Bausch Health Companies Inc (BHC)

[seasonedwell]

Thursday, November 26, 2015
Philidor 2.0: Valeant and Stephen King play Chess with a lot of pharmacies
Valeant (VRX:NYSE) has managed the improbable.

It sells

(a). Generic drugs often with close substitutes,

(b). It has raised their prices sometimes to absurd levels ($1000 acne antibiotics with full generic substitutes is an example)

(c). It claims to raise volumes of these products.

I call this the improbable trio. It seems improbable that a company could do this. Not impossible, just improbable.

The trick it appears is reliance on non-traditional distribution models.

The size of non-traditional channels

Valeant's non-traditional channels are very large. During the dispute between Allergan and Valeant Allergan noted that the IMS sales data for Valeant products was crappy.

Valeant responded that IMS data was unreliable for Valeant. To quote:

U.S. IMS data will cover less than 30% of Valeant’s business and, for that portion of Valeant’s business IMS covers, the IMS data will not properly collect sales through a numbers of channels (e.g., specialty pharmacy, physician dispensed sales, corporate accounts, and alternative fulfillment).


The non-traditional distribution methods are hugely important in Valeant.

The Philidor allegation

The Philidor allegation is that Valeant [through undisclosed proxies] established or owned pharmacies (such as R&O in California) and used their pharmacy numbers to deceive insurance companies into believing that scripts for expensive drugs with generic substitutes were being presented at smaller suburban pharmacies rather than at a Valeant captive pharmacy.

Bloomberg has reported for instance that Philidor staff routinely wrote "dispense as written" on scripts to prevent generic substitution. [This is fraud.]

If however they put all those scripts through one Valeant associated pharmacy the insurance companies would wise up.

So they put the scripts through multiple pharmacies - deceiving the insurance companies into not checking for the fraud.

How many pharmacies?

One of the games we have been playing is spot-the-Valeant proxy pharmacy.

We know pharmacies outside the Philidor web: the proxy captive pharmacies extend beyond Philidor.

But the scale of Philidor problems is not widely understood and has not been disclosed to the market. I doubt Mr Ackman would have adopted his Martingale strategy had he fully understood.

So lets start.

All these pharmacies were registered in Delaware. Many are named after chess terms (as are many previously disclosed Philidor entities) but we are also noting a distinct Stephen King theme.

This should keep the fraud investigators for various insurance companies busy. I suspect this will also get added to the list of things Congress is investigating.

Entity State Entity ID Registered Agent Notes
Fifty Moves, LLC DE 5640758 Corporation Service Company Chess term: Fifty Move Rule
ELO Pharmacy, LLC DE 5762328 Corporation Trust Company Chess term: ELO ranking system
C-K Pharmacies, LLC DE 5762330 Corporation Trust Company Chess term: The Caro-Kahn defence
Tarrasch Pharmacy Holdings, LLC DE 5762881 Corporation Trust Company Chess term: Tarrasch was a great player
NC3 Pharmacy, LLC DE 5770687 Corporation Service Company Chess term: The rarely used Dunst Opening
Lasker Pharmacies, LLC DE 5770702 Corporation Service Company Chess term: After the great player and theorist Emmanuel Lasker.
B&W Pharmacies, LLC DE 5770706 Corporation Service Company Black and White: the usual colours of chess pieces.
NC3 Pharmacy Holdings, LLC DE 5770708 Corporation Service Company Another Dunst Opening reference
Knight & Knight Pharmacies, LLC DE 5770718 Corporation Service Company Chess Knights I presume.
First Rank Pharmacies, LLC DE 5770741 Corporation Service Company Another entity is called "Back Rank: another chess term.
Forsta, LLC DE 5774549 A Registered Agent, Inc. Entity by same name sought wholesale pharmacy registration in AZ with Gary Tanner (Owner) and Jacob Power (Pharmacist-in-Charge), both ex-Philidor/VRX
Charmberlain Pharmacy, LLC DE 5775980 Corporation Service Company Named for a favourite Stephen King location...
Mears Pharmacy, LLC DE 5775991 Corporation Service Company Named for a repeated Stephen King character...
Marsten House Pharmacy, LLC DE 5775997 Corporation Service Company Named for a key location in Salem's Lot. Notably a symbol of evil.
Torrance Pharmacy, LLC DE 5776000 Corporation Service Company Named for key characters in The Shining.
Overlook Pharmacy, LLC DE 5776004 Corporation Service Company The Hotel in The Shining.
Topiary Pharmacy, LLC DE 5776008 Corporation Service Company Topiary animals in The Shining.
Hallorann Pharmacy, LLC DE 5776022 Corporation Service Company Named for the chef at the Overlook Hotel in The Shining.
Decker Pharmacy, LLC DE 5776025 Corporation Service Company Possibly named for another Stephen King character...
Twinner's Pharmacy, LLC DE 5776026 Corporation Service Company Named for Stephen King's repeated doppleganger meme.
Parkus Pharmacy, LLC DE 5776027 Corporation Service Company A Stephen King character in The Talisman.
Halleck's Pharmacy, LLC DE 5776029 Corporation Service Company Named for another major Stephen King Character.
Flagg Pharmacy, LLC DE 5776032 Corporation Service Company Randall Flagg is a major Stephen King Character
Derry Pharmacy, LLC DE 5776033 Derry is a repeated location in Stephen King novels.
Pennywise Pharmacy, LLC DE 5776037 Corporation Service Company Pennywise the Clown is a recurring Stephen King character.
Plymouth Pharmacy, LLC DE 5776038 Corporation Service Company The iconic Stephen King car in The Shining and others was a Plymouth.
Hanscom Pharmacy, LLC DE 5776039 Corporation Service Company From Ben Hanscom, a Stephen King character
Trips Pharmacy, LLC DE 5776042 Corporation Service Company From Captain Trips, a virus that exterminates most the human population in The Stand, a Stephen King novel.
Delain Pharmacy, LLC DE 5776044 Corporation Service Company From Delain, a mythical Stephen King domain.
Creed Pharmacy, LLC DE 5776045 Corporation Service Company From Louis Creed, the main character in a Stephen King novel.
Odetta Pharmacy, LLC DE 5776046 Corporation Service Company From Odetta Holmes, a recurring Stephen King character
Hemingford Pharmacy, LLC DE 5776047 Corporation Service Company From Hemingford Home, a Stephen King location.
Ludlow Pharmacy, LLC DE 5776048 Corporation Service Company From Ludlow Maine, a Stephen King location.
Crandall Pharmacy, LLC DE 5776050 Corporation Service Company From Jud Crandall, a Stephen King character.
Sheldon Pharmacy, LLC DE 5776053 Corporation Service Company From Paul Sheldon, a major Stephen King character.
Freemantle Pharmacy, LLC DE 5776054 Corporation Service Company From Abagail Freemantle, a major Stephen King character.
Revlowe Pharmacy, LLC DE 5776055 Corporation Service Company Presumably from the Reverend Lowe in the Cycle of the Werewolf.
French Landing Pharmacy, LLC DE 5776058 Corporation Service Company The location in Black House, a Stephen King novel.
Wilkes Pharmacy, LLC DE 5776059 Corporation Service Company From Annie Wilkes, a Stephen King character.
Henreid Pharmacy, LLC DE 5776060 Corporation Service Company Possibly from Lloyd Henreid, a minor Stephen King character.
Beaumont Pharmacy, LLC DE 5776062 Corporation Service Company From Thaddeus Beaumont, another Stephen King character.
Sawyer's Pharmacy, LLC DE 5776064 Corporation Service Company From Jack Sawyer, another Stephen King character.
DH Stark Pharmacy, LLC DE 5776065 Corporation Service Company Possibly short for Dark Half from the novel of the same title. George Stark is the major character.
Shardik Pharmacy, LLC DE 5776066 Corporation Service Company Shardik is one of the twelve guardians of the Beams that hold up the Dark Tower (again a Stephen King reference).
TCM Pharmacy, LLC DE 5776067 Corporation Service Company We are fairly sure this is associated - but have not worked out the link.
Burlingame Pharmacy, LLC DE 5776070 Corporation Service Company Jessie Burlingame is a major Stephen King character.
Lauder & Cross Pharmacy, LLC DE 5776071 Corporation Service Company Try these names...
http://stephenking.wikia.com/wiki/Harold_Lauder and http://stephenking.wikia.com/wiki/Nadine_Cross
Claiborne Pharmacy, LLC DE 5776072 Corporation Service Company Dolores Claiborne is a Stephen King novel.
Edgecombe Pharmacy, LLC DE 5776073 Corporation Service Company From Paul Edgecombe, who used to run Death Row in a Stephen King novel.
Georgia Pines Pharmacy, LLC DE 5776074 Corporation Service Company Georgia Pines is a retirement home in Stephen King novels.
Garraty Pharmacy, LLC DE 5776075 Corporation Service Company From Ray Garraty, another Stephen King character.
Cold Mountain Pharmacy, LLC DE 5776076 Corporation Service Company The Cold Mountain Penitentiary is where Paul Edgecomb ran death row.
Coffey's Pharmacy, LLC DE 5776078 Corporation Service Company John Coffey is another Stephen King character.
Stillson Pharmacy, LLC DE 5776079 Corporation Service Company Steve Stillson is the President of the United States in a Stephen King novel.
Rainbird Pharmacy LLC DE 5776080 Corporation Service Company John Rainbird is a Vietnam Veteran in a Stephen King novel.
Longmont Pharmacy, LLC DE 5776083 Corporation Service Company Longmont VA is a location in the Stephen King novel, The Shop.
Dawes Pharmacy, LLC DE 5776086 Corporation Service Company Barton George Dawes is another Stephen King character.
Castle Rock Pharmacy, LLC DE 5776088 Corporation Service Company Castle Rock Maine is a location of paranormal activity. I guess like a Valeant pharmacy.
The Shop Pharmacy, LLC DE 5776089 Corporation Service Company The Shop is a secret Government Agency in Stephen King novels. I guess this is a secret Valeant agency.
Cambers Pharmacy, LLC DE 5776096 Corporation Service Company Joe Cambers, a Stephen King character runs an auto-repair shop in Castle Rock. Probably another paranormal shop.
McGee's Pharmacy, LLC DE 5776099 Corporation Service Company Charlie McGee, a Stephen King character, has pyrokinetic powers - perhaps they include ripping off insurance companies.
Juco Pharmacy, LLC DE 5776103 Corporation Service Company A nickname for Joe Cambers rabid family dog.
Roland's Pharmacy LLC DE 5776108 Corporation Service Company Roland Deschain, a major Stephen King character.
Tower Pharmacy, LLC DE 5776110 Corporation Service Company Possibly a reference to The Dark Tower, a Stephen King novel.
Hawkmarten Pharmacy, LLC DE 5776111 Corporation Service Company We think this is one of the many aliases of Joe Flagg. Suggestions accepted.
Carrietta Pharmacy, LLC DE 5776115 Corporation Service Company The full first name of Carrie, of the infamous Stephen King novel.
PBG RX Pharmacy, LLC DE 5794828 Corporation Service Company We have not found the reference here. The registration details make us think it is related.
Decker Pharmacies, LLC DE 5794834 Corporation Service Company Another reference to Decker.
French Landing Pharmacies, LLC DE 5794836 Corporation Service Company Another reference to French Landing.
NC3 Pharmacies, LLC DE 5794839 Corporation Service Company See the above chess reference.
C-K Pharmacy, LLC DE 5794840 Corporation Service Company See the above chess reference.
ELO Pharmacies, LLC DE 5794842 Corporation Service Company See the above chess reference.
Roland's Pharmacies, LLC DE 5794844 Corporation Service Company See the above reference to Roland Deschain.
Hemingford Pharmacies, LLC DE 5794849 Corporation Service Company See the above reference to Hemingford Home
Flagg Pharmacies, LLC DE 5794852 Corporation Service Company Joe Flagg again.
Overlook Pharmacies, LLC DE 5794854 Corporation Service Company The hotel in the Shining again. Do we see a recurring theme.
Fischer Pharmacy Holdings LLC DE 5805160 Corporation Service Company Surely a reference to Bobby Fisher, world Chess Champion