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Valeant Stocks Tumbles 9% After Company Confirms It Has Received Federal Subpoenas
Back on September 28, when the specialty biotech drug scandal was just getting started and leading to a biotech bear market, Valeant stock suddenly plunged $50 leading to massive losses for its top holder Bill Ackman...
... when it was revealed that House democrats had requested a Valeant subpoena. To be sure, the company promptly made it clear that an official subpoana had not actually been sent, just that some politicians were demanding one.
That changed overnight when Valeant issued a press release providing an "update regarding government inquiries", in which we learn that the subpoena is now official. To wit:
Valeant recently received a subpoena from the U.S. Attorney's Office for the District of Massachusetts and a subpoena from the U.S. Attorney's Office for the Southern District of New York. Most of the materials requested by the subpoenas relate to documents with respect to our patient assistance programs, and also include requests relating to financial support provided by the company for patients, distribution of the company's products, information provided to the Centers for Medicare and Medicaid Services, and pricing decisions. The company is reviewing the subpoenas and intends to cooperate with the investigations.
"All of us at Valeant firmly believe in maintaining strong regulatory and financial controls and believe we have operated our business in a fully compliant manner," stated Pearson. "We remain committed to assisting eligible patients who need our products, and we will be working with the appropriate groups to submit the requested documents and plan to cooperate with the inquiries."
The WSJ adds that "like many other drug companies, Valeant provides help to patients covering the out-of-pocket costs imposed by private health insurers. In 2014, Valeant spent $544 million on patient assistance, and expects to spend $630 million this year, according to a letter Valeant sent to Sen. Claire McCaskill (D., Mo.) on Wednesday."
Under federal law, companies can’t provide such assistance to patients insured by Medicare or other government insurance programs because the help is considered an illegal kickback. To help patients afford their drugs and get reimbursed by payers, Valeant and other companies give funding to private foundations that independently help Medicare patients.
The company’s drug pricing has drawn scrutiny from doctors, hospitals and Democrats in Congress after The Wall Street Journal reported in April about how it and some other companies buy and then significantly raise the prices of drugs. The article featured two drugs used in cardiac care, Nitropress and Isuprel, whose prices Valeant increased by 525% and 212%, respectively, after acquiring the medicines in February.
The WSJ implies that Valeant's drug inflation, which is unprecedented as we have shown before...
... will be in Congressional crosshairs and may limit any incremental stock gains from here on out:
Since 2007, Valeant’s drug prices have grown by a compounded annual rate of 48%, and the increases have offset declines in the volumes of drugs the company has sold, resulting in a net prescription-drug sales gain of 32%, analysts at Sector & Sovereign Research LLC said in a research note Wednesday.
These price hikes have made Valeant “one of the five largest contributors to” drug market inflation in the U.S. over the past 1½ years, Sector & Sovereign analysts wrote.
This was the be expected: we warned on October 4 that "More Pain For Biotechs Ahead: Valeant's "Astronomical" Price Increases Take Center Stage."
Sure enough, as of this moment, Valeant stock was crashng once again, down 9%, or $16 per share, which is more bad news for Bill Ackman, whose 20 million VRX shares means he is starting the day over $300 million in the hole.
Billionaire problems aside, what we are more interested in is where Valeant CDS will open for trading. As of two weeks ago it had blown out to multi-year highs in the mid-400s, and implied a 32% probability of default. Something tells us today's trades will look even uglier.
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Just look at the drug price increases.
Yes, Virginia, there is no inflation in the USA. Official inflation was 0.8% and Chapwood Index showed inflation of 9.7% in 2014. So official US GDP in 2014 was 8.9% lower than real US GDP based on the Chapwood Index
Prescription drugs cost up to 10 times more in the United States than they do in other countries
9 October 2015http://www.wsws.org/en/articles/2015/10/09/drug-o09.html …
Subpoenas all around, glad that's over.
No worries....they have the law firm of Lois Lerner and Hillary Clinton on retainer.....they're teflon baby!
If it gets dicey they're gonna call in some guy named Jon Corzine. I don't know who he is....but I've heard he's pretty good.
Corzine . . . name rings a bell . . .
wasn't he the smartest guy the room?
So official US GDP in 2014 was 8.9% lower than real US GDP based on the Chapwood Index
Sorry, it shows that real US GDP, based on accurate inflation, was 8.9% lower in 2014. Had not had my coffee yet.
There was a kid on a corner selling pencils for $10,000 a piece. When asked why so much he said "But I only need to sell one."
It turns out, this might not be such a great business model.
But I thought Obamacare was free.....Oh wait that's only if you're an Illegal.....
Trickle, trickle, each day we get 'bits' of news like this and then the 'market' jumps on hints of further stimulus or extended ZIRP (or hints of NIRP). Pathetic.
DavidC
They do this because they can. Some MBA type came up with a great idea. Now the government will fine them, forcing them to ah, umm, raise prices.
This Banker mentality is metasticizing through the entire fabric of our lives.
Everything is a scam now.
pods
default is not in the cards, not sure why cds is 32%
Subpoena = A document issued by government authorities when the target recipient fails to pay enough money to government authorities to deter its issuance.
Granted, they're likely one of many profiteering assholes, but this sounds like a buildup to a new election year meme - "Healthcare isn't high because of Obamacare, it's high because of Valeant!". Then attention is focused on the entire industry as the complicit media whips the frenzy even further. Lather, rinse, repeat.
"We have found a witch (scapegoat), may we burn her (them)?"
Big buy apportunity ... If Valeant has learned anything, they should know that all they have to do is go before congress and plead the fifth. After about an hour of that, congress will look around at each other like idiots (shocker) and declare "Case Solved! Nothing more to see here!"
sum ting wong!!!!!!!!!
These price distortions are a direct result from government, as a consumer with a bottomless pocket, creating a huge distortion in the supply/demand equation. Government, willing and able to pay whatever price pharma companies charge; combined with current patent protections giving these companies a veritible monopoly, they can charge whatever they want and get away with it. Institute cross border competition and a competition clause to the patent law allowing competitors to offer competing products with more benefit or fewer side affects (slightly different). I think these two changes would help normalize medical/pharma costs in the US.
Bill Ackman, taking it up the pooper once again. Couldn't happen to a nicer fella. Dear Bill, hope you're enjoying that 700 million loss.
http://fortune.com/2015/10/07/bill-ackman-valeant-drug-prices/