US drugmaker Valeant investigated over ties to mail-order pharmacy

Pharmaceutical company Valeant is under a criminal investigation by US federal prosecutors for allegations of defrauding insurers.
Pharmaceutical company Valeant is under a criminal investigation by US federal prosecutors for allegations of defrauding insurers. PHOTO: BLOOMBERG

SAN FRANCISCO (BLOOMBERG) - Valeant Pharmaceuticals International is the subject of a criminal probe by US federal prosecutors, who are investigating whether the drugmaker defrauded insurers by hiding its ties to a mail-order pharmacy, the Wall Street Journal reported on Wednesday (Aug 10).

Prosecutors are pursuing an unusual legal theory that Valeant and its mail-order pharmacy, Philidor Rx Services, allegedly defrauded insurers by hiding their close relationship, the Journal said, citing unidentified people familiar with the matter. Valeant said that it's cooperating with the investigation without confirming details.

Prosecutors are looking into whether Philidor made false statements to insurers about its ties to Valeant, the Journal reported. Philidor, a now-defunct speciality pharmacy, filled prescriptions for Valeant dermatology drugs such as toenail fungus treatment Jublia. Prosecutors are investigating whether insurers thought Philidor was neutral rather than in the service of Valeant, the Journal reported.

Valeant shares plunged in late trading, falling 13 per cent to US$23.90 at 7.59pm in New York on Wednesday. The loss erased much of the gains from Tuesday, when the drugmaker reported second-quarter results and said it would maintain its previous full-year financial forecast.

Valeant came under scrutiny last year over issues including its business practices, particularly its relationship with Philidor, which was helping boost drug sales. The drugmaker severed its ties with Philidor in October, following reports about tactics the mail-order pharmacy allegedly used to gain more insurance reimbursements for Valeant medicines. They included submitting claims using other pharmacies' identification numbers and altering codes on some doctors' prescriptions.

Speciality pharmacies are common in the drug industry, where they fill prescriptions typically for complex drugs, such as those that require cold storage. Valeant's relationship with Philidor was closer than usual. Valeant had paid US$100 million for an option to buy Philidor for nothing any time in the next 10 years, and consolidated Philidor's financials into its own.