Valeant Investigated By Feds for Its Drug Pricing Practices; Faces Multiple Subpoenas
Published: Oct 15, 2015
October 15, 2015
By Alex Keown, BioSpace.com Breaking News Staff
LAVAL, Quebec— Valeant Pharmaceuticals, Inc. ’ is down 7 percent after the company revealed it has been subpoenaed by two different states over pricing of two heart-related drugs, patient assistance programs and its drug distribution.
Valeant is under fire for a price increase of two recently-acquired cardiac drugs, Nitropress and Isuprel, after the company acquired Salix Pharmaceuticals, Ltd. . Valeant then increased the prices for those drugs by 212 percent and 525 percent, respectively. Valeant acquired the two drugs in April.
On Wednesday, the Quebec, Canada-based company said in a statement that it received a subpoena from the U.S. Attorney's Office for the District of Massachusetts and a subpoena from the U.S. Attorney's Office for the Southern District of New York. Valeant said it is reviewing the subpoenas and is cooperating with the investigation of the two offices.
The company also said it was responding to a letter from U.S. Sen. Claire McCaskill, a Missouri Democrat, concerning the pricing of the two drugs. In the letter, Valeant Chief Executive Officer J. Michael Pearson addressed the history of Nitropress and Isuprel, the reimbursement process for hospital procedures involving Nitropress and Isuprel, the analysis and reasons underlying Valeant's pricing decisions, and Valeant's programs designed to improve patient access, among other topics. The company also disclosed that it is reaching out to hospitals that have been negatively impacted by the price increase.
“All of us at Valeant firmly believe in maintaining strong regulatory and financial controls and believe we have operated our business in a fully compliant manner,” Pearson said in a statement. “We remain committed to assisting eligible patients who need our products, and we will be working with the appropriate groups to submit the requested documents and plan to cooperate with the inquiries.”
When news of congressional and legal investigations surrounding the price increase surfaced in September, company stock took a beating, dropping by 20 percent. Pearson, who has overseen massive growth at Valeant, was forced to pen a letter explaining company strategy surrounding the acquisition of drugs through acquisition.
Valeant isn’t the only pharmaceutical company to see a dip in prices related to questions about its practices. Most recently, and perhaps more notoriously, the market negatively reacted to criticism of New York-based Turing Pharmaceuticals’s 5,000 percent price increase for Daraprim, a treatment for toxoplasmosis the company acquired in August for $55 million. Following the revelation of the price increase, former U.S. Secretary of State and candidate for the Democratic presidential nomination, said if she were elected, she would seek to cap the prices for prescription drugs. Clinton’s comments caused numerous biotech stocks to fall an average of 2 percent. The Nasdaq Biotechnology Index dropped 4.4 percent and the SPDR S&P Biotech ETF dropped by 6 percent.
In addition to the two cardiac drugs, Valeant has also been criticized for quadrupling the price of the 55-year-old drug Cuprimine, used in the treatment of Wilson disease. A New York Times article excoriated Valeant for its practice of increasing the price of drugs following an acquisition. According to a Deutsche Bank report, Valeant increased prices on its brand-name drugs an average of 66 percent, about five times more than its other competitors, the Times said. Valeant, the article says, spends only about 3 percent of sales generated revenue on research and development, “which it views as risky and inefficient compared with buying existing drugs.” That amount was about $246 million in 2014.
But Valeant isn’t the only company to increase the price points of its drugs. Pfizer Inc. has raised the price of 133 of its drugs, including two 9.4 percent increases for its blockbuster pain medication Lyrica. Additionally, Merck & Co. has increased the prices of 38 of its medications, according to Bloomberg. Both companies raised the prices of some of their drugs by up to 10 percent.