The pharmaceutical industry in Maryland and other states has been riding high, largely on the unrestricted profits that these companies make by charging gargantuan prices for new and experimental drugs, as well as for other drugs it owns. But there are apparent limits to the kinds of selfish practices that the federal government will tolerate. One company, Valeant Pharmaceuticals International, for example, has been the subject of an extended federal investigation recently, largely based on the gouging prices that it charges for its drug products.
However, the first case reported by federal prosecutors because of its investigation portrays the company to have been more a victim than a perpetrator. In this first case, it was a Valeant executive who was charged with taking $9.7 million in kickbacks and not telling Valeant about it. That executive reportedly took payments from Philidor Rx Services, a mail order prescription business.
At the same time, Valeant had paid $100 million on an option to buy Philidor, but that deal later fell through. The Justice Department has accused the former Valeant executive of conspiring with the CEO of Philidor to give Philidor an exclusive distribution position on some of Valeant's products. The CEO reimbursed the Valeant executive with the reported $9.7 million in kickback payments over time. The funds were shuffled through corporate bank accounts that led to a shell company controlled by one of the men, which was used primarily to pay the Valeant's executive his share of the Philidor revenues.
Prosecutors are alleging that the two men concocted the scheme on their own. Some observers opine that Valeant was active in sponsoring and encouraging its executive to promote and build up the mail order business through Philidor. However, the criminal complaint filed as a result of the federal investigation appears to portray Valeant as an innocent victim in the plot hatched by the two conspirators. Both men denied the charges, stating that they told Valeant the progress of their work and that the company benefited greatly from their work. Cases like this one, based essentially on criminal fraud, are not uncommon in the federal courts in Maryland.
Source: New York Times, "Kickback Case Questions Whether Valeant Was Victim or Participant", Peter J. Henning, Nov. 21, 2016