Valeant defends its latest round of price increases--but critics aren't buying it

Raising prices has gotten Valeant into plenty of trouble already--but the company is at it again.

On Friday, the embattled drugmaker announced it would hike wholesale prices on drugs in its neurology, gastrointestinal and urology portfolios, with those increases ranging from 2% to 9%.

Valeant touched off an industrywide pricing scandal last year when it purchased two heart meds from Marathon Pharmaceuticals and jacked their costs way up--and it has agreed to stay away from large price increases. But the way the Canadian pharma sees it, the latest changes “are consistent” with that commitment, CEO Joseph Papa said in a statement.

What’s more, Valeant said, its overall pricing moves across its pharma portfolio “represent an increase of less than 2.0%” within the calendar year and on a forward-looking, annualized basis “are in line with the 2016 Consumer Price Index of 2.3%.”

Not everyone’s buying it, though.

“While the company seems to us to be trying to position this as some sort of modest increase, we note that these price increases come on top of excessive price increases taken in previous years,” Wells Fargo analyst David Maris wrote in a note to clients. “We do not think a company that raises the price on a product by 50% one year and then commits to mid-single digits the following year is somehow not relying on a price-driven strategy.”

Maris also dismissed Valeant’s assurance that “there will be no pricing adjustments this year on dermatology and ophthalmology products.” Apparently, Valeant's not counting three from September on ophthalmology products--each by 9.9%.

The way Maris sees it, the changes “are a result of a sobering look at disappointing prescription trends and a desire to show growth in 2017.”

Growth would certainly help the Quebec-based company’s reputation with investors, who have suffered through a firestorm of political pricing pushback, investigations and debt-default concerns this year. Papa, who took the reins earlier this year, has been trying to engineer a turnaround.

Maris isn't the only one who doesn’t expect to see growth in Valeant’s upcoming financial disclosures. When the company reports Q3 earnings in a few weeks, Bloomberg Gadfly’s Max Nisen expects to see a disappointing performance, he wrote on Friday. A Bloomberg Intelligence report published last week found that the turnaround in Valeant’s prescription drug business wasn’t actually happening; script growth appears to be lagging on the company's key meds. 

Meanwhile, healthcare systems across the country are still waiting on discounts on the two now-pricey heart meds--discounts Valeant execs pledged in April before Congress. In mid-September, Bloomberg reported that of 13 top U.S. hospital systems and purchasing groups that responded to a query, only one large hospital system and one purchasing group said they were receiving breaks on the drugs.

Valeant has also only lowered prices on two products since Papa joined the company and pledged to take a hard look at pricing.

“To us, the Valeant story is the same as it has been, and the only change is in how it is being told,” Maris said.

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