Executives Finally Criminally Charged In Pharma Fraud Scheme

Valeant, the high flying pharmaceutical stock that was Wall Street’s favorite for years, has collapsed in a cloud of illegality. And today two executives associated with this collapse were actually charged with multiple counts of fraud and conspiracy. The fraud involved an executive at Valeant, Gary Tanner, and another at a mail order pharmacy called Philidor Rx Services, Andrew Davenport. In 2014, Valeant purchased an option to acquire Philidor but neglected to inform investors of that fact until a year later. Valeant then used a number of methods to direct business to Philidor and increase sales. One of those methods was apparently actually changing prescriptions to specify that a Valeant drug be used as opposed to another, cheaper alternative. Both sides benefited from this cozy arrangement as Valeant’s sales increased and Philodor grew quite rapidly and began to make tens of millions of dollars after just starting up in 2013. Mr. Tanner was the person in charge of developing relationships with mail order pharmacies and directed Valeant’s relationship with Pilidor, to the exclusion of others. In return for Tanner’s help in steering Valeant’s business to Philidor, Davenport kicked back $10 million of the $50 million that he had received via their scheme.

As Dean Baker points out, virtually every economist agrees that protectionist policies lead to corruption in the industries that are being protected. Drug patents work virtually like tariffs, raising the cost of the product. So it should be no surprise to economists to see this kind of corruption, although none were cited in the Times article. And it is nice to see a real executive finally criminally charged. Too bad that never happened with those Wall Street executives who destroyed the global economy and led to the rise of the right and Donald Trump.