How authorities say drugmaker paid off doctors, lied to insurance companies to push potentially lethal fentanyl-based drug

Insys' founder, some executives are accused of carrying out an elaborate scheme.

Decorated war veteran Jeffrey Buchalter was hit with multiple IEDs over the course of three combat tours in Iraq -- the worst of which left him with nearly a broken back. But he survived.

And yet, he said he found himself closest to death back home while under the care of a doctor who prescribed him an incredibly powerful opioid spray called SUBSYS.

“I missed some of the best years of my kids' life,” he told “Nightline,” referring to the years he says the powerful fentanyl spray consumed his life. “I can't get that back.”

Watch the full story on "Nightline" TONIGHT at 12:35 a.m. ET on ABC

Buchalter, along with Patty Nixon, a former employee of Insys, the maker of SUBSYS, and Richard Hollawell, a small town attorney on a crusade against the company, have found a common cause in attempting to hold Insys responsible for what they say is its role in the opioid crisis.

According to the Centers for Disease Control, there were 47,000 opioid deaths reported in 2017 and more than a third of those were caused by prescription medications. Yet no pharmaceutical executive has ever been convicted in a criminal case.

But now John Kapoor, the billionaire founder of the Arizona-based drugmaker Insys Therapeutics, along with former executives, are accused of carrying out an elaborate nationwide scheme to bribe doctors to prescribe the company’s highly addictive opioid medication SUBSYS.

A federal criminal indictment and hundreds of lawsuits accuse them of coaxing doctors with money and sexual favors to prescribe SUBSYS – an FDA-approved fentanyl spray specifically for severe cancer pain -- to thousands of patients who did not have cancer. Then, according to prosecutors, Insys "put profits over people," defrauding insurance companies to have them pay for it.

Prescription drugs like SUBSYS are responsible for more than a third of opioid deaths, according to the CDC, yet, no pharmaceutical executive has ever been convicted in a criminal case. Prosecutors now hope to change that, using federal racketeering charges -- usually reserved for mobsters -- to go after Insys executives.

More than 7,000 deaths have been reported of people who were taking SUBSYS -- all patients who didn’t have cancer but were prescribed the drug anyway -- according to the U.S. Food and Drug Administration’s Adverse Events Reporting System. Fentanyl is up to 50 times more powerful than heroin, according to the CDC.

“Makes you wonder why they're not charged with homicide,” Buchalter said.

During his military service, Buchalter said he was exposed to 14 IED blasts that left him with significant spinal injuries. He ended up at Walter Reed National Military Medical Center in Bethesda, Maryland.

“The vertebrae had slipped off each other,” he said. “And the back was actually in jeopardy of sliding off and causing paralysis, if not worse.”

Still, Buchalter flourished. He got married and he and his wife settled down in Maryland and started a family. Being a dad meant “everything” to him, he said.

“It's the strength that you need when you don't feel like there's anything else that'll give you the motivation to be the better version of yourself,” Buchalter said.

But he said there were moments when the pain from his spinal injuries was unbearable. He was prescribed Percocet, oxycodone and a host of other prescription painkillers.

“I don't think there's one I haven't been on,” he said, acknowledging that he became addicted to opiates.

“I would say that I was taking more than I ever should have,” he added.

Buchalter said a simple fall, an injury, or sleeping in a bad position would all cause his back to flare up.

“At that point, [the pain was] a 10 out of 10,” Buchalter said. “It would be ungodly. I couldn't move, had difficulty walking, and when that would happen I'd always have to go to the emergency room to get treated for acute pain.”

Then in 2010, Buchalter thought he had found a better approach when he was introduced to a new doctor -- Dr. William Tham, a pain specialist in Annapolis, Maryland.

According to Buchalter, Tham told him, "There's this new medication that I think will keep you outta the emergency room." That medication was SUBSYS, a spray that the patient squeezed under their tongue and then held the medicine there for up to one minute.

SUBSYS was FDA-approved specifically for severe cancer pain. It’s a legal and common practice for many prescription medications but tightly regulated for powerful opiates. But Buchalter, and thousands of other patients like him, were prescribed the drug “off-label,” a term that means the medication is being used in a manner not specified in the FDA-approved packaging label for the drug, according to the FDA.

“This is a very narrow drug,” attorney Richard Hollawell said. “This is approved for one reason only… and that's breakthrough cancer pain.”

But it didn’t matter that patients didn’t have cancer pain, Patty Nixon, a former Insys employee told “Nightline.” Nixon’s role at Insys, she said, was getting insurance companies to sign off on payments for SUBSYS prescriptions. It was one part of the alleged years-long scheme that cheated millions of dollars from insurers, including Medicare. According to her, only around 10 percent of patients she helped to get prior authorization for insurance payments actually had cancer.

What mattered, Nixon said, was that the patient was insured so that Insys employees could make sure those SUBSYS prescriptions were paid for.

Nixon claimed that her employer was “asking me to lie to insurance companies about patients having cancer and breakthrough their cancer pain.”

“I was in a very small office in Chandler, Arizona, and I would call Alaska and say I was from Alaska… sometimes I was from Hawaii,” Nixon said. “Wherever the patient was from and wherever the doctor was located.”

Nixon said the lies were all based on a script she would read over the phone that Insys executives instructed her to follow when speaking to insurance companies what they called “the spiel.”

“A lot of it was word games,” she continued. “When the insurance company would ask the question… ‘Does the patient have cancer with breakthrough cancer pain?’ And when we would respond, we would say, ‘Yes, we're treating the breakthrough pain.’ … So it eliminating the word cancer.”

National Cancer Institute describes breakthrough cancer pain as when a cancer patient, who may already experience chronic pain, has a sudden increase in pain, or a severe flare-up.

One day, Nixon said she “had a particular chart with an insurance company that I was having difficulty getting approved” so she went to her boss.

“And she grabbed a sticky note and she wrote down 787.20 and she handed it to me and said, ‘That's for difficulty swallowing, put that on every single chart and you won't have any problems,’” Nixon said, even if it wasn’t true.

Nixon said she started learning about the patient deaths from doing her own research.

“I found that people had passed away, Sarah Fuller is a patient that had passed away,” Nixon said. “I feel like if I would have spoken up sooner, then maybe I could have saved her life. I'm sorry.

“I don't think people really understand what it's like to live with this,” she continued. “It's not easy to sit here and have this interview with you. But I still have my voice and they don't.”

Sarah Fuller was a 32-year-old New Jersey woman who had battled chronic pain after a series of car accidents. When treatments had left her struggling with an opioid addiction, she turned to New Jersey family physician Dr. Vivienne Matalon.

Her mother Deborah Fuller told “Nightline that she ”said [to Matalon], ‘Sarah is addicted to painkillers. So when you deal with her chronic pain, you gotta find another avenue like maybe yoga or something like that or physical therapy, something that isn't drugs.’”

But Fuller said Matalon disregarded the family’s plea. During a January 2015 appointment, Sarah Fuller was prescribed SUBSYS -- an appointment that Fuller said was accompanied by an Insys sales rep.

The following day, according to court documents, that Insys sales rep texted her manager about how to get Matalon into the Insys speakers program, which federal prosecutors allege was a bribe to get doctors to prescribe SUBSYS.

Federal prosecutors allege that Insys, dissatisfied with sales after only three months on the market, Insys began a speakers program supposedly to increase brand awareness.

These programs, hosted by pharmaceutical companies, are legal and are commonly held to teach doctors about new medications. But in the case with Insys, prosecutors argue that the company conceived its programs as a front for bribes.

“One of the things that they do is they identify medical providers, physicians, that are high prescribers of opioids, in general, pain-management doctors, not oncologists,” Hollawell said.

Dr. Tham, the pain specialist who treated Buchalter, was allegedly part of Insys’ speaker series. He received at least $55,000 from Insys between 2013 and 2016, according to the Centers for Medicare & Medicaid Services’ Open Payments database. Open Payments is CMS’ national transparency program that collects and publishes information about financial relationships between the healthcare industry (drug companies) and healthcare providers (doctors, hospitals).

“They [Insys] were setting up sham speaking events,” Hollawell said. “It was just a means to have a fancy dinner and act like that they were putting on an educational event that was legitimate.”

A 2016 complaint filed by states attorneys general on behalf of 24 states said Insys promised one physician a $100,000 payment for his “support with Subsys” and “Insys spent $58,000 on meal expenses for doctors in just one month.”

Those meals were often accompanied by sales reps like Amanda Corey Emhof, a former reality show participant who had appeared on TV’s “Beauty and the Geek” and one episode of “Judge Judy,” as well as modeled for Playboy.

Evidence shows Insys routinely employed sex appeal to drive prescriptions, according to prosecutors.

"I have never seen such in-your-face, such egregious, blatant behavior... hiring drug reps that had no industry experience whatsoever, strippers -- just people that didn't have college degrees, had no understanding of the FDA and regulations," Hollawell said.

Sunrise Lee, who worked for Insys as a regional sales manager, was accused of giving a doctor a lap dance in a Chicago nightclub in 2012, according to witness testimony.

“She never worked in the pharmaceutical industry,” Hollawell said. “And they're bringing somebody in that was an exotic dancer and ran an escort service to sell a product that could kill somebody with one prescription. And that was their M.O.”

Lee has denied the allegations, stating through an attorney that the witness “admitted to being intoxicated.”

Socializing with doctors was a corporate strategy. One 2012 email from Insys' then-vice president of sales Alec Burlakoff shows him pressuring his staff in one of his many directives, according to a report by the U.S. Homeland Security and Government Affairs Committee.

One line reads: “How do I transition from the doctor viewing me as ‘the Subsys representative’ to ‘Alec -- my friend in pharmaceuticals’?"

Another: "Have I really FORCED myself to step ‘outside’ of my comfort zone?"

And another: "If you have not found a way to spend time with your customers OUT OF THE OFFICE AND NOT IN A RESTAURANT it’s simply not good enough."

It seemed to work. Between 2012 and 2013, Insys saw more than 1,000 percent growth in net revenue of SUBSYS sales -- the best performing initial public offering of the year. The following year, SUBSYS became the most widely prescribed drug of its type.

By then, Insys CEO John Kapoor, a soft-spoken immigrant from India, had become a billionaire. By 2015, he was on Forbes’ annual “Richest People in America” list.

All the while, Kapoor was hailing his drug as a win for patients and shareholders alike. Speaking at the annual tech conference TiEcon in 2015, Kapoor told the audience, “that product [SUBSYS] that we launched three years ago will do close to $300 million.”

“All these changes create a product the patients want and in two to three years our market share is approaching 50 percent of the market,” Kapoor said in that same speech.

At an Insys national sales meeting in 2015, the company played a crude five-minute rap music video celebrating their success. The video showing Burlakoff under a fentanyl spray bottle costume and two young Insys salesmen dancing in sunglasses and hoodies. Some of the lyrics included "I got new patients and I got a lot of them," and “We’re raising the bar and we’re changing the game. To be great, it takes a decision, to be better than the competition.”

Meanwhile, patients like Sarah Fuller and Jeff Buchalter were edging closer and closer to death.

The Fuller’s family attorney, Richard Hollawell, said he got a subpoena for the phone call an Insys employee made to Fuller's insurance, pretending to be from Dr. Matalon’s office.

The Fuller’s family attorney Richard Hollawell said he was able to track down that Fuller’s SUBSYS prescription came from Dr. Matalon’s office. He obtained a recording of a phone call between the Insys rep and an insurance rep handling Fuller’s coverage process in which the Insys rep says she is calling from Matalon’s office about patient Sarah Fuller in regards to the medication SUBSYS.

“That’s [what] I would call... the murder weapon, the smoking gun, all those terms,” Hollawell said. “If they did not make that call, she would've never been approved for the drug, and you heard all the misrepresentations that were made.”

In the recording, the Insys rep is heard telling the insurance rep that the doctor was treating Fuller “for breakthrough cancer pain.”

"Let me look here. (UNINTEL PHRASE) medication intended for the management of breakthrough cancer pain," the Insys rep said, misrepresenting Fuller's diagnosis.

A carton of SUBSYS would be delivered monthly to Fuller’s door. Over time, her mother said Sarah, “was extremely lethargic. Her complexion, pale.”

“It was literally killing her,” Deborah Fuller said.

Sarah Fuller died nearly 15 months after starting on SUBSYS. At the time she had been planning her wedding, but she never made it to her wedding day.

“[On] her wedding day we all met here [at Sarah’s grave site], her fiance, us, and everybody left something,” Deborah Fuller said. “My daughter and I brought wedding balloons. My husband brought a wedding topper and two champagne flutes. Her fiance left a bouquet of flowers.

“And it was just really surreal because we should be in a church watching her walk down the aisle and go to a great reception. But that's not how it happened,” she continued.

The Fuller family sued Insys and Dr. Matalon for negligence and wrongful death.

In May 2018, the New Jersey Board of Medical Examiners revoked Dr. Matalon’s license. The Fuller family and Dr. Matalon, who claimed she was misled by sales reps about using Subsys to treat Sarah Fuller, reached a settlement for an undisclosed sum without admission of wrongdoing.

In a statement to ABC News, declined to comment on ongoing litigation, but said that it “in no way defends the past misconduct of former employees and is fully cooperating with the government. … Last year, INSYS further announced its intention to divest its opioid business and focus its efforts on non-opioid drugs."

The company would only acknowledge in their statement that, "as of January 1, 2019, there have been 951 cases of patients who passed away while on, or having been suspected to have been on SUBSYS. The majority of those cases were assessed as not related to the use of SUBSYS, or having insufficient information to make a causal assessment. As SUBSYS is approved for the treatment of breakthrough cancer pain, to say these deaths are ‘associated with the use of SUBSYS’ is both inaccurate and misleading.”

Kapoor pleaded not guilty to federal racketeering charges and denies all the allegations against him. The company’s former CEO Michael Babich pleaded guilty in federal court in January to conspiracy and mail fraud charges after striking a plea deal with prosecutors. Former vice president of sales Alec Burlakoff also struck a deal with prosecutors and pleaded guilty in federal court to racketeering conspiracy.

Patty Nixon told “Nightline” she remains consumed by guilt and regret for her role in exposing SUBSYS to countless patients. She testified before a grand jury that indicted Babich.

“It was scary. I mean, I had to tell the truth, I had to tell what my job was and what I did. And what I did was illegal. So that was really scary. I wasn't sure what was gonna happen to me,” Nixon said. “I didn't ask for any plea deal... I'm not trying to profit from this in any way, shape, or form.”

The federal trial against Kapoor and his co-defendants continues through April.

As for Jeff Buchalter, he too says his life was wrecked by SUBSYS. He said he had what he called a “come to Jesus moment” when he ended up in the emergency room again in severe pain.

“I was in the ER with sterile abscesses in both legs, and the ER staff refused to give me” the dosages of pain medications Buchalter had told them he had been prescribed.

“The nurses were scared to death to give me those doses,” he added.

By that point, Buchalter said he was taking so much of the fentanyl-based SUBSYS spray, it was the equivalent of 5,000 Percocet a day or “they say equivalent to a gram of heroin.”

“Somehow my body recognized it as something that it needed and … that's the difficult part of going forward, is nobody really understands why I survived,” he said.

The hospital was so alarmed, Buchalter said, that they admitted him to the ICU to bring him off the fentanyl.

Since that near-death hospital visit, Buchalter said he has spent years working to rebuild his life sober. The withdrawals felt like “hell on Earth,” he said. His house went into foreclosure, he and his and his wife divorced, and he now lives a transitional shelter for homeless veterans.

“My biggest regret is my children having to suffer the anguish of seeing their daddy in and out of hospitals and struggling to regain his health,” he said.

He has filed a lawsuit against Insys and Dr. Tham.

Tham denies any wrongdoing. In response to the allegations made by Buchalter, both Kapoor and Tham’s attorneys told ABC News they had “no comment.”

Buchalter still asks himself, “why I survived when I shouldn't have.”

“I believe I survived to tell the stories of those that didn't,” Buchalter said. “I owe it to myself, to my family, and all the others who didn't to get my story out and to get back to the top of the mountain, so to speak,” he said.