Just when you (and Bill Ackman) thought the worst was over, an avalanche of insurers and pharmacies are dumping Valeant's Philidor and raising more questions about its activities. VRX is now down 16% on the day, back below the key $100 level (after touching $127 intraday).
The carnage started when Dow Jones reported that two of five independent directors of Sequoia Fund, Valeant’s largest holder, resigned this past weekend:
- *TWO SEQUOIA FUND INDEPENDENT DIRECTORS RESIGN AMID VRX NEWS: DJ
- DJ says Vinod Ahooja and Sharon Osberg quit board this past weekend amid recent scrutiny of VRX
Then, just before the close, we reported that CVS Health, the second-biggest pharmacy-benefit manager in the U.S., had cut off Valeant's specialty chain Philidor, saying that "where CVS goes, others will promptly follow, not only leading to a prompt termination of any and all overinvoicing benefits Philidor provided to Valeant, but also leading to a crack down on specialty pharma organizations everywhere, and likely finally inviting a federal inquiry into just what is going on, because for a pharmacy to admit that there was fire where until just now there was nothing but smoke, not even the Feds can ignore that."
This is precisely what happened literally minutes later when as Bloomberg reported minutes ago Express Scripts also terminated Philidor from its pharmacy network:
- *EXPRESS SCRIPTS TERMINATING PHILIDOR PHARMACY FROM NETWORK
- ESRX says in e-mailed statement evaluating all similar captive pharmacy pacts in light of Valeant’s recent revelations of its relationship to Philador.
But the hits kept coming - add another:
*SOME BCBS INSURERS SAID TO REVIEW VALEANT SPECIALTY PHARMACIES
But the knockout punch was the following, which could make a Federal involvmenet here virtually inevitable:
- *PHILIDOR SAID TO MODIFY PRESCRIPTIONS TO BOOST VALEANT SALES
- *PHILIDOR WORKERS SAID TO BE INSTRUCTED ON CHANGING RX CODES
Bloomberg adds that Philidor had altered doctors’ orders to wring more reimbursements out of insurers, according to former employees and an internal document.
Workers at the mail-order pharmacy, Philidor RX Services LLC, were given written instructions to change codes on prescriptions in some cases so it would appear that physicians required or patients desired Valeant’s brand-name drugs -- not less expensive generic versions -- be dispensed, the former employees said. Typically, pharmacists will sell a generic version if not precisely told to do otherwise by a “dispense as written” indication on a script. The more "dispense as written" orders, the more sales for the brand-name drugmaker.
Ex-employees who worked at Philidor in the last two years, and who asked that their names not be used discussing their former employer, confirmed that prescriptions were altered as the document details. They said the intent was to fill more prescriptions with Valeant products instead of generics.
Which, incidentally, is a federal crime.
So apart from all that, Valeant is fine and this is all nothing more than a short-selling-research shop bear raid, right?
* * *
Ahead of Bill Ackman's conference call tomorrow, we can only wish him luck.