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Insys: Anthem Lawsuit Paves The Road For An Equity Raise And Continued Downside Pressure On The Stock


  • Hours after we predicted insurance clawback lawsuits, Insys is sued by Anthem.
  • Other insurers could easily follow as continued lawsuits could turn into a self-fulfilling prophecy.
  • Insys doesn't have the cash balance, or the cash flow stream, to deal with significant legal costs.
  • We believe almost all roads will lead to a dilutive equity raise for the company.

By Parke Shall

It was just hours ago that we wrote our last article on Insys (INSY), warning investors that the fallout and the bad news from the company's Subsys kickback scandal may be nowhere close to over and that INSY should be further avoided as an investment.

Yesterday afternoon it was announced that insurer Anthem was suing the company to clawback money for reimbursements made under false pretenses for Subsys. We wanted to do a quick recap of how this helps affirm our thesis as well as what the contents of the lawsuit contained, in today's article.

In was in our article out just hours ago that we stated,

We believe that there is now a clear path for not just the DOJ for additional criminal prosecution, but a clear path for insurance fraud claw-back by both commercial and government providers (CMS).

No sooner did we say that, than MarketWatch reported,

Health-insurer Anthem Inc. has filed a civil suit alleging that drugmaker Insys Therapeutics Inc. engaged in “fraudulent schemes” to secure reimbursement for the company’s fentanyl painkiller Subsys.

The suit, filed Wednesday in federal court in Arizona, alleges that Insys bribed doctors and lied to Anthem about patients’ diagnoses to win reimbursement for prescriptions that wouldn’t have been covered otherwise.

Anthem alleges that as a result of the fraud, it paid in excess of $19 million for Subsys prescriptions that shouldn’t have been reimbursed. A spokeswoman for Insys didn’t immediately respond for comment.

Anthem, based in Indianapolis, is seeking unspecified compensatory and punitive damages to be determined at trial, as well as an injunction barring Insys from continuing to engage in the alleged fraudulent conduct.

The opening to Anthem's lawsuit reads like validation to the concerns we have continually written about regarding INSY for the last year or so. It's

This article was written by

Contributors: Scott Tzu, Parke Shall, Thom Lachenmann (contributors write under pen names for anonymity purposes) Please read Seeking Alpha's Policy on Anonymous Contributors to familiarize yourself with the site's terms and conditions relating to anonymous authors.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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