Federal prosecutors on Thursday charged a former Valeant Pharmaceuticals executive and the ex-CEO of a specialty pharmacy for masterminding a multimillion fraud and kickback scheme.
Former CEO of Philidor Rx Services Andrew Davenport and ex-Valeant executive Gary Tanner talked about how they would “ride off into the sunset together” with the tens of millions of dollars they siphoned from Valeant's business with Philidor before they were caught. Tanner was the head of Valeant's “access solutions” team, which secured insurance coverage for the company's branded drugs when there were cheaper generic versions on the market.
From December 2012 to September 2015, Tanner and Davenport promoted Philidor's business. Prosecutors claim Tanner dissuaded Valeant senior executives from working with Philidor's competitors, and got the pharmaceutical company to purchase an option to acquire Philidor in December 2014.
Davenport personally scored $40 million thanks to that option agreement and his high stakes in the company – which were hidden in shell companies. Davenport paid Tanner a $10 million kickback for his work, and Davenport stood to make tens of millions more as the two worked to score sales-related milestone payments from Valeant, prosecutors said.
The Federal Bureau of Investigations said Valeant senior executives voiced concerns over the years about Tanner's close ties to Philidor, but Tanner repeatedly denied that he had any financial stake in the company.
“As shareholders, we should be able to put our faith in those responsible for making decisions on behalf of our investments,” said William F. Sweeney, FBI's assistant director-in-charge. “We should be able to rely on them for placing our best interests above their own. But as evidenced by today's charges, our right to honest services is sometimes exploited by those who engage in kickback schemes that pose significant risks to investors.”
Valeant said on Thursday that Tanner's employment ended in September 2015, and that the company continues to comply with the authorities in the case.
Philidor effectively shut down in January 2016 after the kickback scheme was uncovered.