Found guilty of defrauding Valeant in a multimillion-dollar kickback scheme, former company executive Gary Tanner and ex-Philidor CEO Andrew Davenport were both sentenced to a year and a day in prison by a New York judge.
The charges stemmed from a too-cozy relationship between Valeant and Philidor, the specialty pharmacy that distributed some of the company's drugs. Tanner and Davenport were accused of steering Valeant toward a $133 million Philidor takeover and away from using competitor pharmacies—and netting millions in the process.
The sentences came in below the prosecutors’ ask, probably thanks to letters of support from family and friends depicting the defendants as hard workers and devoted family members. The prosecutors had requested “substantially above” the Probation Office’s recommendation of 30 months of imprisonment, while defense attorneys were calling for probation instead of prison time.
The two former executives were also each ordered to give back about $9.7 million, the amount involved in the kickback plan.
Valeant has yet to respond to a FiercePharma request for comment by publication time. In its court filing as a non-party in the case, the company said the pair led it to pay more for the buyout option and agreed to a larger Philidor discount for its drugs, and it also argued that Tanner was overpaid for being a “disloyal employee.” Therefore, it requested the court to order $15.5 million in restitution from the defendants.
The sentences are based on convictions handed to the two former execs in May. A spokesman from WilmerHale, the firm representing Tanner, told FiercePharma that they plan to appeal the conviction. Davenport’s lawyer, Sharon McCarthy also said on Tuesday that she plans to appeal, according to The Wall Street Journal.
Valeant’s questionable relationship with now-defunct specialty pharmacy Philidor has come under extensive scrutiny. Valeant allegedly controlled the pharmacy to promote its own expensive branded drugs against cheap generics. Those Valeant drugs once accounted for at least 90% Philidor's dispensing, prosecutors said.
But in this case, the Canadian pharma was painted as the victim of a fraud scheme dreamed up by Tanner and Davenport. The two “conspired to deceive and defraud Tanner’s employer, Valeant, in order to enrich them both,” said U.S. Attorney Geoffrey Berman in a statement.
According to the charges, Tanner was secretly promoting Philidor’s interest while serving as the Valeant executive responsible for managing the ties between the two companies. He helped Davenport land a $133 million Philidor takeover by Valeant and steered Valeant away from using other potential competitor pharmacies. In exchange, Davenport offered Tanner $9.7 million in kickbacks out of the roughly $50 million he personally received through the deal.
Since the fraudulent marketing scandal came to light in 2015, Valeant cut ties with Philidor—which later closed shop—but couldn’t stop a sharp decline in its share price. Its former CEO J. Michael Pearson stepped down in 2016, giving way to current helmsman Joseph Papa. And more recently, the company rebranded as Bausch Health, hoping to turn the page on its tainted reputation.