Valeant papers cite financial incentives

Beleaguered drugmaker Valeant Pharmaceuticals International Inc. offered tens of millions of dollars in incentives to a Hatboro pharmacy to sell its products even as the relationship between the two was kept private, according to documents released by a Senate committee.

The 818 pages of documents, part of a trove reviewed by the Special Committee on Aging before an April 27 hearing, provide new insights into a relationship that was at the heart of Valeant's eventual share meltdown - the drug maker's financial arrangements with Philidor Rx Services, a nominally independent pharmacy that has since ceased operations.

Valeant has come under scrutiny in the last seven months over its business practices, including its relationship with Philidor. Its stock has dropped about 89 percent from its highs last August. Now, even as the company has brought in a new chief executive officer and refreshed its board, lawmakers and government agencies are digging into its past practices.

Valeant declined to discuss specifics of the documents.

The hundreds of pages of internal documents, including emails, contracts and pricing information, were provided by Valeant and others to the Senate in preparation for the hearing.

Among them is a contract dated December 2014 that outlines financial incentives that Valeant provided to Philidor, a so-called specialty pharmacy that sought reimbursement from health insurers and benefit managers for Valeant products.

Valeant's contract stipulated that Philidor - which listed 18 owners - would get a $25 million bonus for achieving net sales of about $524 million in any four consecutive calendar quarters. Valeant would provide Philidor with three additional $25 million payments for hitting increasing sales targets, according to the contract.

After the relationship between Valeant and Philidor became public in October 2015, investors pummeled Valeant shares in part over concerns about the unusual arrangements it had made to bolster sales of its expensive drugs.

In addition, workers at Philidor were given written instructions to change codes on prescriptions in some cases so it would appear that physicians or patients had specifically asked for Valeant's brand-name drugs, rather than cheaper generic versions, Bloomberg reported around that time.

"Philidor was just trying to shove expensive drugs out the door and dump all the extra cost on employers, unions, and other payers," said Mark Merritt, CEO of the Pharmaceutical Care Management Association, whose members are pharmaceutical benefit managers.

He said the bonus arrangement linked to sales of expensive drugs was unusual.

"Philidor was not a pharmacy in the traditional sense of the word" but more like a distributor acting on Valeant's behalf, he said.

Express Scripts Holding Co., a big drug benefit manager that has been critical of so-called captive pharmacies, said none of the drugmakers it works with provides additional payments for hitting specific sales targets.