Everyone going after Valeant is going after the same thing

All at once, everyone wants to know more about the mysterious programs that Valeant Pharmaceuticals uses to help people buy its drugs — patient assistance programs.

The programs were mentioned in risk factor after risk factor in the company’s long-delayed annual report, which finally dropped on Friday.

And on Wednesday, when company executives and board member, billionaire hedge fund manager Bill Ackman, went to the U.S. Senate to testify about Valeant’s pricing practices, they were asked a bunch of questions about these programs.

And indeed we don’t know much.

What we do know is that, on top of the US Senate and House of Representatives, State attorneys in Massachusetts and New York also want to know more about the hundreds of millions of dollars Valeant spends on the programs. The state of North Carolina has opened an investigation into them too.

So what exactly do they want to know about these programs? No one’s been clear about that, but we got a clue about it on Wednesday.

Spend money to make money

Ideally, patient assistance programs are exactly what they sound like they are — funds that help make medication more affordable to patients.

However, the government is concerned that at Valeant they have taken on a more sinister role. In fact, government insurance Medicare and Medicaid don’t allow patient assistance programs at all.

Here’s what Sen. Elizabeth Warren had to say about them at Wednesday’s hearing. Basically she was wondering why Valeant didn’t just lower the prices of drugs that were too expensive for patients to access.

“You double the price, even if you get a waiver to the customer, you make a lot of money,” Warren said. “What is the return on investment to Valeant on the money you’re currently putting into the patient-assistance programs?”

Outgoing CEO Michael Pearson, present at the hearing, said he didn’t know.

“Don’t tell me you’ve never done the analysis,” Warren said in response. “By doing this you … keep the patient on the more expensive drug and then you … recoup whatever from the insurance company. What I’m saying is that this must be a profitable … for you … You’re making more money.”

But Pearson stuck to his line, praising the programs for the good they do for Valeant’s customers, but it was hard. The committee members kept pointing out that these programs allow Valeant to maintain price and that Valeant has a “captive audience.”

Plus, on the panel before Pearson, his former CEO Howard Schiller, and billionaire investor Bill Ackman, witnesses said that the patient assistance programs were purposely complex, and were very hard to qualify for. Senators Claire McCaskill (D-MO) and Susan Collins (R-ME), who led the hearing, both said they had contacted hospitals in their home states to see if they had received funds from Valeant. None had.

An executive from St. Vincent’s Catholic Hospitals, the largest Catholic hospital network in the world, also said his organisation had not received funds from Valeant.

Umm, show us the line item

It’s really hard to figure out how much exactly Valeant spends on these programs because it’s not clearly delineated in its government filings.

In its third quarter earnings filing, the company said that the programs were “administered by a reputable third party.”

More from that filing:

“…and we fund outside foundations that have multiple donors. Eligibility is determined by the independent foundations. It is also important to note that eligibility for our in-house commercial access programs is limited to patients not covered by government programs. Looking at history, our commitment to patient assistant programs has grown at an annual compound rate of 128% from $53 million in 2012 to approximately $1 billion we expect to spend in 2016.”

That’s a lot of money to spend on something your company doesn’t track.

We also know that the company talked about them in a letter sent to the Senate Committee on Ageing back in October in which it said the company has these programs for 55 drugs in its product line.

Patient assistance programs

As for the fund numbers in the paragraph above, they were not clearly delineated in the company’s annual reports for 2014 or 2015.

But perhaps we’ll get more clarity soon. It seems everyone wants it.

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