ERICOPOLY

I suppose they could have told Philador that if they try to resist an immediate wind-down, "we'll just exercise our option and shut it down". So resistance is futile.

It's basically why I'd like to know who the investors are that owned Philador. The rapid agreement to unwind without any noise sounds like they are doing what's best for Valeant -- what a bunch of sweet guys.

It's a Philidor manual not a VRX one. They didn't write it. Don't own it and probably can't publish it. Yes but Philidor can do so. Philidor has no incentive to try to keep the ball rolling, clear the air? It's just no skin off their backs to immediately terminate their business? How weird is that? When no one will do business with you, its pretty easy to just close down. Do they have no legal recourse against a company for refusing to work with them? Play the devils advocate and the allegations are untrue -- a false rumor is spread in the newspaper, your partners distance themselves from you and sever ties, and you just unwind. That's it. Let's say for example that you slander a company and it hurts their business to the point that they have no business left. What's the normal response from the company that you slander? Do you expect no response from them other than what you characterize as the easy one, to just close down?

It feels like Philidor put itself through the document shredder. That whole episode is just strange -- is there a precedent yet for a company to destroy itself when, as FatBaboon says, let's wait for an investigation and fact finding while reserving judgement?

It's a Philidor manual not a VRX one. They didn't write it. Don't own it and probably can't publish it. Yes but Philidor can do so. Philidor has no incentive to try to keep the ball rolling, clear the air? It's just no skin off their backs to immediately terminate their business? How weird is that?

We know that they pretended to be completely unaware just last week. We know that they continued to do business through Philador. We know that the board hadn't yet bothered to investigate widespread fraud claims by an entity controlled by Philador -- you know, within your own friggin network of pharmacies! The company could have said "yes, we've investigated Reitz's claims yet found them to be false. We are therefore pursuing the matter as a standard collections issue". That would have made a better soundbite.

I expect him to have sat down with Reitz roughly three months ago when the serious allegations were reported. After all, the longer a fraud continues the greater the shareholder financial liability and more serious the potential damage to the corporate reputation. I don't expect him to have said anything about the matter this past week. I expect him to have already been to the bottom of this long beforehand! Not pretending to be completely surprised!

Seriously? Perhaps R&O just didn't know who Philidor is? Yea it's just the entity that controls R&O. A total unknown! 1) A 64 year old pharmacist is somehow naive about how things are really done in his industry 2) He therefore can easily mistake something that is obviously normal practice for a fraud 3) He gets to the end of his long career and suddenly starts to withhold tens of millions of dollars of his partner's money due to his imaginings that legit stuff is actually a fraud Hmm... Nope, nothing he would say could be taken seriously. No need to investigate his fraud claims. Carry on, sue him as a regular collection problem.

Let's go back to the facts that we know about rather than engage in theoretical speculation: 1) July 2015: R&O sent a message that they believe there is widespread fraud at Philiador and they will stop payment on tens of millions of dollars owed to Valeant. 2) Several months go by. Valeant keeps doing business with Philador 3) late October 2015: newspaper headline that Philador exists with associated speculation over the lawsuit at R&O 4) late October 2015: Management says "holy shit, this sounds serious, let's investigate Philador right away". Oh and by the way, it's just a "standard collections issue" as if to suggest that this day is the first day anybody has tipped us off -- no reason to investigate Philidor ever before! Uh huh. R&O's lawyers write a letter saying they won't participate in your widespread fraud, and you DON'T EVEN INVESTIGATE! There's nothing standard about that kind of reasoning for nonpayment. You wouldn't need to convene a special board committee to investigate R&O for fraud if you had already done so! I agree, this is what does not sit well with me as well. Looks like a cover-up. Yes. I bought shares last week knowing the pharma industry sucks, they'll pay some fine that won't hurt much, and we'll move on. I hit the ceiling when I realized they lied to me during their special "come to Jesus" meeting.

Let's go back to the facts that we know about rather than engage in theoretical speculation: 1) July 2015: R&O sent a message that they believe there is widespread fraud at Philiador and they will stop payment on tens of millions of dollars owed to Valeant. 2) Several months go by. Valeant keeps doing business with Philador 3) late October 2015: newspaper headline that Philador exists with associated speculation over the lawsuit at R&O 4) late October 2015: Management says "holy shit, this sounds serious, let's investigate Philador right away". Oh and by the way, it's just a "standard collections issue" as if to suggest that this day is the first day anybody has tipped us off -- no reason to investigate Philidor ever before! Uh huh. R&O's lawyers write a letter saying they won't participate in your widespread fraud, and you DON'T EVEN INVESTIGATE! There's nothing standard about that kind of reasoning for nonpayment. You wouldn't need to convene a special board committee to investigate R&O for fraud if you had already done so! How could you have such a partner (Philador) and not bother to look into it when you've got $60+ million at stake that won't be collected until you've satisfied his worries about widespread fraud? That's just ridiculous. Why don't we interview ex-cons for the next CEO position to replace Pearson, after all... there's a chance that they are honest people who were wrongfully convicted. I mean, you cannot prove that they weren't, because you never know right?

And my point to the fat ape isn't just that they are engaging in immoral business or whatever that is par for the course in the industry... It's that when they hold a special "get the real facts out" call out to investors and the whole board is there and everything... They just lie and try to cover it up further! "Standard collections issue" my ass.

That's my problem too. Even if you do all mathematical adjustments like say the fine will cost them this, or the sales decline will be 7%, etc... etc... That still leaves you with the ship's captain who will neglect to tell you when there are serious allegations of widespread fraud and will not change course. He will just charge along and let the eventual legal tab just keep piling up. Let's say that in a parallel world Andrew Left had died in his infancy of a rare disease. Would Philidor's doors be open today for business? YOU BET THEY WOULD. Eric do you know enough to be so shrill? Isn't every large corporation subject to payment disputes? Do you know enough here to be so indignant? I really think everyone needs to relax a bit and wait till there's something solid. Philidor bought a pharmacy in California so it can sell drugs in California. The California. Pharmacy then is used to sell drugs in California. The guy then refuses to remit the payments back up the chain. The whole thing is structured via options for legal distance. (How is that different than using bankruptcy remote Corp. or using sub contractors or whatever) Not a thing of moral beauty to be sure. This valeant matter has become completely ridiculous. Valeant has scarcely even been ACCUSED of anything criminally noteworthy, let alone convicted, and who the hell thought this company was some kind of Buffett type Angel. It's a normal business in a crappy industry doing normal things for that industry. Enough with the justifications dude He's not justifying, he is stating facts which are helpful. Right now there are a lot of longs that are on the fence and pretty pissed and I find his posts quite balanced, actually. Fat Baboon, You are the sole owner of the company but you have a manager handle everything for you. He tells you there is a "standard collections issue" when in fact it's a "widespread fraud" accusation. He lies to your face and you hear about it in the Los Angeles Times! What are you going to do, give the guy a bonus and offer him your daughters hand in marriage? Get real.

I don't think anyone really cares that Valeant raises the price on some branded foot or face cream. The issue is the method they go about forcing sales of those products by using very aggressive techniques of filling prescriptions. Such as changing codes to specifically fill their branded product versus the generic, using other pharmacy ID's to trick insurance companies to pay, etc. Not that insurance companies are ethical themselves, but that kind of behavior was altering what typically would occur in a free market. Instead Valeant was forcing the purchase of their product by pretending they were not the owners of the pharmacy that was directly altering those prescriptions. Big difference. If Valeant raises the prices and it flows through normal channels and people choose to pay more for it, fine. But that's not what was going on here. Illegal or not, they've chosen to cut ties with that approach and now it's back to the normal channels and we'll see what profits will look like given that dramatic 180. So far we haven't seen evidence of "immorality" beyond 70% of their drug portfolio. Directly altering a prescription is not in itself unethical or immoral. All we know is prescriptions were altered to say the doctor prefers the brand. Do we know that it was changed without the doctors consent? No, we do not. In all likelihood, the manual said call the doctor if a script doesn't say fill as written and ask if they would like it to say fill as written. Some % of the time, they probably say yes, and Valeant makes more money. Is that immoral? Can I ask a stupid question here? Another stupid question I guess. Why hasn't Valeant published the full manual if it's being quoted out of context? Not that Valeant is expected to be forthright at this point after we've seen what a "standard collections dispute" looks like... but if they'd just go ahead and put the manual on their website it would settle all this speculation. We would either see a stock ticker in the green or orange jumpsuits. At least it would speed things along.

The most damning thing (in my eyes) about this part of the story is that it wasn't when R&O stopped paying them for accusations of widespread fraud that this independent investigative committee was set up to take a look at Philidor... It was when it hit the newspaper. Several months later! Somebody's kid went to school and heard about the story, came home and said "Daddy, are you going to jail?". To which the father said "No sweety, nobody in big pharma goes to jail. Stop watching so many movies, the real world doesn't work like that."

That's my problem too. Even if you do all mathematical adjustments like say the fine will cost them this, or the sales decline will be 7%, etc... etc... That still leaves you with the ship's captain who will neglect to tell you when there are serious allegations of widespread fraud and will not change course. He will just charge along and let the eventual legal tab just keep piling up. Let's say that in a parallel world Andrew Left had died in his infancy of a rare disease. Would Philidor's doors be open today for business? YOU BET THEY WOULD.

They are in it for the Pearson that says this: “Operating honestly and ethically is our first priority, and you have my absolute commitment that we will make it right.” Not the one that says this: "standard collections dispute" while still maintaining that Philador was "immaterial". Dude, like you're partnering your shareholders with a company that you know has been accused of "widespread fraud" by one of it's owned pharmacies (R&O), and you still maintain that it's immaterial. Then when outed and forced to disclose it, you still characterize it as a "standard collections dispute". "You're just a fucking dirtbag is all" is what I'd like to say to Pearson. Handcuffs might make my loss a bit less painful.

They probably thought it was a standard collections dispute at the very beginning. I have no idea why they still thought it was a standard collections dispute by the time we got that Monday conference call. I didn't buy the stock until after I saw his presentation calling it a standard collections dispute. I want that liar fired.

So now the running joke is going to be that, at Valeant, nonpayment for fraud is just "standard".

So on the conference call to investors that's when they said that the reason why R&O wasn't paying is because of R&O's fraud suspicions and we've been investigating these serious allegations just a standard collections dispute.

"The reason why I've stopped sending you checks is because I think you are engaged in massive fraud and I can't associate myself with that." So the reasonable response to that is to demand payment from R&O, ignoring the fraud accusations? Or is the problem that Reitz sent the letter to Philador, Philador burned the letter and is just hoping that Reitz won't escalate the issue in the press when pushed? Remember Valeant only last week thought it wise to have a special investigation into Philador.

Somebody asked a while back if I still had a position in VRX. No, I sold out on Friday for a loss and I mentioned it -- but it's buried too deep in the thread.

On July 21, Davenport and three other Philidor executives arrived unannounced in Camarillo, talking to Reitz for just 15 minutes before rushing off. Reitz said the executives answered none of his key questions. The next day Reitz's lawyer sent a letter to Philidor. "Your continued silence indicates to us that Mr. Reitz' suspicions are well-founded," he wrote. "You appear to be engaging in a widespread fraud." By then Reitz had stopped sending Philidor the millions of dollars in checks that he was receiving from insurers for prescription shipments. His lawyer explained that Reitz had to protect himself from "massive potential" liability. On Sept. 4, the drug giant Valeant sent a letter to Reitz — demanding $69 million that it said the small-town pharmacist owed. http://www.latimes.com/business/la-fi-1101-valeant-pharmacy-20151101-story.html So the thing is... it's quite possible that the only purpose of the Valeant demand for the $69 million is to begin a campaign of actions that give the appearance that it was unaware of any wrongdoing. Why would we draw attention to knowledge of a fraud by acting anything but unaware? Instead they could have investigated and just sat down with Reitz to hear about the fraud. Then they could have pulled the plug on Philidor at that point instead of waiting to last week after all the business partners had fled. So the demand for the $69 million from R&O... it seems to me like a strategy to establish plausible deniability defense. More musings from a worried girlfriend...

I wonder if keeping secret deceptive practices (even if legal)... if that's considered a competitive advantage like intellectual property... So perhaps some of that goodwill really is still an earning asset after the drugs go off-patent and doesn't deserve to be written down! Hah Hah.

And from the looks of things the thing that was truly "wrong" from their perspective (when they severed their ties to Phildor) is that the music had already stopped and the CVS (etc...) had severed their ties. That's when it stunk enough to distance themselves from it. Valeant needs to have been the first one out the door. It was the last.

Either way the scripts would be part of "specialty pharmacies." Not exactly. 1) you have to know how VRX defines speciality pharmacy as there are grey areas in it. 2) you don't know what other pharmacy licenses Philidor was using to fill scripts. They could just as easily been using a retail pharmacy license for the stuff that were not considered a speciality drug. Have to admit this is becoming a fun exercise on critical thinking. This is getting ridiculous. Ok let's think about it critically -if you're philidor what's your angle? You want to unlock further milestone payments? Then are you going to hide the fact that you originated many of these scripts and let parent-valeant think they are attributable to someone else? Why even risk breaking the law if some other Podunk pharmacy gets full credit (per your thought "what if valeant didn't know all the scripts attributable to philidor"). It's all about incentives right? If that's the case then philidor is going to try and take credit for as much of the contribution as possible -At the expense of other channels. The numbers that valeant hq has can only be high, not low. If a drug keeps getting rejected using Philidor's id the script still has to be filled/already sent to the customer whether they get credit for it or not. Are you talking about actually filling the prescription or the insurance reimbursement? my question was how are they incentivized to hide the origination from valeant? There is potentially a ledger somewhere where credit is given come performance milestone time, so they get paid the performance incentive from Valeant either way. But of course that book isn't shown to the insurers.