Outgoing Valeant CEO Tells Senate He Regrets Price Hikes

Outgoing Valeant Pharmaceuticals Chief Executive Michael Pearson plans to tell a U.S. Senate panel on Wednesday that it was a "mistake" to jack up the price of two life-saving heart drugs after their acquisition.

"The company was too aggressive and I, as its leader, was too aggressive in pursuing price increases on certain drugs," Pearson said in prepared testimony before the Senate Special Committee on Aging.

The committee is one of two U.S. congressional panels investigating sky-rocketing price increases of certain decades-old drugs, including four drugs acquired by Valeant and one drug acquired by Turing Pharmaceuticals, a company founded by Martin Shkreli.

Pearson appeared on Wednesday alongside Valeant's activist investor and board member William Ackman and board member Howard Schiller. Ackman said that his first priority is to make sure Valeant doesn't go bankrupt.

One area that lawmakers will be focused on is how little Valeant invests in researching and developing new drugs compared to the industry standard.

Senator Claire McCaskill, the top Democrat on the panel, is expected to tear into Valeant for being nothing more than a "shell company" created to purchase other companies, slash funding for research and increase drug prices.

"It's using patients as hostages," she said in a prepared statement. "It's immoral. It hurts real people."

"Pigs get fed, hogs get slaughtered. It's time to slaughter some hogs."

The committee has been collecting hundreds of thousands of documents as part of its ongoing probe into drug pricing.

"Our investigation has revealed that Valeant has already recovered the full cost of acquiring these four drugs, and the cost of manufacturing them is dwarfed by the net revenue they generate," the committee's Chairman Susan Collins said in prepared remarks.

The testimony that Pearson is expected to give strikes a conciliatory tone compared with his comments last October, when he wrote a letter to McCaskill defending the company's 2015 acquisition of two heart drugs from Marathon Pharmaceuticals.

After that acquisition, Valeant increased the price of Isuprel by about 720 percent and Nitropress by 310 percent.

"We should have abandoned the transaction with Marathon when it became clear that the expected arrival of generic competition made the economics of the deal dependent on significant price increases," he said in prepared testimony.

Valeant is facing investigations by U.S. prosecutors into its drugs pricing. It is also under investigation by the Securities and Exchange Commission for accounting and disclosure problems in connection with its prior business relationship with specialty pharmacy Philidor RX Services.

Last month, it appointed Ackman to the board, delayed filing its annual report and disclosed it needs to restate its earnings.

In prepared testimony, Ackman acknowledged the company has made mistakes.

"I am committed to ensuring that this approach to drug pricing is never repeated at Valeant," he said.

At the same time, he plans to defend Valeant's track record for research and development, saying the company is smart by acquiring and licensing drugs in a "later-stage" of development because it is more profitable and less risky.

Pearson is expected to step down in the next few weeks to make way for the incoming CEO, Joseph Papa, previously of Perrigo Company.

In his testimony, Pearson said he expects Papa will "no longer be seeking to acquire mispriced drugs."

Wednesday marks the second time Schiller will be appearing before a congressional panel.

Last February, he testified before a House of Representatives committee alongside Shkreli, the 33-year old founder of Turing Pharmaceuticals.

In that hearing, however, Shkreli got most of the heat after he smirked, brushed off questions and later, tweeted that lawmakers were imbeciles.