Valeant Pharmaceuticals’ stock has hit a two-year low of $US78 and falling.
The stock is down almost 15% in Thursday’s trading session after also closing down 6% on Wednesday.
The sell-off may be due to Wednesday’s news that Senators Claire McCaskill (D-MO) and Susan Collins (R-ME) are launching a bipartisan investigation into Valeant — and other pharmaceutical firms — for price gauging.
In her comments on the investigation, McCaskill specifically outlined her issues with Valeant’s acquisition-driven business model.
“Some of the recent actions we’ve seen in the pharmaceutical industry — with corporate acquisitions followed by dramatic increases in the prices of pre-existing drugs — have looked like little more than price gouging,”McCaskill said.
It is this business model that has become the central focus of the controversy surrounding the company now that it has severed ties with Philidor, a specialty pharmacy that distributed products almost exclusively for Valeant.
Philidor’s existence was a company secret until last month, when Valeant was forced to reveal the relationship after several articles from the Southern Investigative Reporting Foundation and the New York Times questioned the pharmacy’s practices with insurance companies.
A suit between Philidor and a member of its “network” of pharmacies was also the central focus of short-seller Citron Research’s accusations that the company was using shell pharmacies to book “phantom” revenue.
This is Valeant over the last two years:
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