Valeant The Bane of The Drug Industry

by James Tang (10133 views)
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Estimated reading time: 1.5 minutes

Valeant Pharmaceuticals International is a multinational speciality pharmaceutical company based in Canada and markets a broad range of pharmaceutical products around the world. Back when the company first launched, it grew through a series of mergers and acquisition under its then CEO J. Michael Pearson. The company was doing extremely well, and for the shortest period in time, was one of the most valuable company in Canada (2015). However, the valuable business was short-lived as it was during that time period when Valeant was involved in one of its largest scandals of all times, eventually crippling the company in debt. Today, we will be taking a look at one of the most blatant scandals in the pharmaceutical industry that happened just two years ago.

Back in 2010, Pearson, the then CEO of Valeant had an idea. He believed that a newer business model for his company would not only make them more profitable but reduce inefficiencies in the company. His great master plan was to turn Valeant into a drug giant, one that focused on mere distribution while allowing others to do the research. Putting aside the ethical considerations in this business model, this model seemed to be catching the attention of people OUTSIDE of the drug industry. Wall Street was confident of this new model, with smart money flooding the company, even allowing the company’s share prices to hit an all-time high of $260. Of course, the drug industry itself was disgusted with the rapid acquisitions of companies, with Valeant acquiring companies and slashing their R&D budgets along with the staff. Not that it mattered – until it did.


In September 2015, serious allegations surfaced regarding the company, with some pinpointing the success of the company to unethical practices such as price gouging and fraud. It hit the company hard and took two whole years before the company started becoming profitable again. However, before the company recovered the number of unethical practices that Valeant was involved in was astounding.

It all started when Bernie Sanders and Congressman Elijah Cummings requested information on why the company had increased the price of a number of heart drugs. Upon further digging, it was discovered that more than 50 other drugs had been controlled by Valeant and their prices were actively being spiked. An example was the AIDS drugs used by patients which rose to an all-time high of 5500%. Before long, a certain other Pharmaceutical company name Philidor was named by Southern Investigative Reporting Foundation. It didn’t take long for investigations to find out the relationship between Valeant and Philidor, eventually discovering that many employees at Valeant were involved in operations at Philidor using fake identities. It was then revealed that Philidor was apparently a pharmacy which sold mainly Valeant drugs to patients and handled insurance claims on the customer's behalf. However, prescriptions had been changed from the more reasonably priced generic drugs to those to Valeant’s high-priced drugs contributing to the large amounts of “profits”.

Thankfully, the crisis was well handled, and Pearson was replaced by Joseph C. Papa, who has since then lead the company to lower its debts and becoming profitable once again.