VRX Bausch Health Cos

By Michael Rapoport 

Mutual-fund giant T. Rowe Price Group Inc. has filed suit against Valeant Pharmaceuticals International Inc., alleging the Canadian drug company engaged in "a fraudulent scheme" that cost T. Rowe Price and other Valeant investors billions of dollars.

Valeant used mail-order pharmacy Philidor Rx Services LLC, deceptive pricing and reimbursement practices and "fictitious accounting" to artificially inflate its results and shield its drugs from competition, T. Rowe Price and Alleghany Cos., another Valeant shareholder, alleged in the lawsuit filed earlier this week in federal court in New Jersey that became publicly available Thursday.

T. Rowe Price, which was once one of Valeant's biggest investors, said Valeant's practices exposed it to "massive risks" and resulted in huge losses for shareholders. Valeant has lost about 90% of its value since its August 2015 high, in the wake of disclosures about its relationship with Philidor and its practice under former CEO Michael Pearson of dramatically boosting the prices of its drugs. Mr. Pearson and five other current and former Valeant officials are also defendants in the lawsuit.

A Valeant spokesman couldn't immediately be reached for comment.

The Wall Street Journal reported last week that Valeant is facing criminal investigation over its ties to Philidor, which allegedly used aggressive tactics to get insurers and pharmacy-benefit managers to pay reimbursements for Valeant's often high-price drugs. In addition, Valeant has said it faces civil investigations by the Securities and Exchange Commission and other regulators.

At one time, T. Rowe Price owned as much as 21.5 million shares of Valeant, a 6.4% stake, according to regulatory filings. The firm's Valeant stake was worth more than $4.5 billion at its peak, according to S&P Global Market Intelligence. T. Rowe Price sold most of its Valeant stake in early 2016 after the stock's price tumbled. As of June 30, it owned 1.5 million Valeant shares, worth about $30 million, according to S&P Global Market Intelligence.

The T. Rowe Price lawsuit is separate from pending class-action shareholder litigation in New Jersey that makes similar claims against Valeant and has the TIAA pension fund as lead plaintiff. T. Rowe Price chose to pursue its claims against Valeant individually, and doing so enables the fund company to pursue certain claims it can't make in a class action.

Write to Michael Rapoport at Michael.Rapoport@wsj.com

(END) Dow Jones Newswires

August 18, 2016 11:19 ET (15:19 GMT)

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