(Reuters) - Valeant Pharmaceuticals International Inc’s former chief executive and chief financial officer are at the center of a U.S. criminal probe against the drugmaker over its ties to a specialty pharmacy that helped boost its sales, Bloomberg reported on Monday.
The case against Valeant could yield charges within weeks, or lead to a settlement with the company, the report said, citing people familiar with the matter. (bloom.bg/2fnXLYp) Valeant's U.S.-listed shares closed down 12.3 percent at $17.84 after the report.
Valeant declined to specifically comment on the Bloomberg report, but noted that a year ago it had disclosed that it was under investigation by U.S. prosecutors.
“We have been fully cooperating with the authorities throughout the investigation, and we are in frequent contact and continue to cooperate with the U.S. Attorney’s Office for the Southern District of New York,” Valeant said on Monday. A spokesman for U.S. Attorney Preet Bharara declined to comment.
U.S. authorities are looking into potential accounting fraud charges related to Valeant’s ties to Philidor Rx Services LLC, a specialty pharmacy company that the company secretly controlled, the Bloomberg report said.
Valeant used Philidor to overcome insurer reimbursement rejections of its medications, with Philidor resubmitting claims to insurers until they were approved, according to numerous media reports late last year.
Prosecutors are examining the actions of Michael Pearson, Valeant’s former CEO, who turned the company into an investor favorite with an aggressive strategy of buying drugmakers and increasing sales by raising prices on their medications, the report said.
They are also looking into Howard Schiller, the ex-CFO who led the company on an interim basis when Pearson went on medical leave, the report said. Pearson left the embattled company and was replaced by former Perrigo CEO Joseph Papa in late April.
Valeant has seen its market value fall by some 90 percent in the last year as its drug pricing and other business practices prompted investigations by multiple U.S. government agencies and by Congress.
William Ackman, the billionaire investor whose Pershing Square Capital Management is Valeant’s top shareholder, has worked with the drugmaker to restore investor trust.
Since Valeant’s ties to Philidor were first disclosed last October, the company has cut off ties with the pharmacy, conducted an internal review of that relationship, overhauled its board of directors and appointed new leadership.
Pershing officials declined comment on the report. (Additional reporting by Svea Herbst in Boston and Carl O’Donnell in New York)
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