Now Washington is demanding to talk to a few select Valeant employees

Congressman Elijah Cummings (D-NJ) has sent a letter to Valeant CEO Michael Pearson requesting transcribed interviews with a bunch of Valeant employees who also allegedly worked for Philidor, the company’s soon-to-be defunct specialty pharmacy.

“…troubling new allegations suggest that a group of Valeant employees helped launch Philidor’s business in 2013 and have remained involved in its daily operations,” said the letter.

“These allegations suggest that Valeant employees may have been personally involved in questionable billing practices that led Valeant to cut ties with Philidor last month.”

These ties — which also came to light last month during a Valeant earnings call — contributed to the company’s precipitous 55% stock slide over the last four weeks.

Specialty pharmacies — pharmacies that act as a separate distribution and billing mechanism for big drug firms — aren’t unheard of in the world of big pharma, but Valeant’s relationship with Philidor was strangely close.

Valeant paid $US100 million for an the option to purchase Philidor last year and consolidated all of Philidor’s revenue in its books. Philidor also sold almost exclusively Valeant products comprising 7% of Valeant’s annual revenue.

However, Valeant says the companies ran completely independently of each other.

Shady practices

The reports Cummings refers to contradict that assertion of independence. A recent Reuters report described how a number of Valeant employees helped to start Philidor, and were active in the day to day operations of the company.

Also in that report are allegations that Valeant employees taught Philidor employees how to game insurance companies to get them to accept claims they would normally reject.

“According to a document obtained by Reuters, Valeant employees Bijal Patel and Gary Tanner received a November 2014 email providing guidance on ways to re-submit rejected claims to insurance companies in order to obtain higher reimbursement amounts,” said the Cummings letter.

“Mr. Tanner has been identified by former Philidor employees as ‘a key figure in the pharmacy’s operations.’ These former employees also report being directed to alter physician-written prescriptions so pharmacies would have to dispense Valeant drugs instead of cheaper generic versions in order to maximise Valeant’s profits.”

Last month, the WSJ also reported that some employees moved seamlessly between Valeant and Philidor offices, using different names at each.

To that assertion a Philidor spokesperson responded merely that the “real identities [of the Valeant employees] were well known to the other Philidor employees.”

Congressman Cummings is not the only Washington politician asking Valeant questions. US Sens. Claire McCaskill (D-Missouri) and Susan Collins (R-Maine) announced that they are launching a bipartisan investigation into Valeant — and other pharmaceutical firms — for price gouging earlier this month.

The Senate hearings begin in December. Cummings wants an answer to his request faster than that.

“To investigate these allegations, I request that you make available for transcribed interviews Garry Tanner, Bijal Patel, and Alison Pritchet. I also request that you provide contact information for former employee Laizer Kornwasser. I request that you respond to this request by November 20, 2015,” said the letter.

Impossible to know

In a conference call last week, Valeant’s CEO admitted that it was “impossible to know everything at all times” running such a large company. However, he also reassured investors that the loss of Philidor would only make for a messy fourth quarter and not impact the company’s cash flow long term.

Precise numbers regarding potential losses or guidance for 2016 were held off until Valeant’s December investor day. We do know, however, that Valeant will allow Philidor to keep money that it owes Valeant.

“As we announced earlier this week, Valeant and Philidor have reached an agreement providing for the wind-down of their relationship, including allowing Philidor to retain funds otherwise due to Valeant,” said Valeant spokesperson Laurie Little.

“We believe it is important that Philidor wind down its operations with minimal disruption to doctors and patients, including to fund its operations and to pay its employees.”

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