Barrack, Rodos & Bacine Files Complaint Against Valeant Pharmaceuticals and Others for Violations of the Racketeer Influenced and Corrupt Organizations Act and the New York Consumer Protection Act

8/30/2016 - Barrack, Rodos & Bacine filed a complaint in the U.S. District Court for the Southern District of New York against Valeant Pharmaceuticals International Inc., Andrew Davenport, who had been chief executive of the specialty pharmacy Philidor RX Services LLC, and Matthew Davenport, who allegedly held himself out as Philidor’s CEO in documents filed with the California State Board of Pharmacy.  The proposed class action alleges that the company’s relationship with specialty mail-order pharmacy Philidor was illegal and allowed Valeant to overcharge and wrongly charge for prescription drugs in violation of the Racketeer Influenced and Corrupt Organizations Act and the New York Consumer Protection Act.  
The complaint alleges that Valeant, Philidor and others under their control established and substantially controlled an enterprise of captive pharmacies that regularly and continuously: (i) charged exorbitant prices for Valeant-branded drugs; (ii) routed prescriptions through its secretly controlled pharmacy network and illegally resubmitted rejected claims for reimbursement through other pharmacies, to make it appear that the claims had not previously been rejected; (iii) illegally or improperly substituted Valeant-branded drugs for generic equivalents that were prescribed and/or should have been dispensed, often by physically altering physicians’ prescriptions; (iv) illegally submitted reimbursement claims for prescription refills that were not needed or requested; and (v) secretly waived patient co-pays and offered other incentives to discourage patients from complaining about these deceptive practices and requesting less expensive generic alternatives.  The complaint further alleges that the injuries suffered by class members were exacerbated by Valeant’s strategy of aggressively raising the prices of drugs it had acquired from other drug companies.  For example, after acquiring the rights to the dermatology drug Noritate 1%, Valeant increased its price by 212%.  The Company increased the price of another dermatology drug, Tagretin gel, by 250%, from approximately $12,176 in early 2013 to over $30,320 by 2015.  Similarly, after acquiring Salix Pharmaceuticals in 2015, Valeant raised the price of Glumetza, a diabetes drug, by more than 800%.  The action seeks compensatory and treble damages. 
The case is brought on behalf of health insurance companies, health maintenance organizations, self-funded health and welfare benefit plans, third party payors and any other health benefit providers in the United States or its territories who paid or incurred costs for Valeant-branded products in connection with a claim submitted by a Philidor-affiliated pharmacy between January 2, 2013 and October 30, 2015.  Philidor’s network of captive pharmacies also included Cambria Pharmacy, West Wilshire Pharmacy, R&O Pharmacy, LLC, SafeRx Pharmacy, Orbit Pharmacy, D&A Pharmacy and Prescriptions Shoppe.  A central allegation is that third party payors and other class members were forced to pay or reimburse for exorbitant prices stemming from Valeant’s unlawful conduct with Philidor that helped boost sales. 
The plaintiffs and proposed class representatives include BR&B client the Detectives Endowment Association of the City of New York, which represents 17,500 active and retired detectives, and the New York Hotel Trades Council & Hotel Association of New York City Inc. Health Benefits Fund, which serves active and retired hotel workers.  The case is captioned New York Hotel Trades Council & Hotel Association of New York City Inc Health Benefits Fund et al v. Valeant Pharmaceuticals International Inc et al, U.S. District Court, Southern District of New York, No. 16-06779. Please contact BR&B partners Jeffrey Golan (jgolan@barrack.com) or Jeffrey Barrack (jbarrack@barrack.com) with any questions.