
How Valeant Went from Wall St. Darling to Pariah - chollida1
http://nymag.com/daily/intelligencer/2016/01/valeant-wall-st-darling-to-pariah.html
======
aresant
Yuck.

Everybody should read this article.

If you don't here's a summary:

\- Valeant is a struggling little pharma in early 2000s.

\- They recruit their favorite McKinsey strategist - J Pearson - as CEO to
change.

\- Pearson's strategy is to cut off all R&D to drive up profits.

\- Keep prices at "expected" levels that bake in high R&D. Instead just eat
the profit.

\- Rinse and repeat through acquisitions.

\- Not enough money on the table from that. So let's raise prices
dramatically. Find new ways of fucking over the system of slow-to-move
regulators and insurance companies. Like let's combine generics and "rebrand"
them and price gouge.

\- Participate in Wall Street financial engineering to "merge" with a Canadian
company to enjoy lower tax rates despite HQ and CEO operating in New Jersey.

\- Charlie Munger, Buffet's partner, saw the debacle for what it was stating
that he was "holding his nose", as one of his largest shareholders began
investing heavily in Valeant.

\- And now my favorite part - Bill Ackman who is probably best known for his
crusade against Herbalife's business practices - LOVES this company. Takes a
huge bet, helps Valeant drive takeovers.

\- The thing begins to come unglued when the sheer audacity of Valeant extends
to pretending that they're smaller, specialty pharmacies and are flatly
skirting the laws through financial and legal engineering.

This whole article literally made me sick to my stomach.

It's disgusting.

How the two worst pieces of shit - in two markets notorious for pieces of shit
- Wallstreet & Pharma - managed to come together for one ultimate shit show is
amazing in its blind luck.

~~~
rm_-rf_slash
Thanks for the tldr, I might not have read further otherwise.

An idea I've toyed with for a while is to strip patent protection from
pharmaceuticals and replace it with a guaranteed royalty, so that inventors
are sure to be compensated while the market is open to compete for lower
manufacturing costs, maybe have a clause stating that minor molecular changes
with no effect on the intended condition the drug is meant to treat don't
count as novel, as they do under the current system.

I can't tell if the idea is good or bad yet. What does HN think?

~~~
HillRat
Interestingly, you've basically described compulsory licensing under Doha.

------
bainsfather
John Hempton, a (successful) Hedge Fund manager who specialises in finding
frauds and shorting them, has been writing about Valeant for a year or so [0].
His primary arguments have been: accounting tricks are being used to give the
appearance of high profitability, and that (some) Valeant people have shady
pasts that indicate high likelihood of fraud.

[0] [http://brontecapital.blogspot.co.uk](http://brontecapital.blogspot.co.uk)

~~~
tomcorrigan
His price target for Valeant is zero.

------
coldcode
This is horrible. No wonder people hate pharma companies if this is now
standard practice. Can R&D, sell old stuff for stupid high prices, profit.

~~~
mikeyouse
Don't forget all the shady tax shit they do too -- the very worst of corporate
America's 'financial engineering'.

~~~
geomark
I seriously wonder if people who advocate paying more taxes have thought
carefully about what they are really advocating, given what those taxes are
used for. Is it that people are just mad that big companies can avoid taxes in
ways that individuals cannot?

------
tahoeskibum
Hope that the next prez tackles corporate tax reform to make this sort of
"inversion" no longer feasible.

