Valeant hits back at price-hike critics amid national scrutiny

Valeant CEO J. Michael Pearson

Valeant ($VRX) may be raising prices on several of its drugs--but the benefits it reaps from some of those pricing moves are small, it insists.

The Canadian pharma struck back at investment-community critics on Tuesday, picking apart their assertions that the company relies on the jack-up strategy as a key part of its business model.

While the company has raised prices on 56 drugs this year--by an industry-leading average of 65.6%--the "actual net effect" of a price-hike "is determined after taking into account any rebates/fees to: patients, managed care, government, wholesaler, group purchasing organizations, and customers," Valeant wrote in a financial filing.

Take its 2015 increase on Jublia, for instance: Valeant raised the gross price 20%, but realized a 2% net price increase. Similarly, Solodyn's gross price vaulted 10%, but the net increase tallied 0.7%.

Sen. Bernie Sanders

What Valeant didn't mention was how much its price hikes on Isuprel and Nitropress--drugs whose wholesale costs it punched up by 536.7% and 236.6%, respectively, shortly after acquiring them from Marathon Pharmaceuticals--are contributing to its top line. The pair of meds has been the subject of recent governmental scrutiny, with Rep. Elijah Cummings (D-MD) and Sen. Bernie Sanders (D-VT) in August writing to Valeant CEO J. Michael Pearson requesting documents and details on the pricing moves for the duo.

Pearson, though, in late September wrote to Valeant employees that the portfolio that houses those two meds should only account for 10% of the company's business next year, stressing that it's "becoming a smaller part of our portfolio over time." One-time deal partner and enthusiast investor Bill Ackman has been quick to come to the drugmaker's defense, too, telling Bloomberg Monday that "Valeant got dragged into the story. A very small part of Valeant's business is re-pricing drugs."

Investors, though, aren't convinced. The company's stock has taken a beating lately, with Ackman's own hedge fund, Pershing Square Holding, recording a 12.5% loss in September as a result.

- see Valeant's filing
- get more from Bloomberg

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