Why Is Valeant (VRX) Under Criminal Investigation?

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According to sources that told the Wall Street Journal what they knew, Valeant Pharmaceuticals may be under criminal investigation over allegations that it defrauded insurers by hiding ties to a mail-order pharmacy that boosted sales.

The Wall Street Journal reported on Wednesday that federal prosecutors are probing whether pharmacy Philidor made false statements to insurers about its ties to Valeant, while helping patients get coverage for higher-priced Valeant drugs.

Shares of Valeant sank 9% in after hours trading after the news.

A source told the Journal that it is thought to be the most serious probe Valeant faces, with possible criminal charges against former Philidor executives and Valeant as a company.

“Valeant has been cooperating and continues to cooperate with the ongoing Southern District of New York investigation,” the a spokeswoman told The Wall Street Journal.

Disclaimer: We have no position in Valeant Pharmaceuticals Intl Inc (NYSE: VRX) and have not been compensated for this article.