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Valeant to Pay $23m to End ‘Secret’ Pharmacy RICO Claims


August 6, 2021

Valeant Pharmaceuticals agreed Thursday to pay $23 million to end a proposed class action accusing the drug company of violating the Racketeer Influenced and Corrupt Organizations Act with an alleged scheme to block its drugs from generic competition through a “secret network of captive pharmacies.”

A putative class of third-party payors asked a New Jersey federal judge Thursday to preliminarily approve an all-cash settlement reached with Valeant, the now-defunct mail-order pharmacy Philidor Rx Services LLC and Philidor’s ex-CEO Andrew Davenport, ending claims of fraud and conspiracy in violation of the RICO Act.

The proposed settlement comes after more than five years of litigation, which includes a yearlong stay during which a Valeant executive and Philidor’s ex-CEO were found guilty of engaging in a kickback scheme.

The plaintiffs, led by a group of health and welfare funds, are also seeking approval for a separate $125,000 cash settlement with Philidor and its former CEO.

Allegations that Valeant, which is now Canada-based Bausch Health Cos. Inc., created phantom sales through a shadowy network of specialty pharmacies surfaced in 2015 when a stock commentary website accused the drugmaker of cooking its books through Philidor and other dispensers.

The accusations sparked a stock plunge, which was exacerbated by the unveiling of a U.S. Securities and Exchange Commission investigation into the Philidor affair in early 2016.

Plaintiffs in this case — third-party payors — hit Valeant with a putative class action in May 2016, accusing it of violating the RICO Act by issuing them thousands of fraudulent statements inflating the reimbursements they owed for drugs.

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Plaintiffs are represented by James E. Cecchi of Carella Byrne Cecchi Olstein Brody & Agnello PC, Hannah Ross, James A. Harrod, Jai K. Chandrasekhar and James E. Fee of Bernstein Litowitz Berger & Grossmann LLP, Jeffrey W. Golan and Jeffrey A. Barrack of Barrack Rodos & Bacine, and Julie Goldsmith Reiser, S. Douglas Bunch, and Christopher Lometti of Cohen Milstein Sellers & Toll PLLC.

Read Valeant to Pay $23m to End ‘Secret’ Pharmacy RICO Claims.