This is an enormously important development and underscores the crucial role that investors can play in making sure that incentive compensation and other elements of risk management are aligned with long-term, sustainable returns.

A federal jury on Thursday found the top executives of pharmaceutical company Insys Therapeutics guilty of criminal racketeering for orchestrating an elaborate scheme of bribes and kickbacks to doctors to boost the prescribing of an opioid painkiller it manufactured. The landmark conviction of Insys founder and former chairman John Kapoor is the first of a drug company CEO in the federal government’s pursuit of those responsible for fomenting the deadly opioid crisis. Kapoor and other executives at the Arizona-based company could face prison sentences for the felony convictions that run as long as 20 years.

The details of the company’s sales practices are chilling: To help boost the number of prescriptions and its bottom line, Insys created incentives for doctors that pushed them to prescribe highly addictive pain medication, usually reserved for cancer patients, to patients who didn’t medically require it. The company profited from the wider distribution of the under-the-tongue fentanyl spray Subsys, which can be as much as 100 times more potent than morphine. The drugmaker paid the doctors with lucrative speaking slots at marketing events, some of which could run into hundreds of thousands of dollars. The company then misled insurance companies to cover the wider pool of patients prescribed the drug, which could run as high as thousands of dollars each month, further boosting annual sales that at one point topped $300 million.

Source: Opioid-maker CEO convicted of racketeering for bribing doctors to prescribe addictive painkiller.

UPDATE:

Insys Therapeutics Inc. said it may seek bankruptcy protection after bleeding tens of millions of dollars on legal settlements and the costs of defending former executives convicted of bribing doctors to prescribe the company’s ultra-powerful opioid painkiller.

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“These factors raise substantial doubt about the company’s ability to continue as a going concern,” Insys said in a press release. The company said it may have to liquidate its assets and that investors could lose all or part of their investments in the company.