Valeant Pharmaceuticals (VRX) Receives Federal Subpoenas on Drug Pricing
Shares of Valeant Pharmaceutical International Inc. were trading down -17.29 or -9.75 percent to $160.00 per share in Thursday’s premarket after the news broke late yesterday that the company had received two subpoenas from the District of Massachusetts and the Southern District of New York. The subpoenas request documents on patient assistance programs, patient financial support and the distribution of Valeant’s products. Valeant Pharmaceutical stock closed at $177.29 per share, up +10.79 or +6.48 percent in Wednesday’s regular trading session.
Founded in 1960, Montreal, Canada based Valeant Pharmaceuticals International Inc. is a large pharmaceutical company which focuses on treatments for infectious diseases, dermatology and neurology.
Late yesterday, Valeant released the response of J. Michael Pearson, Valeant’s Chairman of the Board and Chief Executive, to a letter from Senator Claire McCaskill (D-MO) asking about Valeant’s products, Nitropress and Isuprel. Mr. Pearson outlined the history of the two drugs, analysis and reasons behind Valeant’s pricing decisions and the reimbursement process for reimbursement for medical procedures involving Nitropress and Isuprel, as well as Valeant’s programs to improve patient access to the medicine.
In addition to Valeant’s response to the Senator’s letter, Valeant received two subpoenas, one from the U.S. Attorney’s Office for the District of Massachusetts and one from the U.S. Attorney’s Office for the Southern District of New York. The majority of the materials requested in the subpoenas involve documents related to the company’s patient assistance programs including financial aid the company provided patients, the distribution and pricing of Valeant’s products and information the company gives to Centers for Medicaid and Medicare Services.
Mr. Pearson said in a statement that, “All of us at Valeant firmly believe in maintaining strong regulatory and financial controls and believe we have operated our business in a fully compliant manner. We remain committed to assisting eligible patients who need our products, and we will be working with the appropriate groups to submit the requested documents and plan to cooperate with the inquiries.”
The controversy began on September 21st, when Hillary Clinton stated she would seek reforms in the pharmaceutical industry related to current high prices for medications, calling it “price gouging”. On September 28th, U.S. House Democrats asked to subpoena Valeant for documents related to increases in its drug prices. Specifically, Valeant’s heart drugs Nitropress and Isuprel, which had their prices jacked up +212 percent and +525 percent respectively on the day Valeant acquired rights to market them.
Valeant claimed in the letter that the price increases for the two drugs had a limited impact on hospital costs and that the company had spent $544 million on patient assistance programs in 2014 with total expenses for 2015 to be over $630 million.
Valeant stock, as well as the entire biotech and pharmaceutical sector have been under significant pressure since the Clinton statements and the seeking of federal subpoenas by members of the House in September. This morning’s action could indicate further downside in Valeant’s stock price.
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