Valeant’s story: a cautionary tale

Dan Gorenstein Mar 21, 2016
HTML EMBED:
COPY
Howard Schiller, then interim CEO of Valeant Pharmaceuticals International, Inc., listens during a hearing of the House Oversight and Government Reform Committee on Capitol Hill February 4, 2016 in Washington, DC.  BRENDAN SMIALOWSKI/AFP/Getty Images

Valeant’s story: a cautionary tale

Dan Gorenstein Mar 21, 2016
Howard Schiller, then interim CEO of Valeant Pharmaceuticals International, Inc., listens during a hearing of the House Oversight and Government Reform Committee on Capitol Hill February 4, 2016 in Washington, DC.  BRENDAN SMIALOWSKI/AFP/Getty Images
HTML EMBED:
COPY

The controversial company Valeant Pharmaceuticals  is in the middle of what one analyst called a soap opera.

On Monday, the company announced that its current CEO is stepping down, a big-name investor is joining the board of directors and its financial future is in question.

While this all may be rough news for investors, it could be good news for all of us who buy prescription drugs.

The Kaiser Family Foundation recently found seven out of ten Americans believe drug companies worry more about profit than patients.

Enter Valeant Pharmaceuticals.

“What Valeant is doing is buy somebody else’s research. Put it in a new bow. Try to make it pretty and then jacking up the price,” said Johns Hopkins economist Gerard Anderson.

In one instance, Valeant raised the price of a heart medication 500 percent in one day.

Bloomberg Intelligence analyst Liz Krutoholow said to make money, Valeant aggressively raises prices.

“If you look at a specialty pharma company, increases may be nine percent per year. And Valeant in most cases was looking at nine to ten percent per quarter,” she said.

For a while, Valeant rode the wave of Wall St love.

But Congress started asking questions about its business model, insurers pushed back and large employers balked.

“You can’t just jack up your prices and expect coverage on them,” said Krutoholow.

Monday, Valeant shares traded for about $30, down more than 90 percent from this past summer.

Harvard’s Meredith Rosenthal said it’s a warning sign to would-be Valeants.

“While we expect pharmaceutical companies to behave like all other companies, really on the edges, we don’t,” she said.

At some level, she says, there’s this unspoken agreement that it’s ok to make money, hell, lots of money.

But if it seems to cross from profit to greed, that’s not tolerated, even in our healthcare system where we pay more for drugs than anywhere else. 

As a nonprofit news organization, our future depends on listeners like you who believe in the power of public service journalism.

Your investment in Marketplace helps us remain paywall-free and ensures everyone has access to trustworthy, unbiased news and information, regardless of their ability to pay.

Donate today — in any amount — to become a Marketplace Investor. Now more than ever, your commitment makes a difference.