The bankruptcy filing comes just days after Insys Therapeutics agreed to pay a $225 million settlement for the unlawful marketing of its fentanyl spray.
Insys Therapeutics admitted to unlawfully promoting its fentanyl spray, Subsys, but it is now seeking bankruptcy protection, which could lessen the blow that the federal government was hoping to inflict on the company for its unsavory deeds.
Insys filed for Chapter 11 bankruptcy protection, asking the court to allow the sale of company assets to cover more than $250 million in debts, just five days after agreeing to pay a multi-million dollar settlement with the federal government. This is the first time a drug company has sought bankruptcy protection for a legal case stemming from the national opioid crisis.
Chapter 11 is normally filed by businesses seeking the help of the court to restructure debts and obligations, as explained by Investopedia: “In cases involving fraud, dishonesty or gross incompetence, a court-appointed trustee steps in to run the company throughout the entire bankruptcy proceedings. The business is not able to make some decisions without the permission of the courts.” These include the sale of assets.
“After conducting a thorough review of available strategic alternatives, we determined that a court-supervised sale process is the best course of action to maximize the value of our assets and address our legacy legal challenges in a fair and transparent manner,” said Insys CEO Andrew G. Long in a statement.
Companies like United Airlines, General Motors and K-mart have managed to stay in business after filing for Chapter 11.
If Insys is granted Chapter 11 bankruptcy protection, it may continue to operate as it figures out a plan to pay for legal expenses—including more than $11 million to defend the company’s founder John Kapoor, who was one of five former Insys executives who were convicted in May of widespread racketeering conspiracy relating to the marketing of Subsys.
Kapoor is among the highest ranking pharmaceutical executives to be convicted as a result of the opioid crisis, NPR noted. He is expected to receive sentencing in September.
Bankruptcy protection could mean that the federal government will not receive the full amount owed by Insys in the civil settlement: $195 million.
In total, the sum of the money owed in both the criminal and civil resolutions amounts to $225 million.
The company has admitted to orchestrating a scheme to unlawfully promote Subsys—a drug 100 times stronger than morphine—that involved bribing doctors.
“For years, Insys engaged in prolonged, illegal conduct that prioritized its profits over the health of the thousands of patients who relied on it,” said U.S. Attorney Andrew Lelling in a June 5 statement.