What: Valeant Pharmaceuticals (NYSE:VRX) fell more than 12% today after Bloomberg reported yesterday that employees at a specialty pharmacy Philidor RX Services were changing prescriptions so that Valeant’s dermatology creams and gels would be dispensed rather than generic drugs.
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The closure of Philidor was announced by Valeant, which said the pharmacy “will shut down operations as soon as possible”.
“The newest allegations about activities at Philidor raise additional questions about the company’s business practices”, Michael Pearson, Valeant’s chief executive officer, said in the statement.
“We know the allegations have also led them to question Valeant and our integrity, and for that I take complete responsibility”, he added.
For its part, CVS Health Corp. said it was terminating Philidor from the network of its Caremark pharmacy-benefit unit, after audits found the pharmacy wasn’t complying with terms of its agreement.
Herbalife (HLF) threw a jab at Bill Ackman as the hedge fund manager and Valeant Pharmaceuticals (VRX) investor mounted a defense of the drug company. On Tuesday, Rent-A-Center shares tumbled 30 percent after that company cut the upper end of its annual earnings forecast to $2.10 from $2.20. He said he did not understand Philidor’s intentions when he agreed to sell the company his business. “Operating honestly and ethically is our first priority, and you have my absolute commitment that we will make it right”. When patients fill those prescriptions at the pharmacy, insurers often require the druggist to switch to the generic – causing Valeant to lose the sale.
Trying to quell investor concern, Valeant on Monday disclosed accounting details and other information about its ties to Philidor, the Pennsylvania-based specialty pharmacy the company has an option to buy. The stock closed at US$111.50 on Thursday in NY, after falling almost five per cent in one day, and it was down again in pre-market trading Friday.
“Philidor’s relationship with Valeant has benefited countless patients by ensuring they receive their medication quickly and efficiently”, the company said at that time. “We believe reports of wrongdoing at Philidor weakens Valeant management’s credibility, further harms the company’s already tarnished reputation, and that these developments exacerbate potential legal, regulatory, and reputational headwinds for the company”, the ratings agency wrote.
Evidently others were doing the same, as pharmacy-benefit managers CVS Health (NYSE:CVS) and Express Scripts (NASDAQ:ESRX) both said late Thursday that they’re cutting ties with Philidor.
Since after coming under a national spotlight, shares of Valeant dropped by nearly 60% in past three months. The activist investor expressed confidence with his bet on Valeant, but he said blamed the company for its weak response to the accusations of Citron Research.
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Phone calls and e-mails to Fran McGill, a spokesman for Pershing Square, weren’t immediately returned. The brokerage now has a $260.00 target price on the specialty pharmaceutical company’s stock. Valeant Pharmaceuticals Intl’s quarterly revenue was up 35.5% compared to the same quarter past year.
