Former Valeant Executive and Philidor CEO Charged in Multimillion-Dollar Fraud and Kickback Scheme

Gary Tanner, a former executive at Valeant Pharmaceuticals International, Inc. (‘Valeant’), and Andrew Davenport, the former Chief Executive Officer (‘CEO’) of Philidor Rx Services LLC (‘Philidor’), were arrested in Manhattan federal court for engaging in a multimillion-dollar fraud and kickback scheme.

According to the United States Attorney for the Southern District of New York, Preet Bharara, Tanner and Davenport allegedly concocted a fraudulent scheme to illegally use Philidor as a vehicle for personal profit and self-dealing. Their alleged kickback scheme illegally converted Valeant shareholder money into their own personal nest eggs.

FBI Assistant Director-in-Charge William F. Sweeney said, ‘As shareholders, we should be able to put our faith in those responsible for making decisions on behalf of our investments. 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.’

As alleged in the Complaint unsealed today in Manhattan federal court, Valeant is a publicly traded pharmaceutical manufacturer headquartered in Canada, with its principal place of business in New Jersey. Philidor was a specialty mail-order pharmacy that was formed in or about January 2013 with the assistance of Valeant, including the provision of financing, personnel, and supervision.

Tanner was the Valeant executive primarily responsible for the Philidor relationship, as well as Valeant’s alternative fulfillment (‘AF’) program more generally. Valeant’s AF program attempted to cause doctors to prescribe, and patients to purchase, Valeant Pharmaceuticals instead of generic substitutes or alternatives by helping obtain insurance coverage for those drugs or providing other incentives for prescription and purchase of Valeant drugs.

Some of Tanner’s actions benefiting Philidor placed Valeant and its shareholders at risk. Among other things, Tanner resisted efforts to diversify Valeant’s AF program to include other commercially available alternatives to Philidor, increasing Valeant’s dependence on Philidor and what is known as ‘payor risk,’ i.e., the risk that actions by insurers and other payors concerning Valeant’s products could negatively impact Valeant’s revenue.

Tanner was arrested in Gilbert, Arizona, and will be presented later today before a Magistrate Judge in Phoenix. Davenport was arrested this morning in Haverford, Pennsylvania, and will be presented later today before a Magistrate Judge in Philadelphia.

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