Former Valeant and Philidor Executives Found Guilty in Kickback Scheme


A former Valeant Pharmaceuticals and a former Philidor Rx Services have been found guilty of using a kickback scheme to defraud the company.

On Tuesday a federal grand jury found Gary Tanner of Valeant and Andrew Davenport, the former chief executive officer of Philidor, guilty on multiple charges, including wire fraud and conspiracy to commit money laundering, The New York Times reported. This is the first criminal verdict to come out of the multi-year investigation into the relationship between the two companies.

Tanner and Davenport were arrested and charged in 2016 for the kickback scheme. At the time of the charges, former U.S. Attorney Preet Bharara said the duo’s kickback scheme “illegally converted Valeant shareholder money into their own personal nest eggs.”

“As alleged, while purporting to be arms-length business counterparts, the two men were, in fact, partners in crime,” Bharara said in 2016.

Tanner and Davenport are scheduled to be sentenced in September.

Valeant and Philidor had a murky relationship that started four years ago when the Laval, Quebec-based pharmaceutical company acquired the specialty pharmacy company without notifying investors. Valeant steered customers to Philidor to fill its medications as part of an effort to drive revenue and avoid generic competition. Philidor engaged in the “prescriptions made easy” practice. Under this practice, a pharmaceutical company encourages physicians to submit prescriptions for the high-priced medication to a mail-order pharmaceutical company associated with the parent pharmaceutical company. That pharmacy sends the medication to the patient and then directly deals with the insurance company. Those critical of the “prescriptions made easy” practice say it prevents patients and insurance companies from switching to cheaper alternative prescriptions and serves to pad the bottom lines of companies such as Valeant.

The Times noted that both men made enormous sums of money through the scheme. Davenport grabbed about $40 million from Valeant’s acquisition of Philidor and Tanner took in about $10 million. Tanner was responsible for killing potential generic rivals to the Philidor/Valeant arrangement, The Times said.

Valeant spokesperson Lainie Keller told FirstWord Pharma that the jury’s verdict “reflects the facts of the case.”

Valeant was forced to cut its relationship with the company after reports of Philidor engaging in the writing of false prescriptions to pad its sales. That raised questions about its accounting practices and business model. Eventually, Philidor shut down after Valeant severed tied with the company.

For Valeant though the problems with Philidor were just the tip. The once-high-flying king of M&A activity came under scrutiny for pricing as well as its massive $30 billion in debt. The company’s stock prices came crashing down and as a result CEO J. Michael Pearson was dismissed.  

Since the ouster of Pearson, new Valeant CEO Joseph Papa has been working to distance the company from its scandalous past. Earlier this month the company announced it will change its name to Bausch Health Companies Inc. in July. The company will rebrand itself with the highly recognizable name of its subsidiary eye-care company Bausch + Lomb.

While the name has changed, some of Valeant’s past problems still linger. The company is still under investigation for its drug pricing policies as well as its patient-assistance programs, the Times added.


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