Valeant Under Criminal Investigation - WSJ
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`http://www.wsj.com/articles/valeant-under-criminal-investigation-1470868752
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`Valeant for a long time successfully pursued a business model focused not on discovering drugs but on selling
`products it acquired from others, often at significant price increases. PHOTO: RON ANTONELLI/BLOOMBERG
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`ACRUX DDS PTY LTD. et al.
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`EXHIBIT 1528
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`IPR Petition for
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`U.S. Patent No. 7,214,506
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`Valeant Under Criminal Investigation - WSJ
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`https://www.wsj.com/articles/valeant-under-criminal-investigation-1470...
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`Philidor has previously said its employees "behaved ethically" when dispensing
`drugs to patients. Philidor representatives couldn't be reached for comment.
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`Valeant. of Canada. has previously said in public filings that U.S. Attorney offices,
`including in Manhattan, have requested information from it on a wide range of
`subjects including "patient assistance programs .. .its former relationship with
`Philidor and other pharmacies" and "the Company's pricing (including
`discounts and rebates), marketing and distribution of its products."
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`Valeant for a long time successfully pursued a business model focused not on
`discovering drugs but on selling products it acquired from others, often at
`significant price increases. It started using Philidor a few years ago, but didn't
`disclose the relationship to investors until October of last year, when accounting
`and other questions about it arose.
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`Valeant later said it was severing all business ties with Philidor and that it would
`restate earnings based on an accounting error related to the pharmacy.
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`Prosecutors, one person said, are investigating Andrew Davenport and Matthew
`Davenport in connection with Philidor. Corporate reports show Andrew
`Davenport was one of two founding Philidor principals. He was Philidor's chief
`executive officer when the Philadelphia area-based company wound down its
`business earlier this year.
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`Documents filed with California's Board of Pharmacy in December 2014 and
`June 2015list MatthewS. Davenport as Philidor's chief executive. Matthew
`Davenport is an executive with BQ6 Media Group, its website says. The company
`shares Philidor's address. The Wall Street Journal has reported that former
`Philidor employees said BQ6 consulted for Valeant.
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`Neither Matthew Davenport nor Andrew Davenport could be reached for
`comment, and BQ6 didn't respond to requests for comment.
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`The U.S. attorney's office in Manhattan, headed by Preet Bharara. is
`investigating possible mail and wire fraud violations, one of people familiar with
`the matter said. The wide-ranging mail and wire-fraud statutes make it illegal to
`use interstate communications as part of a scheme to defraud another out of
`money.
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`Prosecutors are investigating not only the level of control Valeant exerted over
`Philidor's business, but the extent of the ties, includingValeant's role in
`Philidor's growth, one of the people said.
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`Valeant told investors in October that "the bulk ofPhilidor's volume is related to
`Valeant products." A lawyer for Philidor the following month referred to Valeant
`North America as its only client.
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`Industry experts say it is rare for a pharmacy to be controlled by a drugmaker
`and sell a large portfolio of its drugs. Adam Fein with Pembroke Consulting,
`whose focus is drug sales and economics, called the Philidor-Valeant
`relationship "highly unusual."
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`Valeant has pointed to other drugmakers' use of specialty pharmacies in defense
`ofits Philidor relationship.
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`Valeant started doing business with Philidor in early 2013 when it struck a sales
`agreement with the startup, according to documents submitted to a U.S. Senate
`committee.
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`After starting as a pilot project to dispense only a fewValeant drugs, Philidor by
`2015 was selling a portfolio of more than 50 Valeant drugs, according to the April
`2016lawyer's letter to the Senate committee on aging. That year Valeant paid
`Philidor more than $80 million in fees, versus around $17 million the previous
`year, according to Senate committee docwnents.
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`Philidor's drug distribution service was popular with doctors because it handled
`much of the paperwork involved with seeking reimbursements from insurers.
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`Valeant and Philidor discussed Valeant purchasing Philidor, according to the
`April lawyer letter and people familiar with the matter. In December 2014,
`Valeant agreed to payPhilidor $100 million plus milestone fees for an option to
`buy the company, with no further money down. The deal, which wasn't initially
`disclosed to Wall Street, led Valeant to consolidate its financial results with
`Philidor.
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`Valeant Under Criminal Investigation - WSJ
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`https://www.wsj.com/articles/valeant-under-criminal-investigation-1470...
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`Write to Jacquie McNish at Jacquie.McNish@wsj.com and Christopher M.
`Matthews at christopher.matthews@wsj.com
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`Appeared in the August 11, 2016, print edition as 'Valeant Faces Criminal Probe.'
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`Copyright ©2017 Dow Jones & Company, Inc. All Rights Reserved
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`This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit
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