The company, under scrutiny for its drug-pricing practices, will discount its brand-name dermatology and ophthalmology prescription products by 10 percent for distribution through Walgreens’ more than 8,000 U.S. pharmacies, according to a statement on Tuesday. The Laval, Quebec-based company also plans to extend the distribution model to other independent pharmacies.
Valeant shares surged 12 percent to $105.76 at 11:25 a.m. in New York. They climbed as much as $109.25 earlier, the highest price since Oct. 29.
The company has been under pressure over how it prices drugs and its relationship with mail-order pharmacies such as Philidor Rx Services, which specialized in helping doctors and patients get access to Valeant drugs even when insurers declined to cover them. The stock has plummeted from an all-time high of $262.52 on Aug. 5.
Valeant said it would end its relationship with Philidor on Oct. 30, after reports about tactics Philidor allegedly used to gain more insurance reimbursements for Valeant medicines, including submitting claims using other pharmacies’ identification numbers and altering codes on some doctors’ prescriptions.
"Investors were looking for a definitive track forward for Valeant (in a post-Philidor world) with its pharmacy and distribution strategy," Umer Raffat, an analyst at Evercore ISI, wrote in a note to clients. "We got a very clear answer today." He recommends buying the shares.
The pact with Walgreens "more than replaces Philidor," Valeant Chief Executive Officer Mike Pearson said Tuesday on CNBC.
Under the deal, slated to last 20 years, Walgreens never takes ownership of the drugs but holds them on consignment until delivery, according to Michael Polzin, a Walgreens spokesman. In return, the pharmacy gets to cut out the wholesalers it usually buys drugs from and offer patients lower out-of-pocket costs. Walgreens doesn’t have a similar relationship with any other drugmaker but would consider them going forward, he said.
The Walgreens deal will cover many of the drugs that had been distributed through Philidor, including Jublia, a toe fungus treatment, and Solodyn, an oral antibiotic for acne. It will also include Valeant’s over-the-counter portfolio and provide as much as $600 million in annual savings to the U.S. health-care system.
Valeant is scheduled to hold an investor day on Wednesday as Pearson attempts to restore the company’s luster amid the scrutiny of lawmakers and short-sellers.
The company is spending as much as $500 million on research and development next year and expects to have three drugs approved by the U.S. Food and Drug Administration, Pearson said on CNBC.
"Why people challenge what we’re doing is we do things unconventionally," he said. "Over time we will see that our model will work and is sustainable."
