Valeant Pharmaceuticals: SEC Subpoena, Arizona Targets Company and Jorn Resigns by TheSkeptic
If this week wasn’t bad enough for Valeant, Deb Jorn, the Executive Vice President and Company Group Chairman resigned today from the company. Ms. Jorn was responsible for all major US product launches as well as the Dermatology and GI therapeutic areas. These two areas were Valeant’s most important, representing HALF of Valeant’s forecasted 2016 US revenues. Moreover, Ms. Jorn was also responsible for the huge push of Dermatology products through the captive pharmacy channel they’d established with Philidor and it’s subsidiaries.
Philidor is basically in a world of shit, which could be why Ms. Jorn resigned. We know from an action taken by the California Board of Pharmacy that Philidor, valeant pharmaceuticalss captive specialty pharmacy, was denied a license to operate in the state of California. This led Philidor to attempt to purchase R & O pharmacy through a series of shadow transactions, which could allow Philidor to operate in California, or at least that was the plan. Those well versed in the story are aware that this deal completely fell apart after Russel Reitz, the owner and pharmacist operating R & O Pharmacy accused Valeant, Philidor and others of committing fraud in Federal court. We also know from other court records that Philidor, through R&O, pushed thousands of prescriptions for Valeant products out to over 30 separate states.
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Leading into Jorn’s resignation, this past Monday Valeant’s situation became even more tenuous when it disclosed it had been subpoenaed by the SEC. In yet another laughably ridiculous PR effort, this past Tuesday Valeant is attempting (through private calls with sell side analysts) to spin this SEC investigation by claiming that this is somehow related to Citron Research’s report on the company. The guts of this claim is completely incredible in that Valeant was SUBPOENAED. It very well may be that it was started because they complained about Citron, but you don’t subpoena Valeant for information they would willingly provide about a short seller. It’s amateurish drivel that got pushed out to the market through what could be Reg FD violations.
Worse still for Valeant adn Ms. Jorn, the concerns surrounding Philidor persist like toenail fungus or IBS. Sources have confirmed that the State of Arizona is targeting Valeant and its affiliates. In what I consider to be a model of transparency, you can actually watch the full Arizona Board of Pharmacy Meetings via Arizona’s open meeting process. Additionally you can review the full agenda for each meeting at the Board’s event portal.
This transparency allows you to see that back on November 18th, shortly after Valeant Pharmaceuticals detailed it’s relationship with Philidor, the Arizona Board reviewed an August pharmacy application by Forsta LLC.
Forsta was formed by none other than Philidor’s Gary Tanner(aka Valeant’s Gary Tanner), and it’s pharmacist in charge was none other than Philidor’s Jake Power. As evidenced by the minutes, the Board discussed Forsta’s application at the meeting, as well as Valeant’s relationship with Philidor. It should be noted that Forsta was one of four resident wholesaler applicants and one of 6 resident pharmacy applicants at the November meeting. Flash forward to the January 27-28, 2016 meeting, and you see that Forsta LLC was on the agenda yet again. Although Forsta’s peers from the previous meeting all received approval for license, Forsta was held back with a provisional approval(rendering Forsta non-operational). According to sources familiar with the matter, Forsta was asked to attend the meeting specifically because of it’s ties with Philidor and valeant pharmaceuticalsand the Board wanted very much to explore these connections. Forsta cancelled their appearance right before the meeting and did not attend.
Although the meeting agenda has not yet been made public, sources indicate the Board has asked both Forsta and Philidor to appear at the upcoming March meeting, although it is unclear whether either plans to attend. As a suggestion, I’d like to recommend that both companies just send Gary Tanner and Jake Power. Maybe Deb now that she’s unencumbered.
In addition to probing the interconnections of valeant pharmaceuticals, Philidor and Forsta,the Board has also taken issue with Philidor’s call centers. Despite Philidor’s public claims about winding down their business, sources familiar with the matter indicate that the Board believes the Philidor call centers in Phoenix and Tempe are operating in violation of state laws. The Board has also been presented with evidence demonstrating that Philidor has been attempting to hire pharmacists and technicians in Arizona. This is a curious discovery particularly because Philidor filed a WARN notice in Arizona, on January 5th, 2016 indicating they were providing a 60 day notice period that they planned to eliminate 264 jobs in Arizona as well as a WARN notice for 262 employees in Pennsylvania on November 23rd. Stranger still is that AFTER their public claims of winding down operations, Philidor applied for another license in Arizona on December 15th; that application is currently listed by Arizona as in process.
The issues faced by these companies in Arizona shouldn’t be underestimated given the prestige and level of national engagement of Arizona’s Board of Pharmacy members. During his time as Executive Director of the Arizona Board, Hal wand, who is currently currently theNABP President-elect, overlapped with his friend and recent Arizona Board President Dennis McAllister. Mr. McAllister, is a current member and the former President overseeing the above referenced proceedings that reviewed Philidor and Forsta. Mr. McAllister also sits on the National Association of Boards of Pharmacy’s ACPE Board. In addition to his role at the Arizona Board of Pharmacy, Mr. McAllister is also the Senior Director of Express Scripts’s Pharmacy Regulatory Affairs group where he directly oversees Express Scripts’ relationship with 18 separate state Pharmacy Boards. Yes, the same Express Scripts that was hoodwinked by Philidor/R&O and yes the same Express Scripts blocking access to overpriced Glumetza.
To a certain extent you may be thinking, “Ahh…it’s Arizona, so what! Why do I care and why would the Arizona Board care so much about Valeant, Philidor and Forsta?” Well, it wouldn’t just be the AZ board, but the Feds may get involved as well. You’ll remember from the Isolani lawsuit documents that R&O, which was not licensed in Arizona, shipped prescriptions to Blue Cross and Humana patients in Arizona. While this was going on, Philidor (who was located in Arizona, but not licensed in California) was controlling outbound shipments to Arizona from R&O(who was located in California but not licensed in Arizona). Because the parties had not yet closed the purchase agreement for R&O the effect was that one unlicensed non-resident pharmacy forced another unlicensed non-resident pharmacy to illegally ship prescriptions via mail, across state lines, when they could have simply filled those prescriptions from their own authorized jurisdictions. Smart right? (insert valeant pharmaceuticals business model joke)
You can readily observe from their meetings that due process is a cornerstone of the Arizona Board of Pharmacy’s review and enforcement processes. Although the matters are still under the Board’s review, in the absence of meaningful records production or participation in the due process extended to them, an industry expert indicated that it is highly unlikely that either Philidor or Forsta’s applications will receive final approval. Beyond the denial of the respective applications, the principals of those companies could also face disciplinary action in Arizona, and other jurisdictions, further entangling Valeant in their ongoing self-destruction.