The Script-boosting Bribery Scheme

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​John Kapoor, the majority shareholder at pharmaceutical company Insys Theraputics who stepped down as chief executive in January, was arrested and charged with engaging in conspiracies to commit racketeering, mail fraud, and wire fraud. Kapoor and six other chief executives who have been charged participated in a scheme to bribe doctors to prescribe Subsys, an under-the-tongue spray cancer pain drug that contains fentanyl, an addictive synthetic opioid. The defendants also tried to defraud insurers who were reluctant to pay for Subsys when it was prescribed to patients who did not have cancer.

Lessons Learned

For fraudsters, the worldwide crisis related to opioid drugs is another opportunity to profit. Not only do we need to worry about drug cartels and dealers, but also drug companies, "bad apple" doctors, and even some hospitals. What can auditors learn from this story?

Regulators, enforcement agencies, and auditors need to keep the pressure on detecting and uncovering these kinds of fraud schemes, and shed light on the practices that support them. That includes:

  • Requiring and enforcing better monitoring and reporting from companies involved in the sale of higher risk drugs, such as fentanyl. Recent U.S. Department of Justice cases show that these companies knowingly and/or negligently supplied opioid drugs such as OxyContin to obviously suspicious physicians and pharmacies and enabled the illegal diversion of them into the black market, including to drug rings, pill mills, and other dealers. These companies are supposed to set up monitoring programs to make sure that opioid drugs do not get into the wrong hands, and to watch out for shady physicians and pharmacies, unusually large orders, or suspiciously frequent orders. Better scrutiny of these monitoring programs on a regular basis could help deter fraudulent practices. And bigger penalties for gaps in these programs could help prevent larger fraud schemes and a deeper crisis. 
  • Insurers need to take a tougher stand in questioning and rejecting payments to companies where prescriptions do not clearly meet established criteria. In our story, Insys executives pushed for approval of payment for Subsys when it was prescribed to patients who did not have cancer. 
  • By writing factual audit reports with balanced recommendations, auditors can help the medical profession improve its self-regulation against bribery. There are several key areas for improvement. Doctors often decide which medications to prescribe based on which drug is the most popular choice of their colleagues, and, in turn, the effectiveness of drug company's marketing and advertising efforts. Those efforts frequently constitute bribery, such as when pharmaceutical companies offer financial kickbacks for prescribing medicines and drugs (as in our story). The form of the bribe can be subtler though, such as schemes to pay doctors in the form of speaker fees and food and entertainment to medical practitioners. Or physicians will be sent on exotic vacations in exchange for listening to lectures about the companies' drugs for a few hours of the day. Also, hospitals can be involved — some entice physicians by offering special incentive deals that give doctors valuable gifts if they schedule surgeries when the hospitals are looking for business. All of these practices deserve better scrutiny and perhaps tighter regulation within the medical profession.
Art Stewart
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About the Author



Art StewartArt Stewart<p>​Art Stewart is an independent management consultant with more than 35 years of experience in internal audit, financial management, performance measurement, governance, and strategic policy planning.​​​</p>


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