Incentives work. And no one seems to understand how to motivate human behavior via incentives better than pharmaceutical companies. This became clear to us as we read recent books on the opioid crisis, often focusing on Purdue Pharmaceuticals and the now infamous Sackler family—see Patrick Radden Keefe’s Empire of Pain: The Secret History of the Sackler Dynasty, Ryan Hampton’s Unsettled: How the Purdue Pharma Bankruptcy Failed the Victims of the American Overdose Crisis, Gerald Posner’s Pharma: Greed, Lies, and the Poisoning of America, and Beth Macy’s Dopesick: Dealers, Doctors, and the Drug Company that Addicted America. The story told in those books highlights Big Pharma wrongdoing, rampant greed, huge financial settlements paid ultimately by shareholders, and little or no punishment for individual wrongdoers.

Evan Hughes’ excellent new book, The Hard Sell: Crime and Punishment at an Opioid Startup, tells a story that is at once all too familiar and yet a bit surprising as wrongdoers actually went to jail in this one. A sense that justice was at least approximated makes the book a more satisfying read than most.

Serial entrepreneur John Kapoor founded and largely funded Insys Therapeutics, a start-up whose only product was Subsys, an extraordinarily expense opioid that was much more powerful than OxyContin and had as its main advantage the fact that it was a liquid spray patients could shoot under their tongues to obtain quick and powerful pain relief.

One problem for Insys was that the FDA had approved the drug only for cancer patients facing “breakthrough pain” that other, less dangerous drugs could not assuage. This limitation required Insys to engage in two primary fraudulent schemes to achieve Kapoor’s desired level of sales. First, sales reps had to do their best to find doctors who would prescribe Subsys to patients who didn’t have cancer. Lots of people have cancer, but if Insys was going to make the big bucks, it had to illegally encourage doctors to prescribe Subsys to all sorts of patients who arguably needed pain relief. Second, Insys had to figure out a way to induce insurance companies to pay for Subys prescriptions for these non-cancer patients. While it is legal for doctors to prescribe drugs off label, it was not legal for Insys to promote off-label use.

As Kapoor launched Insys, the opioid crisis was already in full bloom and Purdue Pharma, Johnson & Johnson, Cephalon, and other players were already in deep doo-doo for their role in the disaster. This fact, however, did not deter Insys from copying and even outdoing the well-established ploys that these other companies had used to create the crisis in the first place. So eager was Kapoor for profits that he consciously chose not to spend money on such frills as a general counsel or a compliance officer, even in this heavily-regulated, high risk-exposure industry.

To become a player in the already-crowded opioid field, Insys had to grab market share and the best way to do that was to find, cultivate, and influence the “whales”—doctors who were already running pill mills and the like, doling out outsized percentages of existing opioid prescriptions.

To do that, Insys began by hiring some experienced and some new (and quite often female and attractive) sales representatives and incentivizing them to sell, sell, sell. Their salaries were relatively meager (e.g., $40,000/yr), but the amounts they could earn in cash bonuses (and other perks) by convincing the doctors to prescribe Insys were huge (e.g., $500,000/yr) and obviously motivating.

To incentivize the doctors, Insys encouraged its sales reps to go the extra mile. Flirting with the doctors was encouraged. Paying for expensive meals, travel, and even prostitutes was permitted. Running routine and sometimes extraordinary errands for them was a plus. Most importantly, Insys used and abused a well-established ploy by setting up a “speaker bureau.” The cover story was the doctors were experts in how Subsys worked and therefore could be reasonably reimbursed by Insys for giving lectures to other medical professionals about the strengths and weaknesses of the drug. The truth was that the payments to the doctors were simply bribes to encourage them to prescribe more and larger doses of Subsys to patients whether or not they needed it. Often the doctors were paid for eating meals at fancy restaurants where they gave no talk and the only members of the “audience” were their own employees.

These payments convinced greedy doctors already used to handing out opioid prescriptions like candy to prescribe Subsys in even greater amounts for patients who didn’t need it and/or shouldn’t have taken it.

The flow of money was disconcertingly slow sometimes as insurance companies pushed back on reimbursing Subsys prescriptions for patients who didn’t have cancer. Insys solved this problem by creating its own division to file the paperwork for the doctors. Insys employees, again highly motivated by bonuses tied to their success in fooling the insurance companies, brazenly lied in order to obtain timely, if improper, reimbursement.

When two physician “whales” set up their own pharmacy so that they could double-dip profits every time they wrote a prescription for Subsys, they got so greedy and wrote so many that their distributors, wary of liability in the midst of the opioid crisis, refused to supply Subsys in the amounts demanded. Then Insys took the unprecedented step of shipping Subsys directly to the doctors’ pharmacy, cutting out the middle man so as to sell even more product.

As noted above, the greed at Insys was so great that it launched its product even after the opioid crisis was well known to be causing thousands of deaths. And then it continued to turn up the pressure to sell even after the FDA launched an investigation into its practices, even after several of its “whales” had been arrested for improper prescribing practices, even after some of its own disaffected employees had filed False Claims Act actions, even after the company had been subpoenaed by the feds, and even after some of its own employees had been arrested. The audacity of Kapoor and his management team was shocking.

When DOJ finally acted, it indicted six top Insys executives, including founder and then CEO Kapoor. Although Kapoor tried to distance himself from the day-to-day running of the company so as to pretend he knew nothing of the rampant wrongdoing, the evidence to the contrary was overwhelming. All six execs received prison terms either after pleading guilty or being convicted by a jury. Kapoor was sentenced to five-and-one-half years and, at this writing, is in prison with a scheduled release date in December 2025.

How can this moral train wreck have happened? From a behavioral ethics perspective, the story is complicated but unsurprising.

Certainly, the self-serving bias played a role. Virtually every key player at Insys made tons of money helping to carry out the scheme. Kapoor became, temporarily at least, one of the richest men in America. The doctors and other medical professionals who were bribed by Insys similarly were driven by simple self-serving greed.

To the extent people are greedy, incentives can lead them to make very poor ethical choices, as Professor Lamar Pierce warns in our two videos on conflicts of interest and incentive gaming, and this book shows how successful Insys executives were in using bonus schemes, “speaker bureaus,” and other incentives to induce sales reps, prescribing physicians, and others to ignore their moral standards in exchange for filthy lucre.

The overconfidence bias obviously played a role. There is no other way to explain the foolhardy conduct of Kapoor and his management team other than to conclude that somewhere in their heads they simply thought that they were smarter than the feds who were pursuing them.

The conformity bias was important also. If everybody is doing it, it doesn’t seem wrong, as Lance Armstrong told Oprah Winfrey. Hughes writes: “It was a story in which everyone on the highway was driving at seventy-five miles per hour in a fifty-five zone, and Insys was going eighty-five. Everybody does it is not a legal defense.” But “everybody does it” is a rationalization that good people often give themselves for doing bad things.

Framing played a role. What people have in their frame of reference at the time they make decisions has everything to do with what those decisions will be. If a pharmaceutical company’s executives have only profits in their frame of reference and omit to consider patient interests, things are not going to turn out well. In describing the decision-making process of Insys executives, Hughes points out that their decisions, although terribly corrupt, had a certain logic if viewed strictly from a business perspective:

Their thinking was governed by an undeniable logic flowing downstream from the profit motive: If [competitor] Cephalon already has relationships with the top [prescribing doctors], we need to offer them something better. If Subsys prescriptions aren’t getting reimbursed by the insurers, we need to game the system better than the competitors do. If [Drs.] Couch and Ruan are having trouble getting enough Subsys because their pharmacy’s distributor is trying to comply with the laws, we need to find a way around the problem and make sure the doctors don’t defect to [our rival] Galena. It was a thought process in which the patients barely figured at all.

There’s loss aversion. Everyone hates losses even more than they enjoy gains, and may take moral chances to avoid losses that they would never take to achieve a comparable gain. Heather Alfonso, a registered nurse who regularly took speaker bureau money from Insys in exchange for writing more Subsys prescriptions, had five children and said that she “had come to rely on that extra money and needed it to live.”

Incrementalism played a role. As with most frauds and embezzlements, the wrongdoing started at a relatively small scale and then just grew and grew. One of the key Insys whales, Dr. Gavin Awerbuch had done lots of good in his life. According to Hughes, at trial “[h]e appeared competent, intelligent, and completely lost. Over the course of his career, the doctor seemed to have become, little by little, so corrupted that he could no longer see how corrupt he was.”

Looking at the big picture, we may all hope that the prison sentences meted out to Insys executives catch the attention of everyone in the pharmaceutical industry. Until Insys, only one executive in the industry had been sentenced to jail (and only for 15 days) for criminal wrongdoing. Traditionally, the pharma companies have simply paid fines with shareholder money and treated the payments as simply a cost of doing business. The numbers are shocking. According to Hughes:

…major drug companies have been credibly accused of committing crimes on a consistent basis for thirty years, and they have regularly admitted to doing it. According to a 2018 research report by the consumer advocacy group Public Citizen, drugmakers pled guilty to federal crimes at least forty-eight times from 1991 to 2017. If you include civil settlements that involved no admission of wrongdoing, the numbers become much larger still. Pfizer, GlaxoSmithKline, Novartis, Bristol Myers Squibb, Teva, Merck, Johnson & Johnson, AstraZeneca—these marquee names all paid to settle Justice Department investigations between 1991 and 2017. In fact, they did so at least six times each.

The feds made an example of Insys executives. We shall see if the message reached its intended targets.

 

 

Sources:

Ryan Hampton, Unsettled: How the Purdue Pharma Bankruptcy Failed the Victims of the American Overdose Crisis (2021).

Evan Hughes, The Hard Sell: Crime and Punishment at an Opioid Startup (2022).

Patrick Radden Keefe, Empire of Pain: The Secret History of the Sackler Dynasty (2021).

Gerald Posner, Pharma: Greed, Lies, and the Poisoning of America (2020).

Beth Macy, Dopesick: Dealers, Doctors, and the Drug Company that Addicted America (2019).

 

Videos:

Conflicts of Interest: https://ethicsunwrapped.utexas.edu/video/conflict-of-interest.

Conformity Bias: https://ethicsunwrapped.utexas.edu/video/conformity-bias.

Framing: https://ethicsunwrapped.utexas.edu/video/framing.

Incentive Gaming: https://ethicsunwrapped.utexas.edu/video/incentive-gaming.

Incrementalism: https://ethicsunwrapped.utexas.edu/video/incrementalism.

Loss Aversion:  https://ethicsunwrapped.utexas.edu/video/loss-aversion.

Overconfidence Bias: https://ethicsunwrapped.utexas.edu/video/overconfidence-bias.

Self-serving Bias: https://ethicsunwrapped.utexas.edu/video/self-serving-bias