Valeant under criminal investigation over
Philidor ties: WSJ
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[August 11, 2016]
By Greg Roumeliotis and Alexandria Sage
NEW YORK/SAN FRANCISCO (Reuters) - U.S.
prosecutors have opened a criminal investigation into Valeant
Pharmaceuticals International Inc <VRX.N> over whether it hid from
insurers its relationship with a specialty pharmacy that helped boost
its drug sales, the Wall Street Journal reported on Wednesday.
Lawyers at the U.S. Attorney's Manhattan office are trying to gauge
whether concealing those ties may have amounted to defrauding insurers,
the Journal report said, citing people familiar with the matter.
A source familiar with the matter told Reuters later on Wednesday that
investigators have been looking into what disclosures Valeant and the
pharmacy, Philidor Rx Services, made to insurance companies about their
U.S.-listed shares of Valeant <VRX.TO> <VRX.N>, which is headquartered
in Canada, slid 12.5 percent to $23.90 in extended trading. The troubled
company has seen its market value fall by some 90 percent in the last
year as its drug pricing and other business practices prompted
investigations by multiple U.S. government agencies and by Congress.
It first came under scrutiny from New York prosecutors last October over
its drug pricing and distribution. Media also reported at the time that
it used Philidor to overcome insurer rejections to reimbursing its
medications, with Philidor resubmitting claims to insurers until they
Valeant said in a statement on Wednesday that it was continuing to
cooperate with the U.S. Attorney's Office in New York regarding the
investigation that was disclosed last October. The company did not
provide further details on the subject of the probe.
"Valeant takes these matters seriously and intends to uphold the highest
standards of ethical conduct as we move forward with our mission to
improve people's lives with our healthcare products," the company said.
The investigation by U.S. prosecutors could lead to criminal charges
against former Philidor executives and Valeant as a company, the Journal
report said, citing one person familiar with the matter.
Officials at the U.S. Attorney's Office in Manhattan and representatives
for Philidor, which closed its operations, were not immediately
available for comment on the Journal report.
The October revelation of Valeant's ties to Philidor took investors by
surprise. Following media reports of a relationship between the two, the
drugmaker disclosed at the time that Philidor accounted for nearly 6
percent of its revenue and that it had an option to acquire the
pharmacy, an unusual relationship in the pharmaceutical industry.
[to top of second column]
A sign for the headquarters of Valeant Pharmaceuticals International
Inc is seen in Laval, Quebec June 14, 2016. REUTERS/Christinne
Reuters and other media outlets reported on how Philidor helped
secure insurer reimbursement for Valeant drugs. In some
circumstances, the pharmacy would resubmit claims using the billing
identification numbers of other affiliated pharmacies until an
insurer approved payment, according to former employees.
A small group of Valeant employees were deeply involved in directing
Philidor's daily operations, raising questions about how much the
drugmaker's executives knew of its practices, Reuters reported at
At least one payer, the pharmacy benefits manager OptumRx owned by
UnitedHealth Group <UNH.N>, became aware of what appeared to be
irregular billing practices and sought to shut out Philidor from its
network. After Valeant's ties to Philidor became public, other
payers cut off the pharmacy and it subsequently closed.
Valeant has taken a series of steps to restore investor trust,
including cutting off ties with Philidor last October, conducting an
internal review of that relationship, replacing Chief Executive
Michael Pearson, overhauling its board of directors and appointing
new leaders to run its main businesses.
Billionaire investor William Ackman, whose Pershing Square Capital
Management is Valeant's largest shareholder, has taken a board seat
to influence efforts to clean up the business. New management, led
by CEO Joseph Papa, has sought to move beyond the questions over its
Philidor ties. Ackman declined to comment.
Valeant is also under investigation by the U.S. Securities and
Exchange and U.S. prosecutors in Massachusetts.
(Additional reporting by Anya George Tharakan in Bengaluru; Writing
by Michele Gershberg; Editing by Leslie Adler and Edwina Gibbs)
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