Alexion Raided by Brazilian Police in Sales Practices ProbeBy and
Shares dropped after Monday’s search of offices in Sao Paulo
Patient group with financial ties to Alexion also searched
Alexion Pharmaceuticals Inc.’s Sao Paulo offices were raided by Brazilian authorities Monday as part of an investigation into the drugmaker’s sales practices, according to the country’s national police.
Brazil’s police are investigating whether Alexion, with help from a local patient association, subsidized lawsuits for patients to get access to the company’s lead drug Soliris through the national health system, according to a request for a search warrant reviewed by Bloomberg. Law enforcement officials have found evidence that some of the lawsuits were fraudulent, according to the request, and used alleged fake diagnoses and a partnership between Alexion and the association to attract potential patients.
“Alexion provides support to the patient association in Brazil in the form of unrestricted educational grants and in accordance with local laws and regulations and industry code,” Alexion spokeswoman Kim Diamond said by email. “Alexion has not been charged with any criminal or civil misconduct at this time” and is cooperating with the authorities.
The shares fell 3.4 percent to $124.48 at the close, the biggest decline in almost four months.
Soliris, a blockbuster for two very rare blood conditions, accounted for more than 90 percent of Alexion’s revenue last year.
More than 900 lawsuits were filed by lawyers from the Brazilian patient association to get Soliris paid for in the last six years. Patient lawsuits helped Alexion bring in 1.29 billion reais ($400 million) from the Brazilian government in the last six years, according to the search warrant request. Brazil accounted for about 5 percent of 2016 sales from Soliris, according to Geoff Meacham, an analyst with Barclays Plc.
“Patients in Brazil obtain access to Soliris through the judicial system since this is one of the few ways, and often the only way, that citizens in Brazil with a devastating disease can have access to available therapies and health-care services,” Diamond, the company spokeswoman, said in the email. “Patients are exercising their constitutional right and they bring forth the legal proceedings in their own names in coordination with the patient advocacy organization.”
Police also searched a local patient association, the Associacao dos Familiares, Amigos e Portadores de Doenças Graves, or AFAG, to which Alexion has said it’s given financial support. The patient group’s president, Maria Cecilia Oliveira, confirmed the search, and said in a telephone interview that the group is cooperating and has done nothing wrong. AFAG is based in Campinas, Brazil, about 60 miles northwest of Sao Paulo.
Alexion’s stock has had a turbulent year. Last November, the company announced it was investigating internal allegations of improper sales practices. The following month, its chief executive and chief financial officers resigned after losing the board’s confidence because of information uncovered in that investigation, a person familiar with the matter said at the time.
In January, the drugmaker said its internal probe had found that senior managers had improperly applied pressure on employees to get some customers to expedite Soliris orders. In March, the company said its founder and chairman of the board, Leonard Bell, will retire, and the chief compliance officer stepped down.
In addition, Alexion is under investigation by the U.S. Securities and Exchange Commission and Department of Justice for issues related to the Foreign Corrupt Practices Act in countries including Brazil, according to company filings.