Documents obtained during the April 27 Senate hearing investigating drug pricing offers greater clarity into the aggressive price increases adopted by pharmaceutical company Valeant over the past few years, The Wall Street Journal reported. Outgoing CEO Michael Pearson, who commanded the helm of Valeant throughout its rise and fall, was a key force in Valeant's highly criticized pricing scheme.
Over recent years, Mr. Pearson implemented a strategy of sharp, aggressive price increases on drugs Valeant acquired, igniting widespread backlash and landing him before the Senate Special Committee on Aging last week, the third in a series of hearings on drug pricing.
Dozens of documents assessed during the Senate investigation illuminate how Valeant arrived at steep price increases, and underscore the company's current challenge of rolling back some of these prices. This challenge has investors and analysts concerned about how Valeant will turn around profits and service the $30 billion in debt is carries, according to the report. Distress over the company's pricing practices, its accounting and other business practices has resulted in its stock plummeting by 85 percent since its high last summer.
Under the direction of Mr. Pearson, Valeant implemented a profitable strategy of acquiring existing drugs with the potential to raise prices rather than developing them in house. "Bet on management, not on science," he often said, according to the report.
The Senate hearing focused on four Valeant drugs in particular, including Nitropress and Isuprel, which the company acquired from Marathon Pharmaceuticals in February 2015, as well as Cuprimine and Syprine, which were acquired by Valeant in 2013. According to The Wall Street Journal, the price of Cuprimine has risen 5,787 percent to $26,189 since 2013. The cost of Syprine spiked by 2,934 percent to $19,783 during the same timeframe.
Valeant said it is working on setting a new strategy that does not rely as heavily on acquisitions for which price increases are the key motivator. The company's stock has improved by 27 percent over the past month as it finished filing a long overdue annual report, hired a successor for Mr. Pearson and reached an agreement with lenders to avoid a technical default, according to The Wall Street Journal.