U.S. Attorney to Charge Two Valeant, Philidor Executives, Alleging 'Fraud and Kickback Scheme' -- Update
November 17 2016 - 10:30AM
Dow Jones News
By Anne Steele
Federal prosecutors on Thursday said they would charge former
Valeant Pharmaceuticals International Inc. executive Gary Tanner
and former Philidor Rx Services LLC Chief Executive Andrew
Davenport, alleging they engaged in a multimillion-dollar fraud and
kickback scheme.
Federal prosecutors have been investigating whether the Canadian
pharmaceutical defrauded insurers by shrouding its ties to a
mail-order pharmacy that boosted sales of its drugs.
U.S. Attorney for the Southern District of New York Preet
Bharara was slated to announced the charges at press conference at
noon.
The company didn't immediately respond to a request for
comment.
The lawyers in the U.S. attorney's office in Manhattan were
pursuing an unusual legal theory, The Wall Street Journal had
reported in August, that Valeant and closely linked
mail-order-pharmacy Philidor allegedly defrauded insurers by hiding
their close relationship.
The investigation -- which was expected to be the most serious
Valeant faces -- was to probe whether Philidor, now defunct, made
false statements to insurers about its ties to Valeant, people
familiar with the matter told the Journal this summer. Philidor
helped patients get insurance coverage for higher-priced Valeant
drugs, for example for toenail fungus or acne treatment, instead of
cheaper alternatives. At issue was whether insurers thought
Philidor was neutral rather than in the service of Valeant.
The investigation was also examining some of Philidor's business
practices, including rebates and other compensation provided by the
pharmacy to customers who used Valeant products, as well as
Philidor's efforts to seek reimbursement from insurers, the people
said.
Valeant, once a highflying stock, grew sharply through
acquisitions and drug-price hikes. But the stock has lost more than
80% of its value this year amid a slate of concerns, including
accounting problems, a brush with a potential debt default and
investigations by Congress and federal regulators over drug prices.
Shares were down about 5% Thursday morning at $16.90; its all-time
closing high was $262.52 on August 5, 2015.
Earlier this month, Valeant cut its annual forecast again as the
drug company, struggling to remake its business after a series of
missteps, signaled its turnaround may take longer than
expected.
Write to Anne Steele at Anne.Steele@wsj.com
(END) Dow Jones Newswires
November 17, 2016 10:15 ET (15:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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