Valeant Severs Ties with Philidor

Valeant announced on Oct. 30, 2015 that it will end its relationship with Philidor Rx Services, a mail-order pharmacy that primarily dispensed Valeant medications and circumvented the traditional pharmacy drug channels. The New York Timesreports that Philidor will also cease business operations altogether, following a Bloomberg article that reported that many benefit managers, such as Express Scripts, CVS Health, and OptumRx would stop reimbursing prescriptions dispensed by Philidor. The PBMs also said they would investigate other “captive pharmacy” arrangements, wherein a pharmacy primarily dispenses medications from a single manufacturer or a handful of interrelated companies.

The use of the direct dispensing arrangement through Philidor allowed Valeant to secure revenue for its branded medications by making sure that no automatic generic substitutions for cheaper alternatives could occur. By preventing generic substitution through the routing of prescriptions through Philidor, Valeant has been accused of keeping drug prices high. While many of the high drug prices did not directly affect patients in the short term, and many of the prescriptions were reimbursed in full by insurers, in the long term, practices like those seen at Philidor could mean higher insurance premiums for patients.

“The newest allegations about activities at Philidor raise additional questions about the company’s business practices,” Valeant's CEO J. Michael Pearson said in a news release on Oct. 30, 2015. “We have lost confidence in Philidor’s ability to continue to operate in a manner that is acceptable to Valeant and the patients and doctors we serve.” Pearson said earlier in the week that it stood by the way Philidor’s revenues were absorbed into Valeant’s overall revenue projections, saying that the revenues through this stream were less than 10% of total revenue, making the business not material under Generally Accepted Accounting Principles. By the end of the same week, after a closer look at Philidor’s activities, Valeant said it would end its relationship with Philidor.

Pharmacy workers at Philidor have been accused of using fake names to conduct business, altering doctor’s prescriptions to favor dispensing of medications from Valeant and using unauthorized affiliate identification numbers to drive reimbursement fulfillment, among other claims. Pearson did not necessarily admit to wrongdoing, and communicated that the allegations were surprising for Valeant: “We understand that patients, doctors and business partners have been disturbed by the reports of improper behavior at Philidor, just as we have been,” he said in a statement.

Meanwhile, the newest media stories on Philidor’s practices seem to have abandoned the designation of Philidor as a specialty pharmacy, which the National Association of Specialty Pharmacy called a “mischaracterization.” Earlier in the week, however, even Valeant itself referred to Philidor as a specialty pharmacy in official slide presentations, indicating that some confusion still exists-even at the manufacturer level-on the true definition of specialty pharmacy.

Sources: Valeant, Bloomberg, the New York Times, NASP