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A former Insys Therapeutics sales rep has pleaded guilty to violating federal kickback laws in connection with an alleged scheme to boost sales of an opioid painkiller.

The guilty plea is the latest development in a contentious drama involving Insys Therapeutics and its marketing of Subsys. The drug, which was approved in 2011 to treat acute cancer pain, is a form of the fentanyl narcotic that carries a high risk of dependency. And the company is being probed by various federal and state agencies that doctors were encouraged to prescribe the drug for unapproved uses (see page 11).

Last week’s plea agreement, moreover, comes amid ongoing controversy over the abuse and misuse of prescription painkillers and the extent to which these are appropriately prescribed. A recent tally by the US Centers for Disease Prevention and Control found that the rate of opioid overdose deaths rose 14 percent from 2013 to 2014. An earlier report found that 74 percent of the nearly 23,000 US deaths from painkillers in 2011 were due to overdose.


In response, the Food and Drug Administration earlier this month launched a plan to toughen opioid warning labels, improve treatment of both addiction and pain, and expand the use of abuse-deterrent medications. The CDC, meanwhile, is revising proposed guidelines to encourage physicians to become more circumspect in their prescribing.

A document filed with the plea agreement concerning the former sales rep, Natalie Perhacs, underscores such concerns.


Two physicians in Mobile, Ala., operated a pain management clinic and between 2012, when Subsys became available, and 2013, they became among the top prescribers in the US. However, of the thousands of patients they treated, very few had cancer, according to court documents, which indicated she had a prominent role in the scheme.

In October 2013, the clinic prescribed Subsys more than any other medicine. During that month, the physicians — Dr. John Couch and Dr. Xiulu Ruan — together wrote 110 prescriptions, the court documents stated. Furthermore, of those prescriptions, 33 were for patients who had previously never been prescribed the medicine, and nearly all were written off-label to patients who did not have cancer.

The feds further allege that Insys compensated the physicians for the prescribing practices by paying them nearly $210,000, mostly in speaking and consulting fees, in 2013 and 2014, according to the Open Payments database, which tracks payments made by drug makers to physicians. The feds contended these fees were actually kickbacks and violated federal law.

The physicians were arrested last summer and face trial in July for allegations of fraud. We asked their attorneys for comment and will update you accordingly. [UPDATE: An attorney for Ruan, Dennis Knizley, called us to say that his client denied having any romantic involvement with Perhacs or any involvement in any criminal conduct].

As for Insys, a spokeswoman for the drug maker sent us this: “While Insys is still reviewing these developments, it is important to note that the Company provides its personnel with specific training on company policies and procedures, which are designed to comply with applicable laws and regulations.”

Subsys, by the way, accounted for nearly all of the $91 million in revenue that Insys reported generated in last year’s third quarter, and Subsys sales were up approximately 56 percent during that period (see page 16).

The court documents described how Insys hired a sales rep from a competitor specifically to tend to Ruan and encourage Subsys prescribing, according to the court documents. And a majority of the rep’s compensation was based on commissions generated by the number and dosage strength of prescriptions written by Ruan, the documents stated.

When the rep was promoted, Perhacs was hired, even though she did not have prior experience with pharmaceutical sales, the documents stated. So why was she hired? The documents suggest that Ruan, who already knew her from her previous job working for a medical equipment company, took a liking to her.

In an email he sent her on Nov. 7, 2012, Ruan asked Perhacs, “Well, I want to ask you a personal question and hopefully you would not be offended. Are you involved with someone now? … You don’t have to answer any of these if you do not feel comfortable.”

A few months later, Ruan recommended Insys hire her to fill the vacant slot that emerged after the other rep was promoted. Perhacs was hired in April 2013 “to induce, and in exchange for, Dr. Ruan continuing to prescribe Subsys to (the clinic’s) patients after (the previous sales rep) moved into management,” according to the court documents.

Perhacs faces up to five years in prison and a $250,000 fine, according to the plea agreement. We asked her attorney for comment and will pass along any reply that we receive. [UPDATE: Her attorney called to say that his client did not have any romantic interest in Ruan].

The feds maintain that her “primary responsibility” was to increase the number of Subsys prescriptions written by Ruan and Couch. Moreover, the court documents stated that, because she helped the office fill out insurance forms, she was also aware that many prescriptions were written off-label for patients without cancer pain.

This story was updated to include comments later provided by attorneys for the Perhacs and Ruan.