Controversial Drug Company Valeant Pharmaceuticals is Now Facing a Purported Class Action Lawsuit from Investors

Valeant Pharmaceuticals, a specialty drug company officially based in Quebec, Canada, has been in the spotlight a lot this year thanks to its controversial pricing policies on certain drugs it has acquired the rights to. With a growing lack of faith in Valeant’s business practices, the company took another severe PR hit with the findings of an investigation by the Citron Research Group, who believe that Valeant has used its relationship with pharmacy company Philidor RX Services to create ‘phantom accounts’ with a view to manipulating figures expressed in securities filings and releases, and conference calls with analysts on Wall Street.

The Purported Class Action Against Valeant Pharmaceuticals
Investors who bought shares in Valeant between late February and October of 2105 have engaged California based law firm Robbins Geller Rudman & Dowd to file the lawsuit in New Jersey Federal Court. While Valeant is technically based in Canada where it enjoys low tax rates, the Chairman and CEO J Michael Pearson does most of his operating in New Jersey. The filing claims that the investors raising the lawsuit were misled intentionally by Valeant, who were showing allegedly fraudulent accounts and revenue for transactions between themselves and Philidor.
At present, Valeant are denying any wrongdoing and claiming the allegations are an attempt to lower their share prices and manipulate the securities market.

Other Recent Controversies Involving the Valeant Name
Valeant is unusual compared with other drug companies in that it spends only 5% of what it makes in sales on further drug research and development. The majority of its peers spend closer to 20% on developing and testing new drugs. Valeant’s preferred strategy is to buy the rights to drugs that are already on the market, and this has caused a lot of controversy when two heart medications, Isuprel and Nitropress, were acquired by Valeant and immediately saw their prices raised by 520% and 210% respectively.

A tweet by presidential candidate Hilary Clinton regarding price hiking in the pharmaceuticals industry, which indicated she had a plan to stop it, actually caused an immediate drop in Valeant’s share prices, even though neither Clinton or the article she linked to in the tweet in question actually made mention of Valeant or the two heart drugs.
In further controversy, Valeant have recently come under question about the fact that they now hold 80% of production on what are known as ‘hard’ or ‘rigid’ contact lenses, after acquiring two other companies. As prices have started to rise on these products too, the Federal Trade Commission is beginning to investigate the situation.Valeant’s shares did, unsurprisingly, take a hit after the Citron report and news of this class action lawsuit was made public. It will be interesting to see whether this controversial business, which seems to be drawing scrutiny for their business practices from all directions, will be able to assuage investor doubts and handle the findings of any further investigations.

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