Drug Company Manager Admits Role in Kickback Scheme Related to Fentanyl Spray Prescriptions

John H. Durham, United States Attorney for the District of Connecticut, announced that JEFFREY PEARLMAN, 51, of Edgewood, N.J., pleaded guilty today before U.S. District Judge Janet Bond Arterton in New Haven to engaging in a kickback scheme that defrauded federal healthcare programs.

According to court documents and statements made in court, from approximately September 2012 until November 2015, PEARLMAN was employed by Insys Therapeutics, an Arizona-based pharmaceutical company that manufactured and sold Subsys, a fentanyl-based sublingual spray that was approved by the Food and Drug Administration solely for the management of breakthrough pain in cancer patients.  The company first hired PEARLMAN as a sales representative and subsequently promoted him to the position of District Sales Manager.  As a District Sales Manager, PEARLMAN was responsible for managing the company’s sales representatives who called on licensed healthcare providers in Connecticut, New York, New Jersey and Rhode Island.

In pleading guilty, PEARLMAN admitted that he and the sales representatives he managed induced certain physicians, advanced practice registered nurses (APRNs) and physicians’ assistants to prescribe Subsys by paying them to participate in numerous sham “Speaker Programs.”  The Speaker Programs, which were typically held at high-end restaurants in Connecticut and elsewhere, were ostensibly designed to gather licensed healthcare professionals who had the capacity to prescribe Subsys and educate them about the drug.  In truth, the events were usually just a gathering of friends and co-workers, most of whom did not have the ability to prescribe Subsys, and no educational component took place.  “Speakers” were paid a fee that ranged from $1,000 to several thousand dollars for attending these dinners.

In 2013, PEARLMAN attended a dinner at a New Haven restaurant where a Connecticut healthcare provider was paid a speaker fee even though no other healthcare professionals were present, and no presentation of Subsys took place.

In a meeting that occurred with the same Connecticut healthcare provider in the spring of 2013, PEARLMAN told the provider that the more prescriptions of Subsys that the provider wrote, the more Speaker Programs PEARLMAN could provide.  In June 2013, when these prescriptions were not initially being written as planned, PEARLMAN emailed the Insys sales representative who was responsible for calling on the provider and reiterated that per the “verbal agreement” PEARLMAN had made with the provider, the provider needed to write more Subsys prescriptions or he was “going to have tremendous difficulty in justifying more [speaker] programs.”

As a result of this scheme, Medicare Part D plans authorized payment for nearly 400 Subsys prescriptions made by the Connecticut healthcare provider, causing millions of dollars of losses.  PEARLMAN personally profited from this scheme through inflated quarterly bonuses he received that were based in large part on the sales results of the sales representatives he managed.

PEARLMAN pleaded guilty to one count of conspiracy to violate the anti-kickback law, an offense that carries a maximum term of imprisonment of five years and a fine of up to $250,000.  Judge Arterton scheduled sentencing for October 31, 2018.

PEARLMAN was arrested on September 29, 2016.  He is released on a $200,000 bond pending sentencing.

This investigation is being conducted by the U.S. Department of Health and Human Services Office of the Inspector General and the Federal Bureau of Investigation, with the assistance of the Drug Enforcement Administration’s Tactical Diversion Squad.  The case is being prosecuted by Assistant U.S. Attorneys Douglas P. Morabito, Sarah P. Karwan and Richard M. Molot.

Several other individuals affiliated with Insys Therapeutics, and medical practitioners involved in this kickback scheme, have been charged in the District of Connecticut and in other Districts across the United States.

U.S. Attorney Durham encouraged individuals who suspect health care fraud to report it by calling the Health Care Fraud Task Force (203) 785-9270 or 1-800-HHS-TIPS.