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State nets $2M settlement with opioid executive

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Posted at 2:50 PM, Jul 01, 2020
and last updated 2020-07-01 21:36:26-04

The former CEO of a Valley pharmaceutical company accused of widespread fraud to push opioid prescriptions has agreed to a $2 million settlement with the Arizona Attorney General’s Office.

Attorney General Mark Brnovich announced the settlement with Michael Babich on Tuesday in a case involving Insys Therapeutics.

“Insys and their executives must be held accountable for engaging in unethical and illegal behavior that helped fuel the opioid crisis in Arizona,” said Brnovich in a prepared statement.

The Attorney General’s Office has two ongoing civil cases against Insys, its former executives, and Arizona doctors accused of engaging in a fraudulent scheme to push prescriptions of the company’s fentanyl spray called Subsys.

Subsys is a spray form of fentanyl, a powerful opioid, that is FDA-approved only for cancer patients with “breakaway pain.”

Since that’s a limited market and insurance companies won’t pay for the drug outside of the FDA’s approval, officials said Insys defrauded insurance companies by working with doctors to submit falsified patient records to say the patients had cancer when they did not.

Babich and other Insys executives have also faced criminal cases for their conduct.

Earlier this year, Babich was sentenced to two and a half years in federal prison. The company’s founder, John Kapoor, was sentenced to 66 months.

In 2017, ABC15 interviewed an Insys whistleblower named Patty Nixon, who worked with the FBI on the criminal investigation.

She had worked in the company’s unit that helped falsify patient records.

“Most of the prescriptions and charts were for regular chronic pain, knee pain, menstrual cramps,” Nixon said. “Not cancer. Not cancer at all.”

Nixon estimated that 90 percent of prescriptions were based on fraudulent claims in a scheme that netted hundreds of millions of dollars.

“This was extremely dangerous,” she said. “People have died. People’s lives have been ruined. And this company did it for profit.”

The Attorney General’s Office said its lawsuits are ongoing. The state is still pursuing claims against other executives and some Arizona doctors accused in the scheme.

As part of Babich’s settlement, he has agreed to cooperate in the state’s case.

Contact ABC15 Investigator Dave Biscobing at Dave@ABC15.com.