Suit Alleges Valeant Ran Secret Prescription Refill Scam
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`http://www.insurancejournal.com/news/national/2016/08/19/423867.htm...
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`View this article online: http://www.insurancejournal.com/news/national/2016/08/19/423867.htm
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`Valeant Pharmaceuticals International Inc. refilled patients’ prescriptions without their permission and steered
`them to more expensive drugs in order to boost sales and profits, according to a lawsuit that sheds new light on
`the drug company’s secret operations.
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`T. Rowe Price Group Inc. sued Valeant and its top executives, using information from former employees to back
`its claims that the mutual fund giant was a victim of fraud. The former Valeant workers expand on previous
`disclosures about the Laval, Quebec-based company that has been the subject of criminal, congressional and
`regulatory investigations of how it shielded branded drugs from generic competition to inflate revenue and
`profit.
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`Employees cited in the lawsuit provided fresh insight into how the mail-order pharmacy Philidor Rx Services
`LLC helped Valeant hide cheaper generic versions of its drugs and channeled prescriptions to brand names. One
`pharmacy worker in Phoenix said Philidor had a group of 10 employees “devoted to calling patients to enroll
`them in the automatic refill program without their permission,” according to the complaint.
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`Philidor workers would leave messages for patients saying “if we don’t hear from you in 24 hours, we will
`process your refill,” according to the intake specialist cited in the complaint. The worker said people “were upset
`with this practice because regardless of whether or not the patient is billed, the refill is billed through their
`insurance and has an impact on a patient’s policies.”
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`Ongoing Investigations
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`New York-based insurer Alleghany Corp. joined the T. Rowe Price securities fraud case, which claims the
`investors relied on Valeant’s misrepresentations and omissions. Valeant is facing investigations from Congress
`and the U.S. Securities and Exchange Commission. The Wall Street Journal reported last week that federal
`prosecutors are investigating potential fraud.
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`Valeant’s Chief Executive Officer Joe Papa said the company hasn’t set aside any money to pay for potential
`fines or litigation judgments, David Maris, a senior analyst at Wells Fargo Securities LLC, said in a note to
`investors Thursday. He said he expects Valeant will have to pay $2 billion in litigation expenses.
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`“We find the growing list of investigations potentially overwhelming for any management team, let alone one
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`ACRUX DDS PTY LTD. et al.
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`EXHIBIT 1542
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`IPR Petition for
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`U.S. Patent No. 7,214,506
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`Suit Alleges Valeant Ran Secret Prescription Refill Scam
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`http://www.insurancejournal.com/news/national/2016/08/19/423867.htm...
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`that is dealing with a significant business disruption and management turnover,” Maris said.
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`Confidentiality Agreements
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`Secrecy was so important to the Valeant-Philidor relationship that the employees had to sign confidentiality
`agreements “empowering the pharmacy to sue workers who divulged information about its activities,” according
`to a patient-care specialist cited in the complaint.
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`Philidor’s internal policy also mandated that Valeant-branded drugs be dispensed, even if a prescription called
`for a generic, said an adjudication specialist cited in the complaint.
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`“Philidor told employees to always put ‘brand’ in Philidor’s computer system and to change the prescription in
`order to dispense a brand drug,” the specialist said. “Indeed, her supervisor told her that, ‘We do not dispense
`generics. You give them the brand drugs.”‘
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`None of the employees cited in the complaint are named.
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`‘Massive Risks’
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`Valeant engaged in a “growth by acquisition strategy” and continually reported revenue and earnings growth
`while shielding the secret network of controlled pharmacies and other practices from investors, exposing it to
`“massive risks,” T. Rowe Price said in the lawsuit, filed in Trenton, New Jersey, on Aug. 15. The company’s
`U.S. unit is based in Bridgewater, New Jersey.
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`Company spokeswoman Laurie Little said the complaint repeats allegations and claims made in a suit filed last
`October that seeks class-action status.
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`“Valeant intends to defend itself and cannot comment further on ongoing litigation,” Little said in an e-mail.
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`T. Rowe Price owned 1.48 million shares of Valeant as of June 30, down 31 percent from the previous quarter,
`according to data compiled by Bloomberg. Valeant shares fell 2.7 percent to $29.19 Thursday in New York
`trading. The stock hit a high of $262.52 on Aug. 5, 2015.
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`Valeant severed its ties with Philidor in October, following reports about tactics the mail-order pharmacy
`allegedly used to gain more insurance reimbursements for Valeant medicines. They included submitting claims
`using other pharmacies’ identification numbers and altering codes on some doctors’ prescriptions. Valeant didn’t
`originally reveal its full relationship with Philidor, which included shared staff and an option to acquire the
`business.
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`Ex-CEO Sued
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`Beyond Valeant, the complaint cites six current and former executives as defendants, including former Chief
`Executive Officer Michael Pearson and former interim CEO Howard Schiller.
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`According to the complaint, Valeant hired former Medco Health Solutions Inc. executive Laizer Kornwasser in
`2013 to oversee its relationship with Philidor. Kornwasser, who left Valeant last year, received $8.8 million in
`cash and stock awards in his first year, according to the complaint, which didn’t cite the source of its
`information.
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`Valeant put a 30-person team inside Philidor “with instructions to show doctors how to direct patients to Valeant
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`Suit Alleges Valeant Ran Secret Prescription Refill Scam
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`http://www.insurancejournal.com/news/national/2016/08/19/423867.htm...
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`products,” according to the complaint. “At different points in Philidor’s evolution, Valeant employees were
`responsible for performing a variety of key business functions for the pharmacy, including interviewing Philidor
`job applicants and overseeing the pharmacy’s billing operations,” the complaint said.
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`The case is T. Rowe Price Growth Stock Fund Inc. v. Valeant Pharmaceuticals International Inc., 16-cv-05034,
`U.S. District Court, District of New Jersey (Trenton).
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