Why Valeant Pharmaceuticals Is Under Fire

April 28th 2016

Kyle Jaeger

Valeant Pharmaceuticals is in hot water with the public at large, after members of a Senate committee disclosed details about the company's efforts to increase profits by driving up drug prices in February.


As part of an ongoing investigation of drug pricing practices in the pharmaceutical industry, Valeant executives have been called to testify in a series of congressional hearings this year. The investigation has produced evidence of price gouging, the Senate committee determined.

What congressional hearings have revealed about business practices at Valeant Pharmaceuticals.

To understand why Valeant has come under fire by government officials — earning the condemnation of high-profile politicians such as Massachusetts Sen. Elizabeth Warren and Democratic presidential candidate Hillary Clinton — let's look at what the company allegedly did with two heart medications, Isuprel and Nitropress, that it purchased in 2015.

After purchasing the drugs for $350 million, Valeant raised the price of Isuprel by 525 percent and Nitropress by 212 percent, a memo from the U.S. House Committee on Oversight and Government Reform shows. The company did this "overnight," and it has reportedly hiked the prices of 20 other drugs between 2014 and 2015 by at least 200 percent as well.

Internal documents obtained by the Senate committee "demonstrate that Valeant identified goals for revenues first, and then set drug prices to reach those goals," the memo reads. "Valeant employed this strategy for both Isuprel and Nitropress, generating gross revenues of more than $547 million and profits of approximately $351 million in 2015 alone."


What's more, Valeant recognized that its investments in research and development for the two heart medications were "nominal," which appears to contradict a common argument in the pharmaceutical industry that says high drug prices are justified because companies spend the profits on research to improve drug quality and invent new drugs.

Valeant says it's justified in raising drug prices because patients who can't afford the medications can enroll in patient assistance programs.

Patient assistance programs are popular in the U.S. pharmaceutical industry. Rather than lower the price of drugs to make it more affordable for all patients, drug companies like Valeant argue that individuals whose health insurance doesn't cover specific drugs can enroll in their patient assistance programs, which would hypothetically reduce the cost by granting waivers to qualifying patients.


The problem is that not everyone who can't afford the drugs qualifies for patient assistance programs, which is based on income, Business Insider reports. During a recent Senate hearing, Warren pressed Valeant executives on that point, arguing that these programs only serve to increase revenue for drug companies without offering considerable assistance to patients.

"By doing this you keep the patient on the more expensive drug and then you recoup whatever from the insurance company," Warren said during Wednesday's hearing. "What I'm saying is that this must be a profitable for you. You're making more money."

Asked to comment on allegations of price gouging, a spokesperson for Valeant Pharmaceuticals provided ATTN: with a copy of the company's prepared testimony, which was presented at a Senate hearing on Wednesday.

With respect to the company's patient assistance program, Valeant wrote:

"We have other longstanding programs that provide patient assistance, such as capped copays for commercially insured patients and up to zero copays for patients meeting certain income thresholds. These programs are designed to ensure that out-of-pocket expenses do not prevent eligible patients from receiving the medicines that their doctors have prescribed. Valeant offers patient assistance programs for more than 55 products, and we expect to spend more than $1 billion on patient assistance in 2016. We are very proud of this ongoing effort to ensure affordable patient access to our prescription drug products."

Valeant isn't the only drug company accused of price gouging.

​Valeant is by no means the only drug company accused of engaging in business practices to increase its bottom line. But under federal scrutiny, the company serves as an example of the American pharmaceutical industry at large. The drug pricing patterns identified by the Senate committee reveal systemic, industry-wide issues.

What Clinton described as "predatory pricing" practices are evident in drug companies across the U.S., as ATTN: has previously reported. That's why reform advocates are calling for increased government regulation of the pharmaceutical industry — a proposal that is gaining momentum in Congress.

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