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The pain killer: A drug company putting profits above patients

The United States' opiate drug problem isn't limited to illegal narcotics. The sale of dangerously addictive painkillers willfully prescribed by our physicians has quadrupled in the past decade, and one company in particular is pushing pain to the legal edge of aggressive medical marketing.

According to criminal complaints, attorney generals' reports and CNBC sources, specialty pharmaceutical company Insys Therapeutics — with the help of several physicians across the country now under investigation — is putting profits before patients as it makes millions off your pain.

Insys is subject to investigations regarding the sales and marketing practices of its main product — Subsys Fentanyl, a painkiller delivered as an oral spray — by both federal and state attorney generals' offices in California, Massachusetts, Connecticut, Arizona and Illinois, according to its 10-Q filing.

"I've been investigating drug cases for about 15 years now, and the conduct that we saw in this case was among the most unconscionable that I've seen," said Oregon Assistant Attorney General David Hart, who led an investigation that resulted in the first state-level settlement with Insys and a detailed, published report on the company's practices. "There was harm done to patients on a level I'm not used to seeing," Hart said.

In a recent presentation obtained by CNBC, an officer from the Inspector General's Office of the United States Department of Health and Human Services placed Subsys on a list of "new diversion drugs of concern." Diversion is a form of medical fraud that can include doctors prescribing drugs for unintended uses.

Scottsdale, Arizona-based Insys Therapeutics' revenue is almost entirely derived from the highly addictive opiate fentanyl, which it markets under the brand name Subsys Fentanyl. In the six months ended June 30, 2015, Subsys sales accounted for $147.2 million of $148.4 million in total revenue. (Insys is scheduled to report third-quarter earnings on Thursday morning.)

Fentanyl products are "the most potent and dangerous opioids on the market," said Dr. Andrew Kolodny, executive director of Physicians for Responsible Opioid Prescribing and chief medical officer of the Phoenix House Foundation. According to some physicians, fentanyl is about 100 times more powerful than morphine and gets into the bloodstream faster because it is sprayed under the tongue.

The potency of Subsys also comes with a high price tag. One package of 30 sprays can cost between $900 and $3,000, depending on the dosage, and those prices only seem to be increasing. The fentanyl class of drugs had an average prescription price of $160 last year, according to Express Scripts, the largest pharmacy benefits manager in the U.S. The average price of 100 micrograms (mcg) of Subsys (the smallest dose) is 70 percent higher this year than the average 2014 price.

Express Scripts began excluding Subsys from its list of covered drugs this year. UnitedHealth Group also recently made the decision to exclude the drug in 2016, citing lower-cost options.

The stock market has richly rewarded the Insys business plan. The company started marketing the drug in 2012, went public in May 2013 and went on to become that year's top-performing initial public offering. At press time, Insys shares were up over 600 percent since it began trading on the Nasdaq.

In October 2013, John Kapoor, chairman and founder of Insys, made the annual Forbes billionaire list for the first time, due to his various pharma-related investments and companies. In March of this year, Insys entered into a consulting agreement with Kapoor, paying him an additional $300,000 annually "to compensate Dr. Kapoor for his ongoing time and contribution to the company," the company stated in a filing. He also receives compensation as executive chairman of the board of directors of Insys. In 2014, Kapoor received a total of $228,472 for the board role.

How the company has achieved its results has come under scrutiny, with allegations that Insys is pushing the drug far beyond cancer patients and engaging in potentially fraudulent activities in the process.

Insys shares have been volatile in trading this year — up 37 percent year-to-date, but down 35 percent in the past three months through Nov. 3. Short interest — bets that the company's stock will decline — have tripled since late 2014, according to Nasdaq, and now represent roughly 75 percent of the public float, or the amount of company shares available for investors to trade.

Subsys, according to FDA guidelines, is only meant to be used to treat late-stage cancer pain. In the 2012 FDA approval letter, the agency stated, "This new drug application provides for the use of Subsys (fentanyl sublingual spray) for the management of breakthrough pain in adult cancer patients who are already receiving and who are tolerant to around-the-clock opioid therapy for their underlying persistent cancer pain."

Several sources — and emails obtained from current and former employees of Insys, as well...


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