Simple proof that Philidor has shipped drugs where it is not licensed
The Wall Street Journal has a fabulous article about Valeant's ties to Philidor - its captive specialty pharmacy.
In it they suggest that Valeant staff double under fake names as Philidor staff.
The use of alternative names by workers at Philidor is one of a number of new details emerging about the relationship between Valeant and the network of specialty pharmacies it uses to distribute drugs. The relationship is at the center of questions that investors have raised about the strength of the drug company’s operations and the disclosures of its business ties.
Citron Research alleged that Philidor was used as a method of channel stuffing. However I think that it is more likely that it is used as a mechanism for customers to buy and insurance companies to pay for drugs that they would not have otherwise done so.
Two methods are - it seems - used to do this. One has been widely discussed - copay assistance.
The other is using name of a pharmacist that is seemingly unrelated (or at least where the relationship has not been disclosed) to "fill" the prescription. That pharmacist essentially donates or lends their NPI number. The captive pharmacies are variable interest entities because they are controlled but not owned. Valeant would in this case wish to hide their ownership.
There is a court case between Isolini (almost certainly an undisclosed Philidor and hence Valeant subsidiary) and R&O pharma (a pharmacy with a license in California). You can find the Isolini documents here (warning large folder).
The usual explanation for why Philidor wanted to use R&O pharma was that Philidor had been denied a license to operate in California and R&O had such a license.
We however have our doubts. One of the Isolini documents (provided by the Philidor/Valeant side of the transaction) had an invoice for all the product that had been shipped in R&Os name and for which R&O owed money.
That list contained identification numbers. We discovered that those numbers were in fact UPS shipping numbers and each of these deliveries is traceable. This (linked) document is a list of UPS tracking numbers.
And those deliveries went all over the United States. They went to California - sure - but they also went to other addresses.
Some went to States where Philidor was licensed but not R&O. Some went to States where R&O was licensed but not Philidor. Some went to States like Oregon where neither R&O nor Philidor was licensed.
So here is the pertinent question: why would Philidor (which is staffed by Valeant staffers using false names) use the name of a two-bit pharmacy to send prescriptions all over the United States including to States where the two-bit pharmacy was not licensed?
The only explanation I can come up with - and one that the company should address in the conference call - is that they did it because they were getting rejections or audits from insurance payers when using Philidor's name. Hence they used the NPI number of another pharmacy and the payers paid without audit.
I expect the company to provide an alternative explanation in the conference call because this looks like deception using a mail service to deprive property from a financial institution: classic mail fraud. And because it is against an insurance company (a finacial institution) the monetary penalty is up to $1 million per instance. And each instance is separate and fines are cumulative.
Don't even try to work out the fine.
John
PS. These conclusions are broadly similar to Roddy Boyd's most recent article (which is excellent).
For reference here are the first hundred or so of many UPS numbers - used the linked document to see them all.
1ZX101A60240754571
1ZX101A60242624449
1ZX101A60241063100
1ZX101A60242658805
1ZX101A60241684752
1ZX101A60241980815
1ZX101A60242805208
1ZX101A60242086012
1ZX101A60240757121
1ZX101A60240758102
1ZX101A60242906831
1ZX101A60241155850
1ZX101A60242203715
1ZX101A60240602878
1ZX101A60240039648
1ZX101A60242264356
1ZX101A60242391594
1ZX101A60241428458
1ZX101A60342259486
1ZX101A60241293362
1ZX101A60240186677
1ZX101A60340954406
1ZX101A60242821655
1ZX101A60241770006
1ZX101A60242709296
1ZX101A60240831782
1ZX101A60242691331
1ZX101A60240019660
1ZX101A60242398873
1ZX101A60140680607
1ZX101A60241977427
1ZX101A60241013495
1ZX101A60241624398
1ZX101A60242433744
1ZX101A60340241560
1ZX101A60240482427
1ZX101A60242512695
1ZX101A60240122244
1ZX101A60242894854
1ZX101A60240029775
1ZX101A60140262096
1ZX101A60241940966
1ZX101A60241501752
1ZX101A60242341496
1ZX101A60242668910
1ZX101A60240097737
1ZX101A60242248374
1ZX101A60240482687
1ZX101A60241814950
1ZX101A60242882492
1ZX101A60241780068
1ZX101A60241667011
1ZX101A60241160193
1ZX101A60242731172
1ZX101A60341260396
1ZX101A60241699059
1ZX101A60240737849
1ZX101A60241162664
1ZX101A60242866698
1ZX101A60240670394
1ZX101A60242211448
1ZX101A60240978964
1ZX101A60240710162
1ZX101A60241348839
1ZX101A60240671231
1ZX101A60242518340
1ZX101A60242063582
1ZX101A60242699879
1ZX101A60241070718
1ZX101A60242438016
1ZX101A60242040249
1ZX101A60241181018
1ZX101A60240271897
1ZX101A60341132597
1ZX101A60241975116
1ZX101A60241652643
1ZX101A60240390311
1ZX101A60341236109
1ZX101A60240332777
1ZX101A60242258005
1ZX101A60342564468
1ZX101A60341206829
1ZX101A60240541934
1ZX101A60241997969
1ZX101A60241709001
1ZX101A60240386979
1ZX101A60240152999
1ZX101A60240300622
1ZX101A60241346322
1ZX101A60342328302
1ZX101A60240511887
1ZX101A60242099651
1ZX101A60241627260
1ZX101A60241694269
1ZX101A60242067668