Valeant and its captive pharmacies: some questions
Some Questions for State Attorneys General and Boards of Pharmacy
- Is a pharmaceutical manufacturer allowed to own or effectively control a pharmacy in your home state?
- If a third party obtains effective control over a pharmacy licensed in your state, is a new registration filing required?
- If a pharmacy owner sells all or a portion of its economic interest in a pharmacy in your state, is it required to update its registration?
- Is it a violation of state law in your state to fail to disclose the ultimate holder of control and/or economic interest in a pharmacy? That is, if Valeant exercises control or holds an economic interest in Philidor, and Philidor is a regulated owner of a Pharmacy, has Philidor violated your state registration laws by failing to mention the ownership and/or control of Philidor by Valeant?
- May two pharmacies “share” a National Provider Identifier when dispensing medications in your state, as it has been alleged R&O and Philidor have done?
- Does the law in your state allow a pharmacy to seek reimbursement for prescriptions filled from government or private payers using an identifier such as an NPI#, NDPCP#, or NABP# not assigned to it? If not, what potential legal consequences and penalties would attach?
- For the California Attorney General: as Philidor Rx Services LLC is not licensed as a mail-order pharmacy, is it allowed to purchase directly or indirectly, the equity of or an option to purchase the equity of a pharmacy (R&O) that is registered in California?
- For the California Attorney General: if we interpose another entity into the prior question—Valeant owns and controls part of Philidor that owns and controls part of Isolani that owns and controls part of R&O Pharmacy—has R&O complied with California licensing and disclosure laws, on penalty of perjury?
- For the Pennsylvania Attorney General: as Isolani LLC is not registered as a foreign corporation in your state but owns an interest in a pharmacy (R&O) that is registered in Pennsylvania, how is it able to operate based in Hatboro, PA?
- May two pharmacies “share” a National Provider Identifier when introducing medications into interstate commerce, using the telephone and mail, as Philidor and R&O are alleged to have done?
- Does federal law allow a pharmacy to seek reimbursement for prescriptions filled from government or private payers using an identifier such as an NPI#, NDPCP#, or NABP# not assigned to it? If not, what potential legal consequences and penalties would attach?
- It has been alleged in documents filed with the court in a lawsuit by Isolani against R&O Pharmacy that Philidor encouraged the owner of R&O to falsely certify the results of a prescription audit by one of its payer clients. It has also been alleged that Philidor used identifiers (such as NPI#, NCPDP#, and NABP#) belonging to other pharmacies to send invoices to payers for prescriptions filled.
- Will you investigate whether the actions of Philidor Rx Services to constitutes “health care fraud” under 18 USC § 1347, which applies to public and private providers of health benefits and does not require actual knowledge or specific intent?
- Similarly, if proven, will you investigate what is alleged to be a specific intent to deceive payers in this way could potentially constitute mail or wire fraud, as defined in the federal statutes?
- Will your staff investigate and will you convene a hearing of the Senate’s Permanent Subcommittee on Investigations to discuss these issues and others related to Valeant’s business practices and their compliance with state and federal laws?
- Have you – as alleged in some internet posts by disgruntled employees – failed to reimburse drugs distributed by Valeant but then been shopped by Valeant to other “seemingly independent” pharmacies. [Philidor it is alleged tried switching distributor codes to fool your controls.]
- Will you continue to accept claims for payment from Philidor Rx Services LLC, R&O Pharmacy, West Wilshire Pharmacy, Safe Rx Pharmacy, Orbit Pharmacy?
- Will you undertake an audit (or re-open past audits) of these pharmacies to determine their continued eligibility to seek reimbursement from you for prescriptions dispensed?
- Will drugs manufactured or marketed by Valeant in the future require more stringent pre-clearances or other restrictions?
- Are there any other entities with whom Valeant has relationships like Philidor Rx Services LLC or its affiliates that haven’t been disclosed yet?
- Are there any other entities for which Valeant holds an option to acquire ownership that have not yet been disclosed?
- You have stated that Philidor administers Valeant’s patient co-pay assistance programs. In the last conference call, Mr. Pearson indicated that spending on these programs has grown at a compounded rate of 128% annually, rising from $53M in 2012 to a projected total of over $1 billion in 2016. (In your letter to Senator McCaskill, Mr. Pearson indicated that spending on such assistance programs totalled $544M in 2014 and an estimated $630M for 2015.)
- What portion of these annual amounts does Philidor administer?
- What instructions have you given Philidor in administering these programs?
- What criteria have you instructed Philidor to use in determining patient eligibility for these programs?
- How do you monitor Philidor and other entities to ensure that patients meet the criteria you have established?
- How do you reward (or punish) Philidor and other entities for adhering (or not) to these criteria?
- What controls do you have in place to ensure that Philidor administers these programs legally? Systematically waiving co-pays for claims that would otherwise be paid by Medicare or other government programs is illegal.
- Have you ever, prior to the arrival of subpoenas from US Attorneys, disciplined Philidor or withheld or otherwise delayed payment because individual staff of Philidor have broken these laws? If so, what actions were taken? In what amounts, when and why? How have you ensured that any such problem has not recurred and will not do so again in the future?
- How many Valeant employees, contractors, or agents (whether full or part-time) are responsible, in whole or in part, for monitoring Philidor’s compliance with your guidelines and state and federal law? How often do you and your executive team review Philidor’s adherence to your guidelines and to state and federal law regarding co-pay assistance?
- How is Philidor compensated for operating this program on your behalf? Is any portion of their compensation based on prescription volume dispensed or revenue generated?
- In the conference call Mr. Pearson stated that Valeant funds multiple outside foundations that have multiple donors. What are the names and locations of these foundations and what portion of its operating revenue do Valeant donations represent? Who are the five largest donors to each?
- Presumably these foundations fund copays for medicare and other government sponsored pharmaceutical insurance. Which outside institutions? How much money?
- How are these donations accounted for in your GAAP accounts? Where do these donations appear in your audited financials reported on form 10-K?
- How do you determine the amount of assistance to provide each year? How did you select the $1B projected total for 2016?
- How do you assess whether you are getting value for money for your charitable deductions?
- What controls do you maintain to ensure that shareholders receive value for the $1B in contributions? Have your auditors inspected those controls?
- Who (which individual or group of individuals) determines which patients will receive co-pay assistance, and for which products? Are the individuals making such award determinations employees of Valeant, Philidor, or a third party? (If a third party, who?) How are these individuals compensated?
- Of the billion dollars of patient assistance expense that you expect in 2016 how much is administered through Philidor and how much is through other parties? Who are the other parties and for what amounts of this expenditure do you expect each will be responsible?
- Can you provide a detailed breakdown of patient assistance costs by product or business line? How much for instance is neurology, dermatology, ophthalmology, etc.?
- It is our impression that Philidor is heavily focussed on dermatology. Is that correct?
- If so, who administers the patient assistance outside dermatology and how do you control them?
- What proportion of your dermatology products are sold with patient assistance?
- What proportion of your products (in dermatology or not) are sold to government-insured patients?
- What proportion of your products (in dermatology or not) are sold to government-insured patients with patient assistance programs?
- How is it the case that Philidor administers your co-pay assistance programs, yet you indicated that Philidor is responsible for only certain of your products, most of which are dermatological in nature?
- You indicate that the form of assistance ranges from capped co-pays to subsidized prescriptions to referrals to a foundation (for patients in federal programs) to which you contribute. What was the total amount of assistance awarded for each category?
- Which foundations received such grants from Valeant, and in what amounts, over the past three years? How much did each of those foundations dispense as part of the assistance programs for drugs produced and or marketed by Valeant? What portion of each charity’s total funding does Valeant represent in each case?
- What portion of this and prior years’ “patient assistance” programs funding was used to reimburse prescriptions filled by Philidor or other affiliated pharmacies? What portion went to non-Valeant affiliated “specialty pharmacies?” What portion went to non-Valeant affiliated “traditional” pharmacies?
- For each of the products that you indicate is covered by your patient assistance programs, how much assistance has been provided for each, in what form, and by whom?
- How do you ensure that patients who receive a reduced co-payment, in whole or in part, do not subsequently submit reimbursement requests to government-paid programs for which they may be eligible?
- I know that you are not disclosing the detailed questions in these subpoenas but can you answer one question: in aggregate, how long are these document requests by number of pages? Are they five pages, fifty pages or five hundred pages?
- Do you know if any of your independent administrators of your patient assistance programs have received subpoenas? Has Philidor (or any of its affiliates) received subpoenas?
- If a co-pay is waived, diminished via a coupon, or paid in whole or in part by a charity, how do you ensure that prescriptions filled by Philidor will ultimately be approved by the insurance company?
- Are Philidor employees given any sort of incentive to ensure that the prescriptions are indeed reimbursable?
- What portion of insurance claims submitted by Philidor over the past several quarters were disputed or went unpaid?
- To your knowledge, has Philidor ever failed an audit by a payer? If so, who, when, and why?
- Do any Valeant employees, contractors or agents presently work full- or part-time in any Philidor office? Have they previously?
- Has any employee of Philidor been instructed to deny or otherwise obfuscate the relationship between Valeant and Philidor? Has any Valeant employee, contractor, or agent so instructed any employee or member of Philidor?
- How do doctors know about Philidor? Do you or your salespeople inform them? If not, how are the doctors finding out about Philidor?
- Are your sales representatives aware of your relationship with Philidor? When were they so informed? Was Philidor or its affiliates mentioned as part of your representative training?
- Are your sales representatives instructed to or in any way compensated for informing the prescribers they visit of Philidor’s existence or its ability to waive or diminish, in whole or in part, co-payments for products produced or marketed by Valeant?
- Do your sales reps carry literature of any kind that mentions Philidor?
- How does Philidor compensate Valeant for such referrals, if any?
- What portion of prescriptions filled by Philidor are for non-branded generics? What portion of total prescriptions filled with non-branded generics were written on the prescription and what portion were requested by the patient?
- If a patient does not request a generic but a non-branded generic is available, will the Philidor pharmacist suggest such a generic?
- To your knowledge has Philidor or Philidor staff ever written a dispense as written code on the script without being specifically directed to by the doctor or the patient?
- If not, why not? Who gave the pharmacists you employ such direction? And if not, what gives you legal comfort that the states in which Philidor is licensed allow a non-pharmacist to give such instruction to a pharmacist?
- Have Valeant officers or employees, whether full or part-time and present or former, given any direction to pharmacists employed, whether current or former, full or part-time, as to whether to suggest substitution of generic drugs? To your knowledge, have officers or senior staff at Philidor or its affiliates so instructed the licensed pharmacists they employ?
- To your knowledge, is that correct? To your knowledge, has Philidor purchased your products from any other wholesalers? If so, whom? Do you now, or have you previously, shipped products produced or marketed by Valeant directly to Philidor?
- Do you include inventory held at Kinray or any other wholesaler used by Philidor or its affiliates as part of the consolidated inventory of Philidor held on your balance sheet?
- If so, when were you so informed? What corrective action did you suggest if any?
- If not, what impact did Philidor’s inability to legally fill prescriptions in California have on its relationship with you and/or the entries consolidated on your financial statements?
- For what purpose were these entities established?
- What is the nature of these partnerships and what assets do they hold?
- Who besides Valeant has or may potentially receive an economic benefit from these entities? Is Valeant the sole member or limited partner?
- Has your accounting treatment of Philidor on your own financial statements changed? If so, how and when? If not, do you believe the acquisition of an option to acquire the equity of Philidor require a restatement of any prior year’s filing before the Securities and Exchange Commission? Why or why not?
- By quarter, what was the total amount of your revenue (gross and net) for products that have been dispensed by Philidor?
- By quarter, how much inventory have you had on your balance sheet on consignment with or related to Philidor? Is that inventory held at Valeant or at a distributor?
- By quarter, what was the total amount of receivables from payers generated from prescriptions filled by Philidor (and its affiliates)?
- By quarter, what was the total amount of your provision for potentially uncollectible receivables from payers generated from prescriptions filled by Philidor (and its affiliates)?
- Are they aware of your relationship with Philidor? What information did you provide to them about this relationship? When?
- To your knowledge, have they audited Philidor, its operations, or its financial controls?
- To your knowledge, did they inspect Philidor to determine whether it maintains effective internal controls?
- Were there any disagreements with PWC over how your relationship with Philidor should be disclosed in your filings before the Securities and Exchange Commission?
- What portion of the operations of Philidor and its affiliates were included in the audit scope on which you and PWC agreed for your 2014 Annual Report?
- What evidence did you provide to your auditors to convince them that Philidor Rx Services constitutes a variable interest entity that meets the tests for consolidation on your financial statements?
- Did you have any discussions with your auditor regarding the need, if any, to disclose your relationship with Philidor and its affiliates?
- What communications, if any, has Valeant had with the SEC’s Division of Enforcement, the US Attorney/DOJ, or Canadian regulators, regarding any matter, in the past 30 days?
- If such communications exist, what was the purpose and date of those communications?
- Last week the company said it received a subpoena from the U.S. Attorney’s Office for the District of Massachusetts and a subpoena from the U.S. Attorney’s Office for the Southern District of New York. Who they were sent to?
- Who owns and has owned Philidor?
- Do you fill prescriptions for patients living in California? When we phoned, your representative indicated that you ship to “all 50 states.” How are you legally able to ship products to states such as California, where you are not licensed?
- What advice did you obtain, and from whom, that you could legally fill prescriptions and mail them to customers in California, a state in which you are not licensed?
- Why did you, as the California Pharmacy Board found, omit required information from your filing to become licensed in California?
- For what products (and from what manufacturers) do you fill prescriptions? What is your annual prescription volume and revenue from each product?
- Has Philidor Rx Services ever submitted a claim for reimbursement to a payer, whether government or private, using an identifier (such as NPI, NCPDP, or NABP) assigned to R&O Pharmacy, West Wilshire Pharmacy, or any another entity?
- Your CEO said in an email to Russell Reitz, filed in a court proceeding, that you no longer do so. For how long did you do so? From when to when?
- How many prescriptions were filled using another entity’s identifier? What was the total amount of revenue from these prescriptions, at wholesale cost and net to you?
- What advice did you obtain, when, and from whom, that made you comfortable, as your CEO Andy Davenport indicated, that such practices were legal and did not constitute insurance fraud or “health care benefits fraud” as defined in 18 USC § 1347?
- Did you switch as was alleged for the purposes of reducing the scrutiny of insurance companies on your claims?
- What is your role in R&O’s pharmacy operations?
- Why did you send invoices, as filed with the court, from Philidor to purchase products from Valeant Pharmaceuticals, to the attention of the R&O Pharmacy finance department?
- Why did your employee send emails suggesting to Russell Reitz
- Why did you use and then discontinue the use of, as the email from your CEO Andrew Davenport filed with the LA County court by R&O Pharmacy indicates, the various identifiers (NPI, NCPDP, NABP) assigned to R&O Pharmacy?
- As you are licensed in many states, why did you desire to use such identifiers assigned to R&O Pharmacy?
- As the acquisition agreement filed with the LA County Court indicates that such identifiers were to be assigned to Isolani LLC as part of the purchase of R&O, how did Philidor Rx Services obtain the right to use such identifiers itself?
- To your knowledge, have any of your employees—including licensed pharmacists or pharmacy technicians—resigned due to reservations about the conduct they observed and/or in which they were asked to participate? What did you do, if anything, to learn of those concerns and/or ameliorate those of which you were informed?
- What information did Russell Reitz provide you that made you agree to stop using identifiers such as NPI#, NCPDP# or NABP# belonging to R&O Pharmacy?
- Is Philidor Rx Services LLC your full-time employer, as indicated on your LinkedIn profile? If not, who is?
- Did you form Isolani LLC of your own volition, or were you directed to do so by another party? If so, whom? If not, why did you personally decide to acquire a pharmacy in California?
- By name and amount, who has ownership of, or the right to acquire ownership of, an economic interest in Isolani LLC?
- How many employees does Isolani LLC have and what are their names, titles, and dates of employment? Are any of them now, or have any of them been, employees of Philidor Rx Services LLC or Valeant Pharmaceuticals (and its subsidiaries, current or former)?
- Were you the sole provider of initial start-up capital for Isolani LLC? If not, what other person or entity provided capital? Were Philidor, Valeant, or their subsidiaries (current or former), or employees (current or former) among those who provided capital?
- Did you personally provide the $350,000 to purchase R&O Pharmacy from Russell Reitz, as outlined in the purchase agreement you filed with the court in your lawsuit against R&O? If not, who did? Did Philidor, Valeant, their subsidiaries, or their employees provide any capital to you personally or to Isolani LLC to facilitate this purchase?
- As Isolani LLC is entitled to all of the profits and losses of the operations of R&O Pharmacy according to the purchase agreement you filed with the Court, do you personally receive such profits and bear such losses? If not, who does? Are any of the persons who are entitled to receive such profits or bear such losses current or former employees or entities currently or formerly associated with Philidor Rx Services LLC or Valeant Pharmaceuticals in any respect?
- Have you signed any agreement governing the operations of Isolani LLC or the assignment of its profits and losses to any other entity, including Philidor Rx Services LLC, Valeant Pharmaceuticals, their subsidiaries (current or former), or their employees (current or former)?
- Who is providing the funds to pay attorneys and other expenses in your lawsuit against R&O Pharmacy in California? Are any of these funds provided by Philidor Rx Services LLC, Valeant Pharmaceuticals, their subsidiaries, or their employees?
- Why was Isolani LLC formed to purchase a 90% stake in R&O Pharmacy rather than having Philidor Rx Services LLC or Valeant (or its subsidiaries) purchase it directly?
- Why did you request, as part of the purchase agreement you filed with the LA County Court in your lawsuit against R&O Pharmacy, that Russell Reitz transfer, at your request, his NABP/NCPDP and NPI numbers into Isolani LLC’s name? In using such identifiers, do you believe that Isolani LLC, itself not a registered pharmacy in any state or with the federal government, be in compliance with pharmacy registration requirements?
- Are you based in Pennsylvania, from whence you direct the operations of Isolani LLC? If so, why are you not registered as a foreign corporation in Pennsylvania?
- Why, according to emails filed with the court, did a controller for Philidor Rx Services LLC undertake to assist R&O Pharmacy with its compliance audits by a payer customer, when the 90% owner of R&O is Isolani LLC?
- Philidor Rx Services indicated in a press release that they own an option to acquire R&O Pharmacy, of which Isolani LLC owns 90%. What are the terms of this option? When did Philidor acquire this option and for what compensation? Did you receive any proceeds from this sale personally? If not, as you were the sole member of Isolani LLC, why not?
- Have you mailed any prescriptions to patients outside of California, the only state where you are licensed?
- What is the nature of your relationship (commercial, legal, financial, operational) with Philidor Rx Services at present and historically?
- To your knowledge, has anyone not a direct employee of Brighton Way Pharmacy caused any identifier assigned to Brighton Way Pharmacy (such as an NPI, NCPDP, or NABP number) to invoice a payer for a prescription or other services?
- What is the nature of your relationship with Lucena Holdings, a Delaware LLC?
- Have any employees, contractors or agents of Valeant or its subsidiaries, current or former, been physically present on your premises in Los Angeles? For what purpose?
- Have any employees, contractors or agents of Philidor Rx Services or its subsidiaries, current or former, been physically present on your premises in Los Angeles? For what purpose?
- How many persons do you employ? How many are licensed pharmacists, pharmacy technicians, or pharmacy interns?
- How long has Aisan Zagarian been licensed as a pharmacist in California? Is West Wilshire Pharmacy her first employer as a registered pharmacist? How many prescriptions has she filled in the time she’s been employed at West Wilshire?
- For what products do you fulfill prescriptions? Do you fill prescriptions for any products not manufactured or marketed by Valeant Pharmaceuticals or its subsidiaries, current or former?
- You know it’s always the guy named “Fab” who gets blamed for the whole mess, right?
Source: http://brontecapital.blogspot.com/2015/10/valeant-and-its-captive-pharmacies-some.html
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