Another Insys Employee Charged in Kickback Scheme

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By Eric Topor

Former Insys Therapeutics sales manager Jeffrey Pearlman is the latest executive from the company to be indicted in a kickback scheme involving Insys’s cancer pain management drug Subsys ( United States v. Pearlman , D. Conn., No. 17-cr-27, indictment 2/8/17 ).

Pearlman was indicted Feb. 8 on one count of conspiracy to violate the anti-kickback law through his management of a sham speaker marketing program promoting Subsys. The speaker series was ostensibly an educational outreach effort for practitioners to educate their peers on Subsys, but federal prosecutors from the U.S. Attorney’s Office for the District of Connecticut alleged that the events were social dinners with no educational component, held solely to pay practitioners for prescribing Subsys.

Pearlman’s indictment includes references to an unnamed advanced practice registered nurse (Practitioner 1) who received $83,500 in kickbacks from Pearlman in exchange for prescribing Subsys to patients who didn’t have cancer. This nurse appears to be Heather Alfonso, who formerly worked at the Comprehensive Pain and Headache Treatment Center in two offices in Connecticut, and pleaded guilty to one count of receiving kickbacks in relation to a federal health-care program in June 2015.

Although Pearlman’s indictment doesn’t definitively name Alfonso as Practitioner 1, her guilty plea in court matches several key facts, including the amount of kickbacks she received for prescribing Subsys, her status as an APRN practicing in Connecticut and the general details of her admitted experiences in the Subsys speaker series.

Typically Subsys isn’t reimbursed by Medicare Part D for noncancer patients. Alfonso admitted to prescribing Subsys to Part D beneficiaries who didn’t have cancer, but whose prescription authorizations included a cancer diagnosis.

Counsel for Pearlman didn’t return Bloomberg BNA’s request for comment on the indictment. Prosecutors from the U.S. Attorney’s Offices for Connecticut and Massachusetts also didn’t return requests for comment.

FBI Affidavit Connections

Pearlman was arrested on Sept. 29, 2016, in connection with the alleged kickback scheme based on an affidavit from FBI special agent William P. Ready, who described a person referenced as “cooperating witness 1” who aided in the Pearlman investigation. Ready’s description of cooperating witness 1’s statements concerning Pearlman’s involvement in the alleged kickback scheme are also consistent with Alfonso’s admitted conduct and Practitioner 1’s conduct in Pearlman’s indictment.

Pearlman allegedly threatened to cut Practitioner 1 out of the speaker program in June 2013 if he didn’t see an increase in Subsys prescriptions from her. Any practitioner who spoke at one of Pearlman’s speaker sessions was paid approximately $1,000.

Practitioner 1 allegedly increased Subsys prescription frequency from an average of just under one per week in May 2013 to 2.3 per week by July 2013, and then to three per week by September 2013.

Ready said cooperating witness 1 was assisting the prosecution “in the hopes of obtaining leniency at sentencing in connection with [the witness’s] conduct.” Ready also describes a second cooperating witness who was employed at Insys and is assisting the government “in exchange for not being charged in connection” with this second witness’s conduct while employed at Insys.

Alfonso is facing a potential five years in prison, paying restitution for causing $1.6 million in fraudulent health-care reimbursements for Subsys and additional fines. Alfonso’s sentencing was originally scheduled for September 2015, but has been delayed multiple times.

Alfonso’s first two motions for a continuance of her sentencing indicate that they were being sought “by agreement” with the prosecuting attorney in the case, Assistant U.S. Attorney Douglas P. Morabito, who is also prosecuting Pearlman. However, a subsequent motion to continue sentencing filed on July 8, 2016, gave Alfonso’s cooperation with a prosecution in the U.S. District Court for the District of Massachusetts as the reason for further delay in sentencing.

Additional Insys Indictments

On Dec. 6, 2016, six former Insys executives were indicted in the District of Massachusetts on bribery allegations surrounding Subsys prescriptions ( 21 HFRA 22, 1/4/17 ). The indictment also alleged efforts by the defendants to operate a sham speaker program for Subsys, and that administrative assistance in filing Subsys insurance claims was provided to practitioners as an additional incentive.

Those six defendants—former Insys Chief Executive Officer Michael Babich, and sales executives Alec Burlakoff, Richard M. Simon, Sunrise Lee, Joseph A. Rowan and Michael J. Gurry—have all pleaded not guilty.

Alfonso was last scheduled for sentencing on Jan. 10, 2017, but the government requested a further six-month continuance in a joint status report, citing Alfonso’s continuing cooperation in “numerous ongoing criminal investigations.” Alfonso’s sentencing hasn’t been rescheduled, and the court ordered the parties to file a further joint status report on July 18.

Katten Muchin Rosenman LLP and Wiggin and Dana LLP are representing Pearlman. The U.S. Attorney’s Office for the District of Connecticut is representing the government.

To contact the reporter on this story: Eric Topor in Washington at etopor@bna.com

To contact the editor responsible for this story: Peyton Sturges at psturges@bna.com

For More Information

Pearlman's indictment is at http://src.bna.com/mc9.

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