T. Rowe Price Group Inc. sued Valeant Pharmaceuticals International Inc. alleging top executives used a secret network of pharmacies, deceptive pricing, reimbursement practices and accounting tricks to hide its branded drugs from generic competition and artificially inflate revenue and profit.
The Laval, Quebec-based company has suffered multiple controversies in recent months related to its business practices, accounting and drug pricing. It’s facing investigations from Congress and the U.S. Securities and Exchange Commission. The Wall Street Journal reported last week that federal prosecutors were also investigating the company for potential fraud.
Valeant engaged in a "growth by acquisition strategy" and continually reported revenue and earnings growth while shielding the secret network of controlled pharmacies and other practices from investors, exposing it to "massive risks," T. Rowe Price said in the lawsuit, filed in Trenton, New Jersey, on Aug. 15.
The company created the network around the Pennsylvania mail-order pharmacy Philidor Rx Services LLC to hide the fact that much cheaper versions of its drugs were available in generic form, and channeled prescriptions for its branded versions through the network, according to the suit.
The company declined on Thursday to immediately comment on the lawsuit.
Valeant severed its ties with Philidor in October, following reports about tactics the mail-order pharmacy allegedly used to gain more insurance reimbursements for Valeant medicines. They included submitting claims using other pharmacies’ identification numbers and altering codes on some doctors’ prescriptions. Valeant didn’t originally reveal its full relationship with Philidor, which included shared staff and an option to acquire the business.
By Chris Dolmetsch
