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[music playing]
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[Don Dahler] You see how greedy this move looks?
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Yeah, I could see how it looks greedy,
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but I think there's a lot of
altruistic properties to it.
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[reporter 1] Martin Shkreli brashly raised the price of Daraprim
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from $13.50 a pill to $750.
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[Lester Holt]
The most hated man in America
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provoked a lot of anger on Capitol Hill today.
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[reporter 2] The "pharma bro" CEOgrinned before Congress...
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[reporter 3] Martin Shkreli lived up to his bad-boy reputation...
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Smirkfest.
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[Elijah Cummings]
It's not funny, Mr. Shkreli.
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People are dying
and they're getting sicker and sicker.
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[camera shutters clicking]
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[reporter 4]
The poster boy for hiking drug prices
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arrested today for securities fraud.
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I was sitting with an investor
who was complaining to me
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about how awful and unethical
Martin Shkreli's actions were
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in hiking up the price of Daraprim.
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I said to him, "Why is what Valeant's
doing any different?"
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And he said,
"Well, that's a good question."
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If Martin was the minnow in all of this...
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then Valeant CEO Mike Pearsonwas the whale.
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[theme song playing]
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[Fahmi Quadir]
I was always this Pollyanna growing up
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and thought science and drugsare all for the good.
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But that was kind of idealistic and unrealistic.
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These are capitalist businesses.
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They're trying to make profitsfor their shareholders
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and sometimes they use tacticsI wouldn't necessarily agree with.
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Short sellers tend to get a bad rap
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because we say a lot of thingsthat people don't want to hear.
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There are a lot of peoplewho don't like me.
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Valeant managementcertainly does not like me.
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But that doesn't stop me,
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because I'm driven by doing goodby the people
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that have been taken advantage of by companies like Valeant.
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What I do is not about making money.
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Your interest has to be in bringing
some of these companies to justice.
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[Erin Lee Carr] Can you talk aboutthe rise of the company?
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Sure, I can do this really well,
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because I have been fighting the company
for decades.
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Uh, Valeant's forbearer or its origin
was a company called Biovail,
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which is a corporate clogged toilet
based in Canada.
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We've got a merger in medicine...
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[Boyd] In 2010, there was a sort of a merger of equals
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with Valeant Pharmaceutical.
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Valeant planted a foreign flag
to save money
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as a way to skip paying taxes stateside.
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[Boyd] And a guy named Mike Pearsontook over the remaining company.
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Our job is to create shareholder value.
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And, uh,
so people shouldn't be afraid of...
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of anything that happens
that helps them create shareholder value.
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That's our job.
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[Bethany McLean] When Mike Pearson stepped in to run Valeant,
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its stock was maybe less than $15 a share.
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But at its peak, it hit $262 a share.
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It was an incredible, incredible ride.
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One of the greatest money-making, uh,
opportunities Wall Street has ever seen.
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Valeant Pharmaceuticals
is continuing its shopping spree,
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announcing that it's to buy
orphan drug maker Aton Pharma.
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Billion-dollar takeover deal
in the pharmaceutical industry.
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Canada's Valeant is buying Medicis
Pharmaceutical for $2.6 billion in cash.
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That is about $44 a share.
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Over to you, Seema.
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Maria, Valeant Pharmaceuticals acquiring
Bausch and Lomb for $8.7 billion.
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That was a big move
in the health-care scene.
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Our strategy is a pretty simple one.
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Uh, since I joined the company three plus
years ago, we've made 22 acquisitions.
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We'd like to do this still, but if not,
we'll do something else.
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[cheers and applause]
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[Boyd] Valeant Pharmaceuticals is justsimply hoovering up companies.
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They're like a vacuum sucking up companies
out of the public markets.
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At one point, I'd tracked
that they had bought 110 companies.
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For a while, the entire pharmaceutical
industry was terrorized by
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and terrified of Valeant,
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because they were the company that was
getting all of Wall Street's admiration.
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This was the hot stock and supposedly
these guys were the ones
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who had figured out how the pharmaceutical
industry was supposed to work.
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[woman] Valeant, Valeant,Valeant, Valeant.
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On Wall Street,
there's smart and dumb money.
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The smart moneyare the premier hedge funds,
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some of the best investors of our time.
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From the Sequoia Fund, which was runby a protégé of Warren Buffett's,
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to Bill Ackman,whose hedge fund Pershing Square
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was one of the biggest, most successfulhedge funds out there,
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to ValueAct.
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This fund that is always below the radar,but is regarded as being very smart.
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All of these guys were in Valeant.
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We originated
with Mike this strategy of rolling up,
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to use your words, consolidating
the pharmaceutical industry.
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And Mike has proven
that the execution is there.
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[McLean] They saw a CEO who promiseda revolutionary strategy
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that was smarter than what everybody elsein the pharmaceutical industry was doing.
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It was music to the ears of peopleon Wall Street,
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who tend to think they're smarter
than everybody else.
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So, if somebody markets themselves
as smarter than everybody else,
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wow, it's like meets like.
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[Boyd] I think, to look at Valeant,you had to be an outsider.
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If you're in the Wall Street machine,
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you just wanted their share priceto go up and up and up.
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But on the other hand was this small minority of dissenters
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called short sellers.
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Two thirds of the broader
global financial community
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views them as...
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loosely affiliated with,
let's say, ISIS/Al-Qaeda.
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For example, there is this colorful guyout in Beverly Hills,
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guy named Andrew Left.
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[Carr] In simplest terms,
what is short selling?
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Oh, boy.
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It's amazing 'cause every day
the stock market opens.
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So every day, any stock has an equal chance of going up or down.
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But everybody only thinks
stocks can go up.
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If 90% of America is looking atwhat stock's gonna go up the next day,
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what if I just flip that thought and say,
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"Why don't I try to make a living,"a tough one at that,
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"saying what stocks are gonna go down tomorrow?"
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[Boyd] There are a lot of very,very smart people on Wall Street,
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but Fahmi Quadir, she is just a next-level intelligent person.
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To use the chess analogy, she saw
three to four moves ahead on Valeant.
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[Quadir] No company is telling you
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why you should short their stock.
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Every source of information,
everything that the company tells you,
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everything you hear on CNBC is largely
people telling you to buy a stock.
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So to go short, you need to go out there
and find the information on your own.
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Oh, I forgot one other.
Uh, John Hempton in Australia.
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[John Hempton] We like to find peoplewho are cheating other people.
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[Carr] Why?
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Because sometimes they give you
trading opportunities that are oblique.
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For instance,
this highly reputable-looking
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pharmaceutical company called Valeant,
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was in reality a house of cards,
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with people cheating other people
left, right and center.
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We figured that, at some stage,all of this cheating would come undone,
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and the Valeant stock would go downa long, long way.
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We follow bad people in markets,
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we're very good at picking apart
bad accounts,
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and we short-sell them.
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And that means we make a profit
when stocks go down.
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Fahmi, Andrew Left, maybe Hempton,
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maybe seven people in the world
are questioning,
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"This emperor has no clothes."
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If you haven't noticed about us,
we're mostly outsiders. [chuckles]
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We didn't need to believe the bullshit.
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Fahmi and I chatted maybe 20 times,
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and of all the people I spoke to,
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she was the personthat had the most original observations.
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[Quadir] I never, in my life, thoughtI would be a short seller.
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I was just planning to take a gap year
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and then start my PhD
in algebraic topology.
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Um, but that never happened.
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I got pulled into Big Pharma consulting.
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And then a famous short sellersaw the way I thought
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and the kinds of lengths I would goto conduct my research.
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He saw that I was a short seller
before I even knew it.
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The thing is, with Valeant, no one wanted
to hear the short side of the story.
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It was all about the magical numbers
that Valeant was putting out.
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These non-GAAP adjusted, EBITDA metrics,
pro forma cash, EPS, et cetera.
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And that's all investors
wanted to hear about.
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Valeant Pharmaceuticals' main source
of growth isn't new drugs.
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It's been growing revenue by buying out
smaller companies.
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Mike, it's all about acquisitions, why?
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We've looked at the return on
research and development in total.
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Um, for the last decade or so,
it has not been positive for the industry.
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And, um, so we think a much better use
of our capital
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is to, uh, buy products that are approved,
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buy companies that have approved products,
and grow that way.
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Pearson was a real skeptic of the money
that most pharmaceutical companies spend
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developing new drugs.
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He thought that most of those dollarswere wasted. They weren't efficient.
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There were better ways to runa pharmaceutical company
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much more efficiently in order to make more money for its shareholders.
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You might go for three or four years
running a pharmaceutical company
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and not have any breakthroughs.
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And if you're someone who's
a McKinsey analyst or a hedge funder,
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you might say, "Waste of money,"
and throw your hands up.
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But if you're a scientist,you understand it's just time.
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It's time, data and understanding,and you're gonna find it.
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If you slashthat research and development,
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that all goes to the bottom line.It's all profitability.
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[Hempton] They bought over 100 companies.
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Their formula was relatively simple.
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"We will consolidate the accounting,
we will consolidate the sales force,
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and we won't do science."
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And the formula seemed to work.
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People had literally made billions of dollars by backing Mike.
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They wanted to tell Wall Street that,
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"All this money we make,
that belongs to you."
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But this was a company
that pretended to be cheap,
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but owned the most expensive
corporate jets you could find.
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They went and bought a Gulfstream 650.
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This is a corporate jet that can fly
nonstop from New York to China.
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[Carr] Valeant had a 650.
What does that say to you?
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They like to fly in style.
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It's the biggest...
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I don't even wanna say "the biggest
swinging dick you can have,"
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but that's essentially what it is.
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[Quadir] Mike Pearson had this reputationof spending most of his time
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just talking to investors,taking them on his Gulfstream 650,
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flying them outto Duke basketball games.
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What you would hear on the street is,
you know,
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"Oh, don't worry about the balance sheet,
don't worry about the fundamentals.
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Just talk to Mike."
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People thought that Pearson was infallible.
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They failed to do basic researchon what is Valeant.
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But with short bets, it's always wiseto do your research first.
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I started by looking at the entire history
of Valeant's prescription products.
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What Valeant was doingafter it acquired these businesses
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was increasing the prices exponentially and then the sales volumes,
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so the patients taking the drugwould substantially decline,
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but the dollars that Valeant's generating
are going up.
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So, this is my nighttime reading material
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for the past two years.
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Some people like to read
Buffett biographies,
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some like to read Fifty Shades of Grey,
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but I spent the last two years of my life
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reading every single publicly available
document on Valeant Pharmaceuticals.
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This is Valeant's investor dayat the end of 2012.
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They were really ramping upwith their acquisitions
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and maximizing their valueon those products
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through co-pay assistance, patient assistance and increasing price.
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Health care is just a certain field where,
if you're committing fraud,
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you're not just committing fraud
against your shareholders,
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you're potentially committing fraud
against patients.
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[Carr] When did you and your wife meet?
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[John] In the late '80s, in Chicago, through work.
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[Carr] What was it like when she told youshe had Wilson's disease?
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What did you think at the time?
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I didn't think anything about it.
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She was taking a simple drug
four times a day and she was fine.
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[woman] Wilson's disease is simplythe inability to process copper.
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It builds up and, ultimately,
it poisons you through your liver.
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About one in 30,000 people have it.
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[woman] The medication I take for Wilson'sis Syprine.
235
00:18:06,418 --> 00:18:10,047
[Carr] Can you talk to us about why
it's important for you to be anonymous?
236
00:18:12,633 --> 00:18:14,760
[coughs] Um...
237
00:18:18,180 --> 00:18:21,725
[John] We had spent maybe $30 a month
238
00:18:21,809 --> 00:18:24,186
and that would come out ofour flexible savings.
239
00:18:24,269 --> 00:18:27,523
You just paid it, took the drug
and you went on.
240
00:18:27,606 --> 00:18:30,484
And then all of a sudden,
right after Christmas,
241
00:18:30,567 --> 00:18:31,860
she goes to Walgreens,
242
00:18:33,070 --> 00:18:37,908
and, uh, she calls me and says
they want $20,000
243
00:18:39,076 --> 00:18:40,744
for her drug.
244
00:18:40,828 --> 00:18:42,996
[woman] "This can't be my drug.
This can't be happening.
245
00:18:43,080 --> 00:18:44,623
I've been on this medication for years."
246
00:18:44,706 --> 00:18:46,458
It just kept going up and up and up.
247
00:18:46,542 --> 00:18:49,837
Today, it's $200-plus per tablet.
248
00:18:49,920 --> 00:18:53,048
[Carr] What's the math on that,
$200 per tablet?
249
00:18:53,132 --> 00:18:57,344
It's about, uh, $289,000 a year.
250
00:18:59,346 --> 00:19:04,059
We probably have about $80,000 worth of itin our refrigerator today.
251
00:19:05,686 --> 00:19:09,064
[Carr] What would happen
if you stop taking the medication?
252
00:19:11,150 --> 00:19:11,984
[woman] I'd die.
253
00:19:13,068 --> 00:19:16,029
And you're insulated from the cost,
until you're not.
254
00:19:16,113 --> 00:19:17,739
Until you lose your job.
255
00:19:17,823 --> 00:19:19,992
Until you find
that you can't get health insurance
256
00:19:20,075 --> 00:19:22,744
because the cost of your medicine
is so exorbitant.
257
00:19:22,828 --> 00:19:25,831
Until it wipes out your family
because you have to pay for it,
258
00:19:25,914 --> 00:19:27,791
because you're gonna die if you don't.
259
00:19:31,712 --> 00:19:35,966
She worries that if her company knewthat her insurance was so costly,
260
00:19:36,049 --> 00:19:38,177
that she would be targeted for layoff.
261
00:19:38,677 --> 00:19:40,179
And if she gets laid off,
262
00:19:40,262 --> 00:19:42,139
she's gonna have a hard timefinding another job,
263
00:19:42,222 --> 00:19:45,142
given her age and healthcare issues.
264
00:19:46,101 --> 00:19:49,146
And if she has to payfor her medicine herself,
265
00:19:49,229 --> 00:19:51,231
they'll be bankrupt, within a few years.
266
00:19:51,940 --> 00:19:55,861
[woman] I decided I didn't wanna show
my face as I work through all of that.
267
00:19:56,653 --> 00:19:59,823
Everybody runs scared
from these drug companies.
268
00:20:00,741 --> 00:20:02,201
Because the drug companies
269
00:20:02,284 --> 00:20:07,206
have somehow convinced patients
and the advocacy groups,
270
00:20:07,289 --> 00:20:10,709
"If you don't let us have our way,
we'll just not make the drug."
271
00:20:13,795 --> 00:20:19,092
[woman] It's really personal and to see such greed and avarice go unchecked,
272
00:20:19,927 --> 00:20:21,845
I think was maddening to him.
273
00:20:21,929 --> 00:20:25,641
And if you know John,he can't stand by and watch it.
274
00:20:28,101 --> 00:20:31,772
[John] You start to try and figure outwhat's going on.
275
00:20:33,065 --> 00:20:36,026
For 20 years, Merck sold itfor about a dollar a tablet.
276
00:20:36,652 --> 00:20:41,490
In about 2007, we noticedthat the price of the drug had doubled.
277
00:20:41,573 --> 00:20:45,118
Merck put it into a company called Aton.
278
00:20:45,202 --> 00:20:48,538
Three years later, Valeant acquired Aton.
279
00:20:48,622 --> 00:20:52,834
And that's whenthe price really started to accelerate.
280
00:20:55,754 --> 00:21:00,008
Syprine had risento be one of their top 30 drugs.
281
00:21:00,092 --> 00:21:03,262
Well, to be a top 30 drug,
it kinda had to have some volume,
282
00:21:03,679 --> 00:21:06,974
and we knew that this didn't have volume.
So it was all price.
283
00:21:09,226 --> 00:21:10,978
[McLean] If you're willingto take the price of a drug
284
00:21:11,061 --> 00:21:12,771
that was selling for a dollar a pill
285
00:21:12,854 --> 00:21:15,023
and boost it to $300,000 a year,
286
00:21:15,399 --> 00:21:18,110
if you've figured out that lever
and you're willing to use it...
287
00:21:18,193 --> 00:21:20,112
Well, you've got a gusher.
288
00:21:20,445 --> 00:21:23,949
I mean, you really have found the ability
to turn straw into gold.
289
00:21:45,595 --> 00:21:47,931
[Quadir] Those in finance, those on Wall Street,
290
00:21:48,015 --> 00:21:50,892
you know, the talking heads
that came on CNBC,
291
00:21:50,976 --> 00:21:55,647
they loved Valeant because it functioned
as if it was a hedge fund.
292
00:21:56,732 --> 00:21:57,733
Bill Ackman is here,
293
00:21:57,816 --> 00:22:00,444
he is the CEO and founder
of Pershing Square Capital Management.
294
00:22:00,527 --> 00:22:03,405
It currently has nearly
$6 billion under management.
295
00:22:03,488 --> 00:22:05,157
You were a very good short seller.
296
00:22:05,240 --> 00:22:07,284
Uh, occasionally, we got it right.
297
00:22:07,367 --> 00:22:10,245
-You were a very good short seller.
-Occ---
298
00:22:10,329 --> 00:22:12,331
Not always. It's a difficult business.
299
00:22:12,414 --> 00:22:17,127
Bill Ackman is a smart, savvy businessman.
300
00:22:17,210 --> 00:22:19,296
I think he's opportunistic,
301
00:22:19,379 --> 00:22:23,342
and I mean that not in a negative way,
but in a positive way.
302
00:22:23,425 --> 00:22:25,677
This is a time of opportunity
for people with money.
303
00:22:25,761 --> 00:22:26,762
Absolutely.
304
00:22:28,346 --> 00:22:30,766
It's the single best time in my career
to invest.
305
00:22:30,849 --> 00:22:32,225
-To invest money?
-Yes.
306
00:22:33,185 --> 00:22:35,771
[Katz] I think Bill is impressedwith Valeant's results,
307
00:22:35,854 --> 00:22:38,732
and I think Mike Pearsonwas an impressive guy
308
00:22:38,815 --> 00:22:41,026
from a financial perspective.
309
00:22:41,109 --> 00:22:42,277
I think Bill Ackman
310
00:22:42,360 --> 00:22:45,947
was in the business
of investing money to make money.
311
00:22:52,537 --> 00:22:58,502
Mike Pearson's goal was to be a top five
pharmaceutical company by 2016.
312
00:22:58,585 --> 00:23:00,504
And the only way they could really do that
313
00:23:00,587 --> 00:23:02,464
was to buy something
even bigger than Valeant.
314
00:23:03,507 --> 00:23:06,551
Allergan was an obvious choice.
315
00:23:07,969 --> 00:23:10,305
[McLean] Allergan is, in a way,the anti-Valeant.
316
00:23:10,388 --> 00:23:12,849
It's an incredibly successful company,
317
00:23:12,933 --> 00:23:15,310
mainly that specializedin cosmetic products.
318
00:23:15,393 --> 00:23:18,271
Any woman who's used Botox
would know what Allergan is
319
00:23:18,355 --> 00:23:20,440
because Allergan
was the inventor of Botox.
320
00:23:20,524 --> 00:23:22,567
Whatever you think of Botox,
it was an invention
321
00:23:22,651 --> 00:23:24,778
and an incredibly successful one at that.
322
00:23:24,861 --> 00:23:26,363
I'm not the Dalai Lama.
323
00:23:26,446 --> 00:23:29,116
Somebody says, "Oh, Dolly,
you always just look so happy."
324
00:23:29,199 --> 00:23:32,661
-I say, "That's the Botox." So...
-[audience laughing]
325
00:23:32,744 --> 00:23:35,372
Everything was going along just fine.
326
00:23:35,997 --> 00:23:38,500
And here came a company, uh,
327
00:23:38,583 --> 00:23:42,295
really hell-bent
on short-term profit and greed.
328
00:23:42,379 --> 00:23:43,672
Enter Valeant.
329
00:23:43,755 --> 00:23:45,257
[applause]
330
00:23:45,340 --> 00:23:47,509
[announcer] Please welcome
J. Michael Pearson,
331
00:23:47,592 --> 00:23:49,928
chairman and CEO of Valeant.
332
00:23:50,011 --> 00:23:52,097
It did feel a little like Pearl Harbor.
333
00:23:52,180 --> 00:23:55,100
An explosion of M&A action in pharma.
334
00:23:55,183 --> 00:23:58,186
That is our big story.
We've got every angle covered for you.
335
00:23:58,270 --> 00:23:59,688
Top-gun activist Bill Ackman
336
00:23:59,771 --> 00:24:02,357
teams up with Valeant,
Canadian drug company,
337
00:24:02,440 --> 00:24:04,860
to bid for the Botox maker Allergan.
338
00:24:04,943 --> 00:24:07,362
We call it Pharmapalooza.
What does it mean for you?
339
00:24:07,445 --> 00:24:09,239
This, folks, is Power Lunch,
340
00:24:09,322 --> 00:24:11,992
and this, Sue,
is your Power Lunch on drugs.
341
00:24:13,618 --> 00:24:16,329
Uh, so, why does this make sense?
342
00:24:16,413 --> 00:24:18,039
[McLean] Valeant didn't have the moneyto buy Allergan.
343
00:24:18,123 --> 00:24:19,958
So just briefly on Pershing Square...
344
00:24:20,041 --> 00:24:21,835
[McLean] And so they teamed upwith Bill Ackman,
345
00:24:21,918 --> 00:24:25,088
who quietly
accumulated the stake in Allergan.
346
00:24:25,172 --> 00:24:27,299
And then tried to, basically,
347
00:24:27,382 --> 00:24:30,468
sway the rest of Allergan shareholders
to go with Valeant.
348
00:24:30,552 --> 00:24:33,889
The outsider. That will be the theme...
349
00:24:34,389 --> 00:24:37,642
[McLean] Bill, who's suave and tall,perfectly dressed,
350
00:24:37,726 --> 00:24:40,187
with this shock of white hair,and very healthy,
351
00:24:40,270 --> 00:24:43,690
and then Mike, who's sort of gruffand a little overweight
352
00:24:43,773 --> 00:24:46,401
and kind of slovenly,do this presentation.
353
00:24:46,484 --> 00:24:50,447
In terms of historically,
we've grown our business about 55% a year.
354
00:24:50,530 --> 00:24:54,242
Uh, they've grown their businesses
in the emerging markets, about 11% a year.
355
00:24:54,326 --> 00:25:00,832
Both Bill Ackman and Mike Pearson
were masters in use of fact,
356
00:25:00,916 --> 00:25:06,713
to lead to, in my humble view,
erroneous and misleading conclusions.
357
00:25:06,796 --> 00:25:10,133
In the R&D number,
you'll see 1.3 minus 900...
358
00:25:10,217 --> 00:25:16,139
That, uh, Allergan's R&D efforts, uh,
hadn't been good.
359
00:25:16,223 --> 00:25:17,599
And that we'd wasted money.
360
00:25:22,479 --> 00:25:25,523
Allergan was functioning
like a proper pharmaceutical company.
361
00:25:26,858 --> 00:25:29,903
It had a strong focus on R&D.
362
00:25:30,403 --> 00:25:33,949
Mike Pearson talks a lot abouthow R&D is so inefficient
363
00:25:34,032 --> 00:25:36,076
and he doesn't want to spend money on it.
364
00:25:36,159 --> 00:25:39,663
You know, he says,"Bet on management, not on science."
365
00:25:40,789 --> 00:25:42,082
Our operating committee...
366
00:25:42,165 --> 00:25:44,876
[Pyott] From, uh, Bill Ackman's perspective,
367
00:25:44,960 --> 00:25:47,837
I think he was, uh, very enamored,
368
00:25:47,921 --> 00:25:54,552
and maybe I could use the word beguiled,
uh, by, um, Mike Pearson's pitches.
369
00:25:55,095 --> 00:26:01,184
Our job, Howard and mine, and Ari's job
is to create value for our shareholders.
370
00:26:01,268 --> 00:26:04,187
I found the first pharmaceutical CEO
that I could actually,
371
00:26:04,271 --> 00:26:06,481
"Hey, I could think about
investing in this business."
372
00:26:06,564 --> 00:26:09,567
And this is a business
that has an incredible story.
373
00:26:10,402 --> 00:26:12,112
[McLean] There's a book called
The Outsiders
374
00:26:12,195 --> 00:26:14,364
that became, sort of,cult reading on Wall Street,
375
00:26:14,447 --> 00:26:17,951
and it celebrates CEOswho are mavericks in their industry.
376
00:26:18,034 --> 00:26:20,328
[Ackman] So, we think the only problemwith the book
377
00:26:20,412 --> 00:26:21,705
-is they left Mike off the book,
-[laughter]
378
00:26:21,788 --> 00:26:24,082
so he'll be, I guess,
in the second edition.
379
00:26:24,165 --> 00:26:25,667
[McLean] Bill thought that in Mike Pearson,
380
00:26:25,750 --> 00:26:27,335
he had found another outsider
381
00:26:27,419 --> 00:26:29,838
who was every bit as legendary
382
00:26:29,921 --> 00:26:33,091
as the people
who are celebrated in this book.
383
00:26:33,174 --> 00:26:35,552
There are copies of the book
as our gift to you.
384
00:26:35,635 --> 00:26:36,636
Encourage you to read it.
385
00:26:36,720 --> 00:26:39,306
It seems in a weird way to me
386
00:26:39,389 --> 00:26:42,267
that Bill Ackman
developed a huge crush on Mike Pearson.
387
00:26:42,767 --> 00:26:44,060
Um...
388
00:26:44,561 --> 00:26:46,813
[stuttering]
Why did you feel it necessary
389
00:26:46,896 --> 00:26:50,608
to team up with Bill,
as charming as he is?
390
00:26:51,860 --> 00:26:54,654
-[Pearson] He's charming?
-[laughter]
391
00:26:54,738 --> 00:26:57,073
He was willing to invest $4 billion in us.
392
00:26:57,574 --> 00:26:59,576
Um, or in this transaction.
393
00:27:00,201 --> 00:27:03,747
[stammering] I also think that he has
394
00:27:04,456 --> 00:27:06,708
real credibility in terms
of being a smart investor.
395
00:27:07,334 --> 00:27:11,087
If Allergan does not want
to negotiate with you,
396
00:27:11,171 --> 00:27:12,547
uh, what are the next steps?
397
00:27:12,630 --> 00:27:15,925
Well, maybe we should ask
the 10% owner of Allergan.
398
00:27:17,135 --> 00:27:20,680
So what we do for a living,
is we buy stakes in companies, uh,
399
00:27:20,764 --> 00:27:24,768
and we work with them to help them
do the right thing for shareholders.
400
00:27:24,851 --> 00:27:26,353
And that's what we're gonna do here.
401
00:27:27,437 --> 00:27:29,689
We have all kinds of ways
of making that happen.
402
00:27:29,773 --> 00:27:31,107
[laughter]
403
00:27:31,191 --> 00:27:35,320
What Ackman basically did was quietly
acquire this stake in Allergan
404
00:27:35,403 --> 00:27:39,074
in order to help Valeant
with its takeover attempt.
405
00:27:39,157 --> 00:27:41,076
And you look at that on the outside
and you think,
406
00:27:41,159 --> 00:27:43,495
"That's got to be insider trading.
That can't be legal."
407
00:27:43,578 --> 00:27:46,206
You're actually permitted to trade
on inside information
408
00:27:46,289 --> 00:27:49,125
as long as you didn't receive
the information
409
00:27:49,209 --> 00:27:50,126
from someone who's breached...
410
00:27:50,210 --> 00:27:51,878
[McLean] Even at the time, people said,
411
00:27:51,961 --> 00:27:53,922
"Well, I guess he's checkedthe letter of the law,
412
00:27:54,005 --> 00:27:55,715
but this doesn't smell right to us."
413
00:27:55,799 --> 00:28:00,970
So it was a controversial company
trying to take over a beloved company
414
00:28:01,054 --> 00:28:04,974
using incredibly controversial tactics.
The whole thing was ugly.
415
00:28:07,560 --> 00:28:09,062
We really question
416
00:28:09,145 --> 00:28:12,941
the sustainability of the Valeant
business model in its entirety.
417
00:28:13,024 --> 00:28:16,736
They are proposing cutting R&D 90%.
418
00:28:16,820 --> 00:28:22,075
We personally take the view
that is value destruction, not creation.
419
00:28:22,158 --> 00:28:25,036
To us, it was very clear
that their approach
420
00:28:25,120 --> 00:28:27,831
was, uh, in plain English,
"asset stripping."
421
00:28:28,581 --> 00:28:31,209
[McLean] They launched this devastatingcounterattack.
422
00:28:31,292 --> 00:28:32,919
Basically calling Valeant a fraud.
423
00:28:33,711 --> 00:28:37,632
They even compared it to Tyco,which was a notorious 1990s company
424
00:28:37,715 --> 00:28:40,051
where the CEO ended up going to prison.
425
00:28:41,177 --> 00:28:43,888
What's going on at Allergan,
I think is unprecedented.
426
00:28:43,972 --> 00:28:47,767
It's completely inappropriate,
possibly illegal.
427
00:28:47,851 --> 00:28:51,730
Having Bill, um, out there in the public,
you know, he doesn't give up.
428
00:28:52,230 --> 00:28:54,315
Uh, we don't give up either.
So, I think that helps...
429
00:28:54,399 --> 00:28:58,111
[McLean] Most people, at least quietly,were on Allergan's side.
430
00:28:58,194 --> 00:28:59,696
A prominent Wall Streeter said to me,
431
00:28:59,779 --> 00:29:02,031
"It's like the dirty drunk
attacking your beloved uncle."
432
00:29:02,866 --> 00:29:05,285
[Betty Liu] The scuttlebutt
was that, if you were gonna sell,
433
00:29:05,368 --> 00:29:07,954
it was gonna be to anybody else
but Valeant. Is that right?
434
00:29:08,037 --> 00:29:11,916
Really, the prime objective
was to prevent Valeant
435
00:29:12,000 --> 00:29:14,836
from stealing us
at a ridiculously low price.
436
00:29:14,919 --> 00:29:17,297
[Pyott] We had a big fight on our hands.
437
00:29:17,380 --> 00:29:21,801
But for Allergan, there is a good
and happy end to this whole tale.
438
00:29:24,053 --> 00:29:26,723
[McLean] Allergan found another bidder,a company called Actavis,
439
00:29:26,806 --> 00:29:31,019
and acquired it for a higher pricethan Valeant was willing or able to pay.
440
00:29:34,105 --> 00:29:36,191
All of a sudden,Valeant was front page news.
441
00:29:36,274 --> 00:29:38,693
And with the attention came scrutiny.
442
00:29:38,777 --> 00:29:40,278
Why are you short?
443
00:29:40,361 --> 00:29:43,156
[McLean] Jim Chanos, who's a very well-known short seller,
444
00:29:43,239 --> 00:29:46,034
started to talk about all the flawsin Valeant's business model.
445
00:29:47,202 --> 00:29:49,829
Chanos forwards all his workto Bill Ackman and says,
446
00:29:49,913 --> 00:29:53,625
"You're making a mistake on this company.I think it's got real problems."
447
00:29:53,708 --> 00:29:56,127
And unfortunately,
Jim does not have Valeant right.
448
00:29:58,046 --> 00:30:01,090
[McLean] Bill Ackman would have walked away from the Allergan deal
449
00:30:01,174 --> 00:30:02,425
with a great deal of money
450
00:30:02,509 --> 00:30:06,429
because Allergan's stock price went upquite a bit during this exercise.
451
00:30:07,680 --> 00:30:09,307
But he didn't walk away.
452
00:30:09,390 --> 00:30:11,976
Instead, he took all that money
and then some
453
00:30:12,060 --> 00:30:14,604
and acquired a huge stake in Valeant.
454
00:30:15,647 --> 00:30:19,317
He didn't seem to recognizewhat other people saw so clearly.
455
00:30:20,777 --> 00:30:22,946
[Hempton] Bill is a funny guy.
456
00:30:23,029 --> 00:30:25,114
I think there's a Wall Street expression
for this.
457
00:30:25,198 --> 00:30:27,784
It's, um, "Often wrong, never in doubt."
458
00:30:29,160 --> 00:30:31,663
And people who are often wrong,never in doubt,
459
00:30:31,746 --> 00:30:34,499
are very good to trade against.
460
00:30:34,582 --> 00:30:36,000
They will double up,
461
00:30:36,084 --> 00:30:39,671
they have large amounts of moneyto bet when they're wrong,
462
00:30:39,754 --> 00:30:41,965
and Bill truly believes it.
463
00:30:47,387 --> 00:30:49,973
[Boyd] The American system takesour best and brightest people,
464
00:30:50,056 --> 00:30:52,559
of which Bill Ackmanis certainly a member.
465
00:30:52,642 --> 00:30:56,896
And they get paid outlandish sums
to look the other way.
466
00:30:58,398 --> 00:31:00,525
If you're Bill Ackmanor other people like him,
467
00:31:00,608 --> 00:31:02,318
they invent rationalizations around it.
468
00:31:05,238 --> 00:31:07,156
[Hempton] These big-name hedge fund managers
469
00:31:07,240 --> 00:31:10,660
are just as capable of cognitive
dissonance as everybody else.
470
00:31:11,703 --> 00:31:13,162
The skeptics came out of the woodwork
471
00:31:13,246 --> 00:31:16,291
around the time
of the Allergan bid in 2014,
472
00:31:16,374 --> 00:31:19,127
and for the next year or so
they couldn't have looked more wrong
473
00:31:19,210 --> 00:31:22,130
as Valeant stock just went higher
and higher and higher.
474
00:31:23,298 --> 00:31:25,550
[David Faber] You came out
of the Allergan fight a loser.
475
00:31:25,633 --> 00:31:29,345
But there are those who'll say,
this company is only built to acquire.
476
00:31:29,429 --> 00:31:31,639
I don't think we were a loser.
We were disciplined.
477
00:31:31,723 --> 00:31:33,850
A lot of analysts are expecting
some more M&A.
478
00:31:33,933 --> 00:31:36,769
That's your business model.
Can we expect more big M&A from you guys?
479
00:31:36,853 --> 00:31:39,314
We'll absolutely
start getting back in M&A.
480
00:31:39,397 --> 00:31:43,359
Valeant is now buying bankrupt
cancer vaccine maker Dendreon.
481
00:31:43,443 --> 00:31:46,112
It is the deal of the day,
if not one of the biggest of the year.
482
00:31:46,195 --> 00:31:48,823
Valeant agreeing to buy
Salix Pharmaceuticals for a hundred...
483
00:31:48,907 --> 00:31:50,825
You're never gonna stop
doing deals, are you?
484
00:31:50,909 --> 00:31:53,202
Uh, probably not. Life would get boring.
485
00:31:56,915 --> 00:32:00,084
The market was dismissing
the skeptics' concerns. End of story.
486
00:32:01,669 --> 00:32:06,007
All I hear is, "Valeant is brilliant.
Bill Ackman's a genius.
487
00:32:06,090 --> 00:32:10,720
Mike Pearson is changing the landscape
of American pharmaceutical management."
488
00:32:10,803 --> 00:32:13,556
And then, I'm here saying,
"I think they're very wrong."
489
00:32:14,390 --> 00:32:18,394
So, I'm on a message boardcalled cafepharma.com.
490
00:32:18,478 --> 00:32:21,898
And I see a bunchof ex-Valeant sales executives
491
00:32:21,981 --> 00:32:24,484
griping about something called Philidor.
492
00:32:25,860 --> 00:32:27,946
Another ex-Valeant rep says,
493
00:32:28,029 --> 00:32:30,907
"What's Philidor?I've never even heard of it."
494
00:32:32,659 --> 00:32:36,412
And they're like,"We're trying to keep it on the down low.
495
00:32:36,496 --> 00:32:38,706
No one reallyis supposed to know about it."
496
00:32:39,958 --> 00:32:41,751
As a reporter when you hear the--
497
00:32:41,834 --> 00:32:44,587
You know, the magic phrase,
"No one's supposed to know about it,"
498
00:32:44,671 --> 00:32:47,799
it's kind of like a teenage boy
looking at Playboy.
499
00:32:47,882 --> 00:32:49,467
"I want to know about it."
500
00:32:54,472 --> 00:32:59,477
I found somethingin the California Pharmacy Board decision,
501
00:32:59,560 --> 00:33:04,899
that denied Philidor the licenseto operate as a pharmacy.
502
00:33:04,983 --> 00:33:07,944
So right then and thereI know Philidor's a pharmacy.
503
00:33:08,152 --> 00:33:12,949
I call up the California Pharmacy Board
and they tell me,
504
00:33:13,032 --> 00:33:16,244
"Read that decision closely.
We think Philidor's a fraud."
505
00:33:20,289 --> 00:33:22,291
[Hempton]
Roddy was the first person to say
506
00:33:22,375 --> 00:33:26,212
that Philidor was specifically a device
to rip off insurance companies.
507
00:33:26,295 --> 00:33:28,798
On the face of it,
it was just a mail-order pharmacy.
508
00:33:30,133 --> 00:33:32,844
[Boyd]
It's designed to be kind of user-friendly.
509
00:33:32,927 --> 00:33:37,265
Low co-pays, three months' supplyon your doorstep the next day.
510
00:33:37,348 --> 00:33:40,143
The patient doesn't have to goto CVS or Walgreens,
511
00:33:40,226 --> 00:33:43,688
but the prices are incredibly high.
512
00:33:43,771 --> 00:33:48,026
I mean, they're charging
hundreds of dollars for Retin-A.
513
00:33:48,109 --> 00:33:51,571
Clearer skin in two weeks?
It's possible with Retin-A Micro...
514
00:33:51,654 --> 00:33:54,282
[Boyd] This is the economic engine of Valeant.
515
00:33:54,365 --> 00:33:59,871
[man] Toe nail fungus? Don't hide it!
Tackle it with new FDA-approved Jublia!
516
00:33:59,954 --> 00:34:01,539
[Boyd] Jublia, foot fungus cream,
517
00:34:01,622 --> 00:34:04,292
that if you actually look into it,often doesn't work.
518
00:34:04,375 --> 00:34:07,462
Almost $1,000 per.
I mean, it's incredible.
519
00:34:07,545 --> 00:34:10,381
This would have been found out
by the customer straight away
520
00:34:10,465 --> 00:34:13,301
if they were asked to pay $1,000
for their vitamin A cream,
521
00:34:13,384 --> 00:34:16,637
but that money was stuck
to the insurance companies.
522
00:34:17,430 --> 00:34:21,434
Thousands of scripts for expensive drugswere coming from Philidor.
523
00:34:22,685 --> 00:34:25,021
But the insurance companiesstarted getting wise
524
00:34:25,104 --> 00:34:28,649
and they started rejecting moreof the scripts that came from Philidor.
525
00:34:28,733 --> 00:34:32,695
So, Philidor would buya suburban pharmacy.
526
00:34:32,779 --> 00:34:37,116
And then they would pretend thatthe script came through that pharmacy.
527
00:34:37,200 --> 00:34:41,245
But the problem is, you can't buy enoughsuburban pharmacies
528
00:34:41,329 --> 00:34:43,664
to deceive the insurance companies.
529
00:34:43,748 --> 00:34:47,460
So, maybe you could start inventing
fake suburban pharmacies,
530
00:34:47,543 --> 00:34:51,089
and I guess you can invent as many fake
suburban pharmacies as you want.
531
00:34:52,715 --> 00:34:57,011
In Delaware, 70 different pharmacieswere registered by the same lawyer.
532
00:35:03,434 --> 00:35:07,605
My staff member goes down them and says,"Isn't that a character from The Shining?"
533
00:35:09,148 --> 00:35:11,984
Mr. Hallorann?
Are you scared of this place?
534
00:35:14,112 --> 00:35:17,281
No, scared of nothin' here.
535
00:35:18,366 --> 00:35:19,325
It's just that,
536
00:35:20,618 --> 00:35:23,079
you know, some places are like people.
537
00:35:24,288 --> 00:35:27,416
Some shine, and some don't.
538
00:35:28,793 --> 00:35:31,337
I guess you could say
the Overlook Hotel here
539
00:35:31,420 --> 00:35:33,923
has something almost like shining.
540
00:35:37,093 --> 00:35:38,594
Hello, Danny.
541
00:35:40,555 --> 00:35:42,306
They're Stephen King novels.
542
00:35:46,310 --> 00:35:51,107
[Boyd] I had to connect, inarguably,Valeant and Philidor.
543
00:35:51,482 --> 00:35:54,735
Because Philidor was an actual,
literal smoking gun.
544
00:35:56,946 --> 00:35:59,031
So, what is a Philidor?
545
00:35:59,532 --> 00:36:00,950
It's a chess reference.
546
00:36:02,368 --> 00:36:06,080
It's a reference to a famousFrench chess player
547
00:36:06,164 --> 00:36:08,833
of the, uh, 18th and 19th centuries.
548
00:36:10,126 --> 00:36:14,130
I started throwing other chess termsinto search engines
549
00:36:14,213 --> 00:36:17,800
and I came up with onethat connected into Valeant
550
00:36:17,884 --> 00:36:20,344
and that was King's Gambit Accepted.
551
00:36:22,471 --> 00:36:26,309
King's Gambit Accepted
in chess speak is KGA.
552
00:36:28,269 --> 00:36:31,814
Buried in Valeant's 2014 annual report,
553
00:36:31,898 --> 00:36:35,818
KGA was disclosedas being owned by Valeant.
554
00:36:39,280 --> 00:36:46,204
Eventually, I found one state that had KGAas the owner of Philidor.
555
00:36:57,340 --> 00:36:59,759
At that moment, I knew I had solved it.
556
00:37:05,890 --> 00:37:08,643
[Hempton] Roddy Boyd worked outwhat Philidor did.
557
00:37:09,977 --> 00:37:12,605
Then, Roddy Boyd found R&O,
558
00:37:12,688 --> 00:37:15,524
which was a suburban pharmacyin California they had bought
559
00:37:15,608 --> 00:37:17,818
in order to hide scripts.
560
00:37:21,989 --> 00:37:25,660
[Boyd] I believe that Philidorwas getting around the fact
561
00:37:25,743 --> 00:37:29,455
that they were denieda California State Pharmacy Board license.
562
00:37:29,956 --> 00:37:35,086
They were pulling out all the stops
to lie to people, to cover it all up.
563
00:37:39,131 --> 00:37:41,175
R&O Pharmacy was a cutout.
564
00:38:01,070 --> 00:38:04,949
One day, R&O Pharmacy gets a demand letter
565
00:38:05,032 --> 00:38:09,704
for almost $70 millionfrom a guy named Robert Chai-Onn,
566
00:38:09,787 --> 00:38:13,332
who was general counselof Valeant Pharmaceuticals International.
567
00:38:15,334 --> 00:38:17,211
I mean, Valeant made a big mistake here.
568
00:38:17,295 --> 00:38:21,757
Valeant set the trap itself
when it had sent the letter to R&O,
569
00:38:21,841 --> 00:38:24,051
because that opened up the Pandora's Box.
570
00:38:24,135 --> 00:38:28,514
I'd found enough cockroaches
and then when I didn't understand this,
571
00:38:28,597 --> 00:38:30,683
I would assume that there was
another cockroach behind
572
00:38:30,766 --> 00:38:31,892
and mostly there was.
573
00:38:31,976 --> 00:38:34,854
It's just that Philidor was a rather big
cockroach to find. [chuckles]
574
00:38:34,937 --> 00:38:37,732
John Hempton,
along with this other band of skeptics,
575
00:38:37,815 --> 00:38:41,736
had been doing a lot of work into Philidor
and he knew it was about to come out
576
00:38:41,819 --> 00:38:44,405
and so he sent Bill Ackman
just a one-word note.
577
00:38:44,488 --> 00:38:46,407
It was exactly the line from The Graduate.
578
00:38:48,326 --> 00:38:52,621
I just want to say one word to you.
Just one word.
579
00:38:52,705 --> 00:38:54,081
"Are you listening?"
580
00:38:54,165 --> 00:38:55,624
-Are you listening?
-Yes, I am.
581
00:38:56,208 --> 00:38:57,168
Philidor.
582
00:38:59,545 --> 00:39:02,381
[Boyd] When Bill Ackmaninitially bought his huge stake,
583
00:39:02,465 --> 00:39:05,217
Philidor probably wasn't apparent to him.
584
00:39:05,301 --> 00:39:07,887
But his staff had been through Philidor.
585
00:39:07,970 --> 00:39:11,557
He could get material non-publicinformation on Valeant.
586
00:39:11,640 --> 00:39:14,393
He had been legally an insider
in the company.
587
00:39:16,562 --> 00:39:21,192
[Hempton] The truth is usuallya simple story and it's not hidden.
588
00:39:21,692 --> 00:39:27,365
But lies are well hiddenand this one had lots and lots of lies.
589
00:39:28,449 --> 00:39:29,909
They didn't have enough cash,
590
00:39:29,992 --> 00:39:33,120
so they invented Philidorso that they'd get more cash.
591
00:39:33,204 --> 00:39:35,164
And they bought this Syprine drug,
592
00:39:35,247 --> 00:39:37,083
which they started ripping off people
593
00:39:37,166 --> 00:39:39,210
to the tuneof a quarter of a billion dollars
594
00:39:39,293 --> 00:39:41,128
by holding a gun at their head.
595
00:39:42,338 --> 00:39:44,924
Revenue was going... [whistles] Right.
596
00:39:45,007 --> 00:39:46,842
The formula looked like it worked.
597
00:40:05,820 --> 00:40:09,657
Every quarter,
you go to the investors section.
598
00:40:12,034 --> 00:40:14,495
And most of the good stuff
is in the footnotes.
599
00:40:15,871 --> 00:40:18,082
So, here, it's a perfect example.
600
00:40:18,165 --> 00:40:21,961
They said they had higher sales of
orphan products and they cite Syprine.
601
00:40:23,170 --> 00:40:25,464
They didn't have higher sales.
602
00:40:26,590 --> 00:40:29,468
More people didn't get Wilson's disease.
603
00:40:29,844 --> 00:40:31,762
What they did is they raised the price.
604
00:40:33,055 --> 00:40:37,059
Syprine is tough because it has
a really small patient population.
605
00:40:37,977 --> 00:40:43,566
Yet, Valeant somehow figured out how
to turn that into a $300 million drug.
606
00:40:44,233 --> 00:40:49,905
Of which they probably make 250 million
in profit every year.
607
00:40:49,989 --> 00:40:55,244
Valeant was very good at creating
an illusion that they were growing.
608
00:40:55,744 --> 00:41:01,125
And they tried to manipulate the numbers
in a way that may have been legal
609
00:41:01,208 --> 00:41:05,379
but was certainly giving investors
the wrong impression.
610
00:41:13,304 --> 00:41:16,515
[Quadir] When you're a short seller,you want to know what the company is doing
611
00:41:16,599 --> 00:41:18,350
because they're not gonna tell you.
612
00:41:19,018 --> 00:41:20,144
I'm here on the East Coast.
613
00:41:20,227 --> 00:41:22,563
I can go to Pennsylvaniaand New Jersey pretty easily.
614
00:41:23,481 --> 00:41:25,483
So I would kind of do a stakeout.
615
00:41:33,491 --> 00:41:37,745
The way I functionis I do my work in the shadows
616
00:41:37,828 --> 00:41:41,540
and I take my work and send itto the appropriate authorities.
617
00:41:41,957 --> 00:41:45,711
That might mean I send my workto journalists and the mainstream media
618
00:41:45,794 --> 00:41:49,715
or to Valeant's auditors or to the SEC.
619
00:41:52,635 --> 00:41:55,971
I spoke with as many Valeant employeesas I could.
620
00:41:56,055 --> 00:42:00,643
There was a real inflection pointin the morale of Valeant employees.
621
00:42:01,435 --> 00:42:04,230
Fahmi had worked out
vast amounts that I hadn't
622
00:42:04,313 --> 00:42:07,441
and I had worked out
vast amounts that Fahmi hadn't.
623
00:42:07,525 --> 00:42:09,860
And I'm a better accountant than Fahmi,
624
00:42:09,944 --> 00:42:13,280
but Fahmi knows
far, far more about drugs than I do.
625
00:42:13,364 --> 00:42:15,491
Fahmi is a medical specialist.
626
00:42:16,408 --> 00:42:22,414
So, all the bits that I work out about,"Hey, they've raised the price,"
627
00:42:22,498 --> 00:42:25,960
Fahmi would tell me, "Uh, yeah,and it's got seven generic alternatives,
628
00:42:26,043 --> 00:42:28,587
and here's why,and here's why this price is silly,
629
00:42:28,671 --> 00:42:30,839
and this is why
the system's being ripped off."
630
00:42:43,477 --> 00:42:46,021
[Quadir] And this wasthe second short position I ever put on
631
00:42:46,105 --> 00:42:47,773
in my entire career.
632
00:42:47,856 --> 00:42:50,276
It was a huge moment for me,
633
00:42:50,359 --> 00:42:54,488
especially since at the time,
very few people were shorting the stock.
634
00:42:54,572 --> 00:42:58,075
But I, as I had said,
thought it was the perfect moment.
635
00:42:58,158 --> 00:43:01,829
Because I thought the balance sheet
was completely tapped out.
636
00:43:01,912 --> 00:43:04,290
Even though I thought
I got my timing right,
637
00:43:04,373 --> 00:43:11,338
I still went into the summer of 2015
with health care at all-time highs,
638
00:43:11,422 --> 00:43:15,217
and Valeant went
all the way up to $262 a share.
639
00:43:16,176 --> 00:43:21,682
I wasn't too disheartened because I had
other short sellers in my ear saying,
640
00:43:21,765 --> 00:43:24,018
"Fahmi, when things get tough,
641
00:43:24,101 --> 00:43:26,437
you just gotta stick with it
because you've done the work."
642
00:43:26,520 --> 00:43:29,440
So I stuck with it,
and I continued to do my work,
643
00:43:29,523 --> 00:43:31,650
because I was still
at that point in my career
644
00:43:31,734 --> 00:43:35,070
where I had to prove to everyone
that I knew what I was doing.
645
00:43:35,738 --> 00:43:36,572
So...
646
00:43:37,865 --> 00:43:43,829
after that, Hillary Clinton came out
with her tweets about drug pricing.
647
00:43:43,912 --> 00:43:46,498
This is a letter from someone who's here.
648
00:43:46,582 --> 00:43:50,961
She has to take a brand name drug,been taking it since the early 1980s.
649
00:43:51,045 --> 00:43:55,466
At that time, it cost approximately
$180 for ten shots.
650
00:43:55,549 --> 00:44:02,097
The latest refill was $14,700
for the same ten vials.
651
00:44:02,181 --> 00:44:05,601
And the companyis called Valeant Pharmaceuticals.
652
00:44:05,684 --> 00:44:06,977
I'm going after them.
653
00:44:07,061 --> 00:44:11,774
This is predatory pricing and we're going
to make sure it is stopped.
654
00:44:12,775 --> 00:44:15,653
As a short seller,
the key thing is waiting for the catalyst.
655
00:44:15,736 --> 00:44:18,614
At what point do people say,
"Now it matters."
656
00:44:18,697 --> 00:44:21,408
And I think the election
and Shkreli were a turning point.
657
00:44:21,492 --> 00:44:24,495
[Jason Carroll] The drug in question is called Daraprim.
658
00:44:24,578 --> 00:44:26,580
It used to cost $13.50 per pill.
659
00:44:26,664 --> 00:44:30,668
Turing changed the costto a whopping $750.
660
00:44:30,751 --> 00:44:33,712
That's price gouging, pure and simple.
661
00:44:33,796 --> 00:44:38,801
Did you not expect a 5,000% price increase
would result in that kind of attention?
662
00:44:38,884 --> 00:44:42,638
Maybe, maybe not. It depends on how, uh,
focused people want to be on the industry.
663
00:44:42,721 --> 00:44:45,432
There have been
much larger drug price increases
664
00:44:45,516 --> 00:44:46,892
by much bigger drug companies.
665
00:44:46,975 --> 00:44:49,103
Martin Shkreli bought Daraprim
666
00:44:49,186 --> 00:44:53,649
and he stuck a whole lot of cost
to insurance company and HIV patients,
667
00:44:53,732 --> 00:44:56,193
and he got rich. Right?
668
00:44:56,276 --> 00:45:00,572
Valeant didn't just do it with Daraprim,
it did it with about 100 drugs.
669
00:45:00,656 --> 00:45:04,493
The Valeant formula was,
"We'll do it with everything we can."
670
00:45:04,576 --> 00:45:08,914
This was Wall Street at its worst,
funding a drug company at its worst.
671
00:45:08,997 --> 00:45:10,833
When I saw Shkreli in the election,
I'm like,
672
00:45:10,916 --> 00:45:12,751
"It's time to dig deep and hard and fast."
673
00:45:12,835 --> 00:45:14,837
Some breaking news on Valeant.
674
00:45:14,920 --> 00:45:18,090
We had heard earlier how the stock
was tumbling. How's it going so far?
675
00:45:18,173 --> 00:45:20,342
It still remains sharply lower.
676
00:45:20,426 --> 00:45:23,303
On a report coming out
from Citron Research, which asks,
677
00:45:23,387 --> 00:45:27,391
"Could this be the pharmaceutical Enron?"
So quite an inflammatory report.
678
00:45:27,474 --> 00:45:31,478
If you read the story, you'll see
what I'm accusing Valeant of.
679
00:45:31,562 --> 00:45:36,275
[McLean] Andrew Left is this irascible,West Coast guy who weighed in on Valeant,
680
00:45:36,358 --> 00:45:38,277
calling it the Pharmaceutical Enron.
681
00:45:38,360 --> 00:45:41,864
It should be noted
that his financial analysis wasn't right.
682
00:45:41,947 --> 00:45:44,450
He thought that Valeant was using Philidor
683
00:45:44,533 --> 00:45:48,787
to stuff the channel
to create sales that weren't really there
684
00:45:48,871 --> 00:45:50,664
and that's not quite what was happening.
685
00:45:50,747 --> 00:45:53,959
But he was absolutely right
in the cultural comparisons to Enron,
686
00:45:54,042 --> 00:45:58,255
because both companies had this culture
of trying to work the rules,
687
00:45:58,338 --> 00:46:02,092
not paying any attention to the ethics.
688
00:46:02,176 --> 00:46:03,927
Andrew Left's story is wrong.
689
00:46:04,011 --> 00:46:06,388
But the company can't come out
and defend it.
690
00:46:06,472 --> 00:46:08,974
And the reason it can't come out
and defend it is that
691
00:46:09,057 --> 00:46:13,187
if they defend it, they have to state
what's really happening.
692
00:46:13,270 --> 00:46:16,106
And ripping off Wall Street
is sort of one thing.
693
00:46:16,190 --> 00:46:18,025
Ripping off Middle America
is another thing.
694
00:46:18,108 --> 00:46:22,821
Listen, these are allegations, of course,
and often times, you don't wanna be in...
695
00:46:22,905 --> 00:46:25,991
I can't be in a position to tell you
whether they are true or not,
696
00:46:26,074 --> 00:46:28,285
but they are focused
on a drug called Philidor...
697
00:46:28,368 --> 00:46:31,079
[Boyd] The minute attentionwent on Philidor,
698
00:46:31,163 --> 00:46:33,790
Valeant sales started
completely imploding.
699
00:46:33,874 --> 00:46:35,959
Valeant, let's take a little look
at the stock.
700
00:46:36,043 --> 00:46:40,422
But I'm not sure if it's, uh, continued
to move down or stabilized in any way.
701
00:46:40,506 --> 00:46:43,091
Where is it now?
Now it's in a complete free fall...
702
00:46:43,175 --> 00:46:46,803
This is about $18 billion of wealth
that has been destroyed...
703
00:46:46,887 --> 00:46:50,265
It's a snowball that keeps getting bigger
and bigger for Valeant.
704
00:46:50,349 --> 00:46:55,020
The stock has since lost $22 billion,
a fourth of its value,
705
00:46:55,103 --> 00:46:58,524
and whoever owns those
puts basically two million shares...
706
00:47:13,080 --> 00:47:15,749
[Pearson] After we saw the false report for Citron,
707
00:47:15,832 --> 00:47:19,670
we request that the SECinvestigate Mr. Left and Citron.
708
00:47:19,753 --> 00:47:23,840
It's very nice and I feel flattered
that he's made me a poster child.
709
00:47:23,924 --> 00:47:28,136
But, uh,
am I the one who laid off everyone
710
00:47:28,220 --> 00:47:30,514
at the Bausch and Lomb research
and development department,
711
00:47:30,597 --> 00:47:33,225
who's raised the price
of heart medication?
712
00:47:33,308 --> 00:47:37,104
There's reasons why his stock is here
and it's not because of me.
713
00:47:37,187 --> 00:47:40,232
We'll call it what it is,
I'm a market participant.
714
00:47:40,315 --> 00:47:43,360
So, obviously, I was interested
in the stock price of Valeant.
715
00:47:43,443 --> 00:47:46,738
That being said, the outrage was
716
00:47:46,822 --> 00:47:53,203
when you look at Pearson and Ackman
speaking like Valeant's doing God's work.
717
00:47:53,287 --> 00:47:55,038
Then you're like, "Come on."
718
00:47:55,122 --> 00:47:58,792
If we're gonna have a fair dialogue
about this, back and forth,
719
00:47:58,875 --> 00:48:00,752
then let's be honest with one another.
720
00:48:00,836 --> 00:48:02,963
And I think what people
are really wondering about is,
721
00:48:03,046 --> 00:48:05,215
with all of this business with Philidor,
722
00:48:05,299 --> 00:48:08,969
just how much did you know
about what was going on?
723
00:48:09,052 --> 00:48:13,473
Lots of allegations have been made,
but, um, nothing has been proven yet.
724
00:48:13,557 --> 00:48:16,184
And I was unaware
of any of the allegations.
725
00:48:17,394 --> 00:48:18,645
[Pearson over phone] Good morning...
726
00:48:18,729 --> 00:48:21,523
[Hempton] The company came outwith a conference call,
727
00:48:21,607 --> 00:48:25,694
and they were distancing themselves
from Philidor as fast as they can.
728
00:48:26,278 --> 00:48:28,947
[Pearson speaking]
729
00:48:34,745 --> 00:48:38,582
But they did put
$100 million into Philidor.
730
00:48:38,665 --> 00:48:43,003
And the whole board of Valeant
apparently had gone to visit Philidor
731
00:48:43,086 --> 00:48:44,796
before they put the money in.
732
00:48:44,880 --> 00:48:47,341
So it's very hard to distance themselves,
733
00:48:47,424 --> 00:48:49,384
but that was the tone
of the conference call.
734
00:48:49,968 --> 00:48:51,803
[Pearson speaking]
735
00:48:54,806 --> 00:48:57,601
[operator speaking]
736
00:48:58,518 --> 00:49:01,021
One investor told me that he thought,
737
00:49:01,104 --> 00:49:03,982
"They'll have answers
for this on the conference call on Monday.
738
00:49:04,066 --> 00:49:06,610
They'll take the weekend,
they'll have this conference call,
739
00:49:06,693 --> 00:49:08,612
and they'll tell me
everything I need to know."
740
00:49:08,695 --> 00:49:11,406
And when they didn't
and were evasive on the conference call,
741
00:49:11,490 --> 00:49:15,285
and didn't really give answers, he said,
"That's it. I'm selling all my stock."
742
00:49:15,369 --> 00:49:16,828
[music playing]
743
00:49:16,912 --> 00:49:19,956
[Ackman speaking]
744
00:49:22,876 --> 00:49:24,586
Bill Ackman had a conference call,
745
00:49:25,170 --> 00:49:27,714
and it was really clear
from the conference call
746
00:49:27,798 --> 00:49:29,716
that Bill had no idea what Philidor did.
747
00:49:29,800 --> 00:49:32,511
[Ackman speaking]
748
00:49:48,777 --> 00:49:52,739
That was a conference call
that was done a little bit in delusion.
749
00:49:54,074 --> 00:49:55,951
-And the delusion... Oh...
-[Carr] He sounds nervous, right?
750
00:49:56,034 --> 00:49:59,538
Do you remember that?
He was very nervous...
751
00:49:59,621 --> 00:50:02,791
He was nervous, except he bet
another billion dollars on it.
752
00:50:02,874 --> 00:50:05,252
[Ackman speaking]
753
00:50:17,389 --> 00:50:22,644
Bill wrongly or rightly started to see it
as a war of public perception.
754
00:50:22,728 --> 00:50:25,188
And that if he could step in
755
00:50:25,272 --> 00:50:29,651
and answer the questions
that Valeant wasn't answering well,
756
00:50:29,735 --> 00:50:33,071
it would turn the tide on this thing.
757
00:50:33,155 --> 00:50:35,866
I think he didn't realize
that now it had become reality,
758
00:50:35,949 --> 00:50:39,327
it was no longer about perception.
Reality was winning.
759
00:50:39,411 --> 00:50:41,455
[Ackman speaking]
760
00:50:47,169 --> 00:50:48,462
[line disconnects]
761
00:50:49,296 --> 00:50:52,299
There is this one e-mail, um,
from Bill Ackman
762
00:50:52,382 --> 00:50:56,011
to Pearson and others at Valeant, saying...
763
00:50:56,094 --> 00:50:59,055
"When every state trooper follows you,
764
00:50:59,139 --> 00:51:01,975
even if you're not guilty,you'll get charged with something."
765
00:51:07,606 --> 00:51:10,150
[McLean] Just when you thinkthings can't get worse,
766
00:51:10,233 --> 00:51:13,987
the news breaks that Pearson hasto take medical leave from the company.
767
00:51:15,238 --> 00:51:17,240
There is a fair amount of speculation
768
00:51:17,324 --> 00:51:20,619
that his very hard-living lifestylecaught up with him.
769
00:51:20,702 --> 00:51:23,997
But there's no question that he was very, very, very sick.
770
00:51:29,085 --> 00:51:31,671
But even though Pearsonhad led them to this point,
771
00:51:31,755 --> 00:51:35,342
they all seemed to believe he was the only one who could save them.
772
00:51:35,592 --> 00:51:37,594
So back Mike Pearson comes.
773
00:51:42,641 --> 00:51:44,559
[Pearson speaking]
774
00:51:47,312 --> 00:51:50,732
Mike Pearson disappeared from the scene
775
00:51:50,816 --> 00:51:55,362
just as the Philidor thing was getting
to the point of Philidor being one-off,
776
00:51:55,445 --> 00:51:58,740
to Philidor being indicative
of the whole structure.
777
00:51:59,449 --> 00:52:01,284
[Pearson speaking]
778
00:52:07,874 --> 00:52:12,212
With him away for a month and a half,
he couldn't control the narrative anymore.
779
00:52:12,796 --> 00:52:16,216
[Pearson continues speaking]
780
00:52:24,850 --> 00:52:27,727
[investor speaking]
781
00:52:30,480 --> 00:52:31,731
[Pearson speaking]
782
00:52:37,571 --> 00:52:41,157
There was a lot of drama
that came out,
783
00:52:41,241 --> 00:52:44,536
that was leaked to the press,
around Pearson.
784
00:52:44,619 --> 00:52:46,454
Well, what about
the whole Philidor aspect of...
785
00:52:46,538 --> 00:52:48,498
[Quadir] ValueAct was obviously on the board,
786
00:52:48,582 --> 00:52:50,333
so they wanted to keep Pearson around.
787
00:52:50,417 --> 00:52:52,752
Do you think Michael Pearson
is still the guy for this job?
788
00:52:52,836 --> 00:52:56,089
Mike, he's a great problem solver
and we're solving problems as we speak.
789
00:52:56,172 --> 00:52:59,926
Really being as determined
as we can be to solve his problems.
790
00:53:00,010 --> 00:53:02,929
We think Mike
is the right guy for the job now.
791
00:53:03,013 --> 00:53:04,848
-[applause]
-Bill Ackman is here.
792
00:53:04,931 --> 00:53:08,685
[Quadir] But Ackman, who startedto ramp up his activism in Valeant,
793
00:53:08,768 --> 00:53:11,396
did not want Pearson around.
794
00:53:11,479 --> 00:53:12,772
So what did we miss?
795
00:53:12,856 --> 00:53:15,734
We missed that someone
with a superb track record
796
00:53:15,817 --> 00:53:17,819
of making acquisitions
could do something...
797
00:53:17,903 --> 00:53:20,030
Mike Pearson went crazy, in my opinion.
798
00:53:21,156 --> 00:53:22,490
First weekend on the board,
799
00:53:22,574 --> 00:53:25,577
uh, we convinced the rest of the board that Mike had to go.
800
00:53:25,660 --> 00:53:29,956
I was the guy the board asked to call himto tell him he was fired.
801
00:53:32,334 --> 00:53:37,589
[Hempton] Ackman effectivelytook control of the board.
802
00:53:37,672 --> 00:53:39,925
He fired Pearson,
803
00:53:40,008 --> 00:53:43,887
he got people to the boardwho were all friends of his.
804
00:53:43,970 --> 00:53:46,097
Then the stock continued going down.
805
00:53:46,181 --> 00:53:49,392
This whole thing
made a mockery of this idea
806
00:53:49,476 --> 00:53:53,897
that a company with this august hedge fund
on its board was a well-managed company,
807
00:53:53,980 --> 00:53:59,653
because it was all just a complete, um,
swear-word show. [chuckles]
808
00:53:59,736 --> 00:54:00,737
[Carr] You can swear.
809
00:54:00,820 --> 00:54:03,281
It was all a complete shitshow.
It really was.
810
00:54:03,365 --> 00:54:08,078
It was just a disastrous, uh, couple
of weeks that have to go down in history
811
00:54:08,161 --> 00:54:12,540
as the worst crisis management ever.
812
00:54:16,878 --> 00:54:19,297
[Quadir] Mike Pearson wentfrom being a billionaire on paper
813
00:54:19,381 --> 00:54:22,550
because of the work he did at Valeantand the deals he made,
814
00:54:22,634 --> 00:54:24,552
to being a potential criminal
815
00:54:24,636 --> 00:54:27,639
and being investigatedon some very serious claims.
816
00:54:27,722 --> 00:54:31,643
So I can't imaginewhat goes on in his mind.
817
00:54:33,311 --> 00:54:35,939
[Carr] What would you say to Mike
if he were sitting here?
818
00:54:36,523 --> 00:54:37,691
Good luck.
819
00:54:42,320 --> 00:54:43,279
[gavel banging]
820
00:54:43,363 --> 00:54:47,450
[Susan Collins] The hearing will
come to order. Senator McCaskill.
821
00:54:47,534 --> 00:54:53,123
Thank you. According
to your SEC filings, Mr. Pearson,
822
00:54:53,206 --> 00:55:00,171
beginning in first quarter of 2013
through the third quarter of 2015,
823
00:55:00,880 --> 00:55:04,926
you state in your filings
that your revenue,
824
00:55:05,010 --> 00:55:09,681
changes in revenue have been driven
primarily by price.
825
00:55:10,223 --> 00:55:13,977
Um, yes, uh, pricing has driven
more growth than volume,
826
00:55:14,060 --> 00:55:16,229
although that is changing over time.
827
00:55:16,313 --> 00:55:19,399
The average price of your top 30 products
828
00:55:19,482 --> 00:55:23,570
is up 78% over last year.
829
00:55:25,864 --> 00:55:31,328
Now, you can't attribute that to R&D
'cause you don't spend that much on R&D.
830
00:55:31,411 --> 00:55:35,957
Uh, we spend 8% of our pharmaceutical
revenue on R&D.
831
00:55:36,041 --> 00:55:38,626
Whoa. Mr. Schiller, didn't you agree
in the hearing in the House
832
00:55:38,710 --> 00:55:40,712
it was actually 3%?
833
00:55:40,795 --> 00:55:42,839
Do I need to pull that testimony out?
834
00:55:43,590 --> 00:55:46,926
[clears throat] My recollection was I said
it's 3% of total revenue.
835
00:55:47,010 --> 00:55:49,637
Right. This is the business model.
836
00:55:49,721 --> 00:55:54,726
This was not, um, researchers
or scientists or academicians
837
00:55:54,809 --> 00:55:57,103
that were trying to buy
a pharmaceutical company
838
00:55:57,187 --> 00:55:59,272
in order to promote new drugs.
839
00:55:59,355 --> 00:56:01,399
This was purely a hedge fund move.
840
00:56:01,483 --> 00:56:04,319
You can create as much value acquiring
841
00:56:05,195 --> 00:56:09,074
small, fast-growing companies
that develop drugs
842
00:56:09,157 --> 00:56:11,910
as you can by developing them yourselves.
843
00:56:11,993 --> 00:56:14,871
-But doesn't that require price increases?
-[Ackman] No.
844
00:56:14,954 --> 00:56:18,124
Wait a minute. You're telling me
you're gonna go buy a company
845
00:56:18,208 --> 00:56:20,377
-that's selling a drug for price X.
-[Ackman] Right.
846
00:56:20,460 --> 00:56:24,089
And you're gonna give them a price for
their company and, therefore, that drug.
847
00:56:24,172 --> 00:56:27,467
-[Ackman] Correct.
-And that's gonna be a profit for them?
848
00:56:27,550 --> 00:56:29,260
-[Ackman] Very much so, yes.
-Yeah.
849
00:56:29,344 --> 00:56:32,389
And then you're gonna take that drug
and charge the same price
850
00:56:32,472 --> 00:56:36,059
after you have put your capital
and given them a profit?
851
00:56:36,142 --> 00:56:38,603
-Don't you have to raise the price?
-No, I think--
852
00:56:38,686 --> 00:56:41,731
Can you find me one drug
that Valeant didn't raise the price on?
853
00:56:41,815 --> 00:56:44,234
I don't know off-hand.
[stammers] I don't have the price list.
854
00:56:44,317 --> 00:56:45,944
Mr. Pearson? One drug.
855
00:56:47,487 --> 00:56:49,781
That you didn't raise the price on
after you acquired it?
856
00:56:49,864 --> 00:56:51,199
[Pearson] Not in the United States.
857
00:56:51,282 --> 00:56:54,160
They found a drug that had a monopoly.
858
00:56:54,702 --> 00:56:59,874
They bought the company,
stripped out all the R&D in the company.
859
00:57:00,500 --> 00:57:03,002
Made no changes to the drug,
860
00:57:03,086 --> 00:57:08,133
and then jacked the price
up 300, 400, 500, 700%.
861
00:57:08,216 --> 00:57:11,302
And the American people
were left holding the bag.
862
00:57:12,220 --> 00:57:15,932
[stammers] Mr. Ackman, Exhibit Number 81
863
00:57:16,015 --> 00:57:22,439
is an e-mail you received in January 2015
from a man by the name of Drew Katz.
864
00:57:24,691 --> 00:57:26,443
He had Wilson's disease.
865
00:57:29,279 --> 00:57:32,115
I first was diagnosed
in the very early '80s.
866
00:57:33,658 --> 00:57:38,204
I'm a lucky one.I'll have my medicine one way or another.
867
00:57:41,458 --> 00:57:45,295
When you invest in a hedge fund,
you're investing in managers
868
00:57:45,378 --> 00:57:48,089
and the managers are then
going to invest your money.
869
00:57:48,173 --> 00:57:52,844
Once it was disclosed
what, uh, the hedge fund owned
870
00:57:52,927 --> 00:57:57,140
and I saw that it owned
a lot of Valeant Pharmaceuticals,
871
00:57:59,142 --> 00:58:04,189
it was really, um, challenging.
872
00:58:04,606 --> 00:58:06,149
It was very challenging for me.
873
00:58:06,232 --> 00:58:08,067
-He had contacted you...
-[Ackman] Yes.
874
00:58:08,151 --> 00:58:10,445
...about the incredible problem
875
00:58:10,528 --> 00:58:14,741
and the fact that death could result
if people couldn't get this drug.
876
00:58:14,824 --> 00:58:15,658
[Ackman] Absolutely.
877
00:58:15,742 --> 00:58:17,827
-And the incredible increase in price.
-Yes.
878
00:58:17,911 --> 00:58:21,122
-You called Mr. Pearson.
-I sent him an e-mail.
879
00:58:21,206 --> 00:58:23,041
My understanding
from you talking with the committee
880
00:58:23,124 --> 00:58:26,503
is that he assured you that
anybody who needed help could get it.
881
00:58:26,586 --> 00:58:29,923
Did you follow up to see what they
had done about the price of this drug?
882
00:58:30,006 --> 00:58:31,674
No, I took him at his word.
883
00:58:31,758 --> 00:58:35,053
[stammers] We have invested,
and for many years
884
00:58:35,136 --> 00:58:37,305
since I joined the company,
885
00:58:37,388 --> 00:58:42,685
uh, heavily in patient assistance programs
so we follow up patient by patient.
886
00:58:42,769 --> 00:58:46,648
Their PR that
they had patient assistance programs
887
00:58:46,731 --> 00:58:50,735
and it was really helping families
that couldn't afford the drug,
888
00:58:50,818 --> 00:58:52,779
we certainly heard testimony
from people that said
889
00:58:52,862 --> 00:58:54,531
that couldn't be further from the truth.
890
00:58:56,908 --> 00:58:59,786
[John] Whenever you see a big increase in a drug,
891
00:58:59,869 --> 00:59:02,413
what the drug company will do is they'll come out and say,
892
00:59:02,497 --> 00:59:04,499
"If you can't afford it, it's free."
893
00:59:04,958 --> 00:59:08,419
All they're doing
is trying to keep the patients quiet
894
00:59:09,087 --> 00:59:11,881
so the insurer will pay the whole bill.
895
00:59:12,715 --> 00:59:14,551
But that's not how that works.
896
00:59:14,634 --> 00:59:18,471
All insurance is pooled money.
Everyone pays for this.
897
00:59:18,555 --> 00:59:22,934
That is why our insurance is so expensive.
Those costs get passed on to us.
898
00:59:23,017 --> 00:59:25,812
This is a cost that's being spread to you.
899
00:59:25,895 --> 00:59:30,692
This is why health care, generally,
is so damn expensive.
900
00:59:45,456 --> 00:59:48,376
Valeant became
one of the most egregious examples,
901
00:59:48,459 --> 00:59:49,502
but they're far from alone.
902
00:59:49,586 --> 00:59:51,879
Huge price hikes
over the past five years...
903
00:59:51,963 --> 00:59:54,924
[McLean] Other companies were set upprecisely to do the same thing.
904
00:59:55,008 --> 00:59:56,843
[Norah O'Donnell] The price of insulin
more than tripled
905
00:59:56,926 --> 00:59:58,636
to more than $700 per patient...
906
00:59:58,720 --> 01:00:00,305
[Anne Thompson]
Fifteen new cancer drugs
907
01:00:00,388 --> 01:00:02,557
that cost more than $10,000 a month...
908
01:00:02,640 --> 01:00:07,270
[reporter] EpiPen prices areincreasing by 400% since 2008.
909
01:00:07,353 --> 01:00:11,524
All of biopharma's earnings growth
last year came from drug price increases.
910
01:00:12,567 --> 01:00:15,445
I texted our board chair
while I was listening to the hearing
911
01:00:15,528 --> 01:00:16,738
and suggested we have
a board call tomorrow
912
01:00:16,821 --> 01:00:20,241
to discuss, uh, the drugs
that are the subject of today's hearing.
913
01:00:20,325 --> 01:00:24,120
And my recommendation is gonna be
to reduce the prices of those drugs.
914
01:00:24,787 --> 01:00:27,790
I'm sitting in my office,
watching it on a web stream,
915
01:00:28,166 --> 01:00:30,710
and you see Ackman say,
"That's it, we surrender.
916
01:00:31,544 --> 01:00:34,088
I'm texting the board,
we're lowering the prices."
917
01:00:35,757 --> 01:00:36,591
And a giant...
918
01:00:37,675 --> 01:00:41,387
You kind of exhale, and say,
"That's it, we won! It's over."
919
01:00:43,556 --> 01:00:45,475
A year later, nothing's changed.
920
01:00:49,479 --> 01:00:51,773
We've been successful, had some good articles written.
921
01:00:51,856 --> 01:00:54,901
We did try to shame 'em. I thought that would do it.
922
01:00:57,111 --> 01:01:01,074
And sometimes you say to yourself, "Why fight this fight?"
923
01:01:01,157 --> 01:01:03,076
And I think about my daughters.
924
01:01:03,159 --> 01:01:08,247
What if they had lost the genetic lottery?
What if they had this disease?
925
01:01:08,331 --> 01:01:14,295
What if they had
this $300,000-a-year drug bill
926
01:01:14,379 --> 01:01:18,424
hanging around their neck
for the rest of their life like a stone?
927
01:01:19,384 --> 01:01:22,679
Their lives would be destroyed.
It'd be terrible.
928
01:01:22,762 --> 01:01:25,056
And it's not just my kids,
it's everybody's kids.
929
01:01:25,139 --> 01:01:27,850
My children would be disappointed
if I stopped fighting.
930
01:01:27,934 --> 01:01:29,602
They wouldn't know who I was.
931
01:01:35,400 --> 01:01:37,568
[McLean] The great tragic irony is that
932
01:01:37,652 --> 01:01:40,780
their victims are now the oneshelping to keep the company afloat.
933
01:01:40,863 --> 01:01:43,116
Valeant can't afford
to reduce their profits
934
01:01:43,199 --> 01:01:45,535
by reducing the cost of these drugs.
935
01:01:48,079 --> 01:01:49,539
[Hempton] Valeant told Congress
936
01:01:49,622 --> 01:01:52,291
that they were going to lower the price of these drugs.
937
01:01:52,375 --> 01:01:53,876
And then they didn't do it.
938
01:01:54,544 --> 01:01:59,465
If they dropped the price of the drugs,
they will not be able to pay their debt.
939
01:02:00,383 --> 01:02:04,804
Right, so Valeant's still in the business
of ripping people off to this day.
940
01:02:08,349 --> 01:02:10,435
[Carr] And now where is it at today?
941
01:02:10,518 --> 01:02:14,731
So today, it is at $16 and change.
942
01:02:15,940 --> 01:02:19,402
And when investors ask me
why I'm not taking profits,
943
01:02:19,485 --> 01:02:22,488
I say there is still
another 16 bucks to go.
944
01:02:25,533 --> 01:02:30,455
We've taken seriously the requests
and the inquiries from this committee.
945
01:02:30,538 --> 01:02:34,959
And we have, uh, dramatically, um, taken
946
01:02:35,042 --> 01:02:38,004
a much more conservative approach
to pricing,
947
01:02:38,087 --> 01:02:40,673
and I think that we're the lowest
in the industry now
948
01:02:40,757 --> 01:02:42,633
over that time period in terms of pricing.
949
01:02:42,717 --> 01:02:44,218
So we certainly have listened.
950
01:02:44,719 --> 01:02:48,014
If you are an industry leader
in this area,
951
01:02:48,097 --> 01:02:51,058
we'll need to have a lot more
hearings with a lot more drug companies.
952
01:02:52,643 --> 01:02:53,853
[John] Mike Pearson...
953
01:02:53,936 --> 01:02:56,105
I never really thought about him on a personal level.
954
01:02:56,189 --> 01:02:59,400
I just think he was a bad actor,
955
01:02:59,484 --> 01:03:02,820
operating in an environment
where there was no rules to stop him.
956
01:03:02,904 --> 01:03:05,239
So he was just a pirate.
957
01:03:05,323 --> 01:03:07,825
I just look at him and I see a pirate.
I don't see anything else.
958
01:03:07,909 --> 01:03:10,536
Clearly, there were things I did
not understand about the business
959
01:03:10,620 --> 01:03:14,499
and this was a failure of due diligence
on my part, for sure.
960
01:03:16,417 --> 01:03:18,711
[McLean] This is the good side of Bill Ackman.
961
01:03:18,795 --> 01:03:22,131
I think he felt that he had a responsibility to fix it.
962
01:03:22,215 --> 01:03:25,384
Now, perhaps you might say
there is still a lot of arrogance at work
963
01:03:25,468 --> 01:03:26,636
in the belief that he could fix it.
964
01:03:28,763 --> 01:03:30,890
To me, the scariest thingabout the Valeant story
965
01:03:30,973 --> 01:03:34,227
is this divergence betweenwhat's good for investors
966
01:03:34,310 --> 01:03:36,896
and what's good for people in society.
967
01:03:37,480 --> 01:03:40,733
And, in this story,
they were two different things
968
01:03:40,817 --> 01:03:41,859
and that didn't matter.
969
01:03:41,943 --> 01:03:43,402
Thank all of you for being here today,
970
01:03:43,486 --> 01:03:46,531
and, um, we are glad, Mr. Pearson,
you're feeling better.
971
01:03:46,614 --> 01:03:48,533
Thank you very much.
972
01:03:48,616 --> 01:03:51,828
[Carr] How much of what Valeant was doingand taking part in what we discussed,
973
01:03:51,911 --> 01:03:54,914
how much of it was legal versus illegal?
974
01:03:54,997 --> 01:03:58,668
I think we didn't find anything
they were doing that was illegal.
975
01:03:58,918 --> 01:04:01,504
And that's the thing
that's startling about this.
976
01:04:01,587 --> 01:04:02,922
-["Lie, Cheat, Steal" playing]
-♪ Authorities have spoken ♪
977
01:04:03,005 --> 01:04:04,507
♪ Demanded your pure devotion ♪
978
01:04:04,590 --> 01:04:07,385
♪ Get magnetized to the groundWhile the falcons of murder close in ♪
979
01:04:07,468 --> 01:04:10,429
♪ I chose to go guanoY'all know, kinda bat shit ♪
980
01:04:10,513 --> 01:04:13,266
♪ The bright lights of fuckeryStuck in me automatic ♪
981
01:04:13,432 --> 01:04:15,852
♪ I’ll teabag a piranha tankHeart barely beatin' ♪
982
01:04:15,935 --> 01:04:18,896
♪ A wild one who’ll swim likeDirectly after he's eaten ♪
983
01:04:18,980 --> 01:04:21,649
♪ While holding a toaster ovenThat's plugged with a fork in it ♪
984
01:04:21,732 --> 01:04:24,777
♪ 'Cause death by electrocution'sLike life in New York, isn't it? ♪
985
01:04:24,861 --> 01:04:27,780
♪ Jewel runner bitch make the name stickNot for sale but I'm takin' payments ♪
986
01:04:27,864 --> 01:04:33,578
♪ Lie, cheat, steal, kill, win, winEverybody doin’ it ♪
987
01:04:33,661 --> 01:04:36,789
♪ Lie, cheat, steal, kill, win ♪
988
01:04:39,041 --> 01:04:40,293
♪ Like who really run this? ♪
989
01:04:40,376 --> 01:04:42,295
♪ Like who really runThat man that say he run this? ♪
990
01:04:42,378 --> 01:04:45,131
♪ Who, who really runThat man that say he run this? ♪
991
01:04:45,214 --> 01:04:46,257
♪ Like who really fund this? ♪
992
01:04:46,340 --> 01:04:48,050
♪ Like who really fundWho say he fund this? ♪
993
01:04:48,134 --> 01:04:49,844
♪ Like who in the world Gon' tell Donald Sterl ♪
994
01:04:49,927 --> 01:04:50,970
♪ Who to putOn the “you can’t come” list? ♪
995
01:04:51,053 --> 01:04:56,601
♪ Lie, cheat, steal, kill, win, winEverybody doin’ it ♪
996
01:04:56,684 --> 01:05:02,440
♪ Lie, cheat, steal, kill, win, winEverybody doin’ it ♪
997
01:05:02,523 --> 01:05:08,279
♪ Lie, cheat, steal, kill, win, winEverybody doin’ it ♪
998
01:05:08,362 --> 01:05:11,908
♪ Lie, cheat, steal, kill, win ♪
999
01:05:18,414 --> 01:05:19,874
♪ Everybody doin’ it ♪
1000
01:05:24,170 --> 01:05:26,339
♪ Everybody doin’ itDoin' it ♪
1001
01:05:29,967 --> 01:05:31,969
♪ Everybody doin’ it ♪
93651
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