Valeant CEO may tell all on drug price-gouging to US prosecutors

Michael Pearson, the outgoing CEO of drug major Valeant Pharmaceuticals International Inc, which is facing investigations by US prosecutors for over pricing of drugs, is expected to reveal before the US Senate panel today that he regrets his decision to acquire and increase the price of two life-saving heart drugs.

"The company was too aggressive  - and I, as its leader, was too aggressive - in pursuing price increases on certain drugs",  Pearson said in prepared testimony before the Senate Special Committee on Aging.

Valeant's stock soared for several years under Pearson's growth-through-acquisition strategy, which focused on buying older, niche drugs and repeatedly hiking prices. But the company's tactics eventually attracted scrutiny.

The company increased the price of the heart drugs Isuprel by about 720 per cent and Nitropress several times, ultimately raising it to $880.88 from a starting price of $214.83 after acquiring them from Marathon Pharmaceuticals in 2015.

"In hindsight I regret pursuing, transactions where a central premise was a planned increase in the prices of the medicines,'' Pearson said in the testimony.

"We should have abandoned the transaction with Marathon when it became clear that the expected arrival of generic competition made the economics of the deal dependent on significant price increases," he said.

Pearson is expected to step down in the next few weeks to make way for the incoming CEO, Joseph Papa, previously of Perrigo Company.

The committee said it will also question Ackman, a billionaire activist investor, and Valeant's former chief financial officer and current board member, Robert Schiller. Ackman's Pershing Square Capital fund holds a nine per cent stake in Valeant.

The company has repeatedly delayed filing its fourth-quarter and full-year 2015 results due to misstated sales from a now-defunct specialty pharmacy. 

Last week the company had asked investment banks to reviews its options after buyout firms and other companies showed interest in some of its units  (Valeant Pharmaceuticals hires investment banks to review strategic options).

The intense scrutiny of Valeant has triggered repeated sell-offs of company shares, which have lost nearly 90 per cent of their value since reaching peak levels last August.

This year alone, Americans are expected to spend more than $328 billion on prescription drugs.  Of this, individuals will pay about $50 billion out-of-pocket. 

The federal government will pick up another $110 billion in payments through Medicare, Medicaid, Veterans Affairs, and other programs.