Dive Brief:
- Quebec-based pharma company Valeant Pharmaceuticals is facing a potential class-action lawsuit from two New York health benefit funds following allegations of overcharging for medication.
- The company, and former Philidor Rx Services founder and CEO Andrew Davenport and his brother Matthew Davenport, have been accused on three counts, including violations of the federal RICO Act.
- The lawsuit could be worth over $5 million to the plaintiffs and other third-party payers.
Dive Insight:
Racketeering is a serious charge alleging Valeant made money through illegal practices, covered by the US Racketeer Influenced and Corrupt Organizations (RICO) Act.
The company is being sued by New York Hotel Trades Council & Hotel Association of New York City Inc Health Benefits Fund, and the Detectives' Endowment Association of New York.
According to Reuters, Valeant had been nudging customers towards its own branded versions of drugs rather than lower-cost generics, specifically through pharmacies linked with its in-house mail-order pharmacy, Philidor Rx.
Valeant initially had not been entirely transparent about its links with Philidor Rx, and hiding these links could have had the effect of artificially driving up demand and therefore prices. The lawsuit proposes class-action status, which would dramatically expand the scope of the case.
Valeant has had a disastrous year. It has been accused of price gouging following sharp increases in prices of Isuprel and Nitropress by 720% and 310% respectively. Lawmakers attacked the company for not providing hospital networks with touted discounts and criticized its overall strategy. Longtime CEO Michael Pearson was replaced with former Perrigo CEO Joseph Papa as the company teetered with a default on several loan obligations.
While Valeant has dropped out of the spotlight as Mylan has become the price gouger du jour, the legal repercussions and complications of its downward spiral and 90% drop in share price appear to be gathering apace.
Earlier in August, the company was accused of ‘fictitious accounting’, deceptive pricing and renewing prescriptions unnecessarily in a lawsuit from the mutual fund T. Rowe Price, a former shareholder. There have also been cases filed by Alleghany Corp and a teachers’ retirement fund.