LIVE: Bill Ackman and Valeant execs get grilled by angry Senators
They're answering questions about the company's practice of buying drugs and jacking up their prices.
Not surprisingly, they are walking into a very aggressive room.
Here's what ranking member Clare McCaskill of the Senate Aging Committee (which has been investigating Valeant for this issue since December) said in her opening statement:
"In case you haven't noticed, that has real ramifications in our political process and could lead to an instability of our government, our economy, and our standing in the world. Pigs get fed, hogs get slaughtered. It's time to slaughter some hogs. I thank the witnesses for being here today, and I look forward to hearing their testimony."
So yeah, this is going to get ugly. To recap, the witnesses in the first part of the hearing were:
- A patient suffering from the rare Wilson's Disease who can't get access to Valeant's drug since the company jacked up its price.
- A worried hospital exec who saw the cost of two Valeant drugs cost him $900,000 more a year after the company jacked up their prices.
- A doctor who treats Wilson's disease and said: "Let me be clear, death is one of the possible outcomes of going without treatment."
Pearson
Outgoing Valeant CEO Michael Pearson said in his opening statement that he "regrets" making acquisitions where its "central premise" was making a profit by dramatically raising prices. He also regrets making "public comments" that made it sound like shareholder interest was paramount at Valeant.
Committee chair Senator Susan Collins of Maine asked Pearson what he was doing to change Valeant going forward. He said that "we have not raised prices at all this year in terms of the neurology and other products." He also said that it reduced prices for dermotology drugs. This runs counter to a report from Wells Fargo released Wednesday morning that showed that the company raised prices for 16 drugs.
He also went back to discussing how much Valeant spends on patient assistance programs - programs that people in the previous panel said didn't really help anyone. Collins didn't let him get away with that either, as she pointed out that these programs allow Valeant to maintain price and that Valeant has a "captive audience."
McCaskill pointed out that Valeant's top 30 drugs actually increased in price by 70% from this time last year. "It couldn't have been because of R&D because you don't spend that much."
Pearson responded that Valeant spends 8% on R&D.
Schiller's previous testimony said 3%, and McCaskill went off on that.
Schiller
Former Valeant interim CEO and CFO, Howard Schiller kept his opening statement light. He has already been in the hot seat since he filled in for Pearson at a hearing earlier this year.
Ackman
Hedge fund billionaire Bill Ackman, who has been a big Valeant shareholder for over a year, opened with this gem: "As a shareholder of Valeant I recognize my investment was an... endorsement of Valeant's strategy."
Then he went on to say talk about the changes he's trying to make to the company since he got on the board and admitted that price increases broke a "social contract" with Valeant's customers.
There was a lot of stuff that was in Ackman's written testimony that wasn't actually said. Like this:
We believe that a drug company can do as much or more for innovation in pharma by acquiring other drug companies and licensing drugs than by developing drugs internally. Much of Valeant's product portfolio has been built through acquisition where Valeant was the high bidder for smaller innovative companies and their products. As a result of these acquisitions, the selling company shareholders earned an attractive and in some cases spectacular return on their investment from the nearly $40 billion that Valeant has invested in acquisitions. We expect that a high percentage of the after-tax capital received by these selling shareholders is likely to have already been reinvested in other early-stage and innovative drug companies so the cycle of drug development can continue.
You can imagine why that would not have gone over well. After one line of questioning Ackman said he texted Valeant's baord chairman to schedule a call tomorrow to discuss lowering prices for two heart drugs in question.