Coverage: Insys Therapeutics founder resigns from board after charges

John Kapoor, the billionaire founder of Insys Therapeutics Inc., resigned from its board of directors on Sunday after being arrested on charges he participated in a scheme to bribe doctors to prescribe a fentanyl-based cancer pain drug.

Suzanne Barlyn and Nate Raymond of Reuters had the news:

Kapoor, INSYS’ majority shareholder who stepped down as chief executive in January, said on Sunday that his continued involvement with INSYS would draw unnecessary attention to the company.

Kapoor was charged with engaging in conspiracies to commit racketeering, mail fraud and wire fraud in an indictment filed in federal court in Boston.

The charges marked a major escalation of investigations related to Subsys, an under-the-tongue spray that contains fentanyl, an addictive synthetic opioid. They came as U.S. President Donald Trump on Thursday declared the opioid crisis a public health emergency.

Kapoor was added as a defendant in a case against six former INSYS executives and managers, including former Chief Executive Michael Babich. Following a court hearing in Phoenix, Kapoor, 74, was released on a $1 million bond.

Anita Snow of the Associated Press reported that prosecutors believe Kapoor pushed prescriptions for people without cancer:

The case naming Kapoor follows indictments against the company’s former CEO and other executives and managers on allegations that they provided kickbacks to doctors to prescribe a potent opioid spray called Subsys amid a drug epidemic that is claiming thousands of lives each year.

The new indictment alleges Kapoor and the other defendants offered bribes to doctors to write large numbers of prescriptions for the fentanyl-based pain medication that is meant only for cancer patients with severe pain. Most people who received prescriptions did not have cancer.

It also alleges that they conspired to mislead and defraud insurance providers who were reluctant to approve payment for the drug when it was prescribed for patients without cancer.

Federal prosecutors in Boston brought the case as part of “ongoing efforts to attack the opioid crisis from all angles,” said Boston-based Acting U.S. Attorney William D. Weinreb.

Lucinda Shen of Fortune reported that Insys shares fell 23 percent on the news:

Insys did not immediately return Fortune’s request for comment.

Insys’ stock closed down nearly 23% following the news of Kapoor’s arrest, pushing the company’s valuation down to $417 million. It was a stunning retreat, considering the company was valued at over $19 billion as recently as 2015, when concerns about the company’s practices were first raised. (Insys is now also developing its own drug to reverse opioid overdoses.)

Insys’ falloff has cost Kapoor a hefty portion of his own net worth, which is made up in part of company stock. At Insys’ peak, Kapoor’s current stake in the company was worth over $1.9 billion. By Thursday’s close, it was down to $246.7 million. (Kapoor still holds a $1 billion stake in Akorn Pharmaceuticals, a generic drug maker where he also serves as board chairman. Akorn’s stock was down about 1% at Thursday’s close.)

Kapoor is set to make a court appearance in Phoenix at a later date.