A leading drug maker, whose founder and top executives have been convicted of bribing doctors to prescribe a highly addictive painkiller, has become the first opioid manufacturer to declare bankruptcy after being hit with huge fines.

On Monday, Insys Therapeutics filed for Chapter 11 bankruptcy protection while it sells off its assets after reaching a $225m settlement with the justice department last week over fraud charges. One of the company’s subsidiaries pleaded guilty to five counts of mail fraud as part of the settlement.

Insys’s founder, John Kapoor, and four former executives are facing lengthy prison sentences after they were convicted last month of bribing doctors to prescribe the company’s opioid spray, Subsys, to patients who did not need it. Subsys is made of fentanyl, an opioid many times stronger than morphine, and was approved for terminal cancer patients. But the company targeted sales at the much larger and more profitable market of people with non-life-threatening chronic pain.

Kapoor oversaw a marketing strategy in which payments to doctors, ostensibly for speeches at educational seminars, were effectively bribes to prescribe the drug. Prosecutors said the seminars were no more than social gatherings at restaurants, bars and strip clubs.

Billionaire founder of opioid firm guilty of bribing doctors to prescribe drug Read more

In one instance, the company paid nearly $260,000 to two New York doctors who wrote more than $6m worth of Subsys prescriptions in 2014. Sales of Subsys surged into the hundreds of millions of dollars a year as a result of the company’s aggressive marketing.

The US attorney in Boston who prosecuted Insys, Andrew Lelling, accused the company of “illegal conduct that prioritised its profits over the health of thousands of patients” and of “fuelling the opioid epidemic”.

Before the agreement with the justice department, Insys was facing large legal bills as it fought hundreds of lawsuits alongside other companies accused of fuelling an epidemic that has claimed more than 400,000 lives over the past two decades. They include Purdue Pharma, the maker of the powerful opioid, OxyContin, which kickstarted the crisis.

The multinational drug giant, Johnson & Johnson, is in the midst of a civil trial in Oklahoma where it has been accused of “a cynical, deceitful multimillion-dollar brainwashing campaign” to drive up sales of its powerful painkillers.

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Oklahoma’s attorney general, Mike Hunter, said greed led the company to play a leading role in “the worst manmade health crisis in the history of the country and the state”. Oklahoma is seeking billions of dollars in compensation to help cover the long-term consequences of the opioid epidemic in the state.

A statement by the lead counsels in the combined legal cases of more than 1,800 states, cities and other communities seeking billions of dollars in compensation from 22 opioid manufacturers, distributors and pharmacies, said they would continue to pursue the legal action against Insys to recover the costs of the epidemic on public finances, from increased crime to addiction treatment and care for orphaned children.

“Bankruptcy and restructuring does not necessarily mean that a company is insolvent. Additionally, the goal of the litigation is not to bankrupt these opioid companies, but to abate the current opioid epidemic and seek long-term, sustainable solutions. If any defendant files for bankruptcy, we will work through all legal avenues to see that our clients’ end goal of abating the crisis is met,” they said. “The American public deserves to see the truth behind this epidemic revealed and justice served.”