Valeant cutting ties with troubled Philidor
Valeant Pharmaceuticals, whose use of specialty pharmacies to get its high-price drugs dispensed to consumers over less expensive generics has raised a storm of controversy, backed away from the heat on Friday by ending its relationship with one such pharmacy.
The Canadian drug maker said it is cutting all ties to Philidor Rx Services — which will shut down operations as soon as possible.
The two companies have been torched in recent days — ever since short-seller Citron Research accused Valeant of using Philidor to create “phantom sales” of its products or pushing more product through distribution channels than sales would warrant.
Valeant has denied any wrongdoing but some investors are still fleeing its shares. Valeant’s stock is down 57 percent since Sept. 18, dropping to $104.72 in Friday morning trading.
Late Thursday. it was reported that employees at Philidor, a mail-order pharmacy, altered doctors’ prescriptions to improperly boost reimbursements from insurers.
Philidor supplied its employees with written instructions on how to change a prescription to include “dispense as written” — which would typically move pharmacists to dispense Valeant’s higher-price drugs, according to a report from Bloomberg. Without such instructions, a less expensive generic may be dispensed. Bloomberg reported.
On Friday morning, hedge fund mogul Bill Ackman, whose Pershing Square has a large stake in Valeant — which has taken a $1 billion-plus hit since the controversy hit — defended the company, saying it did nothing wrong but simply underinvested in communications.
“Investor relations and government relations are not areas the company has meaningfully invested in,” Ackman said during a conference call with Wall Street analysts. “Investors are willing to accept complexity as long as there is transparency.”
Investors appeared unmoved by Ackman words.
Valeant shares opened at $103.30, down from Thursday’s $11.50 close, and moved lower as Ackman spoke. At 10:10 a.m., they were trading at $102.67.
Ackman said Citron’s claim on the drugmaker is “verifiably false.” Ackman did not immediately address the altered prescriptions accusation.
Valeant’s move on Friday to distance itself from Philidor came only after actions taken on Thursday by the three top US drug benefit managers to stop working with the mail-order pharmacy.
“We have lost confidence in Philidor’s ability to continue to operate in a manner that is acceptable to Valeant,” the company’s CEO Michael Pearson said in a statement.
Valeant said this week that it would set up an ad hoc committee to look into the allegations related to the company’s association with Philidor.
“We understand that patients, doctors and business partners have been disturbed by the reports of improper behavior at Philidor, just as we have been,” Pearson added.
“We know the allegations have also led them to question Valeant and our integrity, and for that I take complete responsibility.”
Philidor represented 6.8 percent of Valeant’s total revenue in the third quarter and the drugmaker said it intended to develop a plan to ensure minimal disruption to patients’ access to drugs.
Express Scripts, CVS Health and UnitedHealth’s OptumRx all said on Thursday that they would stop using drugs dispensed by Philidor due to concerns about its business conduct.
Valeant was until recently one of the most popular healthcare stocks among investors — including hedge funds — with its model of rapid acquisition-driven growth.
Its abrupt slide from market darling to a company under fire has weighed heavily on hedge funds like Pershing and ValueAct Partners.
With Post wires