Valeant Was Too Aggressive in Raising Drug Prices, CEO Says
April 27 2016 - 1:20AM
Dow Jones News
Valeant Pharmaceuticals International Inc. has made mistakes and
been too aggressive in the past in dramatically boosting the
price of some of its drugs, the company's outgoing chief
executive is expected to tell a Senate committee Wednesday.
Valeant's drug-price increases have overshadowed its broader
work, "and so I recognize that we therefore need to work to regain
the confidence of Congress, the public, doctors, and patients,"
Michael Pearson, the departing CEO, says in testimony prepared for
the Senate Special Committee on Aging.
In particular, Mr. Pearson says in the prepared testimony, "it
was a mistake to pursue, and in hindsight I regret pursuing"
transactions such as Valeant's acquisition of Isuprel and
Nitropress, two cardiac-care drugs that the company acquired in
2015 and quickly boosted prices on by 525% and 212%,
respectively.
The Senate committee has been investigating dramatic increases
in drug prices imposed by Valeant and other companies, including
those for Isuprel and Nitropress. Valeant investor and board member
William Ackman and former Chief Financial Officer Howard Schiller
are also scheduled to testify at Wednesday's hearing, which will
focus on Valeant's business model.
Mr. Pearson's leadership and strategy of serial acquisitions of
other drug companies sent Valeant's stock soaring until last year,
when it was hammered by questions over its drug pricing, accounting
and business practices. Valeant's stock isdown more than 85% from
its high last August.
Last month, Valeant said Mr. Pearson would depart as CEO. On
Monday, the company named Perrigo Co. CEO Joseph Papa to replace
him.
In his prepared testimony, Mr. Pearson said Valeant shouldn't
have pursued acquisitions like those of Isuprel and Nitropress
where the economic rationale for the deal relied heavily on price
increases.
Mr. Pearson said Valeant is "intently focused on rethinking our
approach to drug pricing going forward." The company expects its
future pricing actions "to track industry norms," he said.
Mr. Pearson also said he regrets that some of his public
comments have left the impression that he was only concerned about
Valeant's shareholders, and that the company didn't consider the
impact of its decisions on patients. "That is absolutely not the
case," he said.
But he also asserted he thinks Valeant hasbeen unfairly
criticized in some respects. He said the company has developed a
variety of programs to help patients pay for drugs, including one
that provides hospitals with rebates of up to 30% on Isuprel and
Nitropress.
Valeant has often been criticized for focusing on acquiring
other drug companies rather than developing drugs through its own
internal research and development. But Mr. Pearson touted Valeant's
R&D program, saying it has a variety of treatments in
development that he said "directly contradict the narrative
advanced by those who have sought to minimize our commitment to
R&D."
Valeant is under investigation by the Securities and Exchange
Commission and other regulators. It has faced concerns over its
now-ended ties to a mail-order pharmacy that former employees
said used aggressive tactics to get insurers and pharmacy-benefit
managers to pay reimbursements for Valeant's drugs. The company
plans to restate past earnings because of problems with booking $58
million in revenue. Italsohas said the "tone at the top" and
pressure on executives to hit performance targets may have
contributed to its problems.
Valeant is also preparing to file its belated 10-K annual
report, which it must file by late May to avoid potential
default on billions of dollars in debt.
Write to Michael Rapoport at Michael.Rapoport@wsj.com
(END) Dow Jones Newswires
April 27, 2016 01:05 ET (05:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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