Exclusive: U.S. insurer caught on to odd billing at Valeant-linked pharmacy

Wed Nov 4, 2015 12:26pm EST
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By Carl O'Donnell, Tim Reid and Caroline Humer

NEW YORK/LOS ANGELES (Reuters) - OptumRx, a leading U.S. pharmacy benefits manager, began to stop payments to a pharmacy closely-linked to Valeant Pharmaceuticals International (VRX.N: Quote) more than a year ago after recognizing billing irregularities, former employees at the pharmacy and sources familiar with the matter told Reuters.

Hatboro, Pennsylvania-based Philidor Rx Services persisted in efforts to secure reimbursement for Valeant drug sales even after receiving a cease-and-desist order from OptumRx, one of its largest revenue sources, in September 2014, two sources familiar with the matter said. OptumRx is owned by UnitedHealth Group (UNH.N: Quote).

In response, Philidor submitted claims to OptumRx for Valeant drugs using the identification numbers of at least four other affiliated pharmacies, these sources said.

Philidor's business practices are at the heart of fraud allegations posed in late October by Citron Research's Andrew Left, an influential short-seller in Valeant stock. Valeant had already come under scrutiny for charging high mark-ups on drugs made by companies it has acquired.

Its ties to Philidor, which surfaced two weeks ago, have led investors to question Valeant's legal liabilities and future prospects, sending its shares down 45 percent. Valeant has denied Left's accusation that it used Philidor to inflate its revenue. But it prompted the drugmaker to disclose that it paid Philidor $100 million for an option to acquire the company in December, raising questions of what it knew of Philidor's practices.

OptumRx's September cease-and-desist letter cited a breach of its contract with Philidor, the sources familiar with the matter said. It isn't clear what billing irregularities caused OptumRx to send the letter, the sources said.

In the months that followed, OptumRx recognized that drug reimbursement claims filed with the identification numbers of four other pharmacies could be traced to Philidor, the sources said. Starting in January, OptumRx sent cease-and-desist letters to the pharmacies, which worked in a network run by Philidor, the sources said.

Spokespeople for both Valeant and Philidor declined to comment.   Continued...

The company logo of Valeant Pharmaceuticals International Inc is seen at its headquarters in Laval, Quebec May 19, 2015. REUTERS/Christinne Muschi