♪ >> narrator:t was an unremarkable morning in a wealthenclave just north of phoenix... >>et's get to this breaking news rht now. federal agents have arrested the billionaire founder and former c.e.o. of aom pharmaceuticalnyight here in phoenix. >> narrator: until federal agents launched a raidthe home of billionaire john kapoor. >> 74-year-old kapoor is the most significantar maceutical executive to be criminally charged thus far in the tionwide opioid crisis.

>> why? 'cause there's no evidence against him he didn't do athing wrong. >> i've never seen anything likehis. these doctors were writing massive volumes of prescrtions 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 opioid crisis-- d a warning to corporate america. >> going to take a look at shares of insys therapeutics. they're falling more than 18% today on news thatxecutives from the pharmaceutical companyd have been arre on racketeering charges. >> wall street loves a success story-- everybody does, wall street just lov it more. and john kapoor had a great story to sell. (cameras clicking) >> it's a terrible thing, but he's got nothing to do with it. >> narrator: with colleagues att the "financiimes," we've been investigang opioid manufacturer insys therapeutics

and its founder. >> there simply weren't enough people who were joining up the dots, to ask the question of, "is this legal?dr what's realling these profits, and is it good for society more widely?" contributions to yse possible by station from viewers like you. thank you. and by the corporation for public broadcasting. major support is proded by the john d. and catherine t. macarthur foundation, committed to building a more just, verdant and peeful world. more information at macfound.org. the ford foundation: working with visionaries on the frontlines of social change wodwide. at fordfoundation.org. additional support is 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. supporting trustworthy journalism that informs and inspires. and by the frontline journalism fund, with major support fn and jo ann hagler. ♪ narrator: this is a sto that starts with pain-- the kind that's so severe, people become desperate for relief. john kapoor understood that pain >> i met john kapoor here in phoenix. 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. >> narrar: dr. lisa jo stearns is one of eight people connected with insys who agreed to speak to us about their experiences with kapoord s drug. >> kapoor'wife had died of with breast cancer. she had developed quite a deal of pain. he had tears well up in his eyes when speaking about his wife, and that his main mission now was to try and heldecrease the amount of suffering forpa ents. i believed that he w somebody that could help us change the way that we have cancer pain treatment in america. (audience applauding) >> narrator: he was, at the time, one of the drug industry's urmost sucssful entrepre >> i know there are all kinds of definitions for entrepreneurs. the onthat i think we all recognize most is that

entrepreneurs e risk-takers. entrepreneurs are also dreamers. ♪ my dream started in india. and myream was to come to this country. i was fortunate that i was able to get a fellowship at state university of new york at buffalo, where i did my phd in medicinal chemistry. ke>> narrator: kapoor had n his chemistry degree and gone into business. between 1981 and 2002, he stard and invested in more than a dozen pharmacticals. over thosewo decades, he developed a reputation-- he was ruthless ipursuit of profits.yd roddy s a former 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 point where that the actual formulation of these drugs were so problematic that they had to halt production.>> arrator: 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 calle specialty pharma, where you pick up products, and then you add some twist to ito make it better, different, and promote it to your sales force. by promoting, you can build those products. >> narrator: one of kapoor's innovative and lucrative twists: he'd taken an existing heart drug, turned it into a spray,

and marked up the price. with insys, he'd try the sam thing using fentanyl, a synthetic opioid up to 100 times more powerful than morphine. it's often used by doctors to wieat end-stage cancer pain, like the kind hi had experienced. >> fentanyl, it's very addictive, and it's dangerous if used, um, in the wrg way. but if used in the right way, it's a godsend to many patients. >> narrator: kapoor cais new fentanyl spray subsys. dr. stearns was a principal investigator of subsys clinical trial. >> there were other fentanyl utilizing for breakthrough pain. but they took anywhere from 15mi to 4tes to work. but then subsys comes along and patients would, within fiveg minute a clinical response and feel better. i thought that that was, um,

amazing. ♪ >> narrator: john kapoor launched subsys in the spring of 2012, after the fda approved it for treating breakthrough pain in cancer patients. >> subsys mes in individual blister packages. not open the blister package untiyou're ready tuse it. >> narrator: but subsys sales were lackluster for 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 e worst launch in pharmaceutical history. he was furious. >> for john kapoor, this is, level of business.ceptable and the first national director of sales was fired in a few months. they brought in alec burlakoff, and lo and behold, things changed.

>> narrator: alec burlakoff had spent close to six years in pharmaceutical sales.ou he w 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 supervision of federal authorities.wa >> when the first time that you met john kapoor? >> approximately april of 20. they're on a fast track to going under. my basic understanding ilack 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, that ooterview ended with dr. k pounding the desk saying, "this is our next vp of les." i left thinking, "this is the opportunity that, of a

fetime, i've been waiting for my whole life. i've always wanted to rk withio a biire." >> alec burlakoff, i thought, was a genius and definitely knew how to, i don't know how, build a sales team that quick, that fast, and make the company go where it did. y could see the guy can sell, only because of the way he connects with peoe. and you throw in a lot of enthusiasm, where you see someone genuinely looking to help you become successful d nancially, you can't help but to gravitate towm. >> his mantra was, "by any means necessary, get the job done." it's from sunup to sundown, d by any means necessary. ar >>tor: these three former sales insiders, who were let go by the company, re the few who would go on camera to tell us about an unbridled sales culture at insys. >> it wasn't about cancer

patients. it was about getting as many people as you could on the drug. >> narrator: with $80 million on the line, kapoor was insys's principal investor. more.nted his money back-- and >> the instruction was, go out there, show that we can get a minimum return on investment of two to one, minimum-- and do not lose his money-- or get fired. and the only way that i kn how to do it, uh, to get that guarantee, is to bribe docto. >> you're saying bribery, like,e yoind of... >> yes, i am. >> that has a really kind of big meaning, that word. >> yes. i think to use any other wor would be irresponsible of me yo this point, i mean... >> back then, dithink, "oh, i'm going to go bribe people?" >> yes. (people talking in bund) >> how did you know what you needed to do? >> from my experience in the industry. >> nartor: burlakoff told us

how he boosted sales, turning to the legal industry practice of paying doctors to appeaat ofessional gatherings. they're called "speaker programs." >> it is a very common practice, something that i'm very familiar with from mdays back at eli lilly as a rep, at johnson and johnson, at cephalon. the only difference is, at if anybody showed thef there, programs and if the doctor even spoke. the only thing that matterede was ttom line. >> i have here documented my dayo-day schedule. i haa speaker program, if that's what you want to call it. the infamous dinner program, may 17. >> narrator: april moore was a new sales rep athe time, working for one of burlakoff'sck handpi 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 get dr. madison out to do speaker

programs. push speaker programs, because that's money." i was told there were going to be approximately 11 to 13 doctors. and not one doctorhowed up. dr. madison saw one of h friends. so sunrise had dr. madon's friend and the date forge signatures of other doctors that were supposed to be at this dinr program. so that dr. madison could get paid. he g anywhere between $1,200fo to $1,50that speaker program. >> dr. kapoor insisted on actually tracking the numberof rescriptions that the speaker prescribed, which had never been done in any 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 speinsys therapeutics, and the number of

dollars that they provided to insys via prescriptions of subsys. o again, minimtwo 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 speaker programs or he hasn't been charged for the crime related to insys, but his medical license was revoked in illinois. inside the company, doctors like madison were known as whales. >> my reps would get up at 5:00 or 6:00.ve they'd dround from doctor's office to doctor's office. the ones that, with lines ofts patiitting in the parking lot, on the floor drinking mountain dew? pretty gootell-tale sign that that's going to be the doctor that you're going to want to engage with. >> narrator: they were pain

door in rip mall clinics, row house offices, even suburban hospitals. >> the office probably could very well have been described as a pill mill. the percentage opatients that had direct cancer-related pain was ze to one percent. >> narrator: heather alfonso was an insys whale-- the only one willing to 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 of things, isn't very much now, is it? >> the scope of things being what? >> considering how much they all made. >> let's just talk about the money, tn. you say yourself that you were motivated 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

ovider, and you're... there are these lines that one, providers are not supposed to >> right. >> so tell me about, why were you crossing those lines? >> what lines? well, cause, see, in my mind, understand this. i was prescribing a medication anyw. prescribe one called subsys or one call fentora, or add some more oxycodone to the streets. i mean, one way or another, something was getting escribed. >> and the speaker's money, did it change your prescribing? patter >> absolutely, the speaker's money changed my prescribingpa erns, yes. because if i'm going to add a medition, i'm going to be you know, supplements my income. ntve five children, and having a signifither who wasn't bringing in the income

to help pay thbills, this additional money was something that i needed. >> it all comes down to targeting.fi you gott their hot button. whatever makes them tick. and it sounds ruthless. ss and it is ruththat we would target someone that's in distress in an effort to take advantage of them. >> narrator: burlakoff told us that once the sales repsth har marks, they'd pressure the prescribers to write ever-higher doseof subsys, a process known as titration. >> it was a directive from dr. john kapoor that we roll out this effective dose caaign, which was basically all about titration. if the doctor's not escalating an issue.quickly, then we have >> narrator: subsys was measured in micrograms.

0 micrograms was the lowest, 1,600 the highest, a prescription worth up to $60,000 a month to the company. e sales reps benefited, as well. >> this is where the dirt is, this is probably the most guilty thing in the coany. if you had a doctor thatpr wrote cription, it was a bonus on your paycheck. >> low doses aren't that much money. higher dose, more money. >> if you reach the 1,600 micrograms of fentanyl... that could kill you, but people were getting there. >> nrator: they even held contests for the sales team. the higher the doses they got their doctors to write, the hier the cash prize. >> three, two, one, cut!to >> nar john kapoor's business was booming. mahe returned to his alma r to commemorate a new pharmy

building named after him and his late 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 successful commercially with subsys, you know. it's a highly competitive marketplace. what was interesting is, the sales and the volumes really started to takoff.

and that, i think, made an impression on a number of us in the investor and analyst community. >> over at the nasdaq, insys therapeutics, a specialty pharma company. >> narrator: insys went public inay 2013. >> good morning, and welcomehe to insysrapeutic operating results conference i'll turn the callto insys c.e.o. michael babich. >> thank you for taking the time out of your day to join usf for our first ence call as a public company. >> narrator: john kapoor hired michael babich in 2001 to helpna his stock portfolio. babich was recently out of college.po ka grew to trust him over the next decade, and chose himnd to be c.e.o. ahe public face of insys. >> this has been a rip-rring stock for you guys. the i.p.o.'s been fantastic. tell us what it is abo insys that has investors so excited. >> mike babich had no background in pharma. that, i thought, was striking. he he is, the c.e.o. of th

company. as i got to know him, though, he seemed to say all the right things. >> our first commercial product, branded prodt, is called subsys, and it's a sublingual spray of fentanyl which is approved for breakthrough cancer pain. and we believe this platform v y important for the future of drug delivery. >> narrator: within five monthsi of i.o., insys shares shot up 400%. and john kapoor's $80 milliope onal investment was worth close to $550 million. >> a lot of biopharma companies are not even genating any revenues. here was a company with a product on the market that was starting to see some success. so that i found attractive. >> um, so, so tell me what, what you thght was up. when a company's share price goes ballistic like that, yes, it may be because they discovered a new innovation

that's so exciting and good for mankind that it's go carry on indefinitely, but that's a pretty rare example.he usually,'s something in that that's just too good to be true. ♪ >> narrator: it was just months after subsys was launched that the first whistleblowers began to emerge. >> i first heard about insys in. the end of 2 one of the chief civil lawyers in our office forwarded me a whistleblower complaint. i was at the time the chief of the healthcareraud unit of the united states attorney's office in boston. all of the whistleblowers made similar allegaons. all over the country, these dctors were being bribed were writing massive volumes of prescriptions for one of the most dangerous drugs on the

market. every investigation of one of these companies starts with, is it possible to go after them criminally? but they're always very difficult. , we're talking with the fda, we're talking within our group about ways to move cases along. >> narrator: the company announced it was being investigated. word spread on wall street. >> i woulday there was something of a collective shrugr had been a whole host of investigations of other coanies-- companies that a industry leaders, and big fines that were paid. and so, i ink 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. a >> narrator: bandful of high-level investors were not buying thensys story. >> there's a class of investors whgo sho. that the stock prigoinghe idea to fall. it's a rather, if you like,si and perverted mentality, you might say. but witht them, we would have a financial system that's a lot less effective, because in a way, shorts often keep the rest of the system honest. >> narrator: jim carruthers was one of those short sellers he'd just started his own investment firm. eo >> s had told us that there were only a small number of doctors that were, um, approximately, you know, 50% ofv their entireue. remember, this is a drug that, it specifically had a warningto to be givereakthrough cancer patients only. we discovered at the prima prescribers are pain med doctors.

and then, when you did a kind of background check on these pain med doctors, what youre ly 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 helpful.e incredibly the u.s. attorney's office in michigan is prosecuting a doctor out there named gavin awerbuch. they've taed to patients, they've done surveillance, they've actually had some undercover buys. at one point, he was thees laprescriber of subsys in the united states. >> narrator: gavin awerbuch was in fact insys's biggest whale. for $138,000 in speaking fees and other gifts from the company, he prescribed at least $7 million worth of subsys. ♪ n >> w heard about those first headlines, you know,ll natu i, i asked management about them. and i wasn't the only one.

>> they were quick to point out that there was a wide audienceo of physicians re writing prescriptions. now, i couldn't see that kind of data from my own research. you know, you, you wt to believe that management teams are going to be honest. and so, they were very, veryd clear: it's a tor, or one or two bad actors. and, and this, there, there isn't anything to worry about here. >> narrator: within days of dr. thomash's arrest, kat of "the new york times" published the first national exsé on insys. >> i got a tip to look into

this companynd look into their marketing practices. the thing that caught my attention was, this is a very dangerous product. if it was misused, it could actually kill people. t if you googled insys, you would see a lot of, you know, people talking about it from a o ll street point of view, and how it's a stocktch. >> narrator: she found one analyst hyping the comny's titration strategy: "high dosesr driving highevenues." >> this idea that the patients as they became more addicted, essentially-- he didn't use that word-- but, and needed higher doses, this would be,kn yo, a good reliable for the company.eam for the, >> katie thomas writes her story for "the new york times," and the stock goes from 20 to 12, roughly. we thought, "okay, the market's seen what is going on here. ey've reacted." we continued to follow thiser story r a nuf months,

and the stock price pops back up to about $25 or s thete were people on wall st who were intent on keeping this stock price upnd, i believe, ignoring some of the more obvious indications that thi was a, um, unsustainable, potentially fraudulent business model. 01 >> november of i get a package from a source of mine, jicarruthers, and he has some tips about insys therapeutics. at some level, he's ing somewhat self-servin right? he wants me to do my own work, write a story about it,st hopefully thk 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, andegan reaching out to them. narrator: what boyd discovered went beyond titration and no-show speaker programs. it was a decadent sales lture in service of one goal. >> alec burlakf cread a culture that the only thing that mattered a 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 ♪ we're raising the bar ♪ and we're changing the game >> narrator: h sales reps, like the ones who created this rap video for a company-widees >> ♪ like theyer seen ♪ going deeper than dan ♪ in a submarine f he argued strongly that you're producing, you know, you should have a lot of fun. >> ♪ we're making history ♪ because we're great ♪ i love titration ♪ yeah, that's not a problem ♪ i got new patients ♪ and i got a lot of them >> he encouraged, or at least

tolerated, doctors andemale stafhaving affairs. >> ♪ i got new patients ♪nd i got a lot of them ♪ if you want to be great to ♪ listen y voice ♪ you can be great ♪ but it's your choice >> sex wita doctor, or chartering a private jet and taking a couple of doctors to, say, cancun, mexico, it's been done. >> ♪ and i got a lot of them >>, encouraged these people implored them, to form relationships. >> ♪ if you want to be great ♪ listen to my voice ♪ you can be great t' ♪ but iyour choice >> because with relationship comes whattrust. >> who >> and if there is no trust there, they certainly are not going to get involved in a quid pro quo situation. >> ♪ i love titration ob♪ yeah, that's not a prm (boat engine humming) >> narrator: burkoff and kapoor picked people without

pharma experience for the sales team. like tim neely, a former firefighter. before he was let go in 2015, he says heas one of insys's top ten sales reps. >> i can tell you about my own experience with insys, and going in for the first week of traing, all right? fire department, dinto from the some crazy pharmaceutical sales mpany, and i didn't real know athing. our cls, no one had a degree in pharmaceutical sales, period. i mean, had a guy that plired pro football, and a g that posed for "playboy" before. i think our y was more about, "can we trust you?" l it'se selling heroin on the stets. inexperienced peop seniorred management positio. >> a saleswoman told me abt

sunrise lee, who oversaw the entire midwest. the only sunrise lee that i could track had been a dancer at a gentlemen's club in florida.rm she has no peutical background, no scienceou backgr. >> narrator: burlakoff p l in charge of a region with two of insys's whales, dr. pauldi man and dr. gavin awerbuch. ul she dn't speak to us. but wh boyd was reporting, she said that she was under federal investigatn for insys's saactices. >> i was not nearly as concerned at hiring a former "playboy" model or a former exotic dancer not they had what i call,r or unfortunately, a kille instinct. almost no conscience. ♪

>> narrator: when boyd finallyd publiss story, he also made t first link to aeath from subsys. >> carolyn markland had backin she had taken subsys the night before a literally died with it on her bed. >> narrator: carol markland's doctor had been a paid speaker for insys. >> we put 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 on the story, and soon made a discovery that would have impact. >> insys had what i call the killer a in its ability to get its drug approved. and their hack, as it were, is t simplie to the insurance

companies. >> narrator: it was called the insurance reimbursement ceer, i.r.c., an internal group at wiinsys that dealt directl insurance companies. in>> narrator: boyd's repo 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 to write, and the cond thing you do is, you gotta get somebody to pay for it. a the industry, 35, 40% approval rate foug like this, it was the normal standard. kapoor thoht that was outrageous. and so, he was telling people, "i want, like, 100% approvalte >> narrator: special agent vivi barrios works in the fbi's healthcare fraud unit. >> i started going tona pretty frequently to speak with as many of the i.r.c. emoyees as i could. i did speak with a woman, and

she basically talked about thate schat they had, which was misleading insurers. >> narrator: she w prior-authorization specialist for insys, a 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 thatt wasn't helping people. ia really, the prior- authorization spst should have no control over whether or not it doeor does not get approved, because a patient either meets the conditions or they don't. >> swhen it was a non-cancer patient, you were supposed to use this blurb or spiel. the spiel was only talking about what the medicwas intended for, and so that was meant to confuse the person on the phone.

>> that seems like a pretty straightforward question. does a patient have cancer? yes, no. >> so the indication is, the doctor knows what it's been indicated for, he's treatingpa th. i didn't exactly say the person has cancer, but i, but iin cated it. >> none of what we were saying was truthful.st we're ocketing the money enf of a prescription that should've never pproved anyway. that's insurance fraud. >> starting in 2012, you can see at the very beginning that the, that e 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? because they're turnound and getting insurance prescriptions faster, and they're getting mo, and so they're, they're getting a larger net revenue. ♪

>>dhe spray that we launche three years ago today, this year will do close to $300 million. and our market share is approaching 50% of the market. >> everybody in the office w meticulously checking their phones all throughout the day to see where the stock was at. and i had mae $8 million, on paper. that was based on the stock price as it was at its peak. >> so yoshould have a dream, you should believe in yourself, and one impoant thing is, stay humble. >> narrator: but there were increasing conseences. ♪ >> i had a large populatn of patients who had been prescribed subsys by their clinicians 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. >> narrator: subsys was being implicated in hundreds of deaths. >> .on 13 action news live a 3:00, a henderson judge found dead in r home. >> a powerful painkiller was in her system at the time of her death. >> narrator: diana hampton was a municil judge in henderson, nevada, outside las vegas. >> diana became addi to fentanyl. she'd been having problems with bk pain. diana definitely fell into addiction as a rest of pain management. this is the paraphernalia that i got from her house. this was the fentanyl. ♪ >> narrator:he was seeing a las vegas pain doctor, one of

the largest prescribers of subsys in nevada. later, he was arrested, and pled guilty to giving her hundreds c of used subsysisters. >> diana was extracting the leftover out of the subsys bottles and shooting them into her arm. i realized that in diana's position, death was probably a exposure.ternative than the she would lose her job, she'd se her judgeship. she 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. th ale lives that are being affected, i managed to...

successfully compartmentalize, where it wasn't in the forefronon a daily basis. because if it was, i would not be able to do my job. >> narrator: news reports on insys continued to surface. some of the biggest prescribers of subsys had been charged, including gavin awerbuch and heather alfonso, who'd ultimately take pleas. 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 saying, "i thought we the top guys." ♪ >> narrator: feeling the essure, kapoor mada strategic move. the man who had been beside him for 14 years to get 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." to be the fall guy."ou're going good morning and welcome to the insys therapeutics third quarter 2015 earnings call. i'd like to turn the call over to dr. kapoor. >> today we announce that michael babich has stepped down executive officer ys.f i will assume the additional role of president and c.e.o. >> narrator: soon, amid tension with kapoor, burlakoff leave the company. (waves crashing) >> i wasn california having lunch on the water, and i get a phone call.

i go, "this is my laer." and we don't talk a lot, so i pick up the phone, ande says, "aac, you are the subject o federal investigation. like, any day now, like, within 24 hours. you need to get a criminalrd attorney yes." ♪ >> burlakoff left a message for me at the massachusettsto atey general's office. it was this bizarre moment, he said he'd just fired his lawyer and he wanted to come in and talk.ev that's happened before. >> i had spent my entire life talking my way out of murky situations, and i thought could do it again. >>arrator: alec burlakoff agreed to meet us one more time near his home in florida. he told us what happened next. >> i purposefully went in

without a lawyer. i met with a assistant u.s. attorney, an fbi agent, and somebody who was typing on the computer, taking notes. >> d they ask you if you bribed doctors? >> i don't recall specifically, but i believe so. and if they did, i would have said sething along the lines of, "yes, the company bribed doctors." but i wouldn't have taken complete responsibily for myself and the fact that i was >> and you knew you that were lying to them? >> yes, yes, i knew that i was lying, yes. it was very clearhat 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 is a very good salesman, and i think he was confident in his ability that he uld, could turn us. at the end of the conversation, i told him i thought he'd been lying to us the entire time he'd

hen talking to us. and we sent him way. (wind blowing) >> narrator: within months, there was enough evidence to move to the next phase of the case against insys-- ats. ♪ >> we charged babich and five other defendants. michael gurry ran the insy reimbursement center. joe rowan was responsible for a third of the u.s. sales force for insys. richard simon, the formerr national direc sales. sunrise lee, who was also a regional sales manager, and then alec burlakoff.ho weht about charging kapoor at the time, but we didn't have enough evidence to go forward at that point. >> narrator: kapoor made change toni paskoski was promed to take over sales. >> in 2016, things began to

change significantly. mostly because of the news coverage, the media coverage. the reputation of c was rising. organization was obviously hindered. a new director for market cess told dr. kapoor, along with some of us, that some friends "told mehat your company is toxic." i mean, "we can't touch you right now." these were high executives representing the insurance companies. >> i stopped recommendin the stock in, in 2017. subsys was not going to recover. >> narrator: a then came october 26, 2017. >> what do you think about the opioid crisis going on? >> it's a terrible tng, but he's got nothing to do wh it. arrested today in ona.n the stock's down 34% even before today, and en you can see the plunge that we are seeing if you include today's tion.

>> looking back at 2014-2015,th we did not kno were bribing doctors. you know, we try our very best to believe that management is saying and doing the rinht that's not naïveté, i think, that's just a part of doing our jobs. um, it's about trust. when management is telling usnd something overr 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 believe we took the position off in early 2018, when the stk had fallen to mid-single digits. this was not a company broht down by short sellers. this was a company that s brought down by its own reckless

abuse of the system. >> how much did you make? >> i'm not going to disclose how much we made. but it was a goo it was a good bet. (train horn blows) >> narrator: in boston, federal prosecutors prepared the case against insys. they would pursue a novel strategy: 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. ♪ >> well, the racketeering statute, the rico, was passed in about 1970, directly aiming at organized crime, the mafia. t now we were abindict 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 started taking out the bookies, and the loan sharks, and the drug dealers. get those individualto cooperate, and that was a key to our success. >> narrator: now they would try nath insys, methodically moving up the organizatchart, closing in on john kapoor. >> alec burlakoff, he had built a trap for himself. you know, coming in and talking to prosecutors for four or five hours on tape and lying, he ha created this piece of evidence at, uh, you know, was going to be devastating to him if he nt to ial. (waves lapping) >> i made the decision to plead and i'm going to crate like

nobody's business. >> narrator: alec burloff had become a witness for the prosecution. and soon, michael babich turned, as well. >> 42-year-o michael babich leaving federal court after pleading guiy to being part of a conspiracy to bribe medical professionals. babich.as important to he i mean, to me, that's the top step before the tip of the with ac burlakofht below babich. >> as part of his plea, babich has agreed to coopere with the government, and their case against insys founder john kapoor heads to trial later this month. ♪ >> narrator: in january 2019, hn kapoor became the fir pharmaceutical c.e.o. to be tried criminally under thera feanti-racketeering law. over the next n weeks, federal prosecutors implicated four insys executives of widespread corruption, with

john kapoor as the architect,nn from emails ting kapoor to paying off doctors to testimony sang he approved the scheme to defraud insurance companies. and they played the titration rap video. ♪ >> john kapoorecame very withdrawn once he saw his closest confidantes, like alec burlakoff, like miael babich, turning on him. and, you know, obviously, these ys are self-interested. they're doing it tsave their own necks, too. >> alec burlakoff was on the stand for five days. he connected everyone around the untry back to the decision-making that wasoing on at corporate headquarters. ♪ >> narrator: the prosecution's most damning evince, a spreadsheeordered up by

kapoor, showing how insys tracked the money that went to doctors anwhat the company got in return. >> i called it a smoking gun. i mean, it was about this return on investment theory that kapoor had, anthat's criminal.ou soight as well be writing out a confession. ♪ >> narrar: after two weeks, the jury delivered an unprecedented guilty verdict against john kapoor and fourxe insys senior etives. >> this case was the first to bring criminal charges against the most senior executives of a publicly traded pharma companyro for thei in the opioid epidemic. this is not only about punishing these defendants. it's about making the next pharma company think hard about its basic responsibilities as a corporate entity and about not victimizing the public can make more money.

>> narrator: kapoor was sentenced to five-and-a-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 executives all received shorter sentences. >> wheexecutives go to jail, that sendsut a pretty seris message to the wider business and financial community. and certainly, with thsys story, that ssage will be pretty clear-cut to the rest of the pharmaceutical world. >> when i lo at john kapoor now, i'm very conflicted. because i see the man that tol me about his wife and how she horrible that was.er, and how and then i see thiguy thatny heads this com that's evil. a narrator: for his role,lec months in prison.tenced to 26 >> dr. kapoor, he tells you ho

to run the business. you decide, however, whether or not you want to participate in . and i decided that i would, and that was wrong. well, and i'm going to prison at a result of . >> go to pbs.org/frontlinemo fo reporting on insys with our partners at the financial times.e >> and mom alec burlakoff. >> label off, label-- nobody cares. >> then listen to the latest episode of our podcast. >> i'm raney aronson, executive producer of frontline, and this is the "frontline dispatch". >> connect to the frontlineun commy on facebook and twitter, and watch frontli anytime on the pbs video app or pbs.orgrontline. >> so when i saw them, i felt hope. >> narrator: the sarry of the ir told by the civilians who lived it. >> then there was a chaos. >> major combat operations in h iraqe ended.

>> mission accomplished. seriously? >> nartor: the memories and experiences from those who survived. >> it's very dangerous to forget. because memory all is what's left for us. >> frontline is made possible bo contributionour pbs station from viewers like you. thank you. and by the corporation for public broadcasting. major support provided by the john d. and catherine t. macarthur foundation, committed to building a more just, verdant d peaceful world. more information at macfound.org. the ford foundation: working with visionaries on the frontlines of social change worldwide. at fordfoundation.org. additional support is provided by the abrams foundation, committed to excellence in journalism. the pa foundation, dedicated to heightening public awareness of critical issues. the john and helen glessner family trust.

supporting trustworthy journalism that informs and inspires. and by the frontline journalism fund,rt with major suprom jon and jo ann hagler. ca ioned by media access group at wgbh access.wgbh.org >> for more on this and other "frontline" programs, visit r website at pbs.org/frontline. ♪ o er frontline's "opioids inc." on dvd visit shop pbs, or call 1-800-play-pbs. this program is also available on amazon vi primo. ♪

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