Valeant has been pummeled recently by drug pricing pushback, antitrust allegations and investigations into its business practices. But now, it has a new deal in hand that may bring it what it needs most: a credibility boost.
The company has inked a 20-year pricing and distribution pact with national drugstore chain Walgreens, it said Tuesday. Under the new accord, Valeant will drop prices of its branded dermatological and ophthalmological products--including its OTC meds--by 10%, with the new list prices phasing in over the next 6 to 9 months.
A separate Walgreens agreement includes price cuts on more than 30 Valeant brands that have generic competition. According to Valeant, those meds will be sold at prices equal to those charged by generics makers, which will cut their sticker costs by 5% to 95%, depending on the brand and the price of rival generics.
At least some of those price cuts are simply undoing--or only partially undoing--price hikes that Valeant rolled out this year. Take Glumetza, for instance; Valeant has jacked up its price by 550% since Jan. 1, and it's one of the drugs now targeted for a price cut.
When all is said and done, Valeant says, the agreements will help consumers access its meds at lower out-of-pocket costs from more than 8,000 U.S. retail pharmacy locations. It expects the pair of Walgreens pacts to save the U.S. healthcare system up to $600 million annually.
Valeant had previously looked to its specialty pharmacy relationships to boost access for its skincare meds. But that strategy hit a snag in late October, when a short seller alleged the drugmaker was using one such pharmacy--Philidor--to inflate its top line. When more reports of questionable business practices began to surface, Valeant cut ties with Philidor, a move CEO J. Michael Pearson said would hurt business.
The whole episode was a "painful learning experience," Pearson said in November, and he admitted to failing to "take the time to listen" to what the outside world was saying about the company. Now, though, he says Valeant has listened up and "taken positive steps to respond."
"Our goal is to create a system that allows prescription medications to be dispensed and insurance claims adjudicated in an efficient manner while allowing physicians to focus their efforts on what matters most: patient care," he said in a statement.
Valeant is hoping the price breaks will go a long way toward improving its image, now tainted by political uproar over its price-hike strategy. Lawmakers have taken the company to task over its lofty bump-ups on a pair of heart meds, prompting it to add a lawyer and lobbyists to its defensive squad in Washington.
It's also hoping the move will go a long way toward pleasing investors, who have sent shares plummeting over the last few months. And on that front, Evercore ISI analyst Umer Raffat seemed optimistic on Tuesday.
"Investors were looking for a definitive track forward for Valeant (in a post-Philidor world) with its pharmacy and distribution strategy--and we got a very clear answer today," he wrote in a note to clients.
- read Valeant's release
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