WASHINGTON (AP) — The outgoing CEO of embattled drugmaker Valeant Pharmaceuticals will tell lawmakers Wednesday that he was "too aggressive" and regrets drastically hiking prices for several critical medicines, according to testimony provided to The Associated Press.
J. Michael Pearson will issue the unusual mea culpa on Capitol Hill for the business strategy that made Valeant an industry powerhouse but also triggered a vigorous backlash against the Canadian drugmaker.
"Let me state plainly that it was a mistake to pursue, and in hindsight I regret pursuing, transactions where a central premise was a planned increase in the prices of the medicines," Pearson states in the written testimony.
The comments come days before Pearson is to be replaced as Valeant CEO, and may not win much sympathy from members of the Senate Committee on Aging. The committee is investigating the dramatic price increases pushed by Valeant and several other drugmakers.
Valeant announced Monday that it would replace Pearson as CEO early next month with Joseph Papa, the current CEO of Perrigo Co.
The Senate committee is also scheduled to hear from William Ackman, a billionaire hedge fund manager who is one of Valeant's leading investors and a board member. Howard Schiller, Valeant's former chief financial officer and a current board member, is also scheduled to testify.
A longtime corporate consultant, Pearson took the reins at Valeant in 2008 and embarked on a spree of more than 140 acquisitions, buying up rights to older, niche drugs and repeatedly hiking prices. Pearson's approach — which bypassed the huge research and development investments typically made by drugmakers — seemed to offer a cheaper, more reliable business model and made him a favorite of Wall Street investors.
Valeant raised net prices on its portfolio of U.S. drugs by 41.3 percent between October 2014 and October 2015, according to research by Sector and Sovereign Research analyst Richard Evans. His analysis cites Valeant as a driving force behind recent U.S. drug price inflation.
Pearson also pioneered the tax-dodging "inversion" technique later employed by other U.S. companies, merging with firms overseas to take advantage of their reduced tax rates.
But Valeant's tactics eventually attracted scrutiny.
The company caught the attention of Congress last year after buying two life-saving heart drugs, Nitropress and Isuprel, and hiking their prices, tripling one and raising the other six-fold.
Pearson says that Valeant decided to raise the prices after learning that cheaper generic versions of the drugs would soon hit the market. Instead, Pearson now says the company should have abandoned the transaction when it became clear the drugs would soon lose their profitability.
"In retrospect, we relied too heavily on the industry practice of increasing the price of brand name drugs in the months before generic entry," he states in his testimony.
In recent months, Valeant has been swamped by a host of problems including three ongoing federal probes of its accounting and pricing practices, massive debt and the threat of default on agreements with creditors and bondholders.
The intense scrutiny of the Laval, Quebec-based company has triggered repeated sell-offs of Valeant shares, which have lost nearly 90 percent of their value since peaking last August.