Valeant boss ordered to testify on drug pricing

Valeant Image copyright Getty Images

The chief executive of Valeant Pharmaceuticals has been ordered to give evidence about rising drug prices to a Senate committee.

Michael Pearson was ordered to appear on 27 April to testify about the practice of buying the rights to old medicines and raising prices.

Valeant is facing three separate federal investigations into its business practices.

Shares fell more than 7% on Monday in New York following the announcement.

On Monday, the bipartisan Senate Aging Committee, said Mr Pearson had received an order testify. In February, the House Committee on Oversight and Government Reform held hearings on this issue where Valeant's former chief executive Howard Schiller testified.

Senator Claire McCaskill, who is the ranking member on the committee, said she was concerned that the practice was "price-gouging".

"Some of the recent actions we've seen in the pharmaceutical industry - with corporate acquisitions followed by dramatic increases in the prices of preexisting drugs - have looked like little more than price gouging," she said.

Valeant is not alone in the practice of buying existing drugs and raising the prices. Its focus on acquisitions rather than development of new drugs, however, has raised questions about the Canadian company's long-term viability.

John Hempton of Bronte Capital, who is betting against the stock, told the BBC: "Saying Valeant's problems are from its business model is against the point because other pharma companies are still working on that model. But raising prices so fast was never going to be acceptable in the long run."

The company's New York-listed shares have plunged more than 70% this year.

Last week, Valeant announced that Mr Pearson would step down as chief executive as soon as a replacement could be found.

Activist investor Bill Ackman, one of Valeant's largest shareholders and most outspoken supporters, has joined the company's board.

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