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Ackman, Valeant Pledge Reforms After Spiking Drug Prices

Thursday, Apr 28, 2016

Activist investor William Ackman promised U.S. lawmakers on Wednesday that he will urge the board of Valeant Pharmaceuticals (VRX.TO) to reduce the high prices of four life-saving drugs that are now at the heart of two congressional probes.

Speaking before the Senate Special Committee on Aging, Ackman revealed that Valeant's board will hold a conference call on Thursday to discuss the costs of heart medications Isuprel and Nitropress, as well as Cuprimine and Syprine, two drugs that are used to treat a genetic disorder that causes copper to build up in the body's organs.

Valeant raised the price of Isuprel by about 720 percent and Nitropress by 310 percent, after acquiring them in 2015. The other two were raised by 5,878 percent and 3,162 percent, respectively.

"My recommendation is going to be to reduce the prices," Ackman testified.

The Senate Special Committee on Aging is one of two U.S. congressional panels investigating sky-rocketing price increases of certain decades-old drugs acquired by companies including Valeant and Turing Pharmaceuticals, a company founded by Martin Shkreli.

Ackman, a major Valeant shareholder, appeared Wednesday alongside the company's outgoing Chief Executive Michael Pearson and Howard Schiller, a board member and former chief financial officer.

Ackman joined the board last month as Valeant faced mounting scrutiny by members of Congress, prosecutors and regulators over its drug pricing, business practices and accounting - issues that have caused its share price to plummet almost 90 percent since August.

Valeant has about $30 billion of debt and has been negotiating with creditors, some of whom issued notices of default after it missed a deadline for the filing of its financial results.

Ackman said Wednesday that one of his top priorities is to protect the company from bankruptcy. Later, in response to a question from Reuters, he expressed confidence that the company will recover.

“There is not going to be any bankruptcy of Valeant,” he said. “We were in a death spiral, and we have taken steps to deal with the banks. We are going to file our 10K on time. We brought in a new CEO.”

Pearson, Ackman and Schiller all told lawmakers on Wednesday they regretted Valeant's pricing decisions.

"The company was too aggressive and I, as its leader, was too aggressive in pursuing price increases on certain drugs," he said.

But many lawmakers on the panel appeared skeptical. They questioned Valeant's business model of investing little in research and development, and the company's practice of acquiring decades-old drugs and raising the prices.

Senator Claire McCaskill, the panel's top Democrat, angrily asked each of the panelists at one point if they could recall one drug that Valeant didn't raise the price on.

"Not in the United States," Pearson responded, while Schiller was only able to come up with the name of one drug Valeant acquired after its purchase of Salix.

"That is not social good, that is social bad," McCaskill said.

Lawmakers also questioned whether Valeant's patient assistance and rebate programs are truly helping patients and hospitals afford the medications.

Senator Susan Collins, the panel's chairman, said her committee's investigation has thus far been unable to find a single hospital that has received a discount.

"I can assure you that many of the large hospital systems are getting discounts on the heart drugs," Pearson said.

Pearson is expected to step down in the coming weeks to make way for the incoming CEO, Joseph Papa, previously of Perrigo Company (PRGO.N).

Wednesday's hearing also featured testimony from doctors and a patient with Wilson's Disease who was forced to stop using Syprine because of the price spike.

Dr. Frederick Askari of the University of Michigan told the panel that the cost of Syprine is now so high that it has become less expensive to get a liver transplant and a life-time supply of anti-rejection medications.

The patient, Berna Heyman, testified that Valeant refused to help her when she called to complain about the prices. Later, after speaking with the media, the company changed its tune, offered to help, and even sent flowers.

"I refused the flowers," she said.

 

Source : reuters.com

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