The outgoing CEO of embattled Valeant Pharmaceutical delivered a mea culpa to members of Congress on Wednesday morning, saying that he and his company had been “too aggressive” in acquiring drugs and shamelessly jacking up their prices at the expense of consumers, insurers and government health care agencies.
“Let me state plainly that it was a mistake to pursue, and in hindsight I regret pursuing, transactions where a central premise was a planned increase in the prices of the medicines, such as our acquisition of Nitropress and Isuprel from Marathon Pharmaceuticals,” J. Michael Pearson told members of the Senate Special Committee on Aging, one of several congressional panels investigating price gouging by the drug industry.
Valeant first raised a storm of protest last April following the disclosure by The Wall Street Journal that the company had purchased the rights to Nitropress and Isuprel, both used to reduce blood pressure and help treat serious heart problems, and then jacked up their prices by 212 percent and 525 percent, respectively. It was part of a highly profitable acquisition and marketing strategy the company used over the years to grow from a $650 million a year business with 3,000 employees to a giant with 22,000 employees and $12 billion in annual revenue.
While insisting in a prepared statement that the company made many good decisions during his nearly eight-year stewardship for which he is proud, Pearson said, “In retrospect, we relied too heavily on the industry practice of increasing the price of brand name drugs in the months before generic entry.”
Pearson, who is being replaced as Valeant’s chairman and CEO, said that he understood the upset over his company’s drug pricing practices, and said that his company had to work hard to regain the trust of lawmakers and the public. He also apologized for his previous public statements that seemingly put his concern about stockholder profitability over the public’s welfare. “My cumulative public comments have left the misimpression that shareholder interests were my only focus as CEO of Valeant,” he said. “That is absolutely not the case.”
The company — whose stock has tanked in the wake of the controversy over its marketing and financial management practices — is part of a rogues’ gallery of pharmaceutical companies that have been sharply criticized by presidential candidates, lawmakers and consumer advocates for price gouging. Turing Pharmaceuticals, headed by wealthy hedge fund manager Martin Shkreli, last September obtained the manufacturing license for an antiparasitic drug called Daraprim and then raised its price by 5,556 percent, from $13.50 to $750 per tablet.
Pearson, a one-time McKinsey & Company consultant, seemed sincere in his remorse and apology, and made legitimate points that Valeant and other drug companies have softened the blow of some price hikes with rebates and special programs for subsidizing drug costs for low-income consumers.
But that provides little solace for consumers, health care insurers and federal and state health care programs that are struggling to cope with the effects of wholesale price increases nearly across the board.
In January, the pharmaceutical industry largely shrugged off mounting concern about drug prices by unveiling hefty price hikes. Pfizer Inc., Amgen Inc., Allergan PLC and other companies raised U.S. prices for scores of drugs, with many of the increases between 9 percent and 10 percent, according to The Wall Street Journal.
And The New York Times reported on Tuesday that many of the major drug companies have been quietly raising prices even more since then. In April alone, Johnson & Johnson boosted prices on some of its top-selling products, including a leukemia drug called Imbruvica, while Amgen, Gilead, Celgene and other major companies have also raised their prices this year.
“It used to be the drug companies only took one price increase a year,” Dr. Steve Miller, chief medical officer at Express Scripts, a major drug-benefit manager, told the Times. “Now what they’re doing is taking multiple price increases multiple times a year.”