Money Recovered in the Settlement Will Help Fund the State’s Response to the Opioid Epidemic

NEWARK – Attorney General Gurbir S. Grewal today announced an anticipated $5 million settlement with Insys Therapeutics, Inc. founder John N. Kapoor to resolve allegations that Kapoor unlawfully orchestrated the payment of bribes to New Jersey doctors as part of a nationwide kickback scheme to boost sales of the company’s flagship opioid drug Subsys.

After the State is reimbursed costs from the lawsuit, most of the recovery will be used to fund the State’s efforts to combat the opioid epidemic. The remainder will be divided among state agencies affected by the alleged fraudulent scheme, as required by law.

The settlement resolves a civil lawsuit filed by the Attorney General and the Division of Consumer Affairs against Kapoor in 2017, asserting violations of the New Jersey Consumer Fraud Act and False Claims Act.

The Kapoor settlement is the first settlement in any of the State’s civil lawsuits against corporations and executives involved in manufacturing and fraudulently marketing opioid drugs. The settlement does not resolve the State’s claims against Insys itself, which has declared bankruptcy and filed a plan of liquidation, or the State’s claims against other companies that engaged in misconduct involving the sale of opioids.

“We are committed to holding accountable anyone whose bad conduct has helped fuel the opioid epidemic, whether they pushed drugs from a board room, an exam room, or a street corner,” said Attorney General Grewal. “With today’s settlement, we’ve recovered a substantial sum from one individual who used his perch in a corporate board room to sell addictive drugs through bribes and fraud. We are looking forward to additional recoveries from other opioid manufacturers and distributors, who also are responsible for helping New Jersey overcome and heal from the epidemic they unleashed.”

The State’s 2017 complaint alleged that Kapoor directed and approved a campaign to fraudulently market Subsys – a sublingual fentanyl spray approximately fifty times stronger than heroin and one hundred times more potent than morphine – to boost sales in New Jersey and elsewhere. Although the U.S. Food and Drug Administration approved Subsys only for the narrow purpose of treating breakthrough pain in opioid-tolerant cancer patients, the State alleged that Kapoor arranged for Insys to bribe healthcare professionals to write Subsys prescriptions for other purposes and at higher doses than appropriate. The State also alleged that Kapoor directed and approved a scheme to lie to insurance carriers and pharmacy benefit managers about patients’ diagnoses and treatment histories to secure payment for unwarranted prescriptions.

According to the State’s complaint against Kapoor, Kapoor’s conduct contributed to a flood of improper Subsys prescriptions, many of which resulted in payments from the State’s public employees’ health benefit and workers compensation insurance programs.

In May 2019, a federal jury in Boston convicted Kapoor and four other Insys executives of racketeering conspiracy in connection with the nationwide Insys bribery scheme. In January 2020, Kapoor was sentenced to five-and-a-half years in federal prison.  As part of his sentencing, a multi-million dollar monetary obligation was imposed on Kapoor, which he owes jointly and severally with his co-defendants.

Under the terms of the Final Consent Judgment filed in Superior Court in Middlesex County today, Kapoor agreed to make an upfront, lump sum payment of $1 million within ten days, followed by an additional payment – anticipated to be $4 million – following satisfaction of the monetary obligation imposed in the criminal case. (Kapoor is obligated to pay the State a lump sum equal to 30 percent of any amount of the criminal obligation not paid by him, up to $4 million.)

The settlement also permanently bars Kapoor from managing or owning any business organization within New Jersey and from serving as an officer, director, trustee, member of an executive board or similar governing body, principal, manager, or stockholder owning 10 percent or more of the aggregate outstanding capital stock of all classes of any corporation doing business in New Jersey.

Since 2018, the State also has taken action against numerous doctors who indiscriminately prescribed Subsys to non-cancer patients after receiving monetary payments from Insys, which disguised its payments as compensation for sham speaking and consulting work. The State Board of Medical Examiners has barred five of those doctors from practice in New Jersey, and administrative actions are pending against four more. Those doctors’ patients collectively suffered at least two overdoses and one overdose-related death, while other patients were placed at heightened risk of addiction, overdose, and death.

“As we continue to hold individual doctors accountable for their part in this egregious abuse of New Jersey patients, we are pleased that a central figure in this scheme is answering for his conduct,” said Sharon M. Joyce, Director of the Office of the New Jersey Coordinator for Addiction Responses and Enforcement Strategies (NJ CARES). “We cannot begin to measure the pain and suffering caused by John Kapoor’s callous greed, but we know it will plague our communities for years to come. This settlement rightly makes him responsible for providing financial resources needed to combat the long-lasting and destructive ripple effects of his unlawful actions.”

Section Chief and Deputy Attorney General (DAG) Lara Fogel, and DAsG Eric Boden, Brian DeVito and Dana Vasers, all from the Government & Healthcare Fraud Section in the Division of Law’s Affirmative Civil Enforcement Practice Group represented the State in the litigation, in consultation with Assistant Attorneys General Janine Matton and Brian McDonough of the Affirmative Civil Enforcement Practice Group.

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The mission of the Division of Consumer Affairs, within the Department of Law and Public Safety, is to protect the public from fraud, deceit, misrepresentation and professional misconduct in the sale of goods and services in New Jersey through education, advocacy, regulation and enforcement. The Division pursues its mission through its 51 professional and occupational boards that oversee 720,000 licensees in the state, its Regulated Business section that oversees 60,000 NJ registered businesses, as well as its Office of Consumer Protection, Bureau of Securities, Charities Registration section, Office of Weights and Measures, and Legalized Games of Chance section.