NAVAJO COUNTY — The Navajo County Supervisors recently voted to approve a plan of reorganization in the bankruptcy case of one of the minor defendants the county sued in its lawsuit against opiate manufacturers, distributors and individuals.
The action came after one of the drug companies that manufactured a opiate nose spray, Arizona-based Insys Therapeutics Inc., filed for bankruptcy on June 10, 2019.
Insys allegedly bribed and misled doctors in order to boost sales of opiate prescription painkillers while thousands died from overdose to both prescription painkillers and illegal narcotics. Insys proposed that its creditors and claimants settle for about ten cents on the dollar — not unheard of in the bankruptcy process.
A letter from attorney David Molton advised the county how it could file a proof of claim in Insys’ bankruptcy case. Filing a proof of claim is the procedure whereby the county gets in line with all the other claimants hoping to recover at least something.
Navajo County sued dozens of defendants and opted to join what is called multiple district litigation (MDL.) That’s where about 800 states, counties and cities which have sued for damages in hundreds of different courts, agreed to move all their suits to one federal district court in the Northern District of Ohio. Plaintiffs are seeking billions of dollars.
Navajo County Attorney Brad Carlyon told The Independent that the Board of Supervisors liked the idea of cost-sharing with other plaintiffs in one forum. By contrast, the Apache County Board of Supervisors have kept that county’s suit local — filing it in the Apache County Superior Court. Insys is a defendant in the Ohio case but filed its Chapter 11 bankruptcy case in Delaware — probably because it incorporated in that state.
The MDL plaintiffs claim that some 200,000 overdose deaths from prescription painkillers were caused in large measure by payments to doctors to prescribe unneeded or excessive painkillers as well as misleading and incomplete information given to doctors and deceptive advertising campaigns overstating the value of the drugs while understating the risk of addiction and overdose.
Insys Therapeutics has already agreed to pay the US Justice Department some $225 million for misleading claims and payments to doctors who prescribed the painkillers. The company acknowledges owing $1 billion in claims, but says it has assets of only $39 million — plus the value of the fentanyl nose spray called Subsys worth about $60 million. The spray was licensed to treat cancer pain, but like many opiates was then prescribed for things like chronic pain – with a much greater danger of addiction and overdose.
The Phoenix New Times reported that 7,500 people died from using Subsys in 2018 (1-22-20).
Insys filed its bankruptcy in order to get a stay of all claims while it reorganizes — a typical Chapter 11 case. In the reorganization process, the bankrupt company comes up with a plan of reorganization which describes how and how much it intends pay its creditors and claimants. The plan must be voted on by claimants and approved by the court. As stated, Navajo County approved the plan, and the Delaware bankruptcy court docket says the plan was approved on January 16, 2020.
A review of the amended 91-page plan of reorganization does not list settlement amounts; rather it designates the “classes” of claims, like secured claims, administrative claims, priority (tax) claims, etc., and sets up various trusts, offices, boards, etc to manage the process of handling the claims. The fact that the Board of Supervisors received counsel on how to file its proof of claim suggests that they haven’t filed one yet, so it’s unclear how much they’re claiming.
Their lawsuit, like every other one reviewed by The Independent, does not state a dollar amount the county seeks; rather the suit pledges to prove its dollar loss at trial, but that is a moot point now. The trial will no longer include Insys because it will have settled all claims through its bankruptcy — for pennies on the dollar.
Insys defendants sentenced to federal prison
Several Insys executives and employees were sentenced this week in a criminal case against the company, after seven employees were convicted of racketeering conspiracy, according to a report in the Boston Herald (1-21-20). The case was heard in a federal court in Boston, Massachusetts.
The convictions surrounded a scheme of bribe-to-prescribe; Insys paid physicians for so-called speaking engagements to promote Subsys to other doctors, but often the payment was an outright bribe to prescribe the drug for off-label uses. Insurance companies were scammed as well. They paid for the expensive drug for people who were allegedly cancer patients with severe pain, but usually were not, according to a report by AARP (“How a Drugmaker Bribed Doctors and Helped Fuel the Opioid Epidemic, Nov.20, 2019).
Navajo County and the other MDL plaintiffs could still go after the billionaire founder of Insys, John Kapoor, who was scheduled to be sentenced Thursday in Boston. The plaintiffs maintain that many of the drug companies essentially shifted profits to owners and stockholders in an attempt to shelter the money from the lawsuits.
A representative of the Arizona Attorney General’s office said this week that the state still intends to go after Insys for possible violations of the Arizona Consumer Fraud Act on top of the actions in federal court, according to the Phoenix New Times (1-22-19).
Between 2012 and 2014, Navajo County had 75 drug overdose deaths, which is about one third more than the statewide average, according to state department of health resource figures.
The death rate from opiates has continued to increase since 2016. According to the Arizona Department of Health Services, in a two year period ending in September 2019, Navajo County had 103 opioid overdose deaths.
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