Valeant Pharmaceuticals: Some Corporate History

Yesterday, I wrote a few words about where Valeant stands now. I'd like to follow up today by taking a look back.

Valeant was a California company that merged with Canada's Biovail in 2010. The two companies were of about equal size, and some would say the resulting company had as much of Biovail's DNA in it as Valeant's, although of course calls itself by Dad's name.

And at that time, Biovail was known as a product development company, (with some pushing-the-envelope bookkeeping tricks, but let's be charitable and forget about that.) Unfortunately some of its key products, including the neurological medicine Wellbutrin, were suffering from tough competition. Pearson, in 2010, set the company on quite another course. He was more interested in acquiring other companies than developing products.

Let's skip ahead. Valeant spent much of 2014 trying to buy Allergan, which failed because Allergan found another suitor, and was acquired by Actavis for $66 billion in March of the following year.

Before that resolution, though, the disputes raised by Valeant's efforts to buy Allergan made some fascinating law. I hope to say something about the legal questions raised by those efforts in another post tomorrow.

But let's finish up the narrative. When one drug company acquires another, it also acquires the intellectual property of the target -- the right to sell the products the target company had been selling, and to set their price in the marketplace. This seems to have been Pearson's business plan. Buy up companies, acquire their product lines, jack up the prices thereof.

In 2015, Valeant found itself at the center of arguments over the pricing of pharmaceuticals, when Nitropress increased in price by 210% on the day that Valeant acquired the rights to sell it: more egregiously, Isuprel's price increased by 520%, also on a one-day basis.

A certain candidate for President (Secy Clinton) tweeted about this in September 2015, "Price gouging like this in the specialty drug market is outrageous. Tomorrow I''l lay out a plan to take it on."

We needn't concern ourselves with her plan. The important point of this post and yesterday's together is simply that Valeant may be forced to change course before she has a chance to sign her first executive order.