Valeant said to be under criminal investigation: WSJ

[SAN FRANCISCO] Valeant Pharmaceuticals International Inc is the subject of a criminal probe by federal prosecutors, who are investigating whether the drugmaker defrauded insurers by hiding its ties to a mail-order pharmacy, the Wall Street Journal reported.

Ther US attorney's office in New York is pursuing an unusual legal theory, previously unreported, that Valeant and the closely linked mail-order-pharmacy, Philidor Rx Services LLC, allegedly defrauded insurers by hiding their close relationship, the Journal said, citing unidentified people familiar with the matter.

A Valeant representative didn't immediately respond to a request for comment.

Prosecutors are looking into whether Philidor made false statements to insurers about its ties to Valeant, the Wall Street Journal said.

Philidor, a specialty pharmacy now defunct, filled prescriptions for Valeant dermatology drugs such as toenail fungus treatment Jublia. Prosecutors are investigating whether insurers thought Philidor was neutral rather than in the service of Valeant, the Journal reported.

Valeant came under scrutiny last year over issues including its business practices, particularly its relationship with Philidor, which was helping boost drug sales. The drugmaker severed its ties with Philidor in October, following reports about tactics the mail-order pharmacy allegedly used to gain more insurance reimbursements for Valeant medicines. They included submitting claims using other pharmacies' identification numbers and altering codes on some doctors' prescriptions.

Specialty pharmacies are common in the drug industry, where they fill prescriptions typically for complex drugs, such as those that require cold storage.

Valeant's relationship with Philidor was closer than usual. Valeant had paid US$100 million for an option to buy Philidor for nothing any time in the next 10 years, and consolidated Philidor's financials into its own.

Valeant has disclosed in filings that it's the subject of investigations by the US Securities and Exchange Commission and the US Attorney's offices in Massachusetts and New York, among others.

BLOOMBERG