Justice Dept., FTC probe Valeant’s Bausch & Lomb, Paragon lens operations

The U.S. Justice Dept. and the Federal Trade Commission are investigating Valeant Pharmaceuticals (NYSE:VRX, TSE:VRX) subsidiaries Bausch & Lomb and Paragon Vision Sciences, the Canadian drug maker said yesterday.

The Justice Dept. is looking into payments Bausch & Lomb made to doctors using its Crystalens intra-ocular lens and Victus eye laser, Valeant said yesterday in a regulatory filing.

“The government has indicated that the subpoena was issued in connection with its criminal investigation into possible violations of Federal health care laws. B&L is cooperating with the government’s investigation,” Valeant said.

The FTC is investigating whether Valeant illegally cornered the market for a key material used to make rigid contact lenses with its May acquisition of Paragon, the company said.

“[T]he FTC has requested that the company provide, on a voluntary basis, certain information and documentation relating to its acquisition of Paragon. The company is reviewing the letter and the information request and intends to cooperate with the investigation,” Valeant said in the filing.

The Bausch & Lomb buyout and the Paragon deal give Valeant control over 85% to 90% of the supply chain for lenses, according to ProPublica, which cited “4 people who have been interviewed by the FTC.”

Federal prosecutors are also probing Valeant’s pricing decisions, drug distribution and patient assistance programs, according to the filing. The company has come under intense scrutiny for increasing drug prices. The New York Times also reported last week that Valeant and other drugmakers were using specialty drug distributors to circumvent barriers to raise prices.

Valeant’s shares went into a tailspin last week after short-seller Citron Research said Valeant was using specialty pharmacies to inflate its revenue.

The company denied the allegation and asked the SEC to look into Citron.

Valeant’s U.S.-listed shares were up 1.4% at $111.64 in early trading today. Up to yesterday’s close, the stock had lost about 38% of its value since Oct. 14, when the company disclosed that it had received a federal subpoena. The company’s Toronto-listed stock was up 1% at C$146.78.

Material from Reuters was used in this report.

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