Editorial
`
`Volume 11, No. 2 • February 2016
`
`Is Walgreens
`Valeant’s New Philidor?
`The title of my editorial in the September 2015 issue of The
`
`high prices for many of Valeant’s dermatology (e.g., Jublia,
`Luzu, Solodyn) and ophthalmology products. In the financial
`community, however, Valeant was viewed as a very attractive
`investment – until October.
`
`Pharmacist Activist is “Daraprim – The Ultimate Drug
`Pricing Outrage?” It addressed the situation in which
`Turing Pharmaceuticals raised the price of Daraprim from
`$13.50 a tablet to $750 a tablet. However, the title of that
`editorial was premature in light of more recent information re-
`garding pricing and marketing strategies for certain prescrip-
`tion medications.
`
`Valeant Pharmaceuticals has grown in size by acquiring oth-
`er pharmaceutical companies and their products. However,
`in comparison to most large pharmaceutical companies, its
`investment in research and related programs to develop new
`drugs has been very small. To many pharmacists, Valeant is
`best known for dramatic price increases and very high prices
`for its products, including some that are not available from
`other sources. As examples, in early 2015 Valeant acquired
`two drugs that have been marketed for many years – Isuprel
`injection (isoproterenol hydrochloride) and Nitropress injec-
`tion (sodium nitroprusside) – and promptly raised their pric-
`es 525% and 212%, respectively. The attempted justification
`for these increases is the observation of their outside consul-
`tants that the previous prices for the drugs do not reflect their
`“true value.” Concerns have also been raised regarding the
`
`Philidor
`
`Philidor was a “specialty” pharmacy that was unknown to
`most prior to October 2015. In a short period of time it had
`grown to the point that it had hundreds of employees. Its
`growth apparently was attributable to its “specialization” in
`dispensing Valeant products. However, from information
`learned from internal documents and former employees, se-
`rious questions exist about its operations. It is alleged that
`Philidor employees used strategies to dispense high-priced
`Valeant products (e.g., hundreds of dollars for a 60-gram tube
`of Luzu) instead of much less expensive equivalent products.
`The strategies were designed to obtain maximum reimburse-
`ment from PBMs and insurance companies with explanations
`such as prescribers had insisted that the brand-name Valeant
`product be dispensed as written. Prescription co-pays were
`discounted or waived for patients as an incentive to have
`them use Philidor’s mail-order pharmacy, and prescription
`refills were provided without being specifically requested by
`
`Contents
`
`NEW DRUG REVIEW: Mepolizumab (Nucala – GlaxoSmithKline) .....................................................................Page 3
`
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`Page 1 of 4
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`ACRUX DDS PTY LTD. et al.
`
`EXHIBIT 1543
`
`IPR Petition for
`
`U.S. Patent No. 7,214,506
`
`

`

`2
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`patients. The following example provides further insights re-
`garding the strategies employed.
`
`Philidor is Valeant (or not?)
`
`Luliconazole (Luzu) cream is a topical azole antifungal
`agent that was approved by the FDA in late 2013 for the
`treatment of interdigital tinea pedis, tinea cruris, and
`tinea corporis. One of Valeant’s statements in promoting
`the product is, “Luzu is the only topical azole antifungal
`approved to treat athlete’s foot between the toes with
`once-daily, 2-week treatment.” This statement is accurate
`but conveniently ignores the availability of other topical
`antifungal agents such as terbinafine (Lamisil AT) that is
`used for this condition once-daily for just 1 week. When
`I reviewed luliconazole as a new drug, it was one of a very
`few drugs to which I have given the lowest rating of 1
`(important disadvantages) on a scale of 1 to 5 in my New
`Drug Comparison Rating system. I remember wondering
`to myself who would use this prescription product when
`terbinafine is at least equally effective, is available without
`a prescription, is used for a shorter treatment period, and
`is much less expensive. I didn’t have to wait long to find
`out from the following experience shared by a patient.
`
`The patient was prescribed Luzu for athlete’s foot but
`was surprised that the prescriber suggested that he
`obtain the prescription from a mail-order pharmacy
`(Philidor) that would cover the co-pay for the first
`prescription. The prescription was delivered and several
`weeks later the patient received a call from Philidor
`offering to waive his co-pay for all his remaining refills.
`The patient observed that he probably would not have
`needed or ordered the refills if he would have been
`charged a co-pay. He now has “a few years’ supply of
`athlete’s foot cream” and is also suspicious of what
`incentives the prescriber may have received, as well as the
`relationship between Valeant and Philidor.
`
`Other questions also exist regarding Philidor’s operations and
`the Philidor - Valeant relationship. At least some of Philidor’s
`employees were asked by the company to sign agreements that
`they would not discuss the company’s operations. Philidor
`moved to acquire or open pharmacies in other states for the
`apparent purpose of having multiple pharmacies from which
`to submit claims to PBMs and insurance companies. To the
`credit of the California Board of Pharmacy, it denied issuing
`a license because of questions regarding the ownership and
`operations of Philidor.
`
`The more that is learned about Philidor, the stronger the
`allegations become. It has been alleged to be a “phantom
`pharmacy” that existed to increase the sales of Valeant prod-
`ucts using questionable practices. Its business and account-
`ing practices have been questioned. It has been alleged to be
`owned by or operated under the direction of Valeant. For
`many months there had not been a general awareness of a re-
`lationship between Valeant and Philidor. However, it is now
`known that Philidor accounted for about 7% of Valeant’s
`revenue. Valeant has reported that in late 2014 it paid $100
`million for an option to buy Philidor. Current or former
`Valeant employees using fake names were alleged to be in-
`volved in the operations of Philidor.
`
`As the concerns of investors and others intensified and Valeant’s
`stock value plunged, Valeant decided to end the relationship
`with Philidor. A letter dated November 2, 2015 from the CEO
`of Valeant to physicians and other healthcare professionals in-
`cludes the following statement:
`
`“We know many doctors and patients were concerned
`about the recent allegations surrounding Philidor’s
`business practices, and so were we. Given those
`questions, we decided it was appropriate to terminate
`our relationship with Philidor.”
`
`The CEO of Valeant has also stated that “Operating hon-
`estly and ethically is our first priority. . .” Both Philidor and
`Valeant announced that Philidor would be shutting down its
`operations.
`
`The more that is learned about the Valeant - Philidor rela-
`tionship and their business practices, the questions and sus-
`picions become even stronger that there is much more still to
`be learned. As an important example, how could Valeant pay
`$100 million for an option to purchase Philidor and now try
`to claim that it was unaware of its business practices?
`
`Valeant and Walgreens
`
`On December 15, 2015 Valeant and Walgreens jointly an-
`nounced 20-year fulfillment agreements involving the two
`companies that are “designed to help enhance patient care
`through expanded services and lower out-of-pocket expenses.”
`
`(Continued on Page 4)
`
`Volume 11, No. 2 • February 2016
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`Page 2 of 4
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`Volume 11, No. 2 • February 2016
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`3
`
`New Drug Comparison
`Rating (NDCR) = 4
`(significant advantages)
`in a scale of 1 to 5 with 5 being
`the highest rating
`
`New Drug Review
`Mepolizumab (Nucala – GlaxoSmithKline)
`Antiasthmatic Agent
`Indications:
`Administered subcutaneously for the add-on maintenance
`treatment of patients aged 12 years and older with severe
`asthma and with an eosinophilic phenotype; Is not indicated
`for the treatment of other eosinophilic conditions, or for the
`relief of acute bronchospasm or status asthmaticus.
`Comparable drugs
`Omalizumab (Xolair).
`Advantages:
`• May increase the effectiveness of treatment of patients with
`severe asthma and with an eosinophilic phenotype;
`• May permit a reduction in dosage of oral corticosteroids;
`• Has a unique mechanism of action (is an interleukin-5 [IL-5]
`antagonist);
`• Less risk of anaphylaxis (labeling for omalizumab includes a
`boxed warning regarding this risk);
`• Is not likely to be associated with the occurrence of
`eosinophilic conditions.
`Disadvantages:
`• Labeled indications are more limited (indications for
`omalizumab include patients with moderate to severe allergic
`asthma, as well as chronic idiopathic urticaria).
`Most important risks/adverse events:
`Hypersensitivity reactions (e.g., rash, pruritus, angioedema,
`bronchospasm; treatment should be discontinued if reactions
`occur); should not be used to treat acute bronchospasm or status
`asthmaticus; reduction in dosage or discontinuation of systemic or
`inhaled corticosteroids (if appropriate, dosage should be reduced
`gradually under the supervision of a physician, to avoid systemic
`withdrawal symptoms and/or unmasking of conditions previously
`suppressed by systemic corticosteroid therapy); opportunistic
`infections (risk of herpes zoster infection and, if appropriate,
`varicella vaccination should be considered prior to starting
`treatment); helminth infections (should be treated prior to starting
`treatment; if a helminth infection develops during treatment
`and does not respond to anti-helminth treatment, mepolizumab
`should be discontinued until the infection resolves).
`Most common adverse events:
`Headache (19%), injection site reactions (8%), back pain (5%),
`fatigue (5%).
`
`Usual dosage:
`100 mg every 4 weeks administered subcutaneously into the
`upper arm, thigh, or abdomen.
`Product:
`Single-dose vials – 100 mg of lyophilized powder for
`reconstitution; should be reconstituted and administered by a
`healthcare professional; contents of a vial should be reconstituted
`with 1.2 mL of Sterile Water for Injection; reconstituted
`solution should not be shaken to avoid foaming and/or
`precipitation; product labeling should be consulted for specific
`recommendations for reconstitution and administration.
`Comments:
`Many patients with asthma do not experience adequate reduction
`of symptoms and associated complications with available
`treatments, and there are more than 400,000 asthma-related
`hospitalizations each year in the United States. Multiple cell
`types, including eosinophils, and mediators (e.g., cytokines) are
`involved in the inflammatory process that occurs in the airways
`of the lungs. Interleukin-5 (IL-5) is the major cytokine that
`is responsible for the growth and differentiation, recruitment,
`activation, and survival of eosinophils. Mepolizumab is an
`IL-5 antagonist that reduces the production and survival of
`eosinophils. It has been approved for use in conjunction with
`other maintenance treatments for patients with severe asthma
`and with an eosinophilic phenotype.
`
`The effectiveness of mepolizumab was demonstrated in three
`placebo-controlled trials in which either the new drug or placebo
`was added to an existing treatment regimen (e.g., oral and/
`or inhaled corticosteroids). In one of the studies, the primary
`endpoint was the percent reduction of the oral corticosteroid dose
`during weeks 20 to 24 compared with the baseline dose, while
`maintaining asthma control. Twenty-three percent of the patients
`treated with mepolizumab had a 90% to 100% reduction in
`their oral corticosteroid dose, compared with 11% in the placebo
`group. Additionally, 54% of patients treated with the new drug
`achieved at least a 50% reduction in the daily prednisone dose
`compared with 33% of those receiving placebo. Mepolizumab
`did not provide consistent improvements in mean change from
`baseline in mean forced expiratory volume in 1 second (FEV1).
`
`Daniel A. Hussar
`
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`
`Page 3 of 4
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`4
`
`The announcement notes that Valeant will reduce prices by
`10% for all its dermatological and ophthalmological products
`distributed through more than 8,000 Walgreens retail outlets.
`It is further noted that Valeant plans to further extend distribu-
`tion of these products to “additional participating independent
`pharmacies” (editor’s note: Independent pharmacies beware!).
`
`The announcement also identifies a separate agreement that
`states:
`
`“Valeant will also distribute certain branded products,
`that have generics available, in the dermatology,
`ophthalmology, gastrointestinal and neurology/other
`therapeutic areas through Walgreens at generic prices; an
`expected average price decrease of more than 50 percent.”
`
`Glumetza (metformin extended-release tablets) is one of the
`products included in this separate agreement. Valeant raised the
`price of Glumetza by 800% in 2015, resulting in harsh criticism
`from the patients who suddenly had to pay much more for the
`drug, as well as many others. Express Scripts has announced
`that when generic versions of Glumetza become available this
`month that it will block reimbursement for Glumetza. The
`chief medical officer of Express Scripts has also indicated that
`every claim for Valeant products will be getting “extra scrutiny”
`to be sure that the PBMs rules are being followed.
`
`The Valeant – Walgreens agreements warrant investigation, if
`in fact it will be possible to learn the specific terms and finan-
`cials of the agreements. However, just based on the statements
`noted above, it can be concluded that when a discount of 10%,
`50%, or some other percentage is deducted from an outra-
`geously high price, the discounted price will still be very high
`and may still be much higher than that of other products that
`are equivalent in effectiveness and safety.
`
`Numerous questions exist. It has been suggested that the
`Valeant – Walgreens agreements may result in “savings”
`
`by avoiding the middlemen (i.e., wholesalers). If Express
`Scripts and other PBMs will not cover Valeant products like
`Glumetza, Jublia, and Luzu, will Valeant/Walgreens pro-
`vide alternative prescription benefit coverage for patients for
`whom these products are prescribed, thereby avoiding the
`PBM middlemen? If so, will the prescription benefit cov-
`erage for patients for these products be similar to or better
`than their previous coverage? Will Walgreens receive fees
`from Valeant for dispensing prescriptions for these products
`that are higher than the fees that would be expected from
`a PBM? Is it true that Walgreens will receive Valeant drugs
`on consignment, thereby enabling it to reduce inventory
`costs? What financial incentives are being provided to Wal-
`greens that have resulted in its participation in long-term
`agreements with a company whose drug prices and busi-
`ness practices have been so strongly criticized? Is Walgreens
`Valeant’s new Philidor? Can Walgreens withdraw from the
`agreements?
`
`And more questions
`
`When concerns about Philidor’s operations and its relation-
`ship with Valeant became public in the fall of 2015, Valeant
`appointed an Ad Hoc Committee of the Board of Directors
`to review the company’s relationship with Philidor and relat-
`ed matters. On February 23, it was announced that there has
`been a preliminary identification of certain sales to Philidor
`(approximately $58 million of net revenues) that should have
`been recognized when products were dispensed to patients
`rather than on delivery to Philidor. The questions regarding
`the accounting practices are likely to necessitate a restatement
`of Valeant’s earnings. But will the review of this Committee go
`beyond the evaluation of accounting practices? For example,
`will the allegation that current or former employees of Valeant
`were involved in the operations of Philidor be investigated?
`The questions continue!
`
`Daniel A. Hussar
`
`Volume 11, No. 2 • February 2016
`
`w w w.pharmacistactivist.com
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`Page 4 of 4
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