Insys Therapeutics, Inc. (INSY) Securities Class Action Survives Motion to Dismiss

Investors filed a class action complaint against Insys Therapeutics for alleged violations of the Securities Exchange Act of 1934. According to the complaint, Insys promoted prescriptions of its drug Subsys for off-label uses through a kickback scheme. When the government exposed and prosecuted the scheme, Insys attempted to hide its declining financials by publicly boasting its financial health in order to inflate its revenues and earnings. On March 15, 2017, Insys revealed that it would need to restate its financial statements. On June 12, 2018, U.S. District Judge Paula A. Crotty denied defendants’ motion to dismiss plaintiff’s complaint, paving the way for litigation to proceed.

In August 2018, Insys agreed to pay at least $150 million as part of a settlement with the U.S. Justice Department. Since then, various Insys executives and sales people, as well as physicians implicated in the scheme, have pleaded guilty to their involvement or have testified at the trials of others. Most recently, in December 2018, the former Chief Executive Officer of Insys pled guilty to participating in this scheme and agreed to become a government witness. The conduct of Insys officials is particularly egregious in light of the country's opioid epidemic. The drug at issue – Subsys – was approved by the Food and Drug Administration only for the treatment of persistent breakthrough pain in adult cancer patients who are already receiving, and tolerant to, around-the-clock opioid therapy. However, Insys improperly targeted Subsys to patients who did not have cancer. Further, Insys created a sham speaker's program, paying thousands of dollars in fees to doctors- who were not even oncologists - for speeches "attended only by the prescriber's own office staff, by close friends who attended multiple presentations, or by people who were not medical professionals and had no legitimate reason for attending." After being caught in this scheme, company executives lied to investors about the effects the conduct would have on its financial health. Prior to the company's disclosure, its stock traded well above $20 per share. It currently trades at just $6.50.

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