Pharmaguy's Insights Into Drug Industry News
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Pharmaguy's Insights Into Drug Industry News
Pharmaguy curates and provides insights into selected drug industry news and issues.
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Valeant Accused of Enron-like Fraud Via Phony Specialty Pharmacies

Valeant Accused of Enron-like Fraud Via Phony Specialty Pharmacies | Pharmaguy's Insights Into Drug Industry News |
Shares of Valeant Pharmaceuticals tumbled on Wednesday after a research firm accused the drug company of massive fraud similar to what doomed Enron.

It's the latest controversy swirling around Valeant, a $50 billion pharmaceutical giant that's backed by hedge fund billionaire Bill Ackman. Federal prosecutors are already investigating the way Valeant prices and distributes its drugs.

Now Citron, a short-selling firm that publishes free research used to bet against companies, is making allegations that Valeant could be the "pharmaceutical Enron."

Citron pointed to what it sees as a "web of deception" that amounts to "fraud" aimed at creating "invoices to deceive auditors and book revenue."

Citron alleges that Valeant created a network of phony pharmacies "for the purpose of phantom sales" and to avoid scrutiny from auditors.

Citron is an activist short seller that has a team of investigators led by Andrew Left. 

This isn't the first time Citron has accused a health care company of shady behavior. The short seller noted in its Valeant report that in 2008 it exposed a relationship between medical device maker Arthrocare and Discocare. 

Top Athrocare executives were later found guilty of inflating sales figures and the company's former CEO was recently sentenced to 20 years in prison for securities fraud, according to media reports.

Pharma Guys insight:

Call the Valeant bought Sprout (and the "female Viagra" pill Addyi) for $1 billion: 

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Specialty Pharmacies Help Drug Makers Sidestep Barriers on Pricing

Specialty Pharmacies Help Drug Makers Sidestep Barriers on Pricing | Pharmaguy's Insights Into Drug Industry News |

The pain reliever Duexis is a combination of two old drugs, the generic equivalents of Motrin and Pepcid.

If prescribed separately, the two drugs together would cost no more than $20 or $40 a month. By contrast, Duexis, which contains both in a single pill, costs about $1,500 a month.

It is called “Prescriptions Made Easy.” Instead of sending their patients to the drugstore with a prescription, doctors are urged by Horizon to submit prescriptions directly to a mail-order specialty pharmacy affiliated with the drug company. The pharmacy mails the drug to the patient and deals with the insurance companies, relieving the doctor of the reimbursement hassle that might otherwise discourage them from prescribing such an expensive drug.

Horizon is not alone. Use of specialty pharmacies seems to have become a new way of trying to keep the health system paying for high-priced drugs. Valeant Pharmaceuticals International, which has attracted government and media scrutiny for its huge price increases, does much the same thing for its dermatology products with a specialty pharmacy called Philidor Rx Services.

“They are all trying to get rid of the sticker shock of using their drugs,” said Dr. Kenneth Beer, a dermatologist in West Palm Beach, Fla. “They become the drugstore now,” he said.

He said Valeant’s program, which he had used, buffered physicians from insurers and complaints from their patients about high prices.

“It lowers one barrier to using their products,” he said.

“What was started as administering complex, costly drugs has been co-opted as a sales/marketing tool to drive the growth of minor differentiation standard retail drugs,” Ronny Gal, a pharmaceutical analyst at Bernstein, said in a note on Friday. The programs do offer advantages to patients. The drugs are delivered quickly and co-pays are subsidized. Horizon said 98 percent of patients getting Duexis have co-payments of no more than $10, less than the co-pays would be for generics in many cases.

Moreover, if the insurer refuses to pay, the patient already has the drug and the manufacturer absorbs the cost. A spokesman for Horizon said that happened for a large number of Duexis prescriptions. Still, Horizon and Valeant apparently come out ahead because enough insurers do pay.

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