Senate Committee Offers Inside Look at the Rise and Fall of Valeant Pharmaceuticals

The 800 pages of internal emails, correspondence and drug pricing statistics released by the Senate Special Committee on Aging over the weekend offers an inside look at how the multibillion-dollar Valeant Pharmaceuticals with 22,000+ employees jacked up the prices of a number of drugs, by as much as 6,000%, and then lamented the subsequent media and investor questions.

The document dump by the committee comes almost two weeks since the company’s former CEO, J. Michael Pearson, and one of its top investors, Bill Ackman, among others, testified before the Senate committee and apologized for the price hikes, though the company also made no promises about lowering those prices. The company’s new CEO, Joseph Papa, took over on Monday with an annual salary of $67.4 million.

At the hearing in late April, Pearson could not name a single drug offered by Valeant that has not seen a price increase in the US, and though the company has been under heat for its business model, with numerous patients complaining that they can no longer afford their medicines, the company is still raising the prices of its top revenue-generating drugs in 2016, particularly with its drug Xenazine (tetrabenazine), which is used to treat the involuntary movements of those afflicted with the rare disease known as Huntington's disease.

Steep Price Hikes

Perhaps the most egregious example of the company’s numerous pharmaceutical price hikes is with the drug Cuprimine (penicillamine), which treats Wilson's disease, cystinuria and can help patients with severe, active rheumatoid arthritis.

As reported in the New York Times last October, patients who have been taking Cuprimine for decades are now struggling to afford it and the company has recommended that at least some of those patients apply to a foundation to help pay for it.

According to the Senate committee documents, the drug’s price rose by a staggering 5,786% in a little more than five years following the company’s acquisition of Aton Pharma in 2010. And the price of Cuprimine over the past ten years has risen from $93 to $26,188.64, with a 300% increase in the month of July 2015 alone. Another Wilson's disease treatment, Syprine (trientine hydrochloride), saw similar exorbitant increases.

According to a letter from Robert Kelner, a Valeant attorney hired in December 2015, to the Senate committee, the company estimates that between 600 and 700 patients in US take Cuprimine. However, Valeant also sells Cuprimine in Canada and Brazil.

“In Canada, the current wholesale price of Cuprimine is C$352.85 [$271 US dollars] for 100 tablets (C$74.92 [$57.75 US dollars] in Quebec). In Brazil, the price that a manufacturer may charge is R$239.75 [$67 US dollars] for 100 tablets (R$171.39 [$48.37 in US dollars] if purchased by a public entity),” Kelner wrote, noting that government bodies in Canada and Brazil negotiate those prices, though no such equivalent government body exists in the US.

In 2015, 13% of Cuprimine sales in the US were made through Medicaid and 22% were made through Medicare, according to documents signed by Robert Rosiello, executive vice president and Chief Financial Officer of Valeant.

And although Valeant insists that it offers patient assistance programs to help patients pay for Cuprimine, 0% of Cuprimine sales in 2015 and 2016 were attributed to patient assistance programs, according to Rosiello.

Two other examples of Valeant drugs that were acquired in 2015 from Marathon Pharmaceuticals and have seen steep increases as of late include the off-patent blood pressure drug Nitropress (nitroprusside sodium) and the off-patent heart attack drug Isuprel (isoproterenol hydrochloride), which was first patented in 1943, and on which Ackman told the Senate committee he would encourage the company to make a 30% price reduction.

Isuprel has seen cumulative price increases of 720% since it was acquired and Nitropress has seen a cumulative increase of 310%, though ten years ago, Nitropress cost $5.95 (now it costs $880.88 for the same amount of the drug), according to the Senate documents.

Nitropress contributed approximately $166 million to Valeant's 2015 profit, and Isuprel contributed approximately $185 million, according to Kelner. And although that may seem like a modest amount compared to the size of Valeant, the price increases are having a significant impact on hospitals nationwide.

In letter from Ronald Peterson, president of Johns Hopkins Hospital, and Daniel Ashby, chief pharmacy officer of Johns Hopkins Health System, to the Senate committee, the two note that the “sharp increases in hospital-administered drugs like Nitropress and Isuprel can lead to significant losses because hospitals must absorb unanticipated additional expense. This diminishes funding for community services and challenges the ability of Johns Hopkins and other Maryland hospitals to fulfill their nonprofit missions.”

The budgetary impact for The Johns Hopkins Hospital for just Nitropress and Isuprel was nearly $1 million in FY15, they wrote.

Internal Emails

Much of the 800 pages of documents released by the Senate committee are emails between Pearson, Ackman, who owns a 9% stake in the Canadian company, and other senior management, documenting significant investor and media pressure over the last year, particularly as the company’s dubious pricing strategies came to light in the Wall Street Journal, New York Times and through smaller, investigative media outlets like the Southern Investigative Reporting Foundation.

And as evidenced by Valeant’s press release on filing its Q1 report before its default deadline, issued on Monday, the company is trying to stay on top of its public message.

“Every minute that you wait before sending out a press release, another shareholder capitulates on Valeant and does not come back,” Ackman wrote to Pearson and Howard Schiller, former CFO, when questions arose about the company.

And in October 2015, when the New York Times published an op-ed questioning if Valeant is the next Enron, a large company that went bankrupt in 2001 because of accounting fraud, Ackman went into all-out panic, telling the board of directors, “Time is running out…As you know, it takes a lifetime to build a reputation and only a few minutes to destroy it. Your reputation and that of the rest of the board along with the company is at grave risk of being destroyed on a permanent basis.”

And now that Schiller and Pearson have moved on from Valeant, Ackman and the board seem to be making a concerted effort to turn over a new leaf, though since the Senate hearing, no one from the company has made any indication that its drug prices will be reduced.

“The clock is ticking. We are on the brink of a catastrophe that will dramatically affect the lives of everyone involved in a negative way. You owe it to your employees, patients, shareholders and the community at large to do the right thing,” Ackman wrote in October to Pearson and others on the board.

Unsealed Senate Aging Committee Documents