Comment by lifeisstillgood | Hacker News Reader

Comment by lifeisstillgood | Hacker News Reader

lifeisstillgood

I am coming late to the game but cannot find useful, clear explanations (I read the rather over wrought citron doc ... Is this a genuine stock researcher?)

So as I understand it :

- valeant sells over priced medical drugs, which are named on a prescription by a doctor (?) but if you Are with insurer X, the insurer requires the druggist To replace expensive named brand with generic alternative.

- Valeant "owns"/has crushingly close relationship with Philidor a network of local pharmacies / druggists.

- philidor then buys a small druggist in Canada named R&O who then gets orders from all over the country and stops sending the cash to HQ because they were bought for 350k and now have revenue of 69m a few months later

- And ... Exactly how does Philidor do this fraud thing? If you are supposed to swap NameBrand out for GenericBrand, how does sending in 69M of invoices for NameBrand help? Philidor / valeant were not supposed to be selling it anyway? How does this coupon thing help?

This is one of the annoying things about fraud - it is all simple when you eventually understand it.

Ps if anyone cares to explain how one can make and obtain money from having "stolen identity" please post that too ...

This is my take (based on other articles I've read):

- Most of Valeant's drugs have cheap generic options, so most insurance company's say "no" when a pharmacy tries to fill it, hence it's hard as hell for Valeant to sell their drugs

- Valeant forms a cushy relationship with Philidor. Unlike most pharmacies, Philidor puts a LOT of effort into getting the insurance companies to say yes (they just give the drug to the patient before getting paid; if the drug gets denied, they try many others ways to get paid)

- Philidor was starting to get shutdown by payers, basically, any request from Philidor was red flagged by the payers to double check to see if something fishy was going on

- Philidor also tried to get a pharmacy license in California, but the authorities said no because they lied on who actually owned what (apparently getting a "no" to a license is really bad)

- Philidor then decides to buy R&O to get their licenses and their payer contracts. Basically it's a run around, the insurance company will see the script coming from R&O and basically think "ahh.. at least it's not Philidor"

- However, Philidor starts playing loose and fast with R&O license even before they closed the deal. Philidor would bill an insurance company using R&O's pharmacy ID, which is a HUGE no-no

- R&O sees what's up and says "screw this crap, I'm not going to give Valeant any of the insurance money I have until I get some goddamn answers as to what they are doing"

- Valeant (in all it's wisdom) sues R&O for non-payment and R&O says "I never got a invoice from you" and all hell breaks loose as the story unwinds

One important note that was just uncovered that Valeant was abusing the DAW designation. Doctors can write "Dispense As Written" on a prescription to imply that they want the Brand Name drug rather than the generic one. IE, a doctor will often write something like "Tylenol 500mg" but they don't really care if the patient gets any random acetaminophen. If they write "Tylenol 500mg DAW" that means they want the patient to get the brand name Tylenol.

It's looking more and more likely according to internal documents that Philidor was changing doctors' prescriptions by writing DAW on them so that the patients would get the much more expensive Valeant option instead of the cheap generic version -- this is highly illegal, people will definitely be going to jail for that.

Edit to add a source:

http://www.bloomberg.com/news/articles/2015-10-29/philidor-s...

WOW. I hadn't read that.

Some else posted this link a few days ago.

http://azvalue.blogspot.com/2015/08/valeant-detailed-look-in...

I think the cash flow analysis is pretty damning. Valeant says they are pulling in a lot of cash from all of their acquisitions, but if you calculate what the cash flow would need to be for that to be true, it's over 200% of what Valeant actually has on it's 10-Ks!

Philidor was changing doctors' prescriptions by writing DAW on them ... this is highly illegal, people will definitely be going to jail for that.

Oh, boy, this could get exciting quite quickly.

Valeant owns an option that lets them buy Philidor for $0 (plus possible incentive payments).[0] Yes, that's not a typo. This was submitted to HN a few days ago but didn't generate any comments.

The executives still (at least nominally) running Philidor must be shitting in their pants right about now. It looks like Valeant is out to make them look like bagmen. But why would they go down without a fight? The internecine warfare is about to get very interesting, or in more colloquial terms, the shit is really about to hit the fan.

[0] http://www.bloombergview.com/articles/2015-10-26/valeant-s-p...

"SIRF reporting reveals that Valeant has been closely involved with Philidor at every stage of its life-cycle, controlling it in all but name, since day one."

http://sirf-online.org/2015/10/19/hidden-in-plain-sight-vale...

The key is "all but name". If I'm Andy Davenport, Philidor's CEO, I immediately get together with my brother Matthew Davenport, also mentioned in your link, to get my story straight. Because it is their name on all the documents.

Sarbox has put a damper on the Sgt. Schultz defense of "I hear nothing, I see nothing, I know nothing!". CEOs can go to jail even if they claim they were just ignorant figureheads.

So if I'm the Davenports I immediately go to the Federales and cut a deal. I rat out Mike Pearson (Valeant's CEO) and claim that he put them up to it. Note that its in the Davenport brothers interest to lie and make up shit if they have to, because that's probably their best way they avoid Club Fed (or worse).

Like I said, this could get interesting pretty quickly.

Thank you. On a "motivation" note it would be interesting to know when the insurers policy on brand vs generic came in and when Valeant started using Philidor in earnest.

One would assume this was not begun as a scam, but at some point they looked at a sudden decline in revenue and thought, if only that pharmacy group we almost own could help ...

Nah. It's a scam. They took pains not to own the pharmacy ... I am too forgiving.

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