Specialty pharmacies in spotlight as Valeant ties questioned

Wed Oct 21, 2015 8:33pm EDT
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By Deena Beasley

LOS ANGELES Oct 21 (Reuters) - Investor concerns over accounting practices at Valeant Pharmaceuticals International Inc have put a spotlight on the little-known and fast-growing specialty pharmacy industry.

Shares of Valeant fell 19 percent on Wednesday after influential short-seller Citron Research accused the company of using specialty pharmacies, through a network led by its partner Philidor Rx Services, to inflate its revenue, an allegation the drugmaker denied.

Specialty pharmacies are designed to deliver medications with unique handling, storage and distribution requirements, often for patients with complex conditions such as cancer, multiple sclerosis or rheumatoid arthritis. They can provide more detailed guidance for patients on how to take the drugs. Specialty drugs are often expensive, sometimes priced at over $100,000 a year.

The industry has been growing quickly as drugmakers shift research and sales efforts to more complex medications. Pembroke Consulting estimated early this year that the number of accredited specialty pharmacies would jump by nearly 100 to a total of 250 in 2015.

In the past, drugmakers were directly involved in distribution of their products. Merck & Co, for example, owned a pharmacy service company known as Medco. But it spun off that business in 2003, partly due to concerns over potential conflicts of interest.

Medco was later acquired by Express Scripts Holding Co , which is now the largest U.S. pharmacy benefits manager.

A New York Times report earlier this week said that Valeant worked with Philidor Rx Services, based in Hatboro, Pennsylvania, to increase sales, and prices, for treatments that don't meet the specialty criterion, including drugs for acne and toenail fungus, and that regular pharmacies may not prescribe.

The same day, Valeant disclosed that a growing percentage of its revenue is coming from products dispensed through specialty pharmacies, and that it had purchased an option to acquire Philidor. Valeant is Philidor's main customer.   Continued...