MONTREAL -- Valeant Pharmaceuticals is being sued by New York health benefit funds providers that allege the embattled Canadian drug manufacturer overcharged for medications in contravention of racketeering and consumer-protection legislation.
New York Hotel Trades Council & Hotel Association of New York City and the Detectives' Endowment Association of New York filed a class-action lawsuit Monday against Valeant and former Philidor Rx Services founders Andrew and Matthew Davenport, along with several affiliated companies.
The health benefit funds providers, which reimburse employees and retirees for prescription drugs, allege they "unnecessarily paid for or incurred excessive costs" for Valeant medications.
Valeant (TSX:VRX) faces three counts, including alleged violation of the Racketeer Influenced and Corrupt Organizations Act and the New York Deceptive Practices Act. All defendants have been accused of conspiring to violate RICO through activities such as mail fraud, wire fraud and use of interstate facilities in aid of racketeering.
The plaintiffs are seeking a jury trial and unspecified damages over US$5 million on behalf of themselves and other similar third-party payers between Jan. 2, 2013 and Oct. 30, 2015.
"Valeant is aware of these recent claims, and as previously indicated intends to defend itself against such claims," the company said.
"Valeant cannot comment further on ongoing litigation."
The lawsuit against the Quebec-based drugmaker and others was filed 10 days after U.S. mutual fund T. Rowe Price, a former large Valeant shareholder and Alleghany Corp. filed a fraud suit over actions it claims cost investors billions of dollars. Valeant has said that claim is similar to one filed in October by a teachers' retirement fund.
In Monday's 57-page filing, the plaintiffs allege Valeant charged exorbitant prices for Valeant-branded drugs, routed prescriptions through Philidor, resubmitted rejected claims through other pharmacies to make it seem they hadn't been previously rejected, substituted Valeant-branded drugs for generic equivalents, and offered incentives to discourage patients from complaining.
None of the allegations has been proven.
Valeant is also reportedly under a criminal fraud investigation by the U.S. Attorney's office in New York over its activities with mail-order pharmacy Philidor.
It faces other investigations in several states along with the U.S. Securities and Exchange Commission, which is looking at whether Salix -- acquired by Valeant last year -- allegedly misled investors about inventory levels.
Valeant's shares fell 1.87 per cent on Monday, closing at C$39.39 on the Toronto Stock Exchange.
Prior to a series of problems that began to emerge last September, the company's shares had peaked at C$341.02 on July 23, 2015.
