A young sales representative for a controversial drugmaker claims that the company hired her, despite a lack of experience, as a “kickback” to a doctor who found her attractive.
That ex-manager for Insys Therapeutics — a pharmaceutical company investigated by Fusion, as well as at least six states, for its questionable tactics in marketing a powerful prescription opioid — struck a deal last week with federal prosecutors, pleading guilty to fraud in connection with her work.
The sales rep, Natalie Reed Perhacs, admitted that she provided doctors with financial kickbacks in return for them overprescribing Insys’ controversial painkiller to insured patients, most of whom weren’t approved for the drug under FDA guidelines.
In her plea agreement, Perhacs stated that she got her job at Insys at the request of Dr. Xiulu Ruan of Mobile, Alabama, after the doctor had “developed a certain affection” for her.
Perhacs, who had worked for a nearby medical equipment company, met Ruan in late 2012 and ended up in a correspondence with him that was at turns professional and personal.
“I want to ask you a personal question and hopefully you would not be offended,” Ruan wrote in a November 7, 2012, e-mail sent to Perhacs, according to her plea agreement. “Are you involved with someone now?… You don’t have to answer any of these if you do not feel comfortable.”
After trying to get Perhacs hired elsewhere near him, Ruan scored her an interview at Insys the following spring — and made it clear he and his business partner, Dr. John Couch, were doing her a favor, the plea agreement states. “BTW, I am a national speaker as well as on the advisory board for this company. Dr. Couch is also a speaker for this company,” he wrote to Perhacs in an email. “We both know this product well. I hope you can get it this time.”
Insys has long been hailed by NASDAQ investors for its sales of Subsys, a fast-acting spray form of fentanyl — a synthetic opioid painkiller 50 times stronger than heroin. Fentanyl is also highly addictive — so much so that drug cartels produce their own form of the drug to mix in with heroin. It was the leading cause of overdoses last year in states hit hardest by the U.S. opiate epidemic, as Fusion first reported last month in its hourlong investigative documentary, Death by Fentanyl.
Subsys has only been approved by the FDA for cancer patients with serious “breakthrough” pain. But Insys is embroiled in a flurry of investigations and suits alleging that the company offered kickbacks to doctors to prescribe the painkiller “off-label” to non-cancer patients.
Perhacs’ plea agreement, published on Document Cloud, suggests that she owed her job to that scheme. She was hired at Insys shortly after Ruan recommended her — but not “because of her experience or her knowledge of Controlled Substances,” the agreement states. “PERHACS was hired to induce, and in exchange for, Dr. Ruan continuing to prescribe Subsys.”
Between 2014 and 2016, Perhacs made more than $700,000 in commissions on top of her $40,000 base salary, in part by promoting the powerful drug for use by patients it wasn’t intended for, and getting taxpayer-funded insurance providers to foot the costly bill, the plea says.
Perhacs worked primarily with Ruan and Couch, co-owners of Physician Pain Specialists of Alabama and C&R Pharmacy. The two doctors were indicted in May 2015 for allegedly running one of the nation’s largest pill mills: Each wrote over 32,000 prescriptions in a one year period. (As part of her plea deal, Perhacs will testify against Ruan and Couch at their upcoming conspiracy trial.)
“Due to the enormous volume of Subsys prescriptions Dr. Ruan was writing, certain individuals within [Insys] referred to Dr. Ruan as one of [Insys‘s] ‘three whales,’” the plea agreement states.
Some of Ruan and Couch’s non-cancer Subsys patients received the prescriptions at a cost of hundreds of thousands of dollars to taxpayer-funded health insurance providers. Couch, for example, wrote 28 prescriptions for one patient in less than three years. That insurance bill alone added up to $465,062.57, according to the plea.
That number didn’t surprise whistleblower Patty Nixon, who spoke to Fusion in December as part of its investigation into the company’s tactics. A Subsys prescription could cost insurance companies around $30,000 a month, at its highest dosage, and sales reps like Perhac were paid by commission. Lawsuits against Insys allege that sales reps earn more when patients are prescribed higher dosages of the powerful opiate.
Nixon said her team was instructed to mislead insurance companies to get Subsys covered. “It’s real simple: It’s only FDA approved for cancer patients with breakthrough cancer pain,” she said. “If you don’t have cancer, and breakthrough cancer pain, no insurance company is going to pay for this medication.”
The solution, she said, was for company reps to tell insurance companies that patients had cancer when they did not. Most — 90 percent — of the patients referred to Nixon and her colleagues for Subsys sales were cancer-free, she said.
Nixon said she was familiar with Perhacs, who was one of the top sales reps at the company, but was shocked that Perhacs was indicted before some of the other top reps.
“She was by no means the only one doing questionable things to get scripts written,” Nixon said. “She’s not in a small group — there’s a large group of people doing the exact same thing.”
In an email to Fusion Wednesday, a spokeswoman for Insys said the company was still reviewing Perhac’s allegations, but denied any wrongdoing on its part. “Providing items of value to healthcare providers in order to induce prescriptions is a violation of the Company’s compliance policies,” the spokeswoman wrote.
Lawyers of Perhac, Ruan, and Couch did not respond to requests for comment for this story.
Perhacs’ may be the first in a series of Insys-related indictments, however. There are ongoing investigations in “several jurisdictions” in which “additional individuals will be charged,” according to court records from a case out of Connecticut, in which nurse practitioner Heather Alfonso pled guilty to accepting kickbacks to prescribe Subsys.
A Florida-based company, Wayne Automatic Fire Sprinklers, filed a lawsuit against Insys this week, alleging Wayne’s insurance paid for a Subsys prescription for a patient without cancer after an Insys employee stated the same patient had “malignant cancer pain.” The company is seeking damages in excess of $75,000.00. (Insys’ spokeswoman told Fusion that the company “plans to vigorously defend [against] this lawsuit.”)
Also this week, Oregon Assistant Attorney General David Hart testified before Congress on Insys’s sales tactics after the company agreed to a $1.1 million settlement for “alleged misconduct” marketing Subsys in the state.
“I was truly shocked that in 2015 when the scourge of the opiate epidemic is so widely known that a manufacturer of a Schedule II drug would promote in such an unconscionable and irresponsible way,” Hart said.
Nixon told Fusion that justice would only be served if future indictments included Insys leadership like John Kapoor, the company’s founder and CEO.
“I really hope they get Kapoor and the people at the very top who are behind all this greed,” she said. “The sales reps were part of it, but Kapoor? He built this whole thing.”