales chief for a company that sold aquariums. Prior to that, he ran a ticket sales agency called Sitting Pretty Seating Services which, in 2004, attracted the ire of the New Jersey Division of Consumer Affairs. Shortly after, records indicate that the company's registration was revoked for not filing an annual report for two consecutive years. (Pearlman said that contrary to SIRF's implication, he had indeed worked in medical sales, having worked for a company that sold diagnostic testing equipment for  sleep apnea in the late 90's and several years later, he worked for a company that sold genetic endocrinology testing devices in the mid-2000's.)

Sunrise Lee, the recently departed head of the Central, and later Western, sales region, is also an object lesson in Insys's willingness to take a shot on a profoundly non-traditional prospect.

Before she joined the company in August 2012, Lee ran an adult-entertainment business of a sort called Sensuous Entertainment. Prior to that, she was a dancer at Rachel’s, a West Palm Beach strip club (she is to the far left in the photos; the bottom photo is of a Insys sales outing at Chicago's Wrigley Field for its top revenue producers.) It’s not clear what she did before adult entertainment.

So about a year after Lee started selling one of the six drugs so lethal that the FDA created a separate prescription protocol to monitor them, Insys promoted her to run Midwestern sales.

SIRF called Alec Burlakoff, Insys’s national sales chief, and asked him about the choice of Sunrise Lee to run sales for a quarter of the American land mass.

Burlakoff, while agreeing with SIRF’s assertion that adult entertainment is not a traditional recruiting ground for pharmaceutical companies, offered that Lee had unusual attributes that were helpful in marketing Subsys to doctors.

“Doctors really enjoyed spending time with her and found Sunrise to be a great listener,” said Burlakoff.

“She’s more of a ‘closer,’” he said, using a common sales term to describe a person who helps convince a wavering customer to purchase a product, noting that “often the initial contact [with a doctor] was made by another sales person.”

SIRF asked him about the reality of a former exotic dancer pitching a restricted drug to board-certified oncologists. He said she was more effective with pain management physicians who appreciated what he referred to as her "empathy."

“When you are dealing with [doctors] who are around pain and cancer all day, an empathetic and caring sales person is helpful,” Burlakoff said. He said that Lee had been involved in an unnamed nutriceutical company prior to joining Insys and speculated that her “holisitic approach” to the medical field might also have appealed to some physicians. SIRF, having no idea what that means, asked him to elaborate; he did not. (SIRF couldn't find or identify the company.)

For her part, Lee declined comment about Insys, noting that she had just been sued by the company—along with Lance Clark, an Insys sales executive from Dallas who had reported to her—for violating corporate policy regarding outside employment. The suits allege that she recruited physicians to use a toxicology testing company, Advance Toxicology, that was formed by Clark when he was still employed at Insys. It also alleges that she made up having earned a degree from Michigan State.

She did however confirm to SIRF that she has been in contact with both the Health and Human Service OIG and "those other prosecutors," presumably meaning the Department of Justice in Boston. (She declined to discuss it further when asked for clarification.)

Clark, who was unaware of the suit until SIRF told him about it, declined to comment.

With respect to Insys’s controversial business practices, especially the allegations of off-label sales and of payments made to physicians under its Speakers Bureau program (both of which were the subjects of New York Times investigations) Burlakoff insisted that these portrayals don't match how he and his colleagues conduct themselves on a daily basis.

“There is a very, very easy way to get fired on your first day at this company,” said Burlakoff, “And that is to mention selling off-label. We are only selling a breakthrough cancer pain drug. That’s all we want to address with a doctor.”

“You don't run a unit at a company like this by cutting corners,” he said. (Burlakoff was fired from Eli Lilly in 2003 for his role in sending out unsolicited samples of Prozac through the mail in a bid to boost the drug’s then slumping sales. He and several colleagues sued the company alleging management had approved of the plan.)

Having worked for rival drugmaker Cephalon, Burlakoff said he has run [Fentanyl] training programs “for years,” and makes clear to sales staff that their job is not to try and convince doctors but to educate them about the benefits and possibilities of a drug that can help their patient’s cope with a cancer fighting regimen.

(The Department of Justice fined Cephalon $425 million in September 2008 for its off-label sales practices, particularly of its Fentanyl product, Actiq; Burlakoff is referenced in a Qui Tam complaint filed in 2014, for allegedly ordering his staff to organize speakers program events to promote off-label prescription of its Fentanyl drug. He did not respond to a request for comment on this via email and voice message.)

SIRF asked Burlakoff about his previous assertion that the primary market for the drug was oncologists.

“Yes, well, we are trying to break in to that market but most [oncologists] only care about the tumor or malignancy and, in my opinion, don’t focus on the pain component. That’s a problem — for them and for us.”

Adding that there is a “sense that prescribing [Subsys] is something for hospice” among oncologists, Burlakoff said most oncologists that he and his colleagues deal with are happy “to refer pain treatment out” to pain management doctors so they could focus on the cancer treatment.

SIRF asked him if the pain management physicians who appear to be prescribing upwards of 90% of the drug are thus working in tandem with oncologists or are otherwise treating cancer pain. He replied that this was his understanding based on what his sales staff were telling him.

“I can say that no one at Insys wants to see anyone taking [Subsys] for anything other than cancer pain,” said Burlakoff he went on to relate several feel good stories about people whose lives have been changed because of Subsys. More substantively, he referred to discussions he has had with Insys founder John Kapoor, whose wife Edith died of cancer in 2005, that motivates him to sell a product that eases the suffering of cancer patients.

Also misunderstood, according to Burlakoff, was the role of the speakers program in Insys's sales model, said Burlakoff. It wasn’t, as the class action suit alleged via a confidential witness, “a kickback program.” Nor was it the way to incentivize a series of pain management physicians to write more prescriptions, per the depiction in a New York Times article.

Rather, “putting board-certified doctors together, where one of them is explaining the benefits he or she is seeing [from prescribing Subsys]” is the way that the drug gets acceptance. No sales rep is as effective as a doctor at convincing other doctors, he said.

“These are rich, highly-educated doctors. They have money. Whatever they are paid isn’t material.”

SIRF asked him if money wasn't the primary motivation for the doctors who Subsys paid $25,000, $50,000 or more, over the last five months time in 2013, then what did he suppose it was? Because the chart below of the top 10 payment recipients from Insys, and drawn from the CMS Open Payments data, paints a clear picture of doctors who have generated substantial income from the program. He did not reply to a request to comment on this data. (Click here to see the top 25 recipients of Insys payments.)

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Many of Burlakoff's former colleagues, however, describe a very different experience with the speakers program.

A Qui Tam claim filed last year by former Insys salesman Ray Furchak alleged that the speaker program's sole purpose was, in the words of his then supervisor Alec Burlakoff, "to get money in the doctor’s pocket." The catch, as alleged by Furchak, was that the doctors who increased the level of Subsys prescriptions, and at higher dosages (i.e, moving to 400- or 800 micrograms from 200 micrograms), would receive the invitations to the program--and the checks.

The claim describes texts from Burlakoff to Furchak and other sales colleagues regularly demanding that "doctors be held accountable" and that "doctors who are not increasing their clinical experience [prescription writing], please cancel, suspend, and cease doing speaker programs.”

The Department of Justice chose not to join Furchak's suit and he withdrew it. Reached at his new job, Furchak said he stood by everything he had alleged but declined further comment.

Conversations with former sales staff support Furchak's allegations, in that the speakers program was regularly used as a lever to pressure doctors to both increase dosage strength as well as the frequency of their prescriptions for Subsys. In return, former sales staff (who were granted anonymity because of their involvement with the Department of Justice's grand jury proceedings) often had to deal with doctor's annoyed about payment levels or delays in receiving their checks.

The speaker program events have often been held at Roka Akor, a tony sushi-steak restaurant with locales in Scottsdale, Chicago and San Francisco whose owner is Insys founder John Kapoor. Based on interviews with multiple attendees, the bills often run into the thousands of dollars and given the sheer number of events, have helped his restaurants capture a handsome revenue stream. An email to chief executive officer Michael Babich seeking comment was not returned as of the time of publication.

The former sales staff also disagree that Burlakoff's full-throated rejection of off-label sales was shared by upper management. As evidence of this, two former sales staff pointed to a quarterly meeting they attended for the Southeast region sales team in Atlanta during the first week of June last year when CEO Michael Babich, during a question and answer period, read a question about the risk of off-label sales, given Cephalon's steep penalty in 2008.

“I understand why you're asking that question," said Babich. "But Cephalon didn't have TIRF-REMS; we do. You are protected because both the MD and the patient have signed it.” Asked to elaborate on this, he said that because of the TIRF-REMS requirement that the patient be extensively briefed on the risks of Subsys, there couldn't be a plausible claim that the patient (or doctor) didn't know what they were doing.

As one of the two attendees who related this event to SIRF put it, "There wasn't much else to say about the issue when your CEO sees an information protocol as an insurance policy."

Insys's assertions about serving the cancer patient aside, the company's bread is buttered by pain management and physical rehabilitation doctors, according to TRICARE's reimbursement and prescription data (the range is the most recent available, from January 1, 2013 to May 31, 2014) obtained by SIRF. TRICARE represents about 9.5 million people, or 3% of the U.S. population. For the full list of the top 25, click here.

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Based on the list of the top 25 Subsys prescribers within the TRICARE system, there are 20 pain management physicians, 1 osteopath, 1 registered nurse and 3 physician assistants.

SIRF attempted to contact Dr.'s Xiulu Ruan and Patrick Couch, partners in a Mobile, Alabama practice, and the leading Subsys prescription writers by an impressive margin, to discuss this, as well as their ownership of C&R Pharmacy, which dispenses the drug to their patients. (About 50% of the Subsys dispensed in the U.S. is handled by Linden Care, a Long Island, New York-based specialty pharmacy, owned by Bell Health Ventures, a private-equity fund.)

Anthony Hoffman, a lawyer representing the practice told SIRF, “Based on your representation of the [TRICARE] data you discussed with my client, we believe it to be inaccurate and encourage you not to publish it." He did not specify what was wrong with the data and declined further comment.

As first reported in the New York Times, a series of Insys' leading prescribers have been at the center of serious allegations involving their prescription-writing practices.

Last May, federal prosecutors filed a complaint against Gavin Awerbuch, a Michigan-based pain management physician, and the company's largest prescriber (and third most compensated,) for allegedly bilking Medicare out of $5 million over a multi-year period. Prosecutors allege that he wrote 20% of the Subsys prescriptions dispensed to Medicaid recipients nationwide between 2009 and 2014 (Subsys, however, has only been FDA-approved since January, 2012.) In December of 2013, Judson Somerville, a Laredo, Texas-based pain management physician (the number eight prescriber and its most compensated,) had his prescription writing privileges "Temporarily Suspended" by the Texas Board of Medical Examiners for a host of findings, including having three patients die in a six-month period of 2012; it was not the first time he had regulatory trouble.

Stewart Grote, a Lansing, Kansas pain physician, the company's fourth biggest TRICARE prescriber (he received $8,48.05 from Insys) was sanctioned for multiple standard of care lapses and no longer is registered as a physician in the state, according to licensing records; he also had an earlier regulatory issue in 2010.

The Florida Department of Health sued Paul Wand and Miguel de la Garza, the numbers 11 and 23 TRICARE prescribers, in 2012 (Wand received $20,169.06 from Insys; de la Garza $17,019.04.) The Department alleges Wand's standard of care did not meet professional standards across a series of patients, particularly with regard to his prescription writing; with respect to de la Garza, the Department claims he did not professionally administer care to one specific patient. According to the Florida Board of Medicine's website, both cases appear to be ongoing.

Chicago-based pain management physician Paul Madison is not among the top 25 Tricare prescribers but he was the 17th most compensated. He was indicted in 2012 for an alleged $3.5 million false insurance billings scam. The case remains ongoing.

Heather Alfonso, the 25th largest TRICARE prescriber of Subsys, a Derby, Connecticut-based advanced practice registered nurse surrendered her state and federal nursing and prescription writing licenses within the past month as a Connecticut Department of Public Health investigation into her conduct remains ongoing. A February story from the Connecticut Health I-Team disclosed that in 2012, the most recent year for which data was available, she was among the nation's top 10 prescribers of Schedule II substances within Medicare's drug program.


SIRF attempted to get CEO Michael Babich to comment via a detailed voice message left on his office phone and a pair of emails. As of publication, he has not replied.

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Dan Jackson 7 years ago Member's comment

Wow, very well done! Quite the expose.

Paul McGee 7 years ago Member's comment

What a coincidence that this article comes out before ER. I had just loaded up on this stock. :-)

Susan Miller 7 years ago Member's comment

Unbelievable! This report is utterly shocking to me - the executives of this company should be in prison. Well done Mr. Boyd.