Drug manufacturer Valeant remains on the hot seat regarding a series of major price increases on drugs over the last few quarters. U.S. Senator Claire McCaskill, the top Democrat on the Senate’s Permanent Subcommittee on Investigations and the Senate Aging Committee, released a statement on Thursday after Valeant Pharmaceuticals CEO Michael Pearson once again failed to answer important questions about his firm’s huge price hikes on lifesaving drugs:
Sen. McCaskill noted: “It appears obvious to me that Valeant has been anything but responsive or transparent—it refused to take any action until served with federal subpoenas, and is still refusing to provide answers to many of the questions I’ve asked. I look forward to continuing my investigation of drug pricing and plan to further explore Valeant’s inadequate response.”
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Of note, in a Senate hearing earlier this summer, McCaskill asked ex-Valeant CFO Howard Schiller about Valeant’s February 2015 increase of the price per vial of Isuprel, a medication for cardiac arrest, from $215 to $1,346. Valeant also increased the price of the drug Nitropress from $257.80 to $805.61 per vial at the same time.
McCaskill noted she had provided written questions to Valeant following the June hearing, and had assurances from Schiller that she would get answers, “Valeant failed to provide any explanation for the dramatic increases in the price of Isuprel and Nitropess.”
Valeant received federal subpoenas Wednesday
As reported by ValueWalk, Valeant Pharmaceuticals has received subpoenas from U.S. prosecutors seeking information on its drug-pricing decisions. In a statement published late Wednesday, the Canadian drug firm said it received a subpoena from the U.S. Attorney’s Office in Massachusetts and another from the Manhattan U.S. Attorney’s Office seeking information on its patient assistance programs, drug distribution and pricing decisions.
Valeant noted the subpoenas mostly requested information about its programs to help patients pay for the company’s drugs. Valeant’s statement continued to say that “the company is reviewing the subpoenas and intends to cooperate with the investigations”.
Investigation of Valeant likely involves “gray markets”
According to Evercore ISI analyst Umer Raffat, it is likely the federal subpoenas issued today against Valeant relate to how it distributes its drugs, and if there is any possibility that drugs are being improperly distributed or diverted by a “leakage pharmacy”. Diversion of manufacturer or distributor programs to make the drug available to the indigent is how a good bit of “gray market” drugs come about.
Raffat points out that the “worst case scenario” for Valeant here is a fine and settlement, and given how much the stock is off over the last few weeks related to the drug pricing controversy, the firm remains a Buy with a price target of $300.