MONTREAL -- Valeant Pharmaceuticals faces a new legal cloud after a U.S. mutual fund firm filed suit against the embattled drugmaker for allegedly pursuing "a fraudulent scheme" that ultimately cost investors billions of dollars.
T. Rowe Price, along with Alleghany Corp, is suing Valeant, its former chief executive and several current and former executives.
"This case arises from a fraudulent scheme by Valeant and its top executives to use a secret pharmacy network, deceptive pricing and reimbursement practices, and fictitious accounting to shield the company's branded drugs from generic competition and artificially inflate the company's revenues and profits," said the 200-page statement of claim filed Monday in the United States District Court in New Jersey.
Once a fervent defender and third-largest investor, T. Rowe Price sold most of its shares in May.
The plaintiffs are seeking unspecified damages for losses suffered on Valeant stock purchased or acquired by between Jan. 4, 2013 and Aug. 10, 2016.
In a statement, Valeant said it's aware of the lawsuit, which is similar to a claim filed in October by a teacher's retirement fund.
"This T. Rowe Price complaint repeats allegations and claims as in the pending securities putative class action brought against Valeant by Teachers Insurance and Annuity Association of America (and) College Retirement Equities Fund," Valeant wrote in an email.
"As with the original complaint, Valeant intends to defend itself and cannot comment further on ongoing litigation."
T. Rowe Price also declined comment.
The lawsuit points to Valeant's alleged decisions to massively increase prices of so-called "orphan drugs" to treat rare medical conditions that face little or no competition and "back door" efforts to receive reimbursement from insurance companies.
"(The) defendant's fraud was so vast in execution and so devastating to investors, patients, physicians, and insurers, that media and commentators have dubbed it the 'Pharmaceutical Enron,"' the statement of claim said.
None of the allegations has been proven in court.
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 Rx Services.
It faces other investigations in several states along with the U.S. Securities and Exchange Commission, which is looking at whether Salix, which was acquired by Valeant last year, misled investors about inventory levels.
The drugmaker's shares, which rose early Thursday on an announced deal between the company and its lenders, fell on word of the lawsuit.
They closed at C$37.19, down 3.4 per cent in Thursday trading on the Toronto Stock Exchange.
A year ago, Valeant shares (TSX:VRX) were worth more than C$300 each, prior to a series of problems that began to emerge last September.
Earlier in the day, Valeant said it was getting a much-needed break from its lenders, but at the cost of higher interest rates and additional one-time fees.
The company said it had received lender approvals that give Valeant more flexibility to borrow money and sell assets -- part of the company's plan to reduce its debt load in part by selling up to US$8 billion of assets.
Canaccord Genuity analyst Neil Maruoka wrote in a research note that the developments were positive news on balance "but we believe that the company must still divest assets and execute operationally to fully turn the ship around."
