Federal charges brought against former pharmaceutical company executives offer a window into the government’s perspective on why people are suddenly paying more for their prescription drugs.

Federal prosecutors this week charged former executives of Valeant Pharmaceuticals, a publicly held company, and mail-order firm Philidor Rx Services with concocting a scheme to enrich themselves while enhancing the bottom lines of both companies.

The charges—conspiracy and fraud-related—allege that Philidor’s Andrew Davenport and Valeant’s Gary Tanner conspired to push Valeant drugs through Philidor’s channels, often involving passing over cheaper generic drugs in favor of “ailing” Valeant brand drugs.

As reported by the New York Times, the government alleges that the two men made sure to channel millions illegally to one another in funds diverted from the main conspiracy.

Tanner was forced out of Valeant and Davenport went down with his ship when Philidor failed amidst investigations into the scheme by multiple law enforcement agencies.

As outlined by federal prosecutors, the scheme demonstrates how consumers can be forced to pay higher prices for their drugs due to criminal activities inside drug makers and their business partners.

Now, it’s Valeant shareholders who are being gouged. Valeant was a Wall Street darling from 2013 to mid-2015. Its shares topped out just shy of $260 in July 2015. Today, you can pick them up for $18.03 if you place your order quickly.

Valeant was quick to tell the media that Tanner was long gone (although he received a separation payment of $9 million) and that it had been cooperating with the feds. Tanner’s lawyer told the New York Times he’d done nothing wrong; perhaps not surprisingly, Davenport’s attorney said the same on his behalf.

Those denials may have to be rolled out a few more times in coming months; the Times reported that other agencies are preparing cases against the pair.

Instant Insights /

Ex-Valeant, Philidor pharma execs charged with fraud, conspiracy

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