Valeant hit by latest Philidor fallout
- The latest repercussions of Valeant Pharmaceutical's specialty pharmacy scheme from last year emerged Thursday when it was revealed by Bloomberg that mutual fund giant T. Rowe Price is suing the company.
- The lawsuit, filed Monday in the federal court of New Jersey, accuses Valeant of "fictitious accounting" and deceptive pricing through its mail-order pharmacy Philidor to shield its drugs form competition and inflate revenues.
- T. Rowe Price was previously one of Valeant's largest shareholders and said the company's bad behavior exposed it to huge losses and massive risk.
Valeant shares have cratered over the last year as the company sank from a high of $260 per share to trade below $30. The 90% drop in the value of the company began when a report from a short-seller revealed that Valeant had questionable ties to a mail-order specialty pharmacy.
Mail-order pharmacies allow patients to order drugs to their door and usually help patients get a discount on their commercial insurance co-pay. While the practice is common among pharmaceutical companies, the pharmacies usually have contracts with a number of different companies. Philidor exclusively worked with Valeant.
As time went on, it was revealed that Valeant had bought Philidor. It had even gone as far as to renew prescriptions when unnecessary and incorrectly record the revenues from the pharmacy.
Artificially inflated fiscal year 2014 revenue led to inaccurately reported amounts in quarterly reports during 2015. In February, the company disclosed preliminary findings by a special internal committee showing approximately $58 million in revenue which should not have been recognized on its 2014 year-end earnings report.
Now, former CEO Michael Pearson and five other executives from the company are defendants in the lawsuit. Pearson has since left the company and former Perrigo CEO Joe Papa took his place.
T. Rowe Price owned as much as 21 million shares in the company at one time, or a 6.4% stake.
It was reported just last week that the U.S. Attorney's Office for the Southern District of New York is reportedly looking into whether Valeant improperly disguised its close relationship with Philidor.
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