October 27, 2015 / 1:51 PM / in 2 years

FTC looking at Valeant's contact lens dealings: source

(Reuters) - The U.S. Federal Trade Commission is looking into whether Canadian drugmaker Valeant Pharmaceuticals International Inc (VRX.TO) (VRX.N) illegally cornered the market for a component of a new type of contact lens, an industry source told Reuters.

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

Valeant said on Monday it had received a letter from the FTC on or about Oct. 16 seeking more information about Valeant’s recent acquisition of Paragon Vision Sciences, which produces a material used to make gas permeable lenses.

That probe focuses primarily on a small subset of the contact lens market, Ortho-K lenses, according to the contact lens industry source, who asked not to be named to protect business relationships.

The Ortho-K lens, when worn overnight, reshape the patient’s cornea to counteract nearsightedness and other vision problems.

After acquiring the Paragon Vision Sciences in May, Valeant obtained a de facto monopoly on Ortho-K lenses, because Paragon and Bausch + Lomb, which Valeant already owned, are the only holders of the FDA approvals required to manufacture the lenses.

The FTC also asked questions about whether Valeant used distribution contracts as leverage to persuade manufacturers to exclusively sell other Valeant contact lens products, the person said.

Valeant did not immediately respond to questions regarding this story. ProPublica, a non-profit newsroom that produces investigative journalism, was the first to report the probe.

Valeant said earlier this month that it had been subpoenaed by U.S. prosecutors seeking information on its pricing decisions, drug distribution and patient assistance programs. The company has come under intense scrutiny for increasing drug prices.

The New York Times also reported last week that Valeant and other drugmakers were using specialty drug distributors to circumvent barriers to raise prices.

Valeant’s shares went into a tailspin last week after short-seller Citron Research said the company was using specialty pharmacies to inflate its revenue.

The company denied the allegation and asked the U.S. Securities and Exchange Commission to look into Citron.

Valeant’s U.S.-listed shares closed up just under 1 percent at $145.46 on Tuesday. Up to Monday’s close, the stock had lost about 38 percent of its value since Oct. 14 when the company disclosed that it had received a federal subpoena.

Reporting by Vidya L Nathan in Bengaluru, Carl O'Donnell in New York and Diane Bartz in Washington; Editing by Ted Kerr and Christian Plumb

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