By Francine McKenna, MarketWatch
Valeant International’s use of a specialty pharmacy network, and its failure to disclose it until recently, is not unique in the pharmaceutical industry.
Investors were surprised to learn that Valeant , the “diverse and decentralized pharmaceutical company” under attack by short sellers and now under scrutiny by federal authorities, was using a “specialty pharmacy” called Philidor and that this distribution channel accounted for 7% of revenue. Even more surprising was the revelation that Valeant had purchased an option to buy Philidor last December and was already consolidating its results on its books.
MarketWatch asked Securities and Exchange Commission filings expert Michelle Leder, founder of the site Footnoted.com , to analyze how often the terms “specialty pharmacies” and “pharmacy network” were used in SEC filings by pharma companies in the last year.
The term showed up 91 times for 36 different companies. But those companies are no more transparent about the depth and breadth of this distribution channel than Valeant has been.
AbbVie /zigman2/quotes/202428675/composite ABBV -0.56% admitted to The Wall Street Journal that it owns Pharmacy Solutions, which it said “helps patients and doctors establish whether they have insurance coverage for expensive AbbVie drugs including Humira, a treatment for rheumatoid arthritis, Crohn’s disease and other ailments.” AbbVie mentions “specialty pharmacies” in its last three 10-Qs and most recent annual report as one of its distribution channels, but does not mention Pharmacy Solutions by name.
Endo Pharmaceuticals issued a statement last week admitting it also uses specialty pharmacies but does not depend to any great extent on that distribution channel. The company used the term “specialty pharmacy” in four filings last year including three 8-Ks and its 10-K.
In the 8-K filed in February, Endo said that it had been accelerating the recognition of revenue for shipments of the drug Xiaflex sent to “a limited number of wholesalers, specialty pharmacies and specialty distributors who ship the product on an as-needed basis to individual health-care providers.” Xiaflex is used to treat Dupuytren’s contracture, an ailment in which the fingers to bend toward the palm and cannot be properly extended.
Before 2011, it had been waiting to recognize revenue until those wholesalers shipped product to physicians for administration to patients. The change was made because Endo said it could now track the flow of Xiaflex through its distribution channel and see when product went out to physicians for patients. It could not pinpoint the actual sales to patients with any accuracy before 2011. The change had nothing to do with whether Endo owned or did not own the pharmacies, as it did with Valeant.
Allergan also issued a statement last week saying it used specialty pharmacies, but downplayed their significance as a part of its overall sales. There is no mention of “specialty pharmacies” in its filings in the last year.
The term “pharmacy network” shows up 20 times in SEC filings in the last year for pharmaceutical companies other than Valeant. Those mentions include Imprimis Pharmaceuticals Inc., Jazz Pharmaceutical /zigman2/quotes/202658513/composite JAZZ -0.88% , Vivus, Inc., Cannapharmarx /zigman2/quotes/207879395/delayed CPMD -12.31% , BioDelivery Sciences International, Inc. /zigman2/quotes/209440059/composite BDSI -1.45% , DARA Biosciences Inc., Aegerion Pharmaceuticals, Inc., Orexigen Therapeutics, Inc., and Alexion Pharmaceuticals, Inc..