A Peek at Valeant Pharmaceuticals

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A number of pharmaceutical manufacturers have found themselves under intense social and political pressure in recent months following questionable decisions regarding the pricing of prescription medications and vaccines. Valeant Pharmaceuticals has remained largely under the radar in the US compared to others, but its profile is now rising as a brighter light is shone on pharmaceutical pricing.

What is Valeant Pharmaceuticals?

Officially listed as Valeant Pharmaceuticals International Inc., the company is a “diverse and decentralized pharmaceutical company committed to focusing on our key stakeholders while delivering consistently high performance.” The company is located in Laval, Quebec, Canada and is a publicly traded, multinational specialty drug company. Its products focus on areas such as neurology, dermatology, and eye care. Bausch & Lomb and Salix Pharmaceuticals are among its chief subsidiaries.

Risky Business Model

According to Bloomberg, Valeant CEO Michael Pearson has pursued a dangerous business model during his tenure as boss at the pharmaceutical giant. Rather than competing in the marketplace with huge investments on research and development, he took a position of purchase-and-strip. That is to say, the company is working to make millions in profit off of drugs already on the market.

Valeant has made a number of major purchases dating back to June 2010 when it purchased Biovail. The goal in all of its purchases is to use borrowed money to purchase companies with drugs already on the market, strip those assets down, and hike the prices for those drugs to turn a profit.

Hot Water with the Federal Government

Fortune notes that the US federal government has subpoenaed the company in search of more information on its pricing schemes and the distribution models for its drugs. Specifically, the government is looking for information that clarifies how Valeant is helping patients afford the rising costs of its medications, and may even dispute information it has provided to the Centers for Medicare and Medicaid Services.

At the heart of the current debate is the stunning rise in price for two drugs from Valeant. First, Isuprel (a heart drug) from the company has seen its list price rise from $4,489 in December 2013 to a stunning $36,811 as of 2015. Additionally, the drugs Glumetza (diabetes) and Cuprimine (Wilson disease) have risen from $896 and $888, respectively, in 2013 to $10,020 and $26,189 respectively as of 2015.

Valeant insists that despite the rising cost of its medications, it is still working hard with patient assistance programs to ensure that those who need their drugs can still afford them. The company reportedly spent $544 million on such programs last year, and expects to spend a total of $630 million by the end of 2015.

Rising Prices Hurting Stock

The rising cost of its medications and the scrutiny the company now faces for its purchase-and-strip tactics is hurting the stock price for those investing in the company. The price for Valeant stock has plummeted in recent weeks, erasing billions of dollars in capital. Company shares peaked at $347.84 on August 5, and have dipped down to $145.34 as of the final week of October.

Adding to the concerns, the former owner of Biovail is speaking out against Valeant with significant charges. Eugene Melnyk, billionaire owner of the Ottawa Senators NHL franchise, accuses Valeant of pretending to be a Canadian company merely to avoid US taxes. The investigation into Valeant is ongoing at this time.

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