Wall Street is probably not the place to go if you are looking for morality tales.
Unless your idea of moral balance is the old Wall Street adage: “Sometimes bulls win and sometimes bears win, but pigs never win.”
The history of the past decade on Wall Street certainly puts that nostrum to the lie. A platter that ran from Hickory to Kinston across the state of North Carolina, from where tomatoes and honey start the barbecue sauces to the home of mustard and vinegar sauce, probably couldn’t hold all the profit-making pigs who’ve done just fine spicing up their bottom lines and smoking the suckers.
But for connoisseurs of come-uppance on The Street, it’s hard to beat the immorality tale of the rise and continuing fall of the Big Pharma firm called Valeant.
Once upon a time, back in 1994 to be exact, companies with very un-valiant names like SPI and ICN and Viratek got together and eventually rebranded themselves as Valeant. It was a small time company that had a few patents and made a few drugs and for 15 years it grew slowly and unspectacularly. Then, around 2010, it got a new CEO named J. Michael Pearson, a new philosophy, and a new home.
The home was important because it made the company suddenly much more profitable. Valeant moved its corporate headquarters from the United States, where it did the great bulk of its business, to Canada, where it not only paid lower taxes, it got to stiff most of its customers who happened to be taxpayers of the USA by avoiding its used-to-be contributions to the costs of their government.
This accountant’s trick – called inversion and common as pickpockets in the Bucharest railway station — defined Valeant’s patriotic morality. The company’s new philosophy expressed its business morality.
Valeant called itself a pharmaceutical company, but it was really just a drug pusher. The creative side of the pharmaceutical business, the side that adds value to society by coming up with new and better medicines was not for them. That involves research and development, which involves investments which may or may not pay off.
Valeant’s investments were made to what’s become a new Wall Street standard, adding value, not to society, but “for us, the company and our shareholders.” Valeant’s investments, and under J. Michael Pearson the company made them at a dizzying clip, involved buying up companies who had done the R&D and developed the new products, and taking over selling them.
Some of the companies were pretty good and so were some of their products. But many of the purchases were bad deals, and many of their products either tanked or simply petered out as competitors’ R&D produced newer and better ones.
Like the vultures they resemble, these pharma-fowl like Pearson or the infamous Martin Shkreli of Turing Pharmaceuticals reproduce poorly on their own. And scavenging is a tough trade.
So Valeant’s route to profitability, like Turing’s was simple: jack up prices. And when that starts to fail – jack up your financial reports, your 10Ks. And when that starts to fail, rip off your customers who tended to be not only US taxpayers and US health insurers, but through Medicare and Medicaid, the US Government.
Roddy Boyd is an investigative reporter who has worked for Fortune Magazine, the New York Post, The New York Sun and Institutional Investor News. He also founded The Financial Investigator website, www.thefinancialinvestigator.com. I also wrote “Fatal Risk,” on the collapse of AIG. Most recently, he has founded the Southern Investigative Reporting Foundation, www.sirf-online.org. SIRF is dedicated to providing document-driven investigative reporting on publicly traded companies. Our work is centered on providing accountability and information to the investing public and regulators. We are organized as a tax-exempt organization, are members of the Investigative News Network and gladly adhere to the highest standards of journalistic integrity. We do not invest in any securities, short or long, and do not take payment for our work. No one sees our work prior to publication.