June 9, 2016
By Alex Keown, BioSpace.com Breaking News Staff
LAVAL, Quebec – Shares of Valeant stock plunged nearly 13 percent Wednesday, before regaining some ground after the company revealed it was losing money through its new drug distribution deal with Walgreens Boots Alliance, Inc.
Valeant and Walgreens struck a 20-year deal in 2015 after the pharmaceutical company was forced to terminate its distribution agreement with specialty pharmacy company Philidor Rx Services, after concerns were raised about improper accounting practices. However, the Walgreens distribution deal, particularly for the company’s dermatological drugs, which generate about 20 percent of overall revenue, is not going well. Joseph Papa, the new chief executive officer at Valeant, said Walgreens is filling prescriptions for Valeant drugs without first ensuring that insurance companies will pay for them, according to a report in the Financial Times of London. The Times noted that about 25 percent of Valeant’s drugs requiring insurer authorization are being filled without first receiving it.
“That means every time a prescription goes out the door, we’re taping dollar bills [to it],” Papa said, according to the Financial Times.
Under the Walgreens deal, Valeant said it will sell some of its name brand products used for “dermatology, ophthalmology, gastrointestinal and neurology/other therapeutic areas” at generic prices, if there are generics of that drug. Additionally, Valeant will reduce all of its dermatological and ophthalmological products by 10 percent in Walgreens.
Under the contract Pearson negotiated with Walgreens, the drug store chain receives a fee for distributing Valeant’s drugs, regardless of whether or not Valeant is reimbursed by insurance companies. Some drugs require insurer-authorization before the scripts are filled, but the Financial Times said that authorization has been neglected by Walgreens. One Valeant drug noted as being filled without first receiving insurer authorization is the toenail fungus cream Jublia, which has a price tag of about $1,000.
As a result of the Walgreens issues, the company was forced to update its revenue projection to $9.9 to $10.1 billion, down from $11 to $11.2 billion. Papa said the lowered revenue projections reflect the “impact of significant disruption this organization has faced over the past nine months.”
“This has been a difficult period for Valeant and its stakeholders, and while there are some challenges to work through in certain business operations in 2016, such as our U.S. dermatology unit, the majority of our businesses are performing according to expectations,” Papa said in a statement.
With the losses Valeant faces from the Walgreens deal, added to the losses the company has dealt with from the past year of negative publicity and questions over its drug pricing, Papa told the Times he may look to renegotiate the Walgreens deal, or terminate it altogether. Papa will meet with Walgreens executives in an attempt to resolve the prior-authorization issues. However if problems persist, Papa plans to give the deal several more months before executing any plans, the Times reported, citing people familiar with the matter.
