Pain Hustlers: Crime and Punishment at an Opioid Startup Originally published as The Hard Sell

by Evan Hughes

regulators draw an important distinction between what is permitted for doctors and what is permitted for drug companies. While clinicians can prescribe off label, using their own judgment, it is generally forbidden for a pharmaceutical company to promote a product for off-label uses. The rationale is that in determining what is safe and appropriate for a patient, a highly trained doctor should be given leeway to depart from FDA guidance, but a drugmaker should be given no leeway at all, in view of its obvious bias. (Recent legal challenges have carved out exceptions and eroded enforcement, but the prohibition against off-label marketing remains in place.)

What separates the opioid crisis from all previous drug epidemics is that it has its roots in drugs that are perfectly legal to use—FDA-approved and highly regulated painkillers much like Subsys. In the 1990s and early in the following decade, new voices in the medical community advanced the idea that pain needed to be treated more forcefully, that fear of opioids was excessive and had to be overcome so that patients wouldn’t needlessly suffer. Medical students and doctors were widely taught that legitimate pain patients would not become addicted.

This idea never rested on a solid scientific foundation, and it simply wasn’t true. Pharmaceutical companies played a central role in fostering this misimpression, downplaying the risks as they aggressively marketed their painkillers. Drugmakers handed megaphones to physicians who celebrated the benefits of opioids and embraced more liberal prescribing of narcotics, anointing the doctors “key opinion leaders.” These physicians presented themselves in the manner of evangelists, giving talks designed to break down resistance to opioid therapy. In 1997, a North Carolina pain specialist named Alan Spanos said, “These drugs, which are—I repeat—our best, strongest pain medicines, should be used much more often than they are” and “do not have serious medical side effects.” The doctor made these remarks in a promotional video for OxyContin.

It would be wrong to suggest that everyone who was prescribed painkillers became addicted; most of them did not, and many of them were, and are, profoundly grateful for opioids. But even prominent early advocates of liberal practices now acknowledge that far too little care was taken in prescribing these drugs. People experience pain all over the globe, of course, but no foreign country consumes as many opioids as the United States.

Even as street drugs have overtaken prescription products as the leading culprits in the crisis, it has become only clearer that the opioid disaster began with government-regulated painkillers. As many as four out of five heroin users have reported that they started out by misusing prescription drugs. An enormous public health crisis began not with hand-to-hand transactions on darkened street corners or covert shipments over the border but under the sanitized fluorescent glare of neighborhood pharmacies and Walgreens. The drugs at issue were packaged and trafficked by men in suits who worked at companies celebrated on Wall Street and in the pages of business magazines.

Third-party firms have stepped in to supply that knowledge, at a price. The most well known is IQVIA, formed through a merger of industry leader IMS Health and Quintiles. Companies like this acquire sales data for drugs at the pharmacy level. Because each prescription is tied to a prescriber ID number, IQVIA can link up each ring of the cash register to the name of a physician and then sell that data to drugmakers.

Many physicians object to this practice. To have a “private interaction” with a patient be “subsequently sold and repackaged as marketing ammunition to use to influence my prescribing habits is distasteful to me and to many of my colleagues,” a Vermont doctor named Norman Ward has said. That state passed a law banning the sale of prescription data for marketing purposes. But IMS and its competitors joined with PhRMA, the major drugmaker consortium and lobbying group, to challenge the measure in court, and they won: the Supreme Court in 2011 overturned the law on First Amendment grounds. So whenever you fill a prescription at your pharmacy, pharma firms nationwide are going to know about it, and they’re going to know who gave it to you. This allows drug companies to target physicians with great precision.

Back at headquarters, executives figure out where to deploy reps and even what routes they should take in their cars, to maximize efficiency. On their fishing trips for “customers” (a term they use for doctors), drugmakers don’t wander around on their boat with a line in the water. They head out with a near-perfect radar image of what’s happening below the surface. “You fish where the fish are,” a former Insys manager said.

Finding good pharmaceutical sales reps is a challenge. It’s a tricky and demanding job. Many physicians find drug reps to be an annoyance, or worse. They don’t like being told how to practice medicine, much less by someone with an obvious agenda, and they object to unannounced doorstep visits. Office staff try to fend off reps and dissuade them from coming so often. Reps call them the “gatekeepers.” The challenge for reps is to “get back”—both literally and figuratively, to get past the front desk and into the doctor’s realm. An unending battle for access is the norm, and a sales rep’s day is littered with failures. It isn’t unusual to drive fifty or a hundred miles to see a doctor, only to be turned away immediately.

Those attracted to the modest salary at Insys were people who yearned to be drug reps, usually for the first time. “We were willing to give them the shot where most companies would not,” Babich said. While Insys spoke to investors of its “cost-efficient” sales force, the terms used internally were more frank, more crude. Top executives discussed their intention to hire reps who were PhDs—“poor, hungry, and driven.” Or that’s how the term first started being used. Later it morphed into “poor, hungry, and dumb.”

the Insys reps typically knew very little about the people they were trying to persuade. In a relationship business, they had to create relationships from scratch. After summoning the courage to walk into a clinic uninvited on a cold call, they commonly found themselves rejected out of hand. Often their best pitch for Subsys, if they even got past the front desk and had a chance to deliver it, was received to little or no effect. Mia Guzman and Tracy Krane would talk about the frustrating fact that in this industry the “customer”—the doctor—was not in fact a buyer of anything. When you left the room after a sales pitch, you couldn’t tell if you had closed the deal. A doctor might grant an audience and make noises about being on the lookout for the right patients, but then you were left to wait for scripts that might never materialize.

The rookies at Insys came to see that many of their targets had long-standing relationships, professional and personal, with competing reps, and that mattered more than they had anticipated. Once they grew acquainted with the clinics on their call lists, they saw that each of them was a social ecosystem, with a cast of staffers surrounding the doctor and a circle of reps jockeying for position. On every call, the Insys reps were stumbling onto someone else’s territory. By asking a doctor to start opting for Subsys as his go-to TIRF drug, the Insys rep was asking him to deal a serious blow to a Cephalon rep who might have been visiting his office and seeing him at dinners for years. Particularly at the high-decile end, reps began to detect a subtext coming from the doctors: What’s in it for me?

Curiously, the TIRF REMS program was sponsored and administered not by government regulators but by corporations in the industry, most notably the TIRF manufacturers themselves. In other words, the drugmakers were supposed to police the prescribing of drugs they were promoting. Being part of the program meant that Insys had access to reports listing every single Subsys prescription. Each one appeared as a row on a spreadsheet, indicating the doctor, the pharmacy, the dosage, and more. The purpose of collecting this data was to protect patient safety, but Insys found itself with a marketing gold mine. This granular prescribing information flowed into the Arizona headquarters virtually in real time, whereas even the most expensive data that Insys bought from third parties lagged by a few weeks. When a new doctor produced a Subsys prescription, leadership picked up the signal right away and could send their rep to the office to follow up and reinforce the message. The best time to make a sale, one Insys executive said, is right after you made one. In the TIRF REMS system, patient information was anonymized for privacy, but each patient had a unique ID number, which allowed the Insys brass to track individuals over time, each one of them a potential profit center. Kapoor, Babich, Napoletano, and others personally scoured the reports on a near-daily basis.

The top executives were using a government-mandated safety protocol as a marketing tool. They turned a shield into a sword.

A speaker program is a widely used promotional tool in the pharmaceutical industry. Drug companies pay doctors to give talks about the benefits of their product to other potential prescribers. The sales rep assigned to the doctor helps set up the event and attends it. These are not generally speeches with a lectern and microphone in a hotel banquet room. Usually they are relatively small gatherings, with perhaps four to twelve attendees in addition to the speaker and the sales rep. The talks take place at a clinic or, more often, over dinner in a private room at a restaurant. The speaker is trained in advance and uses a slide deck created by the drug company to make the presentations, usually on an ongoing basis; the doctor signs a contract and joins the drugmaker’s “speaker bureau.”

The real target of the speaker program, Burlakoff said, was not the audience of the talks but the speaker himself. The presentations really didn’t matter at all. The idea was to funnel cash to the speaker so that he would prescribe Subsys in return. If he didn’t live up to his end of the deal, he wouldn’t get paid to speak anymore. It was a quid pro quo.

It is common practice in the drug industry for reps to document what they saw and did at each office visit. They use their laptops, tablets, and phones to input these “call notes” in a central company database. A problem with this system is that inexperienced reps might type something that really shouldn’t be set down in black and white. The most damning details in litigation against drug companies have sometimes come from call notes. Purdue Pharma call notes revealed that reps overcame resistance from doctors by pushing the message that OxyContin was less addictive than other opioids, which wasn’t true.

In the last couple of decades, a number of major drugmakers have made an important change to their call-note systems. Now, reps don’t type anything at all. They just select from a series of drop-down menus, answering queries in multiple choice: How much time did you spend with the doctor? Which of the following product benefits were discussed? There is no place for the rep to engage in free writing, no opportunity to accidentally leave evidence of off-label promotion or spell out warning signs about the physician. The genius of the drop-down menu, in other words, is that every possible answer a rep can give is legally clean.

Insys failed to practice such self-protective measures. Before Burlakoff was promoted, when Mike Babich was temporarily running sales, he asked that reps submit weekly written reports on their contacts with top sales targets—at Kapoor’s direction, Babich said. Babich received these reports by email, and he said he or his assistant would regularly print them out for Kapoor. In other words, Insys created a system where the paper trail led not only to corporate but directly to the top of the hierarchy.

I call on Dr. Madison once sometimes twice a week. Dr. Madison runs a very shady pill mill and only accepts cash. He sees very few insured patients but does write some Fentora. He is extremely moody, lazy, and inattentive. He basically just shows up to sign his name on the prescription pad, if he shows up at all.

The true end customers for Subsys were not the doctors, nor even the patients, but the insurance companies that ultimately needed to foot the bill. Almost all health insurers required prior authorization before they would pay for Subsys. It was a costly and potent drug. A doctor’s prescription wasn’t enough. Insurers wanted to know that a TIRF product was truly necessary and that the cheaper generic Actiq wouldn’t suffice.

The sales force was seeing its best results with pain management physicians who saw few cancer patients, such as Gavin Awerbuch, Paul Madison, and Xiulu Ruan. Meanwhile, nearly all insurers refused to pay for Subsys without a cancer diagnosis, because the medication was indicated for breakthrough cancer pain and no other condition. While doctors were permitted to write Subsys for anyone, that didn’t mean insurers had to cover it. And Insys needed health plans to pay; the drug was so expensive that few patients shouldered the cost themselves. Insurers would sometimes make exceptions and knowingly approve a non-cancer Subsys script, but that was relatively uncommon. With Medicare plans, there was typically a strict rule against it, owing to federal regulations.

Using outside vendors that serve as “hubs” to handle prior authorizations, or PAs, is not uncommon, but the practice occupies a murky space in the industry. A drugmaker that contracts with a hub provides a benefit to doctors by taking onerous work off their clinics’ hands, so it can function like a kickback: If you write our product instead of the other one, we’ll pay for the grunt work. What’s more, any outside vendor hired to handle PAs has an incentive to please its client by getting prescriptions pulled through. There is some motive, then, for a hub to massage the facts in order to fit insurance requirements.

Napoletano said that you really don’t want to know the details about who is taking the product, especially with a Schedule II opioid. It could easily lead to violations of patient-privacy laws. Another issue with failing to keep an arm’s length from the patients is that it implicates the company in any inappropriate prescribing. Having an internal division pushing for questionable patients to be approved for a narcotic—it added up to a serious potential liability. If you pay someone else to do it, you can deny playing a role.

Gurrieri began learning something from just about every phone call, offering Insys a window into how coverage decisions were being made. Most insurers, she now saw firsthand, required a diagnosis of breakthrough cancer pain for approval, which disqualified the majority of Subsys patients immediately. But it was worse than that. Insurance plans would typically only agree to pay if the patient had already tried Actiq, the generic TIRF, without success. In fact, plans often required multiple “tried and failed” medications, including opioids from outside the TIRF class, before they would cover Subsys.

The solution to the problem that Gurrieri did not work at the doctor’s office was simple enough: she presented herself as if she did. She began saying she was calling “with” or “for” or “on behalf of” Dr. Jones.

At one point, Gurrieri and a newly hired colleague figured out what the insurance giant Humana needed to hear about prior medications to release the money for Subsys. Gurry then asked them to retrieve all the Humana rejections from the file cabinet and try again. This time they had the magic words and hit paydirt. Gurrieri’s growing team of “prior-authorization specialists” began to keep track of the magic words for particular insurance plans on a shared computer file and on sheets of paper tacked up in their cubicles.

Gurrieri’s unit came to be called the Insys Reimbursement Center. For the IRC team, using the phone conferred an advantage over sending paperwork. You couldn’t get creative with a form full of check boxes. In a conversation, you could misdirect and mislead, bending the truth without completely breaking it, unless necessary. That kind of creativity became, in essence, their central project.

IRC workers had to contend, at first, with the fact that their phone and fax numbers carried an Arizona area code. At times, someone from an insurer would want to contact them, rather than the reverse. That presented a sticky situation, because they didn’t want to reveal who they were. There was caller ID to think about as well. The IRC’s area code didn’t jibe with the story that the call was coming from a clinic in, say, New Hampshire or Alabama. Eventually, Insys set up 800 numbers for incoming calls and faxes, and the person who answered calls at the IRC said only “Reimbursement Center,” leaving Insys out of it. That still left the caller ID vulnerability, though.

Later, the spiel changed: “The physician is aware that the medication is intended for the management of breakthrough pain in cancer patients, and the physician is treating the breakthrough pain.” To the person fielding the call, no medical expert, it was a blizzard of words that sounded like a “yes.” Again, the omission of the word “cancer” in the final phrase was probably missed. The entire statement was often, in fact, technically accurate. It was also, Gurrieri later said, definitely misleading.

The top Insys executives decided to fully exploit their decision to handle prior authorizations internally. The company instituted a system whereby PA specialists would receive bonuses based on how many scripts they pulled through. IRC staffers were supposed to be walled off from sales; in theory, they were supposed to be merely conveying information to insurers. Executives were giving them skin in the game. They now had a financial incentive to get to yes.

Furchak’s suit was what is known as a qui tam, brought under the False Claims Act. In cases of this kind, a whistleblower alleges fraud against the taxpayer and sues on behalf of the government. The term qui tam is an abbreviation of a Latin phrase describing a legal action brought by a person “who sues for the king as well as for himself.” The Department of Justice reviews each qui tam, and if it chooses to “intervene” in the action, it joins forces with the whistleblower—referred to as the relator—and takes the lead role in pursuing the case.

Qui tam suits are a major enforcement tool in the health-care industry, particularly in pharmaceuticals. Any drug company violating the law is liable to be guilty of defrauding the government, because a substantial proportion of prescription drugs are purchased by the taxpayer; public programs such as Medicare, Medicaid, Tricare, and the Veterans Administration pay for prescriptions written for their patients. This monetary loss gives the United States the grounds to go after pharma, to claw back the money. When the Justice Department extracts a serious financial penalty from a drugmaker, and sometimes a criminal guilty plea, the case usually traces back to a quiet decision, years before, of an individual on the inside, a solitary man or woman who took a big step.

Qui tam suits also represent a serious financial opportunity for whistleblowers: they stand to share in any funds recovered by the government. The whistleblower is, in other words, a kind of bounty hunter. When the False Claims Act was conceived during the Civil War, the legislature adopted this framework, drawing on early English law, to encourage informers to report people who were scamming the Union army through price gouging and other schemes. The statute offers a reward out of a recognition that whistleblowers (and their lawyers) would otherwise have little incentive to undertake an arduous and costly ordeal.

In major pharmaceutical cases, the whistleblower’s share, up to 30 percent, can run into the millions or even tens of millions of dollars. In a 2009 settlement concerning off-label marketing at Pfiz...

A surprising number of people in the industry are unaware that they could make money by blowing the whistle. But at larger companies, where employees are more experienced, enough people are in the know that any misconduct can foster an atmosphere of suspicion and competition. Reps who consider filing a suit wonder if someone else already has—the first to file is heavily favored by the law—and people speculate about whether their co-workers might be recording calls or wearing a wire. Top executives h...

For the Justice Department, going after a pharmaceutical company—or any national corporation, for that matter—means taking on an opponent that isn’t going to fold easily. Outstanding, expensive defense attorneys are likely to be hired. The case will involve a protracted investigation and a significant investment in resources, funded by the taxpayer. Although the Justice Department prefers not to discuss it openly, there is plenty of illegal conduct in health care that never gets prosecuted, owing to limited government bandwidth and the daunting burden of proof. The DOJ declines the majority of the qui tam cases it sees.

In spring 2013, when Rowan was taking on more responsibility as a manager and needed to appoint a successor to call on Ruan, he consulted the doctor on the decision. Rowan first offered to hire Ruan’s girlfriend. Ruan had a different proposal. For several months he had been making advances on a young woman with long brown hair and dark eyes named Natalie Perhacs, who visited the clinic as a rep selling respiratory equipment, such as CPAP machines for sleep apnea. Simultaneously, Ruan was making efforts to help her get a new position as a drug rep. When he invited her to dinner or asked personal questions, she would always politely rebuff him. But if Dr. Ruan got Perhacs the Insys job, she would be forced to visit his clinic several times a week and ingratiate herself to make a living.

Like the swarm of other reps who fed on the clinic, Perhacs began acceding to Dr. Ruan’s brazen requests for favors in hopes of winning his business. When Ruan asked, other reps would bring his cars in for maintenance, take his dog out for walks, pick up his relatives at the airport. Perhacs helped out with car auctions he participated in. She wrote at least one rave review online for his practice, posing as a patient under an alias, at his request. She joined his health-products pyramid scheme.

A medication typically travels along a three-step supply chain—from the drugmaker’s shipper to a wholesale distributor and finally to retail pharmacies. With controlled substances, the entire chain is tightly regulated. Since the beginning of the opioid epidemic, drug distributors—including all of the “big three” of McKesson, Cardinal Health, and AmerisourceBergen—have paid hefty fines and settlements for failing to notify the Drug Enforcement Administration of “suspicious orders” of controlled substances from particular pharmacies, as required by law. Under mounting scrutiny, distributors have put in place monitoring systems in which controlled-substance orders from a given pharmacy that exceed a monthly threshold, or “cap,” are put on hold and, barring some innocent explanation, reported to the DEA.

A subpoena like the one Insys received, if it leads anywhere, usually leads to a financial settlement, years down the road. The drugmaker ends up paying millions—occasionally billions, with a blockbuster drug—to “resolve” the allegations, with or without admitting guilt, and perhaps submits to new restrictions. Because no trial takes place, the underlying evidence never gets a full airing. When the settlement is announced, a spate of media coverage mars the company’s reputation. But it might be a one- or two-day news story. Investors are typically unsurprised by the settlement—they’ve been aware of the investigation through public filings—and to them it registers as good news for the company: the costly ordeal is over, the dark cloud lifted. It’s not uncommon to find that just as the Justice Department is announcing its success in holding the industry accountable, the accused company’s share price actually rises.

Insys sometimes targeted “mid-level” clinicians such as nurse-practitioners and physician assistants—who are less commonly hired as pharma speakers than doctors—recognizing that speaking fees would make a more meaningful impact on their income. According to Babich, Matt Napoletano knew about Alfonso’s family finances and had zeroed in on her as a potential speaker. Alfonso later acknowledged that she was driven by greed, but she added that she “had come to rely on that extra money” from the company “and needed it to live.”

Natalie Levine would hear him out about his problems. She fit the role of the love interest in a romantic comedy, the one who is sweet and goofy and approachable for the awkward male protagonist—and just happens to be dazzlingly pretty.

Had the U.S. Attorney’s Office in Massachusetts settled for prosecuting Insys as a company, the investigation would have proceeded largely outside public view and ended in a plea bargain conducted in secret. In a brief hearing, lawyers for the company—and not the Insys executives themselves—would have stood up in court and pled guilty to an “information,” a dry document outlining the charges, and accepted significant financial penalties, stricter monitoring, and a deferred prosecution agreement, a form of corporate probation. Given the severity of the conduct, the company would have agreed to divest Subsys to a third party, but Insys wouldn’t have been barred from doing business with government programs. In a press release, federal officials would have hailed the victory and announced that the settlement “sends a strong message to pharmaceutical manufacturers” selling opioids. It would have produced a blip in the news.

We know this because the Justice Department did, in fact, pursue Insys as a company, in parallel with the case against its former executives. And all of that is exactly what happened.

Had that been the end of it, there would be good reason to doubt whether the “strong message” would be heeded. As the journalist Barry Meier pointed out, if the DOJ sent a strong message in its case against Purdue Pharma in 2007, why did drug distributors—beginning that same year—send enough pain pills to West Virginia over a five-year period to supply every man, woman, and child with 433 of them? Why did Purdue itself keep committing crimes for another eleven years, by its own admission? If the Justice Department sent a strong message in its prosecution of Cephalon for off-label promotion, resolved in 2008, why was the founder and CEO awarded $14.5 million in comp...

If you’re a doctor, the sales reps all want something from you. So do the patients. The easy way out, and also the lucrative path, is to just give in. Just sign your name—to insurance forms you don’t read, to treatment plans your employees come up with, to speaker agreements that pad your income, and of course to prescriptions for opioid painkillers. If you go that route, the reps will compete for your attention and treat you as important, and your practice will flourish. It takes a certain fortitude to be responsible. Insys found people who were weak.

He provided an unprecedented vantage point, from inside the C-suite, onto the marketing of a prescription painkiller. An indictment or a lawsuit or a congressional report affords the view of a hostile outsider looking in. Rarely does an insider speak. When whistleblowers occasionally come forward, they usually come from the lower ranks, like Ray Furchak and Mia Guzman. They certainly aren’t the CEO. One reason that drug companies pay enormous sums to settle investigations before trial is to avoid a moment like this one—a former chief executive, under oath, describing how the business operates.

Their thinking was governed by an undeniable logic flowing downstream from the profit motive: If Cephalon already has relationships with the top customers, we need to offer them something better. If Subsys prescriptions aren’t getting reimbursed by the insurers, we need to game the system better than the competitors do. If Couch and Ruan are having trouble getting enough Subsys because their pharmacy’s distributor is trying to comply with the law, we need to find a way around the problem and make sure the doctors don’t defect to Galena. It was a thought process in which the patients barely figured at all.

In the ritualistic theater of trial testimony, it is really the questioner who runs the show, in the sense that the witness is supposed to be limited to answering what is asked. The attorney posing the questions, who knows in advance roughly what the witness has to say, carefully weaves through the material, swerving to avoid land mines, in order to create the picture most favorable to his position. That picture, of course, is utterly incomplete and badly skewed—a problem that is theoretically remedied when the other side gets its turn and engages in the same routine. This can be a highly frustrating exercise for the witness. It is a natural instinct, for example, that when you are asked a yes-or-no question and a simple “yes” would create a misleading impression, you want to elaborate: “Well, technically yes, but that leaves out something important…” Instead of saying that, you’re supposed to suffer through being misrepresented and hope that the other side gives you a chance to explain, which may never come to pass.