Anthem Alleges Fentanyl Fraud -- WSJ

By Joseph Walker Features Dow Jones Newswires

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (July 14, 2017).

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Health-insurer Anthem Inc. has filed a civil suit alleging that drugmaker Insys Therapeutics Inc. engaged in "fraudulent schemes" to secure reimbursement for the company's fentanyl painkiller Subsys.

The suit, filed Wednesday in federal court in Arizona, alleges that Insys bribed doctors and lied to Anthem about patients' diagnoses to win reimbursement for prescriptions that wouldn't have been covered otherwise.

Anthem alleges that as a result of the fraud, it paid in excess of $19 million for Subsys prescriptions that shouldn't have been reimbursed.

A spokeswoman for Insys didn't immediately respond for comment.

Anthem, based in Indianapolis, is seeking unspecified compensatory and punitive damages to be determined at trial, as well as an injunction barring Insys from continuing to engage in the alleged fraudulent conduct.

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Since at least 2013, Anthem alleges, Insys "has engaged in a carefully orchestrated, illegal, and dangerous scheme to obtain millions of dollars in reimbursement from health insurers, including Anthem, that the company knew it was not entitled to."

Anthem's lawsuit is the latest legal headache for Insys, a Chandler, Ariz.-based company that derives the bulk of its revenue from Subsys. The company and its former executives have been embroiled in multiple legal investigations related to the company's sales tactics for Subsys.

On Tuesday, two former Insys saleswomen pleaded guilty in separate cases to violating the federal anti-kickback statute. One of the saleswomen, Natalie Levine, is married to former Insys Chief Executive Michael Babich, who was charged in December with racketeering conspiracy and other offenses related to his time at Insys. Mr. Babich pleaded not guilty.

Shares of Insys fell 1.1% in after-hours trading Thursday after the Journal reported the Anthem lawsuit.

Insys faces a deep-pocketed legal opponent in Anthem, one of the largest U.S. health-insurers. The company earned about $2.5 billion in profit last year, and it holds cash and cash equivalents of $6.77 billion.

Subsys is a fast-acting fentanyl mouth spray and is among a class of drugs approved by the U.S. Food and Drug Administration to treat severe pain in cancer patients. The drug is highly potent and addictive, and the FDA requires that Insys sell it through a special program that mandates all doctors, pharmacies and patients be registered in a database, and that doctors are educated about the drug's safety risks and proper uses.

The FDA approves drugs for specific conditions and diseases, but doctors are free to prescribe drugs for nonapproved or "off-label" indications as well. However, many insurers, including Anthem, will only pay for Subsys prescriptions when they are written for cancer patients.

Anthem alleges that Insys came up with a "creative, fraudulent and illegal" solution for expanding the Subsys market to non-cancer patients: bribing doctors with payments disguised as promotional speaking fees, and the creation of an internal reimbursement unit that used misleading tactics to get Subsys prescriptions approved by insurers.

Many of Anthem's allegations piggyback on criminal lawsuits brought by federal prosecutors against former Insys employees or doctors with close ties to the company. For instance, Anthem cites the conduct of Xiulu Ruan, an Alabama physician recently sentenced to 21 years in prison for offenses including taking kickbacks from Insys, and Connecticut nurse Heather Alfonso, who has pleaded guilty to taking kickbacks from Insys. Both Dr. Ruan and Ms. Alfonso prescribed Subsys to Anthem patients who didn't have cancer, Anthem alleges.

Anthem supports its claim that Insys' reimbursement unit lied about patients' diagnoses by citing criminal complaints filed against Mr. Babich and other former Insys employees. Insys employees sometimes misrepresented themselves when speaking with insurers, asserted patients had cancer when they didn't, and falsely stated that patients had met Anthem's requirements that they try other pain medicines before Subsys would be covered, the suit alleges.

Elizabeth Gurrieri, the former head of Insys' reimbursement unit, pleaded guilty in June to one count of wire fraud conspiracy and is cooperating with a federal investigation of Insys being led by the U.S. attorney's office in Boston, according to court documents.

Write to Joseph Walker at joseph.walker@wsj.com

(END) Dow Jones Newswires

July 14, 2017 02:47 ET (06:47 GMT)