We may now know why Valeant CEO Mike Pearson chose Monday to give all of his employees a pep talk.
Democrats on the House Oversight and Government Reform Committee have all signed a letter sent to their Chair, Jason Chaffetz (R-UT), asking him to subpoena the pharmaceutical company, Bloomberg reports.
They’re looking for information on two specific drugs used to treat heart conditions that have seen “massive price increases.”
“Dems also asked Chaffetz to invite Valeant’s CEO to testify next week at hearing on drug prices,” said the report.
Valeant’s stock has fallen almost 15% on the news.
This comes after the entire country was scandalized by Martin Shkreli, the 32-year-old CEO of the startup Turing Pharmaceuticals. Shkreli raised the price of a drug his firm purchased by more than 5,000%.
Democratic presidential candidates Senator Bernie Sanders (D-V) and Hillary Clinton spoke out against Shkreli’s price gouge and have called for more regulation to prevent the same from happening to other drugs.
Pearson’s pep talk came in the form of a letter to employees this morning. Here’s a snippet:
After talking with a number of investors and observing the concerns and assertions in the media, I thought it would be helpful to give you my perspective on the two main issues worrying investors:
- Concern that our business model and strategy is dependent upon large price increases in our U.S. pharmaceutical business,
- Concern around our exposure to U.S. government drug price reimbursement
I can assure you that this bear thesis is incorrect on both accounts.
In short, Congress may not agree with point number two, and as such, investors may be soon be about to find out if he’s right about point one.
Even before this price gouging issue became part of the national conversation, though, Valeant and Pearson were controversial figures on Wall Street.
Short-seller Jim Chanos has bet against the company, saying that it’s an accounting rollup — a company that relies on acquisitions and aggressive accounting to appear healthy.
Last year Pearson teamed up with hedge fund manager Bill Ackman in an attempt to force another pharmaceutical firm, Allergan, to sell itself to Valeant.
Ackman, with a 10% stake in Allergan, tried to pressure the company’s shareholders from within. They didn’t fold, however, and the Allergan slipped from Valeant’s fingers.
Ackman did not buy a stake in Valeant until after all that was said and done in March of this year.