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

John H. Durham, United States Attorney for the District of Connecticut, announced that JEFFREY PEARLMAN, 53, of Edgewood, N.J., was sentenced today by U.S. District Judge Janet Bond Arterton to three years of probation for engaging in a kickback scheme related to fentanyl spray prescriptions.

Pursuant to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the court proceeding occurred via videoconference.

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

An investigation revealed that Insys Therapeutics representatives, including Pearlman and the sales representatives he managed, were inducing medical practitioners around the country to prescribe Subsys over other similar medications by paying the medical practitioners to participate in hundreds of sham “Speaker Programs.”  The Speaker Programs, which were typically held at high-end restaurants, were ostensibly designed to gather licensed healthcare professionals who had the capacity to prescribe Subsys and educate them about the drug.  In truth, the events were usually just a gathering of friends and co-workers, most of whom did not have the ability to prescribe Subsys, and no educational component took place.  “Speakers” were paid a fee that ranged from $1,000 to several thousand dollars for attending these dinners.  At times, the sign-in sheets for the Speaker Programs were forged to make it appear that the programs had an appropriate audience of healthcare professionals.

In 2013, Pearlman attended a dinner at a New Haven restaurant where Heather Alfonso, who at the time was an Advanced Practice Registered Nurse (APRN) at Comprehensive Pain and Headache Treatment Center (CPHTC) in Derby, was paid a speaker fee even though no other healthcare professionals were present, and no presentation of Subsys took place.

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

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

Pearlman was arrested on September 29, 2016.  On August 8, 2018, he pleaded guilty to one count of conspiracy to violate the anti-kickback law.

Alfonso and Levine pleaded guilty to related charges.  On June 24, 2019, Levine was sentenced to three years of probation, including six months of home confinement.  On November 26, 2019, Alfonso was sentenced to three years of probation.

Several other individuals affiliated with Insys Therapeutics, and medical practitioners involved in this kickback scheme, have been charged and convicted in other Districts across the U.S.  On May 2, 2019, a federal jury in Boston found John N. Kapoor, the founder and former Executive Chairman of Insys Therapeutics, and four other former Insys executives guilty of racketeering conspiracy.  January 23, 2020, Kapoor was sentenced to 66 months of imprisonment.

In June 2019, Insys Therapeutics agreed to pay a total of $225 million to resolve criminal and civil investigations of the company.

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

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