Valeant VRX has been the talk of the financial markets these past few weeks. The stock is off over 50% since Citron Research’s Andrew Left accused the company of “channel stuffing” and generating phony revenue by sending fake invoices to R&O Pharmacy, which Valeant allegedly part-owned. The drama all started after R&O filed a claim against Valeant in early September. R&O received a $69 million invoice from the pharmaceutical company, yet R&O said it had never done business with Valeant. R&O suspected Philidor (allegedly part-owned by Valeant), which it had sold an equity stake to — of using its pharmacy identification number to fill prescriptions:
What Reitz hadn’t known at the time he signed the sale agreement was that Philidor — and Valeant — were facing a hurdle in getting prescriptions filled in California, the largest market for medicines among the states. State Atty. Gen. Kamala Harris’ staff had denied Philidor’s request for a California pharmacy license, charging that the company had falsified information in its application.”Do you think I would sell to someone that was denied a permit?” Reitz said. “You’ve got to be kidding me.”
Though Valeant denied claims of channel stuffing at Philidor, it failed to disclose the specialty pharma’s aggressive sales practices. A Wall Street Journal article appeared to deliver the smoking gun when it divulged a Philidor training manual detailing Philidor’s aggressive sales tactics, including using other pharmacies’ ID numbers:
A mail-order pharmacy used by Valeant Pharmaceuticals International Inc. had a simple message for staffers charged with getting health insurers to pay up: Don’t take no for an answer. If a health insurer wouldn’t work with Philidor Rx Services LLC, the pharmacy instructed staff to try again using the identification number of a partner pharmacy to secure payment. “We have a couple of different ‘back door’ approaches to receive payment from the insurance company,” a Philidor training manual said.
