Valeant at center of Ackman fund information request

Bill Ackman at the New York Stock Exchange.
Brendan McDermid | Reuters
Bill Ackman at the New York Stock Exchange.

U.S. legislators investigating price hikes in the pharmaceutical industry have asked William Ackman's hedge fund for information on Valeant Pharmaceuticals, according to a person familiar with the matter.

Ackman's $12 billion Pershing Square Capital Management owns a 9 percent stake in Valeant and is the Canadian drug company's third largest investor.

On Thursday, Ackman told his investors that Pershing Square received a request for information a week ago from the U.S. Senate Special Committee on Aging. Ackman said his fund was cooperating with the probe, but he did not give details on what was being sought by lawmakers in his letter to clients.

"The request is directly related to Valeant," the person familiar with the matter told Reuters on Friday.

Valeant has sparked public outrage and been criticized by U.S. lawmakers for dramatically hiking the price of older drugs.

The Canadian company has disclosed several investigations, including the one from Congress and probes by the Securities and Exchange Commission and U.S. Attorney's offices in Massachusetts and New York.

Pershing Square has lost billion of dollars, on paper, as Valeant's stock price tumbled some 85 percent in the last year amid questions about its pricing strategy plus its business and accounting practices.

Ackman formally joined Valeant's board on Monday.

Separately, investors in Sprout Pharmaceuticals, which makes the first drug to treat low sexual desire in women and was bought by Valeant last year, say the drug has been priced too high, Bloomberg reported on Friday.

By overcharging for the drug and neglecting to market it, Valeant has undercut the commercial success of the drug, called Addyi, Bloomberg reported, citing a letter from Sprout shareholders.

Valeant priced Addyi at $800 a month even though Sprout had established a price point of about $400 a month based on market research, the investor group wrote in the letter sent to Valeant on March 14, according to Bloomberg.

The group represented all of Sprout shareholders at the time of its sale to the Canadian drug company for $1 billion in August.

Addyi, whose chemical name is flibanserin, is designed for premenopausal women whose lack of sexual desire causes distress.

The condition is formally known as hypoactive sexual desire disorder, or HSDD. The drug needs to be taken daily.

Addyi has been nicknamed the "female Viagra" even though it does not work like Pfizer's blockbuster Viagra pill for men that in 1998 became the first approved drug for erectile dysfunction.

Due to the higher price point, insurance companies refused to cover the drug, helping to make it unaffordable for millions of women, the investors group said.

The investors requested materials showing that Valeant can fulfill its obligations under the merger agreement going forward, Bloomberg reported. They are seeking evidence that Valeant plans to spend $200 million for marketing and research and development for 2016 and half of 2017, as part of the agreement, it added, citing the letter.

The group also seeks assurance that Valeant will keep a sales force of 150 to distribute Addyi.

In response, Valeant said it was continuing to work closely with pharmacists, healthcare providers, and patients to educate them about the drug.

"Valeant intends to comply with all of its obligations under our agreement with the former shareholders of Sprout, including, as they relate to marketing spend, number of sales reps, and post-marketing studies," said Laurie Little, a Valeant spokeswoman.