Horizon Pharma Discloses Subpoena Over Patient Financial Assistance
Tuesday, March 01, 2016
Dublin-based company’s shares fall 13.3% to $17.16 through close of regular trading.
Horizon Pharma PLC is the latest drugmaker to attract scrutiny from federal prosecutors over its use of financial assistance to help patients pay for the company’s drugs.
Horizon received a subpoena last November from the U.S. attorney’s office for the Southern District of New York for documents and information related to the company’s patient assistance programs, which include providing free medicines and copay coupons to help cover out-of-pocket drug costs, the company said Monday in a filing with the Securities and Exchange Commission. The subpoena also relates to other aspects of Horizon’s sales and marketing activities, the company said.
Horizon Chief Executive Timothy P. Walbert, speaking Monday on a conference call with analysts to discuss the company’s fourth-quarter earnings, said the subpoena also relates to Horizon’s relationships with pharmacies.
Horizon is cooperating with the investigation, and no specific allegations have been made against the company, Mr. Walbert said on the conference call. Horizon said in the regulatory filing that it expects it “may incur significant costs” related to the investigation regardless of the outcome.
Shares of Horizon fell 13.3% to $17.16 through the close of regular trading Monday. The company is domiciled in Dublin and has U.S. headquarters in Lake Forest, Ill.
Horizon is the latest pharmaceutical company whose financial assistance to patients has attracted attention from Preet Bharara, U.S. attorney for the Southern District of New York, who is known for his prosecutions of insider trading and other white-collar crime.
Canadian drugmaker Valeant Pharmaceuticals International Inc. disclosed last October that it had received subpoenas from Mr. Bharara’s office and the U.S. attorney’s office for the District of Massachusetts, requesting documents related to Valeant’s financial support to patients, drug distribution and pricing decisions.
Valeant said in an October filing with the SEC that it was reviewing the subpoenas and intended to cooperate with the investigations.
Valeant shares fell 18.4% to $65.80 Monday after the company disclosed a new investigation by the SEC and said it would delay reporting its fourth-quarter earnings. The company also said Chief Executive Michael Pearson, who had been on medical leave from the Canadian drugmaker, would be returning immediately to the company.
Horizon spent $1.02 billion on providing free drugs and copay assistance last year, the company said Monday.
Horizon’s use of pharmacies and copay assistance programs to help get its drugs to patients has come under increased scrutiny from pharmacy-benefit managers, or PBMs, which manage drug spending for U.S. employers and insurers.
PBMs sometimes set high copays for drugs when they want to encourage doctors and patients to use cheaper alternatives. Branded drugmakers, in turn, try to get around this by helping patients cover their copays. Some pharmaceutical companies use pharmacies to help process the financial assistance and ship the drugs.
Everett Neville, senior vice president for supply chain at Express Scripts Holding Co., the U.S.’s largest PBM, said in a November interview that Horizon’s financial assistance to patients circumvents the PBM’s efforts to discourage use of Horizon’s biggest products by revenue, the pain relievers Vimovo and Duexis.
Express Scripts and CVS Health Corp., another PBM, last year stopped paying in some cases for Vimovo and Duexis because, they said, cheaper alternatives to Horizon’s drugs were available.
Last November, Express Scripts terminated a contract with a Woodbury, N.Y.-based pharmacy that it said was dispensing high volumes of Horizon-made drugs.
Also in November, Express Scripts sued Horizon for alleged breach of contract for not paying Express Scripts some $140 million in rebates and administrative fees.
Horizon has said its programs ensure that patients who are prescribed its drugs are able to get them. The company frequently covers patients’ out-of-pocket costs, such as copays and coinsurance, for its drugs. If patients’ insurance policies don’t cover Horizon drugs at all, the company says it will usually provide the drugs free.
The federal investigation raises the possibility that Horizon may have to temper its use of financial assistance programs going forward, which could impact the company’s sales, Liav Abraham, a Citi analyst, said in an interview.
Horizon’s Mr. Walbert said Monday that the company has a robust audit and compliance program that oversees its financial assistance to patients, and “based on these audits we have no plans to modify our programs.”
In the fourth quarter, Horizon reported a profit of $24 million, or 15 cents a share, compared with a year-earlier loss of $31.6 million, or 27 cents a share. Revenue more than doubled to $244.5 million.
wsj.com
