Valeant's Walgreens deal solves some problems but growth issue persists

Wed Dec 23, 2015 4:49pm EST
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By Carl O'Donnell and Caroline Humer

NEW YORK Dec 23 (Reuters) - The recent pact between Valeant Pharmaceuticals International and Walgreens Boots Alliance may salvage the drugmaker's relationships with physicians, but is unlikely to fully restore Valeant's previous revenue growth from high-priced, branded drugs, according to doctors and investors.

Under the deal announced last week, Walgreen's will take over many of the functions that had previously been managed by Philidor Rx Services, the specialty pharmacy with which Valeant cut ties in response to allegations of aggressive billing practices.

Walgreens will administer discount programs that allow patients to obtain high-priced Valeant drugs at little to no cost. It will also handle the drugs' distribution and obtain reimbursements for Valeant from insurance companies.

The agreement will address a difficulty that has loomed large since Valeant severed its relationship with Philidor in November: the ability of patients to easily obtain Valeant drugs at an affordable price.

However, it will do little to mitigate Valeant's longer term challenge of persuading increasingly cost-conscious insurance companies to cover the cost of its expensive, branded products.

At stake is the future revenue growth of Valeant's dermatology portfolio, one of the company's largest units and the most reliant on pricey medications. Some of its most popular products include toe fungus cream Jublia, acne medication Solodyn and eczema treatment Elidel.

Representatives of Valeant declined to comment.

Valeant disclosed its close ties to Philidor this fall, amid reports about controversial reimbursement practices aimed at boosting Valeant's revenue. Valeant has denied knowledge of misdeeds; its board is conducting an investigation.   Continued...