Insys Therapeutics’ decision to declare bankruptcy last week won’t halt Maryland’s administrative charges against the opioid manufacturer but could affect lawsuits by cities and counties currently pending in state and federal court.
Insys, which manufactures the opioid spray Subsys, filed for Chapter 11 protection on June 10 after agreeing to pay $225 million to resolve a federal investigation into a bribery scheme prosecutors say convinced doctors to overprescribe the drug.
In the following days, attorneys for Insys filed notices of the bankruptcy in lawsuits around the country brought by states, counties and cities against Insys and other manufacturers and distributors of opioids. The notices alerted the courts that the filing of a Chapter 11 petition operates as a stay on litigation, with some exceptions.
Maryland Attorney General Brian E. Frosh filed an administrative action against Insys in September, accusing the Arizona-based company of engaging in a nationwide scheme to boost profits in violation of the state’s consumer protection law. Hearings in the case are scheduled for August.
A spokeswoman for the office said Monday that bankruptcy does not affect Maryland’s administrative action and that the case is proceeding.
Anne Arundel County voluntarily dismissed Insys and founder John Kapoor from its massive lawsuit over the opioid epidemic on Friday. An attorney for the county declined to comment on the dismissal Monday.
Insys has not yet filed a notice in Baltimore city’s lawsuit, also proceeding in its local circuit court, but City Solicitor Andre M. Davis said that once it is docketed the court will have to cease all litigation against the company.
Davis said the city has not decided what steps it might take, but he noted that options include dismissing Insys or moving to lift the stay. A stay on litigation against Insys would not affect the rest of the defendants in the city’s case, according to Davis.
In federal court, where many Maryland cities and counties have filed their lawsuits, Insys is also filing notices of bankruptcy and the accompanying automatic stay. It’s unclear what impact Insys’ bankruptcy might have on the cases, consolidated in U.S. District Court in Ohio for pretrial proceedings.
The plaintiffs’ executive committee in the multi-district case, which has more than 1,800 plaintiffs and counting, issued a statement last week after the announcement saying it would “actively pursue full financial disclosure for Insys and any other defendant that files for bankruptcy,” the Financial Times reported last week.
A spokesman for Insys declined to comment Tuesday on the bankruptcy’s impact on the lawsuits.