Valeant’s New CEO Changes Rebates for 2 Scrutinized Drugsby and
Ackman said last month he’d recommend 30% ‘blanket’ price cuts
New program offers discounts from 10% to 40% based on buying
Valeant Pharmaceuticals International Inc. adjusted hospital rebates for two heart drugs that were at the center of congressional investigations of price hikes, as new Chief Executive Joe Papa begins his attempt to turn around the company.
In the plan unveiled on Monday, hospitals will get at least 10 percent off the list price of heart drugs Nitropress and Isuprel, up to 40 percent off based on volume. That means some hospitals may get a smaller discount than what board member Bill Ackman last month said he would recommend -- “a 30 percent blanket price reduction.”
Papa, who’s working to rebuild Valeant’s image after the departure of former CEO Mike Pearson, formed a pricing committee to review drugs like Nitropress and Isuprel earlier this month, one of his first steps in the new job. Valeant had come under scrutiny after boosting the prices of Nitropress and Isuprel by 525 percent and 212 percent, respectively, shortly after buying them last year. The shares have fallen more than 90 percent since their peak in August amid an accounting scandal and investigations by the U.S. federal government.
Maryland Representative Elijah Cummings, a Democrat who’s been critical of the drugmaker, said the cuts for Isuprel and Nitropress are a “small step in the right direction,” but constitute a slight trim to the “massive price increases” on the drugs.
“Valeant may be trying to preserve as much of its profits as possible while stemming the negative publicity it has gotten over the past year,” he said in a statement.
The shares fell 2.4 percent to $25.28 at 11:32 a.m. in New York as holders including Brahman Capital, a long-time investor, sold their stakes. Jana Partners also exited its 0.5 percent holding, filings show.
In February, Valeant’s then-interim-CEO, Howard Schiller, told Congress that the company had agreements to offer up to 30 percent discounts on the drugs to some hospitals. During a hearing at the Senate last month -- just days before Papa took over -- it was revealed that few, if any, hospital systems were receiving such discounts. Ackman, who testified at the April hearing, said he would advise Valeant’s chairman to cut the price by 30 percent. Ackman’s fund, Pershing Square Capital Mangagement LP, is one of Valeant’s biggest investors.
Last week the New York Times reported that major hospital systems in the U.S. hadn’t been able to receive discounts on the drugs that the company had previously promised.
The new program will offer discounts to all U.S. hospitals, rather than just to ones that buy large quantities of the drugs. The discounts will be made available through group purchasing organizations, which buy drugs on behalf of hospitals. Valeant also said there would also be “no further price increases for these products” or reductions to discounts offered through the rebate program.