Valeant employees closely involved with Philidor operations: Reuters

Valeant's ad hoc committee isn't the only group probing Valeant's ties to specialty pharmacy Philidor. One new report says a small group of the company's employees was deeply involved in running the pharmacy, before the drugmaker cut off the relationship last month.

Valeant ($VRX) staffers worked with Philidor's founders to set up the business in 2013 and widen its operations, Reuters reports, citing insider sources. The most senior of Valeant's staffers involved, Gary Tanner, traveled frequently between Philidor's offices in Pennsylvania and Arizona and Valeant's New Jersey-based U.S. headquarters, and unnamed former Philidor employees told the news service that Tanner was a key figure in Philidor's operations.

That involvement raises questions about just how much Valeant knew about Philidor's methods, the news service notes. In one instance last year, Tanner and colleague Bijal Patel--both of whom used fake names in their email communication within Philidor--were copied on an email with an attachment detailing how Philidor employees could resubmit rejected claims at different price points in order to bill the highest amount an insurance company would fork over.

The former employees also told Reuters they were sometimes instructed by their supervisors to alter prescriptions from doctors, allowing the pharmacy to fill a script with a Valeant drug rather than a low-cost generic.

Philidor also put provisions in place to keep its activities under wraps. In September, Philidor started requiring employees to sign confidentiality agreements that enabled the company to sue workers who spoke up about its dealings, Reuters reports.

Valeant CEO J. Michael Pearson

Philidor, for its part, has said its employees "behaved ethically and in keeping with the highest business standards." And while Valeant recently terminated its relationship with the pharmacy, earlier this week, CEO J. Michael Pearson reminded investors on a conference call that the "many allegations of wrongdoing" at Philidor have "not been proven."

Meanwhile, though, those in the investment community have had a hard time getting "great insight into what was going on here," Morningstar analyst Michael Waterhouse told The Wall Street Journal. "There's a certain sense of flying blind through the whole thing."

Ruane Cunniff & Goldfarb, manager of Valeant's largest shareholder--Sequoia Fund--took matters into its own hands. It reached out to former Philidor employees, even paying hundreds of dollars for information. In one message to former Philidor employees seen by the WSJ, Ruane Cunniff said it wanted to "understand what was happening at Philidor, and in particular, if they were doing anything they shouldn't have been doing."

Currently, Valeant is working to fill the void Philidor has left behind. Earlier this week, the company said it is hoping to replace Philidor with one or more specialty pharmacies within the next 90 days. Its dermatology and neurology sales would take a hit in the transition, the company said.

Other specialty pharmacies have come into the spotlight through the course of the Philidor saga, with Express Scripts ($ESRX) announcing on Wednesday that it had cut off Linden Care, a pharmacy that works closely with Ireland's Horizon Pharma ($HZNP).

But according to Bloomberg Intelligence analyst Jonathan Palmer, setting up more specialty relationships isn't a bad move for Valeant--as long as it does it the right way. "Where a specialty pharmacy is in place to drive growth for the manufacturer is where you get dubious business practices," he told Bloomberg. "But generally speaking, that's the exception rather than the rule."

- get more from Reuters
- get more from The Wall Street Journal (sub. req.)
- get more from Bloomberg

Special Reports: 10 big brands keep pumping out big bucks, with a little help from price hikes | The top 10 most expensive drugs of 2013

Read more on