The moves by the nation’s two largest pharmacy benefit managers whacked Valeant shares before the market close, and pushed them 10 percent lower to $99 after hours.
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It’s a full-on exit as Optum, the health services platform of UnitedHealth (NYSE:UNH), joins CVS and Express Scripts in cutting ties to Philidor, the specialty pharmacy linked to Valeant Pharmaceuticals (VRX -4.6%).
The company also said it was reviewing and evaluating “all similar captive pharmacy arrangements”, referring to pharmacies that drive the vast majority of their prescription volume from one manufacturer or one product. SOptumRx also said it was dropping Philidor from its networks, beginning the process after an audit late past year. They administer prescription- drug benefits for insurers and employers, which involves processing and paying for prescriptions submitted by pharmacies.
A woman reached by telephone at Philidor’s Phoenix offices could not immediately provide comment Thursday evening.
Valeant, in a statement, said it sells its drugs through a variety of channels.
Investors said the controversial drugmaker is now bound to sever ties with the problem-plagued Philidor.
Sequoia’s board chairman, Roger Lowenstein, confirmed that the two directors resigned this past weekend.
Valeant has defended its accounting and practices since the Citron Research note was released last week. Despite executives’ attempts to clarify Valeant’s relationship with Philidor and its network of related pharmacies, shares have sunk more than 50 percent from August highs. The Sequoia Fund, which the mutual fund manages, owns 9.93 percent of Valeant and is the company’s largest shareholder. Philidor is being scrutinized for allegedly phony sales. The Wall Street Journal reported this week that Philidor advised its staff to use “back door” tactics to ensure payment, including using the identification number of a different pharmacy if an insurer wouldn’t work with Philidor. Although it has not exercised the option, Valeant consolidates Philidor’s earnings into its own bottom line – a relationship it only disclosed on October 19.
Philidor contributed less than 7 percent to Valeant’s .8 billion in third-quarter revenues, although it’s a fast-growing business area.
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A building on the Express Scripts campus in Berkeley, Mo. The terminations “completely undermine Philidor’s usefulness to Valeant”, he said.
