Valeant defending its business model against claims of price gouging


Drug Prices Have Come Under Heavy Scrutiny From Congress

When Martin Shkreli became public enemy number one for his notorious price hike of AIDS drug Daraprim in the United States, he received some rare praise from a surprising source. Well, not praise exactly, but an LGBT interest magazine referred to the pharmaceutical CEO as “not the hero we need, but the hero we deserve”, reasoning that “every article about his incarceration provides a helpful primer on his drug price–gouging, providing invaluable exposure for the lack of regulation of the pharmaceutical industry.”
The magazine certainly wasn’t wrong in that the high-profile case of Shkreli has turned the spotlight on other pharmaceutical companies – albeit with CEOs resembling cartoon villains less – accused of price-gouging. One other major company to undergo such scrutiny is Valeant, whose outgoing CEO J. Michael Pearson was questioned by the Senate. Pearson confessed to being “too aggressive” when it came to “pursuing price increases on certain drugs” and the case has been used by some advocates of greater regulation of the pharmaceutical industry as a perfect example of naked profiteering.


Valeant Continues To Defend Its Price Model
Although it was recommended that Valeant significantly reduce the price of several of its drugs, the company has generally defended its business model and offered alternatives, such as sizeable discounts to hospitals and patients for certain branded products, although for many specific drugs, no relief appears to be incoming or promised, with even those pledged yet to appear.

More specific charges insisted that the company did not use the money for research and development of new products but instead focused solely on acquiring drugs to raise the price and turn a quick profit. While Pearson insisted that the company had spent 8% of its revenue for the last year on developing new drugs and technology, this figure is well below other companies, and is set to reduce by more than half for the present year.

While the debate rages on, there remains a relative powerlessness from congress to force the hands of major pharmaceutical companies, leading to ever-growing calls for increased regulation of the industry. Another pressing factor is the debt taken on by many companies when making acquisitions, further driving the need for price rises.






Wilson Sonsini Goodrich & Rosati is the premier legal advisor to technology, life sciences, and other growth enterprises worldwide. In today’s fast-growing, highly regulated generic pharmaceutical market, companies require specialized legal guidance beyond the scope of general corporate and securities counsel. WSGR has an experienced team of experts in key practice areas, including intellectual property, litigation, antitrust, FDA/regulatory, technology transactions, exports and FCPA, trade secret, and trademark and copyrights. Learn more at

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