Cummings again seeks docs in Valeant pricing, business probe

Many industry experts believe the deal would allow consumers to get Valeant’s dermatology and ophthalmology products at a lower out of pocket cost from more than 8,000 Walgreens US retail pharmacy locations and participating independent retailers. The accord comes amid an outcry over skyrocketing drug prices. Lower prices for drugs, retention bonuses to keep workers at the company after disruptions to business, legal fees and a new patient access program will cut about $500 million next year from the company’s adjusted EBITDA, or earnings before interest, tax, depreciation and amortization, Valeant said in a presentation to investors Wednesday.

The political pressure to roll back the price increases, and a heavy debt load from last year’s purchase of Salix Pharmaceuticals as well as its stock decline, has forced Valeant to reduce its reliance on serial acquisitions and price hikes.

Shares in Valeant, down 53% over the past three months through Tuesday’s close, fell 4.2% in premarket trading.

Specifically, Valeant announced that it established an ad hoc committee of the Board of Directors to “review allegations related to the company’s business relationship with Philidor”, because “issues have been raised publicly about Philidor’s business practices, and it is appropriate that they be fully reviewed”. In August, the stock reached a high of $263.70.

Valeant will hold an in-person, half-day investor meeting tomorrow, Wednesday, December 16th, to provide updated financial guidance for 2016, review the company’s strategy, and answer investor questions.

Malhotra said patients and insurers should end up paying slightly less for the drugs covered by the deal, but Valeant will compensate with rebounding volumes and its savings from not having to give drug wholesalers fees of roughly 7 percent of drug prices.

The agreement helped quell concerns about how Valent would make up revenue after cutting ties with mail-order pharmacy Philidor Rx Services, amid accusations about the relationship between the two companies.

Valeant has been accused of using Philidor to create a network of “phantom pharmacies” to steer pharmacy benefit managers toward Valeant’s more expensive drugs, rather than cheaper alternatives.

Valeant slashed its 2015 adjusted earnings per share (EPS) target to the range of $10.23-10.33, from a prior estimate of $11.67-11.87.

Morgan Stanley views the announcement to work with the leading United States pharmacy as a positive step for Valeant, although its value proposition and economics to the healthcare system remain unclear.

The company plans pay down $2.25 billion in debt next year, including mandatory payments and maturities. It will drop wholesale prices for branded prescription-based skin and eye-care products by 10 per cent. The company’s stock price shot up 15% on the news. Valeant said the agreement also covers its over-the-counter product portfolio, adding that the reduced pricing will be phased in over the next six-to-nine months.