Valeant Responds to Concerns About Drug Distribution Practices

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Valeant faces increased scrutiny for allegedly using its in-house mail-order pharmacy, Philidor, to keep drug prices artificially high.

According to a recent report from Citron Research originally highlighted in a New York Timesarticle from Oct. 19, 2015, Valeant is allegedly using phantom drug distribution companies to manipulate distribution numbers to auditors. Philidor Rx Services came on the media’s radar when Valeant CEO J. Michael Pearson said during a quarterly earnings call that Valeant had purchased an option to acquire Philidor in 2014.

Other pharmaceutical-manufacturer-controlled mail-order pharmacy services, such as those associated with Horizon Pharma and Endo Pharmaceuticals, were also mentioned in the New York Times report. In the article, Horizon was cited as using specialty pharmacies inappropriately for drugs that should not typically be considered difficult to dispense and would not normally warrant the use of a specialty pharmacy. Endo said in a response that it is fully independent of any specialty pharmacy and does not have “any ownership interest in, consolidate financial results of, or have affiliations with any specialty pharmacy.” In a Horizon response, the company affirmed that “All pharmacies that distribute Horizon-branded medicines are fully independent, including those that are part of Horizon's Prescriptions Made Easy program.”

In response to the allegations, Valeant said on Oct. 21 that sales to Philidor are considered “intercompany” and aren’t reported on external financial reports. The company also sent out two press releases on Oct. 26 saying it is forming an ad hoc board to investigate the claims by Andrew Left at Citron, even though Pearson said Valeant’s practice are in compliance with the law and the company stands by its “accounting treatment of Philidor completely.”

Pearson called the claims by Left a “false report,” and said in one of the press releases that Left made the claims about Valeant “to frighten our shareholders to drive down the price of the stock so he could make money from his short selling.” Pearson went on to say in the statement that in addition to conducting an internal review at Valeant, he has asked regulatory counsel to coordinate with the US Securities and Exchange Commission to investigate Left and his company.


Mail-order pharmacies are not necessarily specialty pharmacies
As Adam J. Fein of Pembroke Consulting points out, Philidor is not actually a specialty pharmacy at all, but instead is a manufacturer-controlled mail pharmacy that primarily dispenses Valeant products. “Unfortunately, the Valeant allegations have unfairly tarred the entire specialty pharmacy industry along with manufacturers’ legitimate specialty pharmacy relationships,” Fein wrote in an email.

In defense of specialty pharmacies and their practices, BioPlus Specialty Pharmacy released a statement on Oct. 21 saying that using strategies to prefer certain products or drug manufacturers over others is not standard practice for specialty pharmacies and that “predilection of one product over another due to economic reasons primarily benefitting the pharmacy undermines the role of the specialty pharmacist and the stewardship of the pharmacy.”

Sources: The New York Times, BioPlus Specialty Pharmacy, Pembroke Consulting, Endo, Horizon, Valeant