How Valeant Plans to Its Fix Dermatology Portfolio



Actions to fix dermatology portfolio

After the Philidor separation, Valeant Pharmaceuticals’ (VRX) dermatology business has suffered a lot. If you want to learn more about this controversy, please read What Happened in the Valeant-Philidor Controversy?

Valeant’s actions to stop the declining dermatology business include a 20-year fulfillment program with Walgreens, a newly launched prior authorization approval program, the CoverMyMeds program, and a new fee structure.

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Walgreens program

With the Walgreens program, Valeant can offer physicians and patients quick and easy access to its products. In August, Valeant launched an improved prior authorization approval program with Walgreens. For details on the Valeant-Walgreens agreement, please read How One-Time Events Could Impact Valeant’s Performance in 4Q15.

Prior authorization approvals and CoverMyMeds

The dermatology business was facing a negative average selling price (or ASP) problem, and Valeant overcame this with a change in the fee structure. VRX started CoverMyMeds as part of its prior authorization program. With this program, Valeant is monitoring products that received prior authorization more rapidly and extensively.

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New fee structure

Valeant increased the co-pay for prescriptions that have not received prior authorization approval from PBMs (pharmacy benefit managers), which will give the patient earlier access to the prescription. Therefore, even if prescriptions don’t increase much, the effective ASP in non-Walgreens accounts will offer a net benefit to the dermatology business.

With increased fees, Valeant is exposed to the risk that dermatology prescriptions may fall. Although it’s too early to arrive at a conclusion, as noted by Valeant, dermatology prescriptions are being filled according to the company’s expectations. If the dermatology business exceeds the expectations, Valeant’s valuation multiple and share price might surge.

By investing in the VanEck Vectors Pharmaceutical ETF (PPH), you would gain a 2.3% exposure to high-risk Valeant. Along with Valeant, the fund has Merck & Co. (MRK), Abbvie (ABBV), and AstraZeneca (AZN) in its portfolio. Continue to the next part for details on Valeant’s actions to fix its Salix portfolio.


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