|J. Michael Pearson|
After the outpouring of rage that greeted Turing Pharmaceuticals last week when it decided to hike the price on an older med by 5000%-plus, its CEO, Martin Shkreli, is one of the last people any pharma chief would want to be compared with right now.
But that's the position Valeant ($VRX) skipper J. Michael Pearson found himself in Monday afternoon, when all 18 Democratic members of the House Committee on Oversight and Government Reform sent a letter requesting Committee Chairman Jason Chaffetz issue his company a subpoena--and called for Pearson to testify, along with Shkreli, at a hearing next week.
The reason? The committee members say the Canadian pharma is withholding documents from Congress related to Isuprel and Nitropress--a pair of heart meds whose prices soared earlier this year by 525% and 212%, respectively, after Valeant picked them up from Marathon Pharmaceuticals.
The letter puts Valeant and Pearson alongside Shkreli in a pharma-pricing rogue's gallery--a spot that Shkreli undisputedly occupied last week when news of Turing's huge price increase surfaced online. As the letter points out, Shkreli "tweeted that his price increase is 'a great thing for society' and berated a reporter"--FierceBiotech's John Carroll--"as a 'moron' for requesting an explanation for his price increase."
"Valeant is using precisely the same business model as Martin Shkreli," the committee members wrote to Chaffetz, noting that it's one of "acquiring potentially life-saving drugs to maximize their own corporate profits."
"We believe it is critical to hold drug companies to account," they said, requesting that the committee invite Pearson, in addition to Shkreli, to testify next week.
Valeant received a letter back in August from Rep. Elijah Cummings (D-MD) and Sen. Bernie Sanders (D-VT) asking for information on Isuprel and Nitropress, including the dates, quantities, purchasers and prices paid for all sales of the drugs; total expenses relating to their sales, including specific amounts for manufacturing, marketing and purchasing of active ingredients; sales contracts; and profit projections.
But earlier this month, Valeant nixed the request in a two-page letter, arguing that "the specific documents and information referenced in your letter are highly proprietary and confidential."
The way Evercore ISI political strategist Terry Haines sees it, Valeant will end up having to testify at Chaffetz's Turing hearing. "Traditionally, the minority party can ask for and get one hearing witness. Clearly (Democrats) want Valeant there to make the case that drug pricing problems are widespread, and not just with Turing," he wrote.
But either way, "Congressional scrutiny of drug pricing will not lead to legislation in a Republican-majority Congress," he figures. Republicans "have never voted for price regulation … and are not about to start now."
Meanwhile, Valeant's employees are growing antsy over how the pricing crackdown might affect the company, particularly because its shares have suffered in recent days, along with many other drug stocks. Earlier Monday, Pearson sent them a letter aiming to put their fears to rest, explaining that revenues from the jacked-up drugs aren't part of the drugmaker's growth stats.
"Valeant is well-positioned for strong organic growth, even assuming little to no price increases," he wrote. The company's "core operating principles include a focus on volume growth and a concentration on private and cash pay markets that avoid government reimbursement in the U.S. and across the world."
More bad news hit shareholders Monday afternoon, though, as word of the Democrats' letter spread. Valeant shares were down 15% at press time.
- read the letter (PDF)
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Editor's Note: This story was updated with quotes from the committee members' letter.