Valeant reported to be in criminal probe over pharmacy

Valeant Pharmaceuticals International Inc. is the subject of a criminal probe by federal prosecutors, who are investigating whether the drugmaker defrauded insurers by hiding its ties to a mail-order pharmacy, the Wall Street Journal reported Wednesday. Prosecutors are pursuing an unusual legal theory that Valeant and its mail-order pharmacy, Philidor Rx Services LLC, allegedly defrauded insurers by hiding their close relationship, the Journal said, citing unidentified people familiar with the matter. Valeant said that it’s cooperating with the investigation without confirming details. The drugmaker said in a statement Wednesday that it’s cooperating with the probe, which is being led by the U.S. Attorney’s Office for the Southern District of New York. It didn’t confirm details on the nature of the investigation. “We have been fully cooperating with the authorities throughout the investigation, and we are in frequent contact and continue to cooperate with the U.S. Attorney’s Office,” the drugmaker said in the statement. “Valeant takes these matters seriously and intends to uphold the highest standards of ethical conduct.” Prosecutors are looking into whether Philidor made false statements to insurers about its ties to Valeant, the Journal reported. Philidor, a now-defunct specialty pharmacy, filled prescriptions for Valeant dermatology drugs such as toenail fungus treatment Jublia. Prosecutors are investigating whether insurers thought Philidor was neutral rather than in the service of Valeant, the Journal reported. Nicholas Biase, a spokesman for the U.S. Attorney’s Office in Manhattan, declined to comment. Valeant shares plunged in late trading, falling 13 percent to $23.90 at 7:59 p.m. in New York. The loss erased much of the gains from Tuesday, when the drugmaker reported second-quarter results and said it would maintain its previous full-year financial forecast. Valeant came under scrutiny last year over issues including its business practices, particularly its relationship with Philidor, which was helping boost drug sales. The drugmaker severed its ties with Philidor in October, following reports about tactics the mail-order pharmacy allegedly used to gain more insurance reimbursements for Valeant medicines. They included submitting claims using other pharmacies’ identification numbers and altering codes on some doctors’ prescriptions. Specialty pharmacies are common in the drug industry, where they fill prescriptions typically for complex drugs, such as those that require cold storage. Valeant’s relationship with Philidor was closer than usual. Valeant had paid $100 million for an option to buy Philidor for nothing any time in the next 10 years, and consolidated Philidor’s financials into its own. Valeant has disclosed in filings that it’s the subject of investigations by the U.S. Securities and Exchange Commission and the U.S. Attorney’s offices in Massachusetts and New York, among others. In October, the company said the Manhattan U.S. Attorney’s office was seeking information on its patient assistance programs, drug distribution and pricing decisions. Bloomberg