Antitrust Law Daily Wrap Up, RICO NEWS: Valeant Pharmaceuticals engaged in fraudulent scheme, trust funds claim, (Jun 1, 2016)

By Greg Hammond, J.D.

Valeant Pharmaceuticals International, Inc. and its top executives used a secret network of captive pharmacies to shield Valeant’s drugs from competition, fraudulently inflating the prices of its products and artificially boosting sales, in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), according to a complaint filed by two trust funds in the federal district court in Trenton, New Jersey (AirConditioning and Refrigeration Industry Health and Welfare Trust Fund v. Valeant Pharmaceuticals International, Inc., May 27, 2016).

AirConditioning and Refrigeration Industry Health and Welfare Trust Fund and Fire and Police Health Care Fund, San Antonio (the Funds) filed the class action law suit on behalf of themselves and all other similarly situated third party payors who paid claims, or incurred costs, in connection with prescriptions for Valeant branded drug products and were injured thereby from January 2, 2013, through November 9, 2015.

The complaint alleges that Valeant created a secret pharmacy network as a platform to implement a number of fraudulent practices in order to improperly inflate the reimbursements for Valeant drugs paid for by third party payors. The business model included acquiring drugs from other pharmaceutical companies and “massively increasing prices,” rather than researching and developing new drugs, the complaint asserts.

In particular, Valeant allegedly channeled prescriptions for its branded drugs through Philidor Rx Services, through which Valeant created a host of shell companies. Philidor and Valeant employees purportedly staffed Philidor under aliases and were instructed to employ a host of fraudulent practices to prevent the substitution of cheaper generic equivalents for Valeant branded drugs.

The alleged fraudulent practices included: (1) instructing employees to change codes on prescriptions to ensure that the prescription would be filled with a Valeant drug, rather than a generic equivalent; (2) using false pharmacy identification information to bill third party payors for prescriptions; (3) submitting numerous prescription renewals for reimbursement, falsely representing to third party payors that patients had requested renewals of their prescriptions when no such request had been made; (4) waiving patient co-pays to remove patients’ incentive to seek out cheaper drugs, and then misrepresenting the “actual charges” for Valeant drugs by failing to account for the co-pay waivers; (5) using pharmacies within the Valeant Enterprise to enable Philidor to indirectly operate in states where it had been denied a license; and (6) making misrepresentations directly to patients in order to boost Valeant’s drug sales.

The complaint asserts that Valeant reaped hundreds of millions of dollars in ill-gotten profits at the expense of the class because the members paid inflated prices for Valeant drugs and paid for Valeant drugs that should never have been dispensed. Valeant secretly channeled nearly $500 million worth of its drugs through Philidor in 2015 alone, the Funds claim.

The Funds allege that Valeant and Philidor violated sections 1962(c) and 1962(d) of the RICO Act. The complaint requests compensatory and treble damages, including interest, as well as costs, expenses, and attorney fees.

The case is No. 3:15-cv-03087-MAS-LHG.

Attorneys: James E. Cecchi (Carella, Byrne, Cecchi, Olstein, Brody & Agnello, P.C.) for AirConditioning and Refrigeration Industry Health and Welfare Trust Fund and Fire and Police Health Care Fund, San Antonio.

Companies: AirConditioning and Refrigeration Industry Health and Welfare Trust Fund; Fire and Police Health Care Fund, San Antonio; Valeant Pharmaceuticals International, Inc.; Philidor Rx Services

News: RICO NewJerseyNews