VRX - Valeant Pharmaceuticals International Inc.

[feynmanresearch]

No, you are the idiot here my friend. You are pretty challenged if you think what Coca-Cola is doing is worse than Valeant.

I'm sorry, I don't think our fellow poster is either an idiot or challenged. Just willfully disingenuous.

 

What is willingly disingenuous about what I said?

 

I do think that a lot of what Valeant does is immoral.  I also think a lot of what Coca-Cola does is immoral.  I was just pointing out what I think is hypocritical about Mungers statement.  And I think anybody who says voluntary exchange is always moral is absolutely wrong.  That logic implies slavery is moral, because there is a willing exchange.

 

Slavery is the opposite of a willing exchange.

Yea,exactly. How is a slave willingly participating in his enslavement?

[original mungerville]

Can anybody here point me to one thing they are 100% sure is illegal and was done by Philidor?  Not something that seems shady, something that is clearly illegal. 

 

Is anyone sure that using multiple pharmacy IDs until one gets reimbursed is illegal?  Why would they write that in a training manual distributed to 1,000 employees if it was illegal?  Is there any incentive to do so?  If that's illegal and they wrote it in the manual, these would be the dumbest fraudsters ever.

 

Good question and good point. (Because you have to be retarded to put it in the manual.)

[cmlber]

No, you are the idiot here my friend. You are pretty challenged if you think what Coca-Cola is doing is worse than Valeant.

I'm sorry, I don't think our fellow poster is either an idiot or challenged. Just willfully disingenuous.

 

What is willingly disingenuous about what I said?

 

I do think that a lot of what Valeant does is immoral.  I also think a lot of what Coca-Cola does is immoral.  I was just pointing out what I think is hypocritical about Mungers statement.  And I think anybody who says voluntary exchange is always moral is absolutely wrong.  That logic implies slavery is moral, because there is a willing exchange.

Okay, so going back to your example, let's say we have a 12 year old in a war zone in some African country. His tribe/family/whatever is in danger for their life. Would you deny the kid the right to buy a gun/rifle from you?

 

No, I wouldn't deny that kid the right to buy a gun/rifle.  The circumstances are what make one thing moral and another immoral, not an arbitrary fact like was the exchange done willingly.

[Mephistopheles]

Can we please keep the topic to Valeant related matters and not slavery or AK-47's?

 

This thread already has way too many posts!

[cmlber]

No, you are the idiot here my friend. You are pretty challenged if you think what Coca-Cola is doing is worse than Valeant.

I'm sorry, I don't think our fellow poster is either an idiot or challenged. Just willfully disingenuous.

 

What is willingly disingenuous about what I said?

 

I do think that a lot of what Valeant does is immoral.  I also think a lot of what Coca-Cola does is immoral.  I was just pointing out what I think is hypocritical about Mungers statement.  And I think anybody who says voluntary exchange is always moral is absolutely wrong.  That logic implies slavery is moral, because there is a willing exchange.

 

Slavery is the opposite of a willing exchange.

Yea,exactly. How is a slave willingly participating in his enslavement?

 

He's not, and you're right.  But two sides to the exchange are willingly engaging.  If you're now inserting the interests of another party into your definition of morality and saying all sides affected by the transaction must willingly engage for it to be moral, then in the case of selling a nuclear weapon to a known terrorist, isn't everyone on the planet affected by the transaction?  Or isn't everyone in the town in which I'm selling an AK-47 to a child affected?

 

I wasn't intending for this to be a massive discussion on morality, just pointing out the world would be a f***ed up place if your definition of morality was right, and that with a few minutes of thinking it is clear that it is a stupid definition of what is moral and what isn't. 

[cmlber]

Can anybody here point me to one thing they are 100% sure is illegal and was done by Philidor?  Not something that seems shady, something that is clearly illegal. 

 

Is anyone sure that using multiple pharmacy IDs until one gets reimbursed is illegal?  Why would they write that in a training manual distributed to 1,000 employees if it was illegal?  Is there any incentive to do so?  If that's illegal and they wrote it in the manual, these would be the dumbest fraudsters ever.

 

Good question and good point. (Because you have to be retarded to put it in the manual.)

 

Ok, I'm done discussing what is right and what is wrong, sorry for adding 2 pages to the length of this thread.  Let's get back to a more relevant point, who would be so retarded to put the way they would defraud insurance companies in writing in a manual to be distributed to 1,000 employees?

[Orchard]

http://retheauditors.com/2015/11/01/the-case-of-valeant-not-over-by-a-long-shot/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+ReTheAuditors+%28re%3A+The+Auditors%29

[original mungerville]

And as it stands (unless a lot more facts come out), I have a hard time trusting management even if ultimately Valeant recovers. Further, the big investors and board members are now sucked into this thing and so they too have a huge vested interest.

 

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. 

[ERICOPOLY]

Consumers don't willingly buy Valeant's products?

 

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.

 

[ERICOPOLY]

And as it stands (unless a lot more facts come out), I have a hard time trusting management even if ultimately Valeant recovers. Further, the big investors and board members are now sucked into this thing and so they too have a huge vested interest.

 

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.

 

[cmlber]

Consumers don't willingly buy Valeant's products?

 

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... 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.

 

That's a very good point.  Reasons could include, 1) it's incriminating (obviously not good for longs), 2) there is a bunch of stuff in it that would also be misinterpreted without context and be a PR shit storm despite being totally legal, or 3) it's not theirs to publish, it's Philidor's.

 

I personally think 2) is much more likely than 1), because you have to be a f***ing idiot to put methods of defrauding insurance companies in a written manual.  People committing fraud are usually pretty careful not to leave a trace.  It would be like Bernie Madoff creating a manual for his assistant title "How to Fake an Account Statement on Photoshop."  But crazier things have happened.

[LC]

The thing is that I'm a very well off guy. I don't see why I need to buy anything that is a buy. There are so many companies out there and I don't need to be affiliated with one that does business this way. I don't know why anyone else needs to either. I also don't care that others in the industry behave unethically as well. That's ok I don't need to be affiliated with those either.

 

Let me extrapolate this situation to real life. I could definitely make more money if I behave unethically towards my clients. My personal IRR would go up. But I wouldn't do that. So why should I do it through a third party? What's amazing is that a lot of Valeant shareholders have the same view as me regarding ethics in real life. They wouldn't do anything like Valeant does. But they have no problem partnering with Valeant and profiting from its doings and even defending it after it.

 

The most sensible thing posted in this thread to date.

[ERICOPOLY]

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.

[thefatbaboon]

Eric, what do you think usually happens in a collections dispute and lawsuit? You don't think there are all kinds of weird and wonderful allegations made?  What do you expect the non payor to say? I'm not paying because I don't feel like it. I'm not paying because the fairies told me not to.

 

  If Pearson believes or knows that the California pharmacy was selling medicines legally on behalf of Philippe/valeant then his reply that it is a collections dispute is perfectly reasonable. He's not going to say it's a fraud if he doesn't think it's a fraud because in his mind it's a collection dispute.

 

 

[ERICOPOLY]

Eric, what do you think usually happens in a collections dispute and lawsuit? You don't think there are all kinds of weird and wonderful allegations made?  What do you expect the non payor to say? I'm not paying because I don't feel like it. I'm not paying because the fairies told me not to.

 

  If Pearson believes or knows that the California pharmacy was selling medicines legally on behalf of Philippe/valeant then his reply that it is a collections dispute is perfectly reasonable. He's not going to say it's a fraud if he doesn't think it's a fraud because in his mind it's a collection dispute.

 

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?

 

[Picasso]

I think the best thing Valeant could do is eliminate future guidance and stop catering to the whims of the sell side.  Pearson keeps saying he's focused on long-term returns and long-term investors, but some of these decisions are just not long-term at all.

 

Just pull the rug out from under all the sell side analysts.  Valeant doesn't need to issue anymore debt since they already have more than enough, and focus on maximizing cash flows per share.  They should have at least $3 billion of free cash flows per year to reduce debt and make small acquisitions.  They can keep buying small, durable (real durable, not fake durable by using aggressive captive mail-order pharmacies) business with a lot of fat and high tax rates.  All this Philidor and price gouging nonsense is hurting the rest of their business.

 

That might even involve getting rid of Pearson.  You have a business which no longer needs Pearson to run it.  Unless there is something else going on which is really, really bad then letting the stock take the hit from dropping guidance will start the healing process.  Having followed Pearson for a few years, I hate to say it but I think it's time for him to step out of the CEO role.  He's taken this whole maximizing shareholder value to a ridiculous extreme and being misleading is just the icing on the cake.

 

If Valeant decides they are going to make a real attempt at cleaning house (and not just when they're forced to) then I'll be interested in going long again.  In the meantime it's just noisy back and forth between the short sellers and a management team seemingly unable to properly communicate. 

[original mungerville]

The fat ape has a point if you ask me:

 

"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."

 

We know they are certainly guilty of being extremely aggressive and maybe this is a big wake-up call for Pearson.

 

Or, alternatively, maybe they stepped so close or over the line in so many places that the overall revenues won't be sustainable, Pearson is on his way out, and someone from Value Act takes over as interim CEO to clean up the mess they created and merges the company with a competitor - after all, they have good assets and a great tax rate.

 

 

[original mungerville]

Eric, what do you think usually happens in a collections dispute and lawsuit? You don't think there are all kinds of weird and wonderful allegations made?  What do you expect the non payor to say? I'm not paying because I don't feel like it. I'm not paying because the fairies told me not to.

 

  If Pearson believes or knows that the California pharmacy was selling medicines legally on behalf of Philippe/valeant then his reply that it is a collections dispute is perfectly reasonable. He's not going to say it's a fraud if he doesn't think it's a fraud because in his mind it's a collection dispute.

 

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.

[ERICOPOLY]

Eric, what do you think usually happens in a collections dispute and lawsuit? You don't think there are all kinds of weird and wonderful allegations made?  What do you expect the non payor to say? I'm not paying because I don't feel like it. I'm not paying because the fairies told me not to.

 

  If Pearson believes or knows that the California pharmacy was selling medicines legally on behalf of Philippe/valeant then his reply that it is a collections dispute is perfectly reasonable. He's not going to say it's a fraud if he doesn't think it's a fraud because in his mind it's a collection dispute.

 

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.

[merkhet]

Time and time again, I am impressed with how wise Warren & Charlie are -- their advice to companies undergoing a crisis is to:

 

“Get it right; get it fast; get it out; and get it over.”

 

Arguably, Valeant has done the exact opposite here.

[original mungerville]

How much is this thing worth without Pearson? It doesn't take a genius to buy debt at market and below par while buying-in common shares at a low price.

 

What I am trying to get at is what is the value of this thing in a Pearson-is-out-and-ValueAct-assigns-an-interim-CEO-scenario. All the fines, etc are peanuts. At a certain price, its all priced in. It comes down to how much did they push the envelope in the other areas of their business, but all their bloody competitors are also handing out coupons to doctors/patients in order to avoid the copays.

 

And by the way, I think that fucker at Citron went long Friday.

[lessthaniv]

Look, the battle between PBM's and manufacturers has been going on for quite some time. As drugs come off patent, generic alternatives negatively impact margins for the manufacturers and at the same time it can positively influence PBM's. PBM's endorse the widespread use of generics (especially where they receive rebates) while the manufacturers attempt to preserve their historical margins and brand strength.

 

Its an epic game of Chess. (hint: Phillidor, Isolani, Lucena, Back Rank, BQ6, KGA .....)

 

The two groups are diametrically opposed. The money at stake here is significant. To put that in perspective, here is an article going back to September, 2011 discussing the billions of dollars in brand revenue that were to be lost with the onset of new generics.

 

http://www.drugchannels.net/2011/09/medcos-latest-update-on-generic-wave.html

 

The manufactures have tried to retain their brand strength and high margins by utilizing copay strategies. This is the heart of Phillidor. A strategy perhaps adopted from the deal with Medicis. Valeant isn't alone here though. Horizon pharma, Pfizer ... all do it.  One example would be Pfizer's $4 copay card for Lipitor which they actively advertised as:  "LIPITOR for Less than the Average Cost of a Generic Statin."

 

Some doctors and patients like copays because patients can stay on a successful treatment (doctors have already studied the and know the drug) at a competitive price. The bear argument suggests copays will only serve to raise premiums. PBM's are not innocent. As noted above, an argument can be made that PBM's dislike copays because they don't get rebates. And they have played their own game of Chess.. For example, introducing the fairly new - Tier 4  level in their formularies which adopts a more punitive coinsurance model. 

 

http://www.drugchannels.net/2013/09/how-fourth-tier-coinsurance-boom-drives.html

 

I will continue to study the developments but on the surface, this looks like another intelligently organized bear raid to me. The grounds of this industry are fertile and a planted seed of doubt can grow quickly. 

 

But I doubt thus far that Pearson is fraudulent. I think he was playing the same game as his competitors but has become the poster boy for the anti-copay contingent.

 

 

 

 

 

 

 

 

 

 

 

[Picasso]

How much is this thing worth without Pearson? It doesn't take a genius to buy debt at market and below par while buying-in common shares at a low price.

 

What I am trying to get at is what is the value of this thing in a Pearson-is-out-and-ValueAct-assigns-an-interim-CEO-scenario. All the fines, etc are peanuts. At a certain price, its all priced in. It comes down to how much did they push the envelope in the other areas of their business, but all their bloody competitors are also handing out coupons to doctors/patients in order to avoid the copays.

 

And by the way, I think that fucker at Citron went long Friday.

 

I've been thinking about this.

 

Free cash flow should be around $10/share next year.  That might erode slowly over time if they only buyback debt and stock.  Instead I think you can imagine them retiring debt and making small acquisitions to slowly grow FCF/share.  None of this "top 5 pharma by 2016" crap. 

 

What would you pay for something earnings $10 of FCF with $85/share of debt and no "outsider" CEO?  Especially with some  nasty hair it has on it.  Maybe 10x?  That puts you at $100/share. 12x, 13x?  That's still only $120-130.  Doesn't seem that compelling if you halt the growth and see the impact of negative growth from 20-30% of the existing revenue.

 

Now how many sell side analysts have a $120-130 price target?  Just doesn't seem like we've seen capitulation at all.

 

Why do you think Citron went long?

[LongHaul]

The PBM's were in on the bear raid!

[Picasso]

lessthaniv,

 

I don't think anyone has issue with co-pay assistance.  It's the various methods Philidor used to make sure generics were not used such as altering prescriptions, improper audit signatures, etc.

 

In court papers, Reitz detailed how he had discovered that Philidor was using his national pharmacy identification number on prescriptions being filled at other pharmacies — and even on some that were filled and billed before he signed the agreement to sell R&O on Dec. 1.

 

He also found that, without his knowledge, a Philidor executive who had never visited the Camarillo pharmacy was answering questions about the pharmacy's billing practices during an audit by an insurer.

 

That goes beyond offering copay assistance, no?