Message from Valeant chieftains to Senate: 'We made mistakes'

By Emily Wasserman Apr 28, 2016 8:57am

When Valeant ($VRX) CEO J. Michael Pearson and the company’s largest shareholder, Bill Ackman, showed up at a Senate committee hearing on drug pricing, they had one overarching message: Valeant messed up. Big time.

“We have made mistakes,” Pearson said at the Senate Special Committee on Aging’s hearing yesterday. “Valeant was too aggressive. And I, as a leader, was too aggressive.”

Even though some of that aggressiveness paid off, it ultimately came back to bite the company, Ackman said. “While raising the prices of these drugs increased the profits of Valeant, it destroyed enormous shareholder value,” Ackman said.

Sen. Susan Collins (R-ME) and Claire McCaskill (D-MO) took the company to task at the hearing over its drug price increases for four drugs: cardio meds Isuprel and Nitropess, which Valeant hiked by 525% and 212%, respectively; and Syprine and Cuprimine.

The latter two drugs are used to treat a genetic disorder called Wilson’s disease. Valeant raised Cuprimine’s price for 100 capsules to $26,189 from $888, and Syprine’s price has shot up more than 30-fold, Collins said at the hearing.

“By all accounts, Valeant is the company that perfected the strategy of strategic acquisitions and price hikes that made it Wall Street’s dream come true,” McCaskill said at the hearing.

But Ackman, who recently joined the company’s board and helped lead the search for incoming CEO Joseph Papa, has a few ideas for how to get things back on track. “My recommendation is going to be that we reduce the prices of those drugs,” Ackman told the committee, adding that Valeant should roll out “socially responsible pricing.”

Plus, the company learned its lesson the hard way after lawmakers in the Senate and House of Representatives pushed back on pricing, Ackman said. The Senate committee came down on Valeant for delaying, and in some cases, outright refusing to turn over documents related to pricing. The House of Representatives has also chastised Valeant for not being forthright about its price increases.

The Senate committee “has done a good job elevating the issue of pricing, and it’s done a good job of taking about $80 billion of market value off Valeant,” Ackman said at the hearing. “That has not gone unnoticed just by Valeant, but by every other drug company in the country.”

Still, some lawmakers at the hearing were not convinced. “Why should we believe you?” Sen. Bob Casey (D-PA) asked Valeant at the hearing about its plans to reduce prices.

The Senate committee’s probes may not be over just yet. Drug price increases from companies such as Valeant are “very, very troubling,” and that kind of “price manipulation and abuse of pricing has real consequences,” Collins said at the hearing.

“We are determined to come up with solutions,” Collins said. "This isn’t just an investigation to expose the problem; it’s an investigation to help us get to solutions."

- here’s the video of the hearing

Drug Prices Bill Ackman J. Michael Pearson Senate Special Committee on Aging Valeant Pharmaceuticals