Philidor Said to Modify Prescriptions to Boost Valeant SalesCaroline Chen and Ben Elgin
Document shows instructions for changes upon insurer rejection
Pharmacy says it asked doctors, patients to confirm preference
A specialty pharmacy that fills prescriptions for Valeant Pharmaceuticals International Inc. has altered doctors’ orders to wring more reimbursements out of insurers, according to former employees and an internal document.
Workers at the mail-order pharmacy, Philidor RX Services LLC, were given written instructions to change codes on prescriptions in some cases so it would appear that physicians required or patients desired Valeant’s brand-name drugs -- not less expensive generic versions -- be dispensed, the former employees said. Typically, pharmacists will sell a generic version if not precisely told to do otherwise by a “dispense as written” indication on a script. The more "dispense as written" orders, the more sales for the brand-name drugmaker.
An undated Philidor document obtained by Bloomberg provides a step-by-step guide on how to proceed when a prescription for Valeant dermatological creams and gels including Retin-A Micro and Vanos is rejected. Similar instructions for changing the DAW indication are supplied for patients who are paying in cash.
Ex-employees who worked at Philidor in the last two years, and who asked that their names not be used discussing their former employer, confirmed that prescriptions were altered as the document details. They said the intent was to fill more prescriptions with Valeant products instead of generics.
Valeant Cuts Ties
Valeant said Friday that it will cut ties with Philidor and that the pharmacy is shutting down, after Bloomberg first reported the news of Philidor’s practices Thursday.
“The newest allegations about activities at Philidor raise additional questions about the company’s business practices,” Michael Pearson, Valeant’s chief executive officer, said in a statement Friday. “We have lost confidence in Philidor’s ability to continue to operate in a manner that is acceptable to Valeant and the patients and doctors we serve.”
“We know the allegations have also led them to question Valeant and our integrity, and for that I take complete responsibility,” Pearson said. “Operating honestly and ethically is our first priority, and you have my absolute commitment that we will make it right.”
CVS Health Corp. and Express Scripts Holding Co., the nation’s largest drug-benefits managers, said Thursday that they’re removing Philidor from their pharmacy networks and reviewing its practices.
Ron Hutcheson, a spokesman for Philidor, which is based in Hatboro, Pennsylvania, said that “Philidor serves both patients and physicians by delivering the medications that physicians want their patients to have and which patients request. When questions arise, physicians and patients confirm their request for a branded drug.”
Valeant’s biggest shareholder, Ruane Cunniff & Goldfarb, said in a letter to investors earlier Thursday that it stood behind the drugmaker. Philidor ensures that patients who might be asked to accept generic substitutes get the branded Valeant products their doctors prescribe, said the manager of the $8.1 billion Sequoia Fund.
“This bothers some observers, though every prescription that Philidor fills is written by a doctor who intended that the patient receive a Valeant drug,” the letter said.
Valeant shares fell as much as 8.9 percent to $101.50 in late trading Thursday.
Before it came under scrutiny by prosecutors and investors, Valeant was one of the most popular health-care stocks on Wall Street. Now the drugmaker’s relationship with Philidor and a network of affiliated pharmacies across the U.S. is at the heart of questions about its operations and practices. The Laval, Quebec-based company has lost almost $10 billion in market value since a Wall Street short-seller on Oct. 21 suggested it was using Philidor to artificially pump up retail sales and engage in Enron-style accounting tactics. Valeant has denied the allegations.
A specialty pharmacy like Philidor typically fills prescriptions for medications that need special treatment, such as injections, infusions or cold storage. Often, these are high-cost drugs.
According to a Philidor employee manual -- another document obtained by Bloomberg -- the Valeant products dispensed included dermatology medicines, including Jublia, a toenail fungus topical solution, and Solodyn, an acne drug sold in tablet form.
The manual instructed employees to submit claims under different pharmacy identification numbers if an insurer rejected Philidor’s request for reimbursement -- to essentially shop around for one that would be accepted.
Employees were to first submit paperwork with Philidor’s national provider identifier, or NPI, and if that didn’t work were to then try with the NPIs of partner pharmacies, according to a Philidor training manual. “We have a couple of different ‘back door’ approaches to receive payment from the insurance company,” said the manual, dated October 2014.
“You will run across several insurances that we are not contracted with,” according to the document, which was obtained by Bloomberg News. In that case, “submit the NPI for our partner in California, West Wilshire Pharmacy,” the manual said. “There is a good chance they are contracted.” If that was denied, the next step was to “add the Cambria Central Fill insurance and run that as the primary,” apparently referring to a pharmacy in Philadelphia. “They should then get a paid claim and then Cambria, another one of our partners, will reimburse us."
The document’s guidance on NPIs was first reported by the Wall Street Journal.
Calls placed to West Wilshire in Los Angeles weren’t immediately answered. At Cambria Pharmacies, Stephen Bailkin, a manager, said, “I can’t imagine why anyone would be using my NPI number.” He declined to answer questions about Philidor and its relationship with Cambria.
According to Valeant, other drugmakers routinely use specialty pharmacies like Philidor to sell their products. But researchers and short-sellers said the company should have disclosed that it was doing so -- and that it had other financial ties to Philidor. Valeant recently said it paid $100 million late last year for an option to buy Philidor for nothing over the next 10 years.
Valeant also said it didn’t have to declare its interest in Philidor: The specialty pharmacy network has accounted for about 6 percent of Valeant revenue so far this year, below the 10 percent sales-threshold that would make the arrangement material under Generally Accepted Accounting Principles, according to the company.
The Valeant purchase-option agreement for Philidor was signed in December 2014. At the time, Philidor was “a small startup” with net sales of $111 million, according to a Valeant presentation on an Oct. 26 conference call. Specialty pharmacies account for 7.2 percent of Valeant’s net revenue year-to-date, company executives said on the call, with Philidor alone responsible for 5.9 percent.
(An earlier version of this report misstated the date that pharmacy benefit managers cut ties with Philidor.)