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File this under “oops.”

Last April 29, Valeant Pharmaceuticals CEO Michael Pearson was asked on a conference call with Wall Street analysts about the extent to which the company relied on raising prices to drive sales growth. The question was raised because, just three days earlier, a widely read report described how the drug maker was buying up old medicines and quickly raising prices to sky-high levels.


In particular, Valeant early last year had acquired several drugs from Marathon Pharmaceuticals. Among them were two life-saving heart drugs used by hospitals — Nitropress and Isuprel. Valeant had raised prices by 525 percent and 212 percent, respectively. Yet, a slide shown to analysts indicated that the majority of growth came from increased “sales volume.”

Pearson, who is now on medical leave for an undetermined length of time, responded rather pointedly that “in terms of price (versus) volume, actually, (sales) volume was greater than price in terms of our growth.” In other words, Pearson was saying that sales growth was being driven more by the number of prescriptions written for Valeant drugs than price hikes.

But less than a month later, another high-ranking Valeant official contradicted that assertion. In a private email written on May 21, Howard Schiller, who is now the interim chief executive and was chief financial officer at the time, responded to a question from investors about recent financial results, which included the drugs purchased from Marathon.


This is what Schiller wrote, “Last night, one of the investors asked about price vs volume for [the first financial quarter]. Excluding marathon [drugs], price represented about 60% of our growth. If you include marathon, price represents about 80%.” (see page 3)

There is a discrepancy there, of course, which prompted questions on Wednesday from numerous Wall Streeters. So the drug maker issued a brief mea culpa: “To the extent that Mr. Pearson was asked a question about total revenue growth, his response would not have been accurate; it would accurately reflect price/volume mix for Top 20 product revenue growth for the period.”

This is more than a faux pas, however, because the Valeant pricing strategy continues to come under intense scrutiny. Last fall, for instance, the drug maker’s stock took a big hit amid controversy over its relationship with a specialty pharmacy called Philidor Rx Services and the aggressive tactics it used to make sure that insurers paid for brand-name Valeant drugs instead of lower-cost generics.

The disclosure comes just as Schiller is grilled Thursday by the House Committee on Oversight and Government Reform, which is probing rising prescription drug prices. But investors, of course, want to know where growth really comes from, because a key issue for the drug maker now is restoring credibility.

Evercore ISI analyst Umer Raffat wrote in an investor note that, going forward, the company will disclose detailed sales growth for its full product portfolio. Whether such a move will be sufficient for Wall Street remains to be seen. A larger question is whether the pricing strategy will survive.