* Top three U.S. drug benefit managers have dropped Philidor
* Philidor accounted for 6.8 pct of Valeant's Q3 revenue
* Move may slow Valeant sales growth
(Adds appointment of Mark Filip to ad hoc committee)
By Ben Hirschler and Shivam Srivastava
Oct 30 (Reuters) - Valeant Pharmaceuticals (N:VRX) International
VRX.TO is to sever all ties with pharmacy business Philidor Rx
Services in the wake of criticism over the relationship between
the two closely associated companies.
Valeant also said Philidor had informed it that it would
shut down operations as soon as possible.
Valeant and Philidor, which has helped to drive sales for
the Canadian drugmaker, have come under fire after influential
short-seller Citron Research said Philidor was being used to
create "phantom accounts" and inflate Valeant's revenue. Valeant
has denied any wrongdoing. urn:newsml:reuters.com:*:nL1N12L19L
The drugmaker's move on Friday comes a day after the three
top U.S. drug benefit managers, who administer prescription
medicine supplies for health plans, said they had stopped
working with the pharmacy.
"We have lost confidence in Philidor's ability to continue
to operate in a manner that is acceptable to Valeant," Chief
Executive Michael Pearson (L:PSON) said in a statement. urn:newsml:reuters.com:*:nPn2XrdlQ
Valeant said this week that it would set up an ad hoc
committee to look into the allegations related to the company's
association with Philidor. It announced on Friday that former
U.S. Deputy Attorney General Mark Filip had been appointed to
advise the committee.
"We understand that patients, doctors and business partners
have been disturbed by the reports of improper behaviour at
Philidor, just as we have been," Pearson said.
"We know the allegations have also led them to question
Valeant and our integrity, and for that I take complete
responsibility. Operating honestly and ethically is our first
priority, and you have my absolute commitment that we will make
it right."
Philidor accounted for 6.8 percent of Valeant's total
revenue in the third quarter and the drugmaker said it intended
to develop a plan to ensure minimal disruption to patients'
access to drugs.
Express Scripts ESRX.O , CVS Health (N:CVS) CVS.N and
UnitedHealth's UNH.N OptumRx all said on Thursday that they
would stop using drugs dispensed by Philidor due to concerns
about its business conduct.
Shares in Valeant fell heavily in after-hours trading on
that news, reflecting worries about Valeant's future sales
growth. urn:newsml:reuters.com:*:nL3N12T6HN
Valeant shares have lost more than half their value since
September as the company has come under attack on several
fronts. U.S. prosecutors are also investigating the company over
drug pricing, a hot issue in the U.S. presidential campaign.
Pearson told investors this week that if Valeant decided to
cut links to Philidor it "would slow our growth but not
dramatically".
Mizuho Securities analyst Irina Koffler said Valeant had
taken "a dramatic, albeit unsurprising" decision in ditching
Philidor and the company would now need to provide updated
financial guidance to stabilise the stock.
Valeant was until recently one of the most popular
healthcare stocks among investors, with its model of rapid
acquisition-driven growth. Its abrupt slide from market darling
to a company under fire has weighed heavily on ValueAct Partners
and Pershing Square, two well known U.S. activist funds.