During the Walgreens Boots Alliance’s conference call this week on its third-quarter results, co-COO Alex Gourlay told analysts that WBA will address Valeant Pharmaceuticals International’s concerns about its distribution arrangement with the company.
Under the deal, announced in December, WBA and Valeant entered agreements in which the drug maker will directly distribute branded prescription drugs in a range of therapeutical areas to the pharmacy chain at reduced pricing. The agreements were reached under previous Valeant CEO J. Michael Pearson. However, in a stream of recent media reports, new Valeant CEO Joseph Papa (who joined the company this spring from Perrigo) indicated that Valeant is losing money from the deal and is seeking to restructure the arrangement.
Under the 20-year fulfillment agreement announced with WBA, Valeant is cutting the wholesale list prices of its branded dermatological and ophthalmological products by 10%. The pact also includes Valeant‘s over-the-counter product lineup.
And in another arrangement, Valeant agreed to distribute more than 30 branded products in the dermatology, ophthalmology, gastrointestinal and neurology and other therapeutic areas that have generic versions through Walgreens at generic prices. The companies said the reduced pricing for the branded products is expected to be 5% to 95%, or a weighted average price decrease of more than 50%.
“We are satisfied and pleased with performance in the dermatology business. The volume is as we expected,” Gourlay said in the conference call on Wednesday. “And remember, we have paid for the service we provide. We’re not paid on the margin mix here at all. So we’re satisfied the relationship is good.”
Gourlay added that Walgreens has a good relationship with Papa from when he was at Perrigo. “We are in constant dialogue with Joe and the management team, which you see their situation and we are very willing to help them in a positive way,” Gourlay said. “So it’s early days, a 20-year contract, and from our point of view we are pleased. We want to help our partner to be more successful in market.”
The comments from the WBA conference call lifted Valeant’s stock price. Its shares opened at around $20 on Wednesday but climbed over $23 by the market close.