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House committee wants to speak to ex-Valeant exec

A House oversight panel wants to speak with a former top executive of troubled Valeant Pharmaceuticals about what he knows of the drug company's relationship with a controversial specialty pharmacy that is now shutting down.

The headquarters of Valeant Pharmaceuticals International in Laval, Quebec.
Christinne Muschi | Reuters
The headquarters of Valeant Pharmaceuticals International in Laval, Quebec.

The panel's request to Valeant for Laizer Kornwasser's contact information comes a week after CNBC detailed how the firm hired him the same day in 2013 that the specialty pharmacy Philidor Rx was created, and how he had overseen an employee whose responsibilities included acting as a liaison to Philidor. Kornwasser reported directly to Valeant CEO J. Michael Pearson.

The CNBC report revealed how Kornwasser left Valeant this summer, several months before serious questions began being raised about Valeant's relationship with Philidor, and whether sales through the pharmacy were being used to artificially inflate Valeant's revenue.

Public records suggest that Kornwasser, whose title was executive vice president/company group chairman, left equity awards potentially worth up to several million dollars on the table when he resigned from Valeant.

A spokeswoman for Kornwasser had no immediate comment when contacted by CNBC.

"Troubling new allegations suggest that a group of Valeant employees helped launch Philidor's business in 2013, and have remained involved in its daily operations. These allegations suggest that Valeant employees may have been personally involved in questionable billing practices that led Valeant to cut ties with Philidor last month." -Rep. Eljah Cummings, D-Md.

Valeant's stock has been pummeled since mid-September, when it was trading around $242 per share. The stock was changing hands in the low-$70s on Tuesday.

Kornwasser, a Harvard Business School graduate who previously was a senior executive at Medco Health, could not be reached at his northern New Jersey home when a reporter tried to speak with him last week about his dealings with Philidor.

Valeant has denied any wrongdoing. The company disclosed last month that it had received subpoenas from federal prosecutors in Manhattan and Massachusetts about its drug pricing, distribution network and patient-assistance program.

The House Committee on Oversight and Government Reform also has asked Valeant to make available for interviews Gary Tanner, the executive whom Kornwasser oversaw at the company, as well as two other executives at Valeant, as part of an expanded probe into the company's dealings with Philidor.

The committee already was investigating Valeant's practice of buying older drugs with little or no marketplace competition and then dramatically hiking their prices. Tanner left Valeant to work at Philidor last summer, after Kornwasser resigned. A Philidor spokesman had no immediate comment when asked about the inquiry, whether Tanner was still at Philidor, or how he could be reached.

"I am writing today to request transcribed interviews with several of your employees," the ranking committee Democrat, Rep. Elijah Cummings of Maryland, wrote Valeant CEO Pearson in a letter Monday. "Recently, questions have been raised about Valeant's relationship with Philidor Rx Services, a mail-order 'specialty pharmacy' that Valeant allegedly used to mask its price increases and circumvent the traditional insurance reimbursement process."

In addition to asking for interviews with Tanner, and Valeant employees Bijay Patel and Alison Pritchet, "I also request that you provide contact information for former employee Laizer Kornwasser." A spokeswoman for Cummings' committee said that the committee also wants Kornwasser to submit to a transcribed interview about what he knows about Valeant and Philidor's relationship.

The letter noted that although Valeant purchased an option to buy Philidor for $100 million last year, it did not disclose "its connections to this 'phantom captive pharmacy' until last month," after media accounts reported the links.

Valeant soon afterward said it would sever ties to Philidor, following a move by three major pharmacy benefits providers to no longer do business with Philidor on the grounds that the company was not in compliance with provider agreements.

"Troubling new allegations suggest that a group of Valeant employees helped launch Philidor's business in 2013, and have remained involved in its daily operations," Cummings wrote Pearson. "These allegations suggest that Valeant employees may have been personally involved in questionable billing practices that led Valeant to cut ties with Philidor last month."

The letter cites claims that Patel and Tanner received an email in November 2014 that provided "guidance on ways to re-submit rejected insurance claims to insurance companies in order to obtain higher reimbursement amounts." It also says that Tanner "has been identified by former Philidor employees as 'a key figure in the pharmacy's operations.'"

"These former employees also report being directed to alter physician-written prescriptions so pharmacies would have to dispense Valeant drugs instead of cheaper generic versions to maximize Valeant's profits," Cummings wrote. "Valeant employees reportedly attempted to mask their connections to Valeant by creating fake email identities to conduct their internal Philidor correspondence."

In response to Cummings' letter, Valeant spokeswoman Laurie Little said, "We are reviewing the congressman's letter and will respond as appropriate."

"As we have said previously, Valeant's board of directors has formed an ad hoc committee to review allegations related to the company's business relationship with Philidor and related matters," Little said.