Valeant may have hooked up with Walgreen, but it still has a lot to answer for.
Valeant Pharmaceuticals International, Inc., is a publicly traded multinational specialty drug pharmaceutical company based in Laval, Canada. Valeant is known for its unique core growth strategy that is driven almost exclusively through acquisition of other companies. This, coupled with increases in the prices of drugs it has acquired, has led to its tremendous financial success.
Ned MilenkovichSince 2010, more than 100 completed acquisitions have transformed Valeant into one of Canada’s most valuable companies and the largest pharmaceutical company in the nation. In 2015, Valeant’s market value topped $100 billion. However, in 2015, Valeant eventually became embroiled in controversy that has decreased its market value by more than 70%.
The back story
Valeant’s main disease treatment markets include neurology, dermatology, and infectious disease. The controversy began in January 2015 when a numerical lot of ribavirin, used primarily to treat hepatitis C and viral hemorrhagic fevers, was found to be contaminated. Valeant undertook a voluntary nationwide recall, as FDA noted in a press release.
After this, in September 2015, Valeant came under severe criticism for exponentially increasing the prices of drugs it sent to the marketplace. According to a Deutsche Bank analyst*, in 2015 alone, the company increased prices on its brand-name drugs by an average of 66%, five times more than increases set by its closest industry competitor.
Following these increases, the United States House Committee on Oversight and Government Reform urged the Committee chairman to subpoena Valeant for documents connected to price increases for two heart medications, Nitropress and Isuprel, increases of 212% and 525%, respectively.
Later, in October 2015, the U.S. Attorney’s Office for the District of Massachusetts and the United States Attorney for the Southern District of New York issued subpoenas to Valeant regarding the price increases.
More reports followed, claiming that Valeant used pharmacies related to specialty pharmacy Philidor Rx Services to store inventory and record transactions.
One report alleged that because Valeant controlled the pharmacy services offered by Philidor, Valeant was able to steer Philidor's customers to expensive drugs sold by Valeant. Reports also asserted that Valeant employees directly managed Philidor's business operations while posing as Philidor employees, complete with all communications issued under fictitious names.
Shortly after these allegations were made Valeant severed ties with Philidor.
Also in October 2015, the Federal Trade Commission began an investigation into Valeant’s control of the production of rigid, gas-permeable contact lenses. Valeant’s acquisition of Bausch & Lomb and Paragon Vision services is alleged to have given the company more than 80% control of the hard contact lens production pipeline, which the FTC may determine as constituting a prohibited monopoly.
Most recently, shareholders have launched a class action suit in British Columbia against Valeant and a group of senior executives. They are claiming that the company set up an illegal network of pharmacies that exposed the company to potential criminal and civil liability.
“Unbeknownst to Valeant’s security holders during the class period, Valeant established and controlled a network of captive pharmacies across the United States as part of an unlawful and improper scheme to achieve the sales targets for its expensive brand-name drugs,” the claim states.
The class is seeking damages for misrepresentations under the Securities Act, class certification, and declaratory relief for shareholder oppression.
Despite the apparent hardship, including ongoing governmental investigations, the company continues to operate and publicly trade.
*Article updated January 11, 2016 to include Deutsche Bank attribution.