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As Bausch & Lomb Inc. readies itself to be acquired by Quebec-based Valeant Pharmaceuticals International Inc., the eye-care company’s wholly owned ISTA Pharmaceuticals Inc. subsidiary has agreed to pay $35.5 million to settle federal criminal charges.
ISTA’s alleged False Claims Act violations, which occurred from 2006 and 2011, predate Bausch & Lomb’s 2012 acquisition of ISTA, eye-care company officials said Tuesday.
Before it bought ISTA, Bausch & Lomb manufactured product for the firm, but did not have a role in ISTA’s management.
In an announcement Friday of the settlement, federal officials said Bausch & Lomb played no role in ISTA’s wrongdoing and no top ISTA executives transferred to Bausch & Lomb.
“B&L acquired ISTA more than a year after the improper conduct ended, and did not hire any of ISTA's executives or senior management,” Department of Health and Human Services inspector general Daniel Levinson said.
Asked Tuesday about Bausch & Lomb’s late 1990s and early 2000s compliance issues in an analyst conference call, Valeant CEO Michael Pearson did not mention the ISTA settlement and praised Bausch & Lomb’s management for laying the eye-care company’s compliance issues to rest.
Bausch & Lomb CEO Brent Saunders has done “a great job of cleaning up that aspect,” Pearson told the analysts.
After the acquisition’s expected third-quarter close, Pearson said, Valeant plans to keep the Bausch & Lomb name.
“This is not a merger of equals,” he told analysts, however, making it clear Valeant would be calling the shots in the companies’ marriage.
In the merger, Pearson added, Valeant plans to trim some $800 million in costs, making cuts in both Valeant’s and Bausch Lomb’s operations. Valeant hopes to cut the eye-care company’s roughly 40 percent of revenue sales, general and administrative expenses bringing them closer to Valeant’s 20 percent SG&A costs, he said.
Valeant is beginning the integration process this afternoon, but many specifics, including staffing decisions, would only be decided over the next three to four months, Pearson said.
Acquired and taken private by the private equity firm Warburg Pincus LLC in 2007, Bausch & Lomb had filed papers with the Securities and Exchange Commission detailing a planned initial public offering before Valeant announced plans Monday for the $8.7 billion deal. Roughly half of that amount represents Valeant’s agreement to assume Bausch & Lomb debt.
Saunders told the Rochester Business Journal last year that he hoped to continue leading Bausch & Lomb after its separation from Warburg. He is to serve in advisory role after the deal closes, but is not one of the two employees Pearson named as definitely moving to Valeant.
Pearson said Bausch & Lomb’s Global Pharmaceuticals president Daniel Wechsler will join Valeant and oversee the integration, and serve as Valeant group chairman for ophthalmology and eye health. Valeant is also tapping Calvin Roberts M.D., Bausch & Lomb’s chief medical officer, to serve as its CMO.
Warburg and Bausch Lomb director Fred Hassan, a mentor of Saunders, is joining Valeant’s board.
A Department of Justice criminal complaint filed against ISTA in U.S. District Court in Buffalo last Friday follows a 2007 civil complaint against ISTA filed in the same court by an ISTA employee. The employee’s 2007 whistleblower complaint accuses ISTA of aggressively marketing its Xibrom eye drug for uses not approved by the Food and Drug Administration.
The criminal charges ISTA settled last week include conspiracy to introduce a misbranded drug in interstate commerce with intent to defraud and mislead and conspiracy to violate the anti-kickback statute. The latter charge stems from fees the pharmaceutical company paid to doctors.
The criminal conviction bars ISTA pharmaceuticals from reimbursement by Medicare and Medicaid. But settlement terms include a divestiture agreement that would let Bausch Lomb market drugs currently sold under the ISTA name as Bausch & Lomb products.
“We agreed to enter into this divestiture agreement based on the facts of this case, including that B&L did not have a corporate relationship with ISTA during the improper conduct,” Levinson said.
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