Judge Approves Settlements to End RICO Suit Over Inflated Drug Prices

On February 22, 2022, a federal judge adopted a special master’s report approving two settlements totaling over $23 million to end a proposed class action alleging that drugmaker Valeant Pharmaceuticals International Inc. and its executives violated the Racketeer Influenced and Corrupt Organizations Act with a scheme in which Valeant secretly controlled a “network of captive pharmacies” who acted uniquely to push its products over competitors’ comparable products.  The plaintiffs, led by a group of health and welfare funds, claimed that the scheme caused them to pay artificially inflated prices for Valeant-branded drugs and prevented them from obtaining cheaper generic alternatives.

The approval ends nearly six years of litigation.  The case was first filed in May 2016 before the United States District Court for the District of New Jersey.  The suit alleged that Valeant used Philidor Rx, a specialty pharmacy, to create a secret pharmacy network as a platform to implement a number of fraudulent practices in order to improperly inflate the reimbursements for Valeant drugs paid for by third party payors.  For example, Plaintiffs alleged that Philidor employees, as well as Valeant employees staffed at Philidor under aliases, were instructed to change codes on prescriptions to ensure that the prescriptions would be filled with a Valeant drug rather than a generic equivalent.  This scheme, plaintiffs alleged, allowed Valeant to reap hundreds of millions of dollars in ill-gotten profits at the expense of the class.