(Adds Valeant's response, background; updates shares)
Aug 18 (Reuters) - T. Rowe Price Group Inc has sued Valeant Pharmaceuticals International Inc , alleging that investors in the Canadian drugmaker lost billions of dollars as a result of the company's "fraudulent scheme".
Valeant's U.S.-listed shares reversed course to close down 3.4 percent at $37.19 on Thursday. They had risen as much as 5 percent, after the company's lenders agreed to an amendment to loosen covenants on its $31 billion of debt.
T. Rowe Price, one of the biggest investment managers in the world, said Valeant had used a secret pharmacy network, deceptive pricing and reimbursement practices, and fictitious accounting to shield the company's branded drugs from generic competition and artificially inflate revenues and profits.
Valeant's relationship with specialty pharmacy Philidor RX was revealed last fall, including the aggressive tactics used to receive payments from insurers.
Scrutiny of the company's dealings with Philidor and sharp increases in drug prices last year sent the company's shares plunging. The stock is down about 90 percent from its August 2015 high.
Valeant said on Thursday it was aware of the lawsuit but had not been served yet. (bit.ly/2bAYlgG)
T. Rowe Price, which held a 6.4 percent passive stake in Valeant as of Dec. 31, filed the lawsuit in the District Court of New Jersey on Monday. The filing was made public on Thursday.
The lawsuit comes a week after the Wall Street Journal reported that lawyers at the U.S. Attorney's Manhattan office were probing whether Valeant obscured from insurers its relationship with Philidor.
Institutional investors, including TIAA-CREF and CalPERS, filed securities fraud lawsuits against Valeant in New Jersey last year, accusing the company of inflating its share price by not disclosing the use of specialty pharmacies to prop up sales of high-priced drugs.
Valeant has taken a series of steps to restore investor trust, including cutting off ties with Philidor last October, replacing Chief Executive Michael Pearson and adding top investor Pershing Square's Bill Ackman to its board.
T. Rowe Price and Pershing Square Capital Management declined to comment. (Reporting by Ankur Banerjee and Arathy S Nair in Bengaluru; Editing by Sriraj Kalluvila)