Mutual fund T. Rowe Price has filed a lawsuit against Valeant Pharmaceuticals, alleging that the company's executives lied to it and other investors about its drug price gouging, general business practices, and financial health.One of the most brutal parts of the complaint looks atwhat Valeant may have beendoing at its now-defunct secret pharmacy, Philidor.It was the revelation of Philidor's existence, combined with government scrutiny over Valeant's drug pricing, that sent Valeant's stock cratering 90% starting last October.US Attorney Preet Bharara has launched a criminal investigation into Philidor's practices to see if its employees were directed to defraud health insurance companies in order to make them pay for drugs they would otherwise not pay for.How exactly that may have been done is described in T. Rowe Price's complaint as well. It alleges that Philidor employees were taught what management called "back door approaches" to get prescriptions filled.That included: "altering prescription information, making claims for refills that were never requested by patients, and misrepresenting the identity of dispensing pharmacies in order to bypass denials of claims for Valeant drugs."Senior management was aware of all of this, according to internal emails cited in the complaint.Philidor employees talked about it too. This posting on website CafePharma was cited in the complaint as well [emphasis added]:"They took the list of customers who had been approved by [insurance] and had refills available. Instead of waiting for the customer to call they would dial and leave a msg saying your refill will be shipped unless you call within 24 hrs. They would do this on the 30th day of the rx. Previously they had a Co pay so would have to wait to get approval to charge the 35.00 Co pay, making the Co pay 0 allowed them to ship refills whether u wanted them or not. Not a bad money making idea except most people did not really need refills of Solodyn so soon . . . Of course these refills were out the door ASAP sometimes within an hour of the call and the [insurance] money would come in.What patients dont get is your [insurance] company is paying 500 plus bucks for an old medication reformulated and refills not needed. I would bet a lot of Solodyn and Jublia bottles are just lying around still in the shipping package.If you ever saw Wolves of Wallstreet well that was sorta what some of us saw at Philidor. Lets say on average a person does not need a refill of Solodyn for 45 or 60 days from the 1st fill and you force them to take it at 30 days every month $$$$$$$$$$$$$$ and a ton of it! Think about it."Valeant didn't technically own Philidor. It purchased a $100 million the option to buy Philidor for $0 in 2014.The company has argued that its relationship with Philidor wasn't that close, but reportingby the Wall Street Journal revealed that all sorts of weird stuff was going down between the two companies. Valeant employees were working at Philidor under different names, for example.Join the conversation about this storyNOW WATCH: MALCOLM GLADWELL: 'Anyone who gives a single dollar to Princeton has completely lost their mind
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