Valeant Pharmaceuticals scandal

Few collapses in business history have been as abrupt and precipitous as Michael Pearson's, the CEO of drugmaker Valeant. He was recently the CEO of a company whose stock price had increased by almost 4,000% during his tenure. He was a former McKinsey consultant who devised a strategy focused on acquisitions, cost-cutting, and price increases. One of Valeant's major owners, influential hedge-fund manager Bill Ackman, compared Pearson to Warren Buffett, highlighting his skill at capital allocation. Pearson is no longer regarded as a genius. The Valeant Pharmaceuticals scandal began in August 2015, when Bernie Sanders and other congressmen demanded an explanation from the company for raising the prices of two drugs.

According to investigations, the company's aim was to purchase small pharmaceutical companies and raise the prices of their products, rather than investing in its own R&D. This sparked public outrage and a drop in the company's stock price. In October, it was revealed that Valeant owned a pharmacy chain called Philidor and had exploited its position to inflate the size of its order book and generate larger revenues. The company's name has since been changed to Bausch Health Companies Inc.

Date: August 2015

Location: New York