During a scorching round of questioning on Capitol Hill, two executives and a hedge fund manager tied to Valeant Pharmaceuticals were asked whether the company had ever acquired a drug without subsequently hiking its price. None of the three men could supply an answer.
Outgoing Chief Executive Officer Michael Pearson could not recall. “Not in the U.S.,” he offered.
Former Chief Financial Officer Howard Schiller said he thought that Xifaxan, a gastrointestinal medicine that came with Valeant's acquisition last year of its maker Salix, may have stayed at the same price. In fact, according to a recent report from Wells Fargo analyst David Maris, Xifaxan's price has been hiked at least 9 percent — in 2016 alone.
The executives made the admissions during a hearing Wednesday before the Senate Aging Committee over the company's business model of hiking the price of decades-old life-saving drugs as much as 80 times over after acquiring them. The two executives expressed contrition over the strategies they helped pioneer, and which delivered great profits to Valeant before it fell apart last fall after coming under sharp scrutiny from regulators and lawmakers over its practices.
“In hindsight I regret pursuing transactions where a central premise was a planned increase in the prices of the medicines,” Pearson, who is expected to step down next week, told lawmakers. Those price increases, he affirmed, drove a majority of the company's revenue growth in recent years. The company has also offered patient assistance grants, although not all patients and hospitals qualify for them.
Pearson and Schiller were joined by Bill Ackman, manager of the hedge fun Pershing Square Capital Management, who promised to start changing Valeant's business practices following his recent entrance onto the company's board of directors. He also expressed regret over Valeant's price hikes, which have saddled patients with copays reaching into the thousands of dollars.
“It's horrible,” Ackman, who has been among Valeant's most prominent defenders over the last year, told lawmakers. “It's wrong.”
Despite the regrets voiced by the three men, however, Valeant has apparently continued hiking drug prices into 2016, according to the Wells Fargo report. The top 30 drugs produced by Valeant are 78 percent more expensive today than they were a year ago, the report found.
High-profile government hearings aren't the only headaches facing Valeant. The company has still yet to submit financial filings to regulators and investors for its fourth-quarter results, triggering possible defaults from debtholders. Valeant has promised to file its earnings before the end of April.