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Top prescribers of Insys Therapeutics' Subsys arrested on drug charges

  • Two Mobile, AL-based pain specialists, Dr. Xiulu Ruan and Dr. John Patrick Couch were arrested today on charges of illegal prescription drug distribution and conspiracy to commit healthcare fraud to increase insurance reimbursements. Both doctors, owners of Physicians' Pain Specialists of Alabama Pain Center, are the top prescribers of Insys Therapeutics' (NASDAQ:INSY) Subsys (fentanyl sublingual spray), a powerful opioid for the management of pain in adult cancer patients. Neither doctor is a board-certified oncologist.
  • The arrests were part of a year-long investigation, called Operation Pillution, by the DEA's drug diversion unit that included doctors and pharmacists among its targets. Since last July, about 140 people have been arrested with another 170 expected today.
  • According to a grand jury indictment, Drs. Ruan and Couch conspired with each other and other persons to knowingly and willfully distribute and dispense Schedule II controlled substances outside of the usual course of professional practice and not for legitimate medical purpose. Drugs mentioned include oxycodone, oxymorphone, hydromorphone, morphine, fentanyl and methadone. The two physicians are also accused of "up-coding", a fraudulent practice whereby services performed by a physician extender, such as a nurse, are billed under the doctor's provider number.
  • Insys has been under scrutiny for some time for its Subsys marketing practices. In May 2014, an institutional investor publicly questioned its Subsys sales practices. In September, the Massachusetts Attorney General issued a subpoena requesting documents pertaining to its commercial practices supporting Subsys. In December, an investigation by the NY Times highlighted the company's generous compensation to high prescribers of Subsys.
  • Insys generates almost all of revenues from Subsys. In 2014, the product generated $219.5M in sales, up ~124% yoy.
  • Previously: Insys' promotion of narcotic continues to draw attention (Dec. 2, 2014)
  • Previously: Insys subpoenaed over Subsys commercial practices (Sept. 12, 2014)
  • Previously: Insys takes a dive (May 12, 2014)

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INSYS Therapeutics, Inc.