UPDATE 3-Valeant gets boost from new distribution deal with Walgreens

* Deal with Walgreens more than replaces Philidor-Valeant
CEO
* U.S.-listed shares jump nearly 17 percent
* Deal does not secure easier reimbursement from insurers

(Recasts, adds analyst comment)
By Caroline Humer and Vidya L Nathan
Dec 15 (Reuters) - Valeant Pharmaceuticals International Inc (N:VRX)
VRX.TO on Tuesday said it reached a deal to distribute its
drugs through leading pharmacy chain Walgreens Boots Alliance
Inc WBA.O , boosting credibility with wary investors and
sending its shares up 17 percent.
Valeant and its Chief Executive Michael Pearson (L:PSON) have come
under pressure for steep price increases on some of Valeant's
drugs and for close ties to a specialty pharmacy that used
aggressive methods to overcome insurer barriers to reimbursing
its medicines. Valeant's share price had dropped nearly 75
percent in recent months as its actions came under scrutiny from
Congress and state and federal prosecutors.
The company said on Tuesday its arrangement with Walgreens
would replace and build on sales that it would have booked from
specialty pharmacy Philidor Rx Services. Philidor, which is
shutting down following accusations of improper billing,
accounted for about 7 percent of Valeant sales so far this year.
Wall Street analysts said the deal should help Valeant fill
the gap in its revenue as Philidor closes, but acknowledged that
insurers may still refuse to cover many of its drugs.
For example, Valeant said it would offer a 10 percent
discount off wholesale prices on many of its skin and eye
medications, including Jublia and Solodyn. The company did not
explain how that would be passed on to consumers.
Consumers would also benefit through lower out-of-pocket
costs via co-pay assistance and reduced prices for people whose
insurance does not cover the products. Both types of discounts
were previously available through Philidor and other retail
pharmacies.
The deal also calls for offering 30 brand name drugs at the
same price as their generic equivalents, representing a discount
of 5 percent to 95 percent through Walgreens pharmacies.
The process for receiving branded products at generic prices
was also not immediately clear. Commercial insurers typically
direct consumers to generic products through lower co-pays and
often will not pay for equivalent branded products.
Valeant "appears to be taking steps to appease some pricing
scrutiny," wrote Leerink analyst David Larsen in a research
note.
At the same time, the deal does not improve Valeant's
reimbursement status with pharmacy benefits companies like
Express Scripts Holdings Co ESRX.O or CVS Health Corp (N:CVS) CVS.N .
CVS and Express likely will not agree "to dispense many
Valeant drugs they currently exclude from formulary unless there
was an even more meaningful overhaul of the pricing structure,"
Larsen said.
Express Scripts, the nation's largest pharmacy benefit
manager, said that its drug reimbursement and coverage policies
remain in place. CVS did not have an immediate comment.

INVESTOR MEETING
Valeant's announcement comes as Pearson prepares to address
investors in person on Wednesday at a meeting in New Jersey.
Major shareholders have already said they want Pearson to
outline how the company will keep growing profits in the wake of
recent concerns over its business practices.
In recent weeks, the drugmaker has taken other steps to
address some of those concerns, hiring a powerful Washington, DC
law firm to respond to inquiries from lawmakers and considering
the sale of a contact lens business that has come under
antitrust scrutiny, Reuters has reported.

Valeant has opened an investigation into the situation with
Philidor, and said the allegations are unproven. Pearson told
cable news channel CNBC on Tuesday that he "was unaware of any
of the allegations."
The 20-year deal with Walgreens, the biggest U.S. drugstore
operator by the number of pharmacies, gives Valeant's skin and
eye products access to more than 8,000 outlets.
The products will be sold on consignment and Walgreens will
be paid a distribution and dispensing fee. Valeant will take its
product directly to Walgreens distribution centers instead of
the typical channel of using major drug distributor
AmerisourceBergen (N:ABC) ABC.N to reach its pharmacies.
Valeant said it will roll out the discounts over a six to
nine-month period, once the deal takes effect in the first
quarter of 2016.
Valeant said it expects the deal to provide about $600
million in savings to the American healthcare system. It
calculated the figure by multiplying the average selling price
of its dermatology and ophthalmology brands and multiplying it
by 2015 volume. It added a 50 percent price reduction in the
average selling price of its branded products multiplied by 2015
volume.