Valeant Pharmaceuticals Caught for Engaging in Fraud

By Allyana Belen,
Domestic News Writer

The Quebec-based Corporation, Valeant Pharmaceuticals, has undergone a significant decrease in its stock value as accusations of fraud arose regarding its relationship with Philidor Rx, a specialty pharmacy.

As the company and its partners attempt to deal with the allegations, the major controversy surrounding this situation is how the business of pharmacy can lead to inflated prices for the consumer despite the necessity of the medications for the consumer’s health.

In this specific situation, the question arises as to whether or not this is a matter that should be explicitly discussed in terms of stocks and shares, or whether this is an issue that aligns itself with the problems surrounding the business of healthcare.

In the sea of complaints, the two major issues involve the company’s prices and its undocumented relationships with specialty pharmacies.

Valeant has been accused of obtaining drugs and increasing the selling rate of those medications by 100 percent or more. These included medications that were essential to heart surgery patients.

In addition, Citron Research has put forth a complaint that Valeant has been consolidating specialty pharmacies which do not show up on their records. The accusation goes further on to state that because of this, a number of Valeant’s filed transactions were fraudulent.

A specific case of this is Valent’s relationship with Philidor Rx which was only recently uncovered. The reveal came when Valeant developed a board committee to investigate Philidor for several allegations against it, including practicing in states without having obtained proper licenses to do so. The investigation began when an internal audit discovered that Philidor was not adhering to certain terms of its provider agreement.

In fact, the majority of the plummeting stock prices can be traced back to Valeant’s alliance with Philidor Rx.

Valeant has experienced a 50 percent decrease in its shares during these past three months. In terms of prices, Valeant’s shares have sunk to as low as $88.50.

The most significant decreases came when CVS Health decided to remove Philidor Rx from its network on Oct. 30.
Then, within the same day, Valeant cut its ties with Philidor Rx resulting in a seven percent decrease in its stock values.

The largest shareholder of Valeant, the Sequoia Fund, has staunchly defended the actions of Valeant. It has declared that Valeant has acted within the legal perimeters. Co-heads of the Sequoia Fund, Mr. Robert Foldarb and Mr. David Poppe described that what is really being attacked here is Valeant’s “aggressive” methods of doing business.

In detail, Mr. Foldarb and Mr. Poppe recounted this “aggressive” approach as involving the accumulation of a wide variety of prescription drugs, providing financial aid to pharmaceutical firms who have low-interest debt, reducing costs, and milking low-tax accommodations.

As quoted by Forbes magazine, Mr. Foldfarb and Mr. Poppe, described this situation as a teaching method to other major companies.

They said, “One lesson of recent events is that sometimes doing something legally permissible to maximize earnings does not create shareholder value. All enduring businesses must strive to earn and maintain a good reputation.”

These so-called “aggressive” methods of Valeant’s impacted its consumers in a very direct manner.

Valeant would promote the use of Philidor over independent pharmacies which would prevent prescribers from choosing the cheaper alternatives of the drugs that their patients required.

Moreover, it was discovered that Philidor was purposefully altering doctor’s orders to reap a larger profit margin from insurance companies.

In a statement made to Money Morning, Philidor CEO Michael Pearson attempted to smooth over the concerns of those directly impacted by such actions using the theme of integrity.

He stated, “We understand that patients, doctors and business partners have been disturbed by the reports of improper behavior at Philidor, just as we have been. We know the allegations have also led them to question Valeant and our integrity, and for that I take complete responsibility. Operating honestly and ethically is our first priority, and you have my absolute commitment that we will make it right.”

Exactly how Philidor will make it right to its customers has yet to be identified.

However, more importantly, as new information begins to be revealed about this case, the controversy of how “aggressive” business tactics, such as those of Valeant and its former partner, Philidor, can increase the already high rates of healthcare-related services continues to be spotlighted.

A version of this article appeared in the Tuesday, November 3rd print edition.

Contact Allyanna at
mariaallyana.belen@student.shu.edu

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