♪ >> narrator: it was unremarkable morning in a wealthenclave just north of phoenix... >>et's get to this breaking news rht now. federal agents have arrested e billionaire founder and former c.e.o. of a pharmaceutical companyight here in phoenix. >> narrator: until federal agents launched a raid on the home of billionaire john kapr. >> 74-year-old kapoor is the most significant pharmaceutical executive to berg criminally cha thus far in o the nationwideoid crisis.

>> why? 'cause there's noen evidce against him. he didn't do athing wrong. >> i've never seen anything like this. these doctors were writing massive volumes of prescrtis for one of the most dangerous drugs on the market. >> no, he wasn't. >> no, he was not doing that, either. >> narrator: john kapoor's arrest was a watershed in the opio crisis-- and a warning to corporate america. >> going ttake a look at shares of insys therapeutics. they're falling more than 18% tosy on news that executive from the pharmaceutical company ve been arrested on racketeering charges. >> wall street loves a success story-- everybody does, wall street just loves it more. and john kapoor had a grt story to sell. (cameras clicking) >> it's a terrible thi, but he's got nothing to do with it. >> narrator: with colleagues at the "financial times," we've been investigating opioi manufacturer insys therapeutics

and its founder. >> there simy weren't enough people who were joining up the dots, to ask the question of, "is this legal? what's really driving these profits, and is it good for society more widely?" >> frontline is made possible bt butions to your pbs station from viewers like you. thank you. and by the corporati for public broadcasting. maher support is provided by john d. and catherine t. macarthur foundation, committed building a more just, verdant and peaceful world. more information at macfound.org. the ford foundation: working with visionaries othe frontlines of social change worldwide. at fordfoundation.org. additional supports provided by the abrams foundation, committed to excellence in journalism the park foundation, dedicated to heightening public

awareness of critical issues. the john and helen glessner family trust. pporting trustworthy journalism that informs and inspires. and by t frontline journalism fund, with major support from jon and jo ann hagler. ♪ >> narrator: this is a story that starts with pain-- the kind that's so severe, people become desperate for relief. john kapoor understood that pain and thought he could h >> i met john kapoor here in phoenix. he had come to arizona from chicago and developed insys

corporation to try and proce some medication that would help with cancer pain and its symptoms. is >> narrator: dr.jo stearns is one of eight people agreed to speak toout ho their experiences with kapoor and his drug. >> kapoor'wife had died of, with breascancer. she had developed quite a dealai of he had tears well up in his eyes when speaking about his wife, and that his main mission now was to try and help decrease the amount of suffering for patients. i believed that he w somebody that could help us change the way that we have cancer pain treatment in america. (audience applauding)wa >> narrator: h at the time, one of the drug industry's most sucssful entrepreneurs. >> i know there are all kinds of definitions for entrepreneurs.hi the one that i we all recognize st is that

entrepreneurs are risk-takers. entrepreneurs are also dreamers. ♪ my dream started in india. w and my dream to come to this country. i was fortunate that i was able to get a felwship at state university of new york at buffalo, where i did my phd in medicinal chemistry. to >> narr: kapr had taken his chemistry degree and gone into business. between 1981 and 2002, he started and invested in more , a dozen pharmaceuticals over those two dhe developed a reputation-- he was roddy boyd is a formerrofits. hedge-fund analyst turned investigative reporter who's covered kapoor's career. >> he sold his first company to the japanese for about $800

million. but his factories were known for their rampant violations. he cut corners left, right, and center, to the pnt where they took it over and found that the actual formulation of tiese drugs were so proble that they had to halton produc >> narrator: it wasn't an isolated incident. violations and lawsuits littered his path. but that didn't get in the way of him becoming a billionaire. >> we were the first of the investors who built the category in pharma today called specialty pharma, where youod pick up prts, and then you add some twist to it to make itn better, diff and promote it to your sales force. by promoting, you can build those products. >> narrator: one of poor'sin novative and lucrative twists: he'd taken an existing heart drug, turned it into a spray,th

and marked uprice. with insys, he try the same thing using fentanyl, a synthetic opioid up to 100 times more powerful than morphine. it's oftensed by doctors to treat end-stage cancer pain,li the kind his wife had experienced. >> fentanyl, it's veryct ade, and it's very dangerous if used, um, in the wrong way. but if used in the right way, it's a godsend to many patients. >> narrator: kapoor called his new fentanyl spray subsys. dr. stearns was a principal investigator of a subsys clinical trial. >> there were other fentanyl products that ople were utilizing for breakthrough pain. but they took anywhere from 15 to 45 minutes to work. but then subsys comes along and patients would, within five minutes, get a clinical response and feel b i thought that that was, um,am

ing. ♪ >> narrato john kapoor launched subsys in the spring of 2012, after the fda approved it .or treating breakthrough pain in cancer patien >> subsys comes in individual blister packages. notpen the blister package untiyou're ready to use it. >> narrator: but subsys sales l wekluster for the first six months. >> we prescribed maybe a couple of prescriptions a week. because there weren't a lot of people that needed to be managed that acutely. >> narrator: behind closed doors, kapoor said subsys was the worst launch in pharmaceutical history. he was furious. >> for john kapoor, this is, simply put, not acceptable level of business. and the first national directorr of sales was in a few months. they brought in alec burlakoff, and lo and behold, things changed. r:

>> narra ac burlakoff had spent close to six years in pharmaceutical sales. he would become central to the rise of insys, and its ultimate fall. >> you want me to do anything, or just, uh... >> no, no, you can just look around. >> narrator: this is his first on-camera interview, conducted under the survision of federal authorities. oo when was the first time that you met john kapr? >> approximately april of 2012. they're on a fast trk to going under. my basic understanding is lack of sales results. i mean, i come to every interview with more passion and enthusiasm than i like to think anybody else can bring to the table. and i can tell you that when i interviewed for the sales manager position, thaten intervied with dr. kapoor pounding the desk saying, "this is our next vp of les." i left thinking, "this is the opportunity that, of a

lifetime, i've been waiting for my who life. i've always wanted to work with a billionaire." >> alec burlakoff, i thought, was a genius and definitely knew how to, i don't know how, build a sales team that quk, that fast, and make the company go where it did. >> you could see the guy can sell, only because of the way heonnects with people. and you throw in a lot of enthusiasm, where you seeme e genuinely looking to anlp you become successful financially, you help but to gravitate toward him. >> his mana was, "by any means necessary, get the job done." it's from nup to sundown, and by any means necessary. >> narrator: these three former sales insiders, who were let go ewby the company, were theho would go on camera to tell us tuout an unbridled sales c at insys. >> it wasn't about canceren

pa. it was about getting as many peop as you could on the dru >> narrator: with $80 million on the line, kapoor was insys's principal investor. he wanted his money back-- and more. >> the instruction was, go out there, show that we can get an minimum returnvestment of two to one, minimum-- and do not lose his money-- or get fired. and the ly way that i knew how to do it, uh, to get that guarantee,s to bbe doctors. >> you're saying bribery, like, you're kind of... >> yes, i am. >> that has a really kind of t big meanint word. >> yes. i think to use any other word at this point, i mean...f me >> back then, did you think, "oh, i'm going to go bribe people?" >> yes. (people talking in background) >> how did you know what you needed to do? >> from my experience in the industry.

>> nartor:urlakoff told us how he boosted sales, turning to the legal industry practice of paying doors to appear at professional gatherings. they're called "speaker programs." >> it is a very common practice, something that i'm very fakliar with from my days b at eli lilly as a rep, at johnson and johnson, at cephalon. the only difference is, at insys, no one cared if there, if anybody showed up to the programs and if the doctor even. sp the only thinghat mattered was the bottom line. du i have here documented my day-to-day scle.r i had a speaogram, if that's what you want to call its the infainner program, may 17. >> narrator: april moo was ane sales rep athe time, working for on handpicked managers. she was told to focus on one doctor in chicago, dr. paul madison. >> sunrise lee was my manager. she told me, "you want to gett dr. madison do speaker

programs. push speaker programs, because that money." i was told there were going to be approximately 11 to 13or do and not one doctor showed up.so dr. masaw one of his friends. so sunrise had dr. madon's friend and the date forge signates of other doctors w the supposed to be at this dinr program. so that dr. madison could get paid. he g anywhere between $1 to $1,500 for that speaker program. >> dr. kapoor insisted on actually tracking the number of prescriptions that the speaker prescribed, which hadbe neve done in any other company i've been involved in. we were getting daily data, a report that would show a correlation between the number of dollars that they were paid in honorarium to speak by insys thfapeutics, and the number

dollars that they provided to insys via prescriptions of subsys. again, minimum of two dollars for every one dollar we spent. >> narrator: dr. madison made an estimated $86,000 in speaker fees, and wrote at least $1.2 million in subsys prescriptions. he told us he didn't do anything improper with the eaker programs or overprescribe subsys. he hasn't en charged for the crime related to insys, but his medical license was revoked in illinois. inside the company, doctorson like were known as whales. >> my reps would get up at 5:00 or 6:00. they'd drive around from doctor's office to doctor's office. the ones that, with lines of patients sitting in the parking lot, on the floor drinking prty good tell-tgn that that's going to be the doctor that you're going to wt to engage with. >> narrator: they were pain

doors, in strip mall clinics, row house offices, even suburban hospitals >> the office probably could very well have been described as a pill mill. the percentage of patients that had direct cancer-related painpe was zero to onent. >> narrator: heather alfonso was an insys whale-- the only onein wito talk on camera. >> the bulk of my responsibility was signing prescriptions. altogether, with my time with subsys, i made about $83,000, which, in the whole scope oft things, isry much now, is it? >> the scope of things being what? >> considering how much they all made. >> let's just talk about the money, then. you say yourself that you wereti movated by it. >> yes, of course i was motivated by the money. >> what do you mean, "of course"? i mean... i mean, well, i'll be honest, you're, you're a healthcare

provider, and you're... there are these lines that one, providers are not supposed to oss. >> right. >> so tell me about, why were you crossing those lines? >> what lines?ee well, because,in my mind, understand thi i was prescribing a medication anyway. prescribe one called ssys or one called fentora, or add some more oxycodone to the streets. i mean, one way or another, something was gettin. prescrib >> and the speaker's money, did patterns?ibing >> absolutely, the speaker's money changed my prescribing patterns, yes. because if i'm going to add a medication, i'm going to be more apt to add subsys that, you know, supplements my income. i have five children, andha ng a significant other who

wasn't bringing in the income to help pay the bills, this additional money was something that i needed. >>t all comes down to targeting. you gotta find their hot button. whatever makes them tick. d it is ruthless, that we would target someone that's in distress in an effort to take advantage of the n >>rator: burlakoff told us that once the sales reps had their marks, they'd pressure the prescribers to writever-higher doses of subsys, a process known as titration. >> it was a directive from dr. john kapoor that we roll out this effective dose campaign, which was bacally all about titration. if the doctor's not escalating the dose quickly, then we have an issue. >> narrator: subsys was measured in micrograms.

100 micrograms was the lowest, 1,600 the highest, a prescription wor up to $60,000 a month to the company. and e sales reps benefited, as well. >> this is where the dirt is, this is probably the most guilty thing in the company. d if you hadtor that wrote a prescription, it was a bonus on your paycheck. >> low doses aren't that much money. higher dose, more money.th >> if you reace 1,600 micrograms of fentanyl... that could kill u, but people were getting there. >> narrator: they even held contests for the sales team. the higher the doses they got their doctors to write, theas higher theprize. >> narrator: john kapoor's business was boomingd he returneto his alma mater

to commemorate a new pharmacy building named after him ands hite wife. >> i must tell you, i'm really really humbled with all the kind words that have been said about me. they're only half-right. (audience laughs) no. >> narrator: wall street was paying attention. ♪ david amsellem is a stock analyst who advises institutional investors. his reports would help influence insys's rise on wall street. >> initially, i was skeptical that the company would be able to be suessful commercially with subsys, you know. it's a highly competitive marketplace. what was interesting is, the saleand the volumes really started to take off.

and that, i think, made an impression on a number of ushe innvestor and analyst community. >> over at the nasdaq, insys theraptics, a specialty pharma company. >> narrator: insys went public inay 2013. >> good morning, and welcome to insys therapeutics' operating results conference call.ll urn the call over to insys c.e.o. michael babich. >> thank you for taking the time out of your day to jo us r our first conference call as a public company. >> narrator: john kapoor hiredn michael babich01 to help manage his stock portfolio. babich was recently out of college. kapoor grew to trust him over the next decade, and chose him to be c.e.o. and the public face of insys. >> this has been a rip-roaring stock for you guys. the i.p.o.'s been fantastic. tells what it is about insys that has investors so excited.ba >> mikch had no background in pharma. that, i thought, was striking.th here he isc.e.o. othe

company. as i got to know him, though, he seemed to say all the right things. >> our first commercial product, branded product, is called's subsys, and sublingual spray of fentanyl which is approved for breakthrough cance. pa and we believe this platform is very important for the future of drug delivery. onthsrrator: within five of its i.p.o., insys shares shot up 400%. and john kapoor's $80 millio personal investment was worth close to $550 million. investors were doing well, too. >> a lot of biopharma companies are not even generating any revenues. here was a company with a product on the market that was starting to see some success. so tt i found attractive. >> um, so, so tell me what, what you thought was up. when a company's share price goes ballistic like th yes, it may be because they

discovered a new innation that's so exciting and good for mankind that it's going to carry on indefinitely, but that's a pretty rare example. usually, there's something in that that's just too good to be true. ♪ >> narrator: it was just months the first whistleblowers began to emerge. >> i first heard about insys in the end of 2013. one of the chief civil lawyers in our office forwarded me a whistleblower complaint. i was at the time the chief of the healthcare fraud u of the united states attorney's office in boston. all of the whistleblowers made similar allegations. all over the country, thesere doctors eing bribed and were writing massive volumes of prescriptions for one of the most dangerous drugs on the

. every investigation of one of these companies starts with, is it possible to go after them iminally? but they're always very diicult. we're talking with, with the fda, we're talking within our group about ways to move cases along. >> narrator: the company announced it was beingve igated. word spread on wall street. >> i would say there was something of a collective shrug. there had been a whole host of investigations of otherco companies-anies that are industry leaders, and big fines that were paid. and so, i think the market looked at this as another investigation, one of many. >> narrator: insys' stock price rose. by early 2014, john kapoor's investment was approaching $1 billion in value. >> and around 2014, i started to publish research on insys. >> and you recommended it to

investors to buy. >> i did recommend it, yes. >> narrator: but a handful ofel high-lnvestors were not buying the insys story. >> there's a cla of investors whgo short. they take out bets on the ideaat he stock price is going to fall. it's a rather, if you like, sick and perverted mentality, you might say. but without them, we would have a financial system that's a lot less effective, because in as way, shoten keep the rest of the system honest. >> narrator: jim carruthers was one of those short sellers. he'd just started his own investment firm. >> someone had told us that there were only a small number of doctors that were, um, approximately, you know, 50% of their entire revenue. remember, this is a drug that, it specifically had warning to be given to breakthrough cancer patients only we discovered that the primary prescribers are pain med doctor

and then, when you did any kind of background check on these pain med doctors, wh you really found was, in our opinion, pill mills. >> narrator: by then, subsys was turning up in federal busts of pill mills across the u.s. >> there are a couple of things going on that are incredibly helpful. ne u.s. attorney's office michan is prosecuting a doctor out there named gavin awerbuch. they've talked to patients, they've done surveillance, they've actually had some undercover buys. at one pointhe was the largest prescriber of subsys in the ited states. >> narrator: gavin awerbuch was in fact insys's biggest whale. for $138,000 in speaking fees and her gifts from the company, he prescribed at least $7 million worth of subsys. ♪ >> when we heard about thoses, first headliou know, naturally, i, i asked management about them. and i wasn't the only one.

>> they were quick to point outh there was a wide audience of physicians who were writing prescriptions. now, i couldn't see that kind of data from my own research. yoknow, you, you want to believe that management teams are going to be honest. and so, they were ve, very ear: it's a bad actor, or one or two bad actors. and, and this, there, there isn't anything to worry about here. >> narrator: within days of dr. awerbuch's arrest, katie thomas of "the new york times" published the first nationalsy exposé on

>> i got a tip to look into this company and loo their marketing practices. s e thing that caught my attention was, t a very dangerous product.s if it sused, it could actually kill people. would see a lot of, you know, people talking about it from a wall street point of view, andho it's a stock to watch. >> narrator: she found one analyst hyping the comny's titration strategy: "high doses driving higher revenues." >> this idea that the patients as they beca more addicted, essentially-- he didn't use that word-- but, and needed higher dosesthis would be, revenue growthtrr the,ble for the company. >> katie thomas writes her story for "the new york times," and the ock goes from 20 to 12, roughly. we thought, "okay, the market's seen what is going on here. they've reacted." we continued to follow this story for a number of months,

and the stock price pops backo upout $25 or so. eo there weree on wall street who were intent on keeping this stock price up and, i believe,ng ignoome of the more obvious indications that this was a, um, unsustainable, potentially fraudulent business model. november of 2014, i get a package from a sourcof mine, jim carruthers, and he has some tips about insys theics. at some vel, he's being somewhat self-serving, right? he wants me to do my own work, write a story about it, hopefully the stock price declines, and he makes a profit. but there was a story here, and i was just blown away. so i hopped on linkedin and found current and former

employees, and began reaching out to them. w >> narrator:hat boyd discovered went beyond titration and no-show speaker programs. it was aecadent sales culture in service oone goal. >> alec burlakf created a culture that the only thing that mattered waa prescription of subsys. what it took did not matter, and he was very clear about that. >> ♪ 2015, let me begin ♪ insys therapeutics ♪ that is our name r ♪ we'reaising the bar ♪ and we're changing the game >> narrator: his sales reps, like the os who created this rap video for a company-wide contes bought in. >> ♪ like they never seen ♪ going deeper than dan ♪ in a submarine ed >> he artrongly that if you're producing, you know, you should have a lot of fun. >> ♪ we're making history ♪ because we're great ♪ by choice ♪ i love titration ♪ yeah, that's not a problem ♪ i got new patients , and i got a lot of them >> he encouraged at least

tolerad, doctors and female stafhaving affairs. >> ♪ i got new patients g ♪ and i a lot of them ♪ if you want to be great ♪ listen to my voice ♪ you can bgreat ♪ but it's your choice >> sex with a doctor dartering a private jet and taking a couple tors to, say, cancun, mexico, it's been done. >> ♪ and i got a lot of them ge >> i encourathese people, implored them, to form relationships. >> ♪ if you want to be great l ♪isten to my voice ♪ you can be great ♪ but it's your choice >> because with relationship comes what? trust. >> whoo! >> and if there is no trust there, they certainly are not going to get involved in a quid pro quo situion. >> ♪ i love titration ♪ yeah, that's not a problem (b t engine humming) >> narrator: burlakoff and kapoor picked people without

pharma experience for e sales team. like tim neely, a former fireghter. he says he was onesys's 2015, top ten sales reps. >> i canell you about my own experience with insys, and going in f the first week of training, all right? (chuckles): retirement from thee epartment, diving into some crazy pharmaceutical salesd company, didn't really know anything.s, our cl no one had a degree i mean, we h a g thatoo, period. played pro fall, and a girl that posed for "playboy" before. i think our company was more about, "can we trust you?" it's like selling heroin on the streets. >> narrator: they also hired inexperienced people for senior management positions. >> a saleswoman told me about

sunrise lee, who oversaw the entire midwest. the only sunriseee that i could track had been a dancer at a gentlemen's club in florida. she has no pharmaceutical background, no science background. >> narrator: burlakoff p lee in charge of a region with two of insys's whales, dr. paul madison and dr. gavin awerbuch. she wouldn't speak to us.s but when boyd porting, she said that she was under federal investigation for insys' sales practices. >> i was not nearly as concerned at hiring a former "playboy" model or a former exotic dancer as i was assessing whether or not they had what i call, unfounately, a killer instinct. almost no conscience.♪ ♪

>> narrator: when boyd finally published his story, he also made t first link to a death from subsys. >> carolyn markland had back ysin. she had taken suhe night before and literally died with it on her bed. >> narrator: carolyn markland's doctor had been a paid speaker for insys. >> we t it out, and i got a lot of emails from people on wall street who felt that i didn't understand what i was talking about. >> narrator: boyd stayed focused discovery that would havede a impact. ab insys had what i call the killer app in itity to get its drug approved. and their hack, as it were, is simply to lie to the insurance

compies. t >> narrator:s called the insurance reimbursement center, i.r.c., an interl group at insys that dealt directly with insurance companies. to >> nar boyd's reporting on their practices caught the attention of federal investigators. >> when you're in a pharmaceutical company, you have to do two things. first, you gotta get the doctor ng write, and the second t you do is, you gotta get somebody to pay for it. in the industry, 35, 40% approval rate for a drug like this, it was the normal standard. kapoor thought that was outrageous. and so was telling people, "i want, like, 100% approval rate." >> narrator: special agent w vivian barriks in the fbi's healthcare fraud unit. s >>rted going to arizona pretty frequently to speak with as manof the i.r.c. employees as i could.

i did speak with a woman, and she basically talked about that scheme that they had, which was misleading insurers. >> narrator: she was a prior-authorization speciali for insys, and would become a key source for the investigators. she agreed to speak to us if we concealed her identity. >> i was the gatekeeper in between your doctor and the pharmacy. and i was doing what i really thought was helping people, until i found out that it wasn't helping people. >> really, the prior- authorization specialist should have ncontrol over whether or not it does or does not get approved, because a patient either meets the cons or they don't. >> so when it was a non-cancer patient, you we supposed to use this blurb or spiel. e spiel was only talking about what the medication was stended for, and so that meant to confuse the person on the phone.

>> that seems like a py straightforward question. es a patient have cancer? yes, no. >> so the indication is, the k doctws what it's been indicated for, he's treating the pain. i didn't exactly say the person has cancer, but i, but i indicated it. >> none of what we were saying we're just pocketing the money off of a prescription thatsh ld've never been approved anyway. that's insurance fraud. >> starting in 2012, you can see at the very beginning that the, that the net revenue, it starts out low. and then, as you go into 2013, when the i.r.c. starts, net revenue goes way up-- why?us bethey're turning around and getting insurance prescriptions faster, and ey're getting more, and they're, they're getting a larger net revenue. ♪

>> the spray that we launched three years ago today, this yeao will do clos300 million. and our market sha is approaching 50% of the market. >> everybody in the ofce was meticulously checking their phones all throughout the day to see wherehe stock was at. and i had maybe $8 mil, on paper. that was based on the stock price as it was at its peak. >> so you should have a dream, you should believe in yourself, and one impoant thing is, stay humble. >> narrator: but there were increasing consequences. ♪ >> i had a large population of patients who had been prescrib subsys by their clinians for chronic pain conditions that were now addicts. it created this very craving,

addictive-like personality that they hadn't had before they used it. implicated in hundf was being deaths. >> ...on 13 action news live at 3:00, a hendersojudge found dead in her home. >> a powerful painkiller was in her system at the time of her deh. >> narrator: diana hampton was a municipal judge in henderson, nevada, outside las vegas. ia >> d became addicted to fentanyl. she'd been having problems with back pain diana definitely fell into addiction as a result of pain management. thiss the paraphernalia that i got from her house. this was the fentanyl. ♪ >> narrator: she was seeing a las vegas pain doctor, one of

the largest prescriber subsys in nevada. later, he was arrested, and pled guilty to giving her hundreds used subsys canisters. >> diana was extracting the leftover o of the subsys bottles and shooting them into her arm. i realiz that in diana's position, death was probably a better alternative than thepo re. she would lose her job, she'd lose her judgeship. ♪ e would be shamed. >> i didn't think about the patient, the people suffering, the addiction. the, uh, the deaths. i imagined that i was selling a widget. all these lives that are being affected, i managed to...

successfully compartmentalize, where it wasn't in the forefront on a daily basis. because if it was, i wouldot be able to do my job. >> narrator: news reports acon insys continued to su some of the biggest prescribers of subsys had been charged, including gavin awerbuch and heather alfonso, who'd ultimately take pleas. and the investigation of kapoor and his company was closing in. >> we got more than a terabyte of information from the company by way of subpoena. one of the really good pieces of evidence against mike babich was this office-wide email t sayihought we owned the top guys." ♪ >> narrator: feeling the pressure, kapoor made a strategic move. one night after work, he took the man who had been beside him for 14 years tget a drink.

there, babich would later recall, kapoor told him, "every company goes through struggles, and when things like that happen, there's always a fall guy." then he told him, "you're gog to be the fall guy." good morning and welcome to the insys therapeutics third quarte0 earnings call. i'd like to turn the calover to dr. kapoor. >> today we announ that michael babich has stepped down as president and chief executive officer of insys. i will assume the additional role of president and c.e.o. >> narrator: soon, amid tension with kapoor, burlakoff would leave the company. (waves crashing) >> i was in california having lunch on the water, and i get a phone call.

i , "this is my lawyer." and we don't talk a lot, so i pick up the phone, and he says,e "alec, youhe subject of a federal instigation. like, any day now, like, within 24 hours. you need to get a crim attorney yesterday." ♪ >> burlakoff left a message for me at the massachusetts attorney general's office. it was this bizarre moment, he said he'd just fir his lawyer and he wanted to come in and talk. that's never happened before. >> i had spent my entire life talking my way out of murky situations, and i thought i could do it again. >> narrator: alec burlakoff agreed to meet us one more time near his home in flori. he told us what happened next. >> i purposefully went i

without a lawyer. i met with a assistant u.s. attorney, an fbi agent, and somebody who was typing on the computer, taking notes.k >> did they u if you bribed doctors? >> i don't recall specifically, but i believe so. and if they d, i would havelo said something the lines of, "yes, the company bribed doctors."wo but dn't have taken complete responsibity for directly involved in that. was >> and you knew you that were lying to them?>> es, yes, i knew that i was lying, yes. >>t was very clear that he had a story he was trying to sell, which was not reflected in our investigation. >> you know, i let him talk. i asked him very few questions. he was a very good salesman, he think he was confin his, and i ability that he could, could turn us. at the end of the conversation, i told him i thought he'd been lyinto us the entire time he

been talking to us. and we sent him on his way. (wind blowing) >> narrator: within months, there was enou evidence to move to the next phase of these cagainst insys-- arrests. ♪ >> we charged babich and five other defendants. michael rry ran the insys reimbursement center. joe rowan was responsible r a third of the u.s. sales force for insys. richard simon, the former tional director of sales. sunrise lee, who was also a regional sales manager, andth alec burlakoff. we thought about charging kapoort the time, but we didn't have enough evidence to forward at that point. >> narrator: kapoor made changes. toni paskoski was promoted to take over sales. >> in 2016, things began to

change significantly. mostly because of the news coverage, the media coverage. the opioid edemic was rising. the reputation of the organization was obviously. hinder a new director for market accesd r. kapoor, along with some of us, that some friends "told me that your company is toxic." i mean, "we can't touch you right no" these were high executives representing the insurancean cos. >> i stopped recommending the stock in, in 2017. subsys was not going to recover. >> narrator: and then october 26, 2017. >> what you think about the opioid crisis going on?t' >>s a terrible thing, but he's gotothing to do with it. >> john kapoor has beenst ed today in arizona. the stock's down 34% even before today, and then you can see the plunge that we are seeing if you include today's action.

>> looking back at 2014-2015 did not know they were bribing doctors. you know, we try our very best t to beliet management is saying and doing the right thing. that's n naïveté, i think, that's just a part of doing our jobs. um, it's about trust. when management is telling us mething over and over again, um, there's a part of us that say, "okay, they seem like they're saying and doing all the right things." okay? ♪ >> i bieve we took the position off in early 2018, whel the stock had to mid-single digits. down by short sellers. broht this was a company that was brought down by its own reckless

abuse of the system. ow >>uch did you make? >> i'm not going to disclose how much we made. but it was a good, it was a good bet. (train horn blows) >> narrator: in boston, federal prosecutors prepared t case against insys. they would pursue a novel sttegy: using anti-racketeering laws designed to fight organized crime. (people talking in background) fred wyshak, renowned for prosecuting mob kingpins like whitey bulger, was brought on to the case. ♪ >> wl, the racketeering statute, the rico, was passedut in a970, directly aiming at organized crime, the maa. now we were able to indict the whole organization. for example, the winter hill gang in boston. we did a classic investigation.

we started at the bottom of the pyramid and we start taking out the bookies, and the loan sharks, and the drug dealers. gethose individuals to cooperate, and that was a key to our success. >> narrator: now they would try with insys, methodically movingp he organizational chart, closing in on jo kapoor. .> alec burlakoff, he had built a trap for himse you know, coming in and talking to prosecutors for four or five hos on tape and lying, he created this piece oence that, uh, you know, was going to be devastating to him if he went to ial. (waves lapping) >> i made the decision to plead guilty and cooperate fully.

and i'm going to cooperate like nobody's business. >> nrator: alec burlakoff ha become a witness for the prosecution. and soon, michael babich turned, as well. >> 42-year-old michaich leaving federal court after of a conspiracy tobeng part medical professionals. >> it was imrtant to he babich. i mean, to me, that's the top ep before the tip of the pyramid, you know. with ac burlakoff, right below babich. >> as part of his plea, babich has reed to cooperate with the government, and their case kapoor heads to trial later this month. ♪ >> narrator: in janu19, john kapoor became the first pharmaceutical c.o. to be tried criminally under the federal anti-racketeering law. over the next ten weeks, federal prosecutors implicated four insys executives of widespread corruption, with

john kapoor as the architect, from emails connecting kapoor to paying off doctors to testimony saying he ed the scheme to defraud insurance companies.an d they played the titration rap video. ♪ >> john kapoor became very withdrawn once he saw his closest confidantes, like alec chrlakoff, like michael baon turnin him. and, you know, obviously, thes guys are self-interested. they're doing it tsave their own necks, too. >> alec burlakoff was on the stand for fiveays. he connected everyone aroundck the country o the decision-making that wasoing on at corporate headquarters. ♪ >> narrator: the prosecution'sng most damvidence, a spreadsheet ordered up by

kapoor, showing how insys tracked the money that went to doctors and what the company got in return. >> i called it a smokingun. i mean, it was about this return on investment theory that kapoor had, and that's criminal. so you might as well be writing out a confession. ♪ >> narrator: after two weeks, the jury delered an unprecedented guilty verdict against john kapoor and four insys senior executives. >> this case was the first t bring criminal charges against the most senior executives of a publicly traded pharma company for their role in the opioid epidemic. this is not only about punishing these defendants.'s bout making the next pharma company think hard about its basic responsibilities as a corporate entity and about notiz victg the public so it can make more money.

>> narrator: kapoor was sentenced to five-ana-half years in prison. he is appealing the cision. pending that, his lawyer told us, he would not participate in this film. babich and four other exutives >> when executiveso to jail,es. that sends a pretty serious message to the wider businessnc and finaial community. ai and nly, with the insys story, that message wie pretty clear-cut to the rest of the pharmaceutical world. >> when i look at johnoor now, i'm very conflicted. because i see the man that told me about his wife and how she suffered with cancer, and how horrible that was.d then i see this guy that heads this company that's evil.o >> narrar: for his role, alec burlakoff was sentenced to 26nt in prison. >> dr. kapoor, he tells you how

to run the business. you decide, however, whether or not you want tparticipate in it. and i decided that i would, and that was wrong. well, and i'm going to prison as a result of it. >> go to pbs.org/frontline for more reporting on insys with our partners at the financial times. >> and more from alec burlakoff. >> label off, label-- body cares. >> then listen to the latest onisode of our podcast. >> i'm raney aro executive producer of frontline, and this is the "frontline dispatch". e> connect to the frontl community on facebook and twitter, and watch frontline anytime on the p video app or pbs.org/frontline. >> so when i saw them, i felt hope. arrator: the story of th iraq war told by the civilians who lived it. >> then there was a chaos. >> major combat operations in

iraq have ended. >> mission accomplished. yeah? mriously? >> narrator: theories and experiences from those who survived. >> it's very dangerous to forget. because memory all is what's left for u >> frontline is made possible by contributions to your pbs station from viewers like you. thank u. and by the corporation for public broadcasting. major support is provi the john d. and catherine t. macarthur foundation, committed to building a more just, verdant and peaceful world. at macfound.org. the ford foundation: working with visionaries on the frontlines of social changeid worl at fordfoundation.org. additional sport is provided by the abrams foundation, committed to excellence in jourlism. the park foundation, dedicated to heightening public awareness of critical issues. the john and helen glessner family trust.

supporting trustwort journalism that informs and inspires. anby the frontline journalism fund, with major support from jon and jo ann hagler. captioned by media access group at wgbh access.wgbh.org >> for more on this and other "frontline" programs, visit our website at pbsrg/frontline. ♪ ♪ to order frontline's "opioids inc." on dvd visit shop p, or call 1-800-play-pbs.gr this p is also available on amazon prime video.

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