Horizon Pharma is caught up in DoJ investigations of specialty-phamacy relations

When the news broke last fall over Valeant Pharma’s alleged too-close relationship with a specialty pharmacy, Philidor, there was sudden speculation in the financial community over other companies that might be entangled in the same manner. Allergan, Endo Pharma and Horizon Pharma swiftly issued statements distancing themselves from the Valeant situation. But now, as a result of Horizon’s release of its latest 10-K form and its investor presentations on Feb. 29, it turns out that Horizon is under investigation for related reasons by DoJ’s Southern District of New York, headed by Preet Bharara.

Horizon’s 10-K states that “In November 2015, we received a subpoena from the U.S. Attorney’s Office for the Southern District of New York requesting documents and information related to our patient assistance programs and other aspects of our marketing and commercialization activities. We are unable to predict how long this investigation will continue or its outcome, but we anticipate that we may incur significant costs in connection with the investigation, regardless of the outcome.” According to a WSJ article on the investor calls, Horizon CEO Timothy Walbert "said the subpoena also relates to Horizon’s relationships with pharmacies."

There are multiple issues with Valeant’s past practices; one was that it had an option to buy the specialty pharmacy it was using; another was that Philidor employees were allegedly steering patients and doctors to Valeant products, and using copay or patient assistance programs to facilitate that. The DoJ is continuing an investigation of Valeant; more recently, the company restated 2014 earnings because sales had been improperly accounted for. At the time of the Valeant story breaking, Horizon issued a press release stating that “All pharmacies that distribute Horizon branded medicines are fully independent. Horizon does not own or have an ownership stake in any pharmacy and does not possess an option to purchase any pharmacy. In addition, the relationship with these pharmacies is non-exclusive where each of these pharmacies may also fulfill prescriptions for other drug manufacturers.”

Statements similar to Horizon’s were issued by Allergan and Endo in October; it’s unknown whether they are also under investigation. (How these three companies were picked out by speculators for their specialty-pharmacy practices is a bit of a mystery.) Horizon’s 10-K also notes that "The aggregate commercial value of our patient access programs for the year ended December 31, 2015 was approximately $1,020 million" [sic; this must be a typo for $1.020 million, since the company’s entire 2015 revenue was $757 milllion], and that “Even if we are successful in increasing the use our patient access programs, these programs may become too costly for us to maintain if we are unable to maintain or enhance payor reimbursement of our medicines.”

All of this legal thrashing around might amount to nothing at all, except for questions being raised around how the combination of specialty pharmacies and patient support programs are being used to juice pharmaceutical sales. For its part, Express Scripts has announced a severing of relationships with several specialty pharmacies, and is litigating for payments from Horizon.