Hedge-fund darling Valeant got eviscerated by a short seller over its accounting practices, including some just-revealed ‘specialty pharmacies’ it allegedly used to inflate revenues. The company is denying the allegations. But now everyone has started digging.
This comes on top of the interest Congress is finally showing in the rampant price increases of generic drugs. It has become a business model in the US: Hedge-fund like companies such as Valeant plow into the health-care sector with huge amounts of other people’s money and gobble up makers of generic drugs. After the buyout, they jack up prices. They can because there are no competitors, and regulators stay dutifully out of sight.
Valeant’s shares have plunged 56% in less than three months. Its bonds and leveraged loans have sold off sharply. The junk-rated, over-indebted company is going to have a hard time borrowing cheaply to continue its buyout spree.
Regulators – asleep, powerless, or just totally compromised by the revolving door, pharma lobbyists, and regulatory capture – allow or encourage industry abuse of regulations and patent laws. This leaves the industry rife with unregulated monopolistic structures.
This post was published at Wolf Street by Wolf Richter ‘ October 25, 2015.
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