Valeant Pharmaceuticals Case Study

Valeant Pharmaceuticals, led by Michael Pearson (the CEO of Valeant

Pharmaceuticals), strategy was to create a drug giant that focused on distribution and

let someone else do the research. The plan was questionable and required rapid

acquisitions to make it work. So Pearson stared to buy up rival drug companies, fire

his staff and enhance R&D (research and development). As a result, the company

suffered from huge debts but on the other hand, the plan seemed to work, rising

Valeant’s stocks by 260 dollars. (Gandel, 2015)

However, in October 2015, it was alleged that Valeant’s success was mainly because

of price gouging and fraud. The company first caught the eye of the Congress when it

increased two of its drug prices, Nitropress

But there was no evidence for

Valeant’s connection with Phildor at that time. On Oct 19th, however, the southern

investigative reporting foundation released a story in which it gave details about old

ties between Valeant and Phildor, a rapidly growing specialty Pharmacy that seemed

to be controlled by Valeant but had never been introduced to Valeant shareholders.

The story said that R&O Pharmacy, a business partner of Phildor, had sued Valeant

saying that the drug giant might be a target of fraud or engaged in fraud itself

(Gandel, 2015). On Oct 20th more information was revealed about Phildor and

Valeant Pharmaceuticals was accused of using “phantom accounts” to escape the eyes

of the auditors. The company, nonetheless, denied the allegations regarding using

“phantom accounts” and explained in detail how drug sales from pharmacies are

recorded. "We are confident in our full compliance with all applicable accounting

rules, regulations and laws"(Anonymous, 2015), the company stated.

(Anonymous,