Valeant, a Canadian-based company, had a business model that was bound to attract public attention. Valeant's strategy was to purchase the rights to older prescription drugs, double (or more) the price of those drugs, use a mail-order sales system, and wait for the profits to accumulate. In addition, the company had acquired Sprout, the company responsible for developing Addyi, a female libido drug, aka female Viagra, a drug that was, at the time, expected to be in high demand upon FDA approval. Valeant also acquired the toenail fungus drug, Jublia, another drug expected to be a big seller.

There were several glitches along the way as the model was implemented, and Valeant's stock price dropped from \(\$ 260\) per share in the summer of 2015 to \(\$ 61\) per share in March 2016. The New York Times business section referred to the conduct of the company over the past year as a reel of "blooper reels" and an Abbott and Costello "Who's on first?" routine. \({ }^{70}\)

The examination of the pricing model brings to mind one question, "How did Valeant get insurers to cover the drugs?" In some cases, the drugs Valeant was offering were oneof-a-kind; insurers had no generics or alternatives that were as effective, so the patients' prescriptions were approved. However, Valeant was still able to command the high prices even with drugs such as Wellbutrin, a 30 -year-old prescription medicine that had about 30 competing generics available. Well beyond the patent-protected period of exclusivity, Wellbutrin should have had price decreases in order to compete with available generics. However, at the time of Valeant's acquisition of the drug (2013), Wellbutrin cost about \(\$ 475\) per month per patient. Over the course of \(2014-2015\), Valeant raised the price to \(\$ 1,400\) per month for the drug that would nearly always be its best seller each quarter. \({ }^{72}\)
Valeant had developed a unique way of using specialty pharmacies, businesses that are not a CVS or a Walgreens but specialize in filing the types of expensive drugs that do not have the patient base of the generic antibiotic. Valeant used Philidor RX Services LLC as its primary specialty pharmacy. The relationships between Philidor and Valeant were also unique, because Philidor did not just process prescriptions but Philidor became what many would call an extended marketing arm of Valeant. The goal at Philidor was to get insurers to not only cover the prescription for Valeant-owned drugs but to have insurers fill it using the most expensive drugs available, not the generics. Philidor receives a discount on the Valeant drug as well as a fee for filling the prescription with the Valeant drug. Those fees were tied to prices, so the specialty pharmacies had incentives to do all that they could to push the Valeant high-priced drugs......................

Discussion Questions 1. List the ethical issues that you see in the case. Be sure to list them by the categories of ethical dilemmas that you studied in Unit 1.
2. What issues did Valeant miss in its decisions on accounting practices and pricing of its drugs?
3. Why is transparency an issue for publicly traded companies? What credo ideas do you learn from this case?
4. In this case, the health of the CEO was an issue, and its disclosure was tricky for the company because the company had been through some rough waters in terms of its accounting and business model. The following table reflects disclosures that have been made in the past when CEOs have been ill: PR experts say that when a high-ranking executive leaves a company, there are two standard phrases used: "spending more time with family" and "pursuing other interests." However, neither phrase proves to be true and indeed may be a temporary face-saving measure for an executive or company in trouble. For example, Jeffrey Skilling, the now-convicted former CEO of Enron, left the company just months before its collapse with the first phrase of "spending more time with his family." The termination agreements are required by regulators and must give a reason, but one PR expert notes, "Who are they kidding?"89 After viewing examples and consequences in the table, discuss what ethical categories apply and why proper handling of these issues is so important to companies.