Former Valeant and Philidor Executives Arrested for Fraud

Federal prosecutors announced in a press conference that Gary Tanner, a former executive at Valeant Pharmaceuticals, and Andrew Davenport, former chief executive officer of Philidor Rx Services, had been charged with taking part in a multimillion-dollar fraud and kickback scheme. Davenport and Tanner allegedly collaborated to route Valeant drugs through the mail-order pharmacy Philidor, and Tanner helped persuade Valeant to buy the option to purchase Philidor.

According to the complaint by federal investigators, the scheme took place from December 2012 to September 2015. As Philidor’s profits soared, Davenport transferred millions of dollars to Tanner through shell companies, prosecutors said. In return, Tanner convinced Valeant to enter into the purchase-option agreement, funnel its drugs through Philidor, and avoid relationships with Philidor’s competitors.

After Valeant terminated Tanner in August 2015, he was hired by Philidor and began negotiating a consulting agreement to continue working for Valeant while denying any financial relationship with Philador, according to the complaint.

The secret relationship between Valeant and Philidor came to light last fall, followed by media reports that Valeant was funneling its drugs through Philidor to increase sales. One of the tactics included altering prescriptions to specify that only Valeant’s name brand drug could be prescribed instead of a generic version. The companies cut ties last October, but when Philidor was shut down in January 2016, over 90% of the drugs it dispensed were sold by Valeant.

The kickback scheme allegation is more bad news for Valeant, as it continues to face harsh criticism for its aggressive price hikes. The pharmaceutical company’s stock has plummeted from almost $100 a share last November to the current price of $17 per share.