T. Rowe Price Sues Valeant, Alleging 'Fraudulent Scheme'
19 August 2016 - 1:34AM
Dow Jones News
By Michael Rapoport
Mutual-fund giant T. Rowe Price Group Inc. has filed suit
against Valeant Pharmaceuticals International Inc., alleging the
Canadian drug company engaged in "a fraudulent scheme" that cost T.
Rowe Price and other Valeant investors billions of dollars.
Valeant used mail-order pharmacy Philidor Rx Services LLC,
deceptive pricing and reimbursement practices and "fictitious
accounting" to artificially inflate its results and shield its
drugs from competition, T. Rowe Price and Alleghany Cos., another
Valeant shareholder, alleged in the lawsuit filed earlier this week
in federal court in New Jersey that became publicly available
Thursday.
T. Rowe Price, which was once one of Valeant's biggest
investors, said Valeant's practices exposed it to "massive risks"
and resulted in huge losses for shareholders. Valeant has lost
about 90% of its value since its August 2015 high, in the wake of
disclosures about its relationship with Philidor and its practice
under former CEO Michael Pearson of dramatically boosting the
prices of its drugs. Mr. Pearson and five other current and former
Valeant officials are also defendants in the lawsuit.
A Valeant spokesman couldn't immediately be reached for
comment.
The Wall Street Journal reported last week that Valeant is
facing criminal investigation over its ties to Philidor, which
allegedly used aggressive tactics to get insurers and
pharmacy-benefit managers to pay reimbursements for Valeant's often
high-price drugs. In addition, Valeant has said it faces civil
investigations by the Securities and Exchange Commission and other
regulators.
At one time, T. Rowe Price owned as much as 21.5 million shares
of Valeant, a 6.4% stake, according to regulatory filings. The
firm's Valeant stake was worth more than $4.5 billion at its peak,
according to S&P Global Market Intelligence. T. Rowe Price sold
most of its Valeant stake in early 2016 after the stock's price
tumbled. As of June 30, it owned 1.5 million Valeant shares, worth
about $30 million, according to S&P Global Market
Intelligence.
The T. Rowe Price lawsuit is separate from pending class-action
shareholder litigation in New Jersey that makes similar claims
against Valeant and has the TIAA pension fund as lead plaintiff. T.
Rowe Price chose to pursue its claims against Valeant individually,
and doing so enables the fund company to pursue certain claims it
can't make in a class action.
Write to Michael Rapoport at Michael.Rapoport@wsj.com
(END) Dow Jones Newswires
August 18, 2016 11:19 ET (15:19 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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