Media investigations suggest more blatant issues of wrongdoing in Valeant’s specialty pharmacy, Philidor.
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On Thursday, Express Scripts and two other large pharmacy-benefit managers said they would stop processing prescriptions submitted by Philidor or paying it for drugs, expressing concern about the way the pharmacy operated. Additionally, the major pharmacy benefit managers, including CVS and Express Scripts, have chose to cut Philidor from their network, which should significantly pressure the approximate 7% of Valeant’s sales and EBITDA distributed through specialty pharmacies, including Philidor.
After a spate of damaging reports and shareholder unrest in recent weeks, Valeant Pharmaceuticals will sever all ties with the mail-order pharmacy Philidor Rx Services, the company said in a statement.
Valeant said Friday that Philidor has informed the company that it will shut down.
Influential short-seller Citron Research was one of the first critics to call the company out on Philidor in an Oct 20 report, saying Valeant was using the pharmacy set-up to inflate revenue. “Philidor does not currently have a direct equity ownership in R&O Pharmacy or the affiliated pharmacies, but does have a contractual right to acquire the pharmacies now or in the future subject to regulatory approval”, the statement said.
Earlier this week, Valeant said it would set up an ad hoc committee to look into the allegations related to the company’s association with Philidor.
“Some of the best regarded drug companies are repeat offenders”, said Ackman, listing 20 that have paid a total of $30 billion in fines since 1991.
Valeant Pharmaceuticals is cutting ties with Philidor following accusations that it was a “phantom pharmacy” used exclusively to artificially boost sales.
“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 said. When considering if perhaps the stock is under or overvalued, the average price target is $208.82 which is 87.3% above where the stock closed yesterday. Former Philidor employees have told the press that they were trained to use questionable means to push insurers into accepting Valeant’s drugs for treatments that could otherwise have been covered by cheaper generics. Equities analysts predict that Valeant Pharmaceuticals Intl will post $2.89 earnings per share for the current year.
Once the PBMs had made up their minds to axe Philidor, the writing was on the wall for Valeant.
Shares of Atlanta-based Aaron’s sank 26 percent to $24.67 on Friday, the worst decline since at least November 1992.
Valeant’s shares were down 11.8 per cent at $130.74 in afternoon trading Friday on the Toronto Stock Exchange. “They’re providing acne medicine-which you can get at your normal pharmacy-at a very high price”, Robert Fulcher, chief operating officer of the National Association of Specialty Pharmacy, said in an interview. A week prior, Valeant disclosed a $100 million investment in Philidor, with an option to buy the pharmacy.
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Ackman has criticized him for failing to provide these details, noting that he was far more candid on his own short bet against nutrition firm Herbalife, which he put on almost three years ago and is hurting him as the stock is up 48.65 percent this year alone.
