Valeant Pharmaceuticals Lawsuit: $1.21B Settlement, SEC Fund, PwC Claim

The Valeant Pharmaceuticals lawsuit settlement of $1.21 billion, finalized in February 2021, resolved a securities fraud class action brought by investors who said the company (now Bausch Health Companies Inc.) hid its relationship with a captive mail-order pharmacy, manipulated revenue, and pushed extreme drug price increases to inflate its stock. Judge Michael A. Shipp of the U.S. District Court for the District of New Jersey granted final approval on February 1, 2021. Most, but not all, of the litigation stemming from the same conduct has since been resolved.¹

What Investors Alleged

The class action, In re Valeant Pharmaceuticals International, Inc. Securities Litigation (No. 3:15-cv-07658), was filed in 2015. Investors alleged the stock was artificially inflated during the class period by three related deceptions.

The first was Valeant’s concealed relationship with Philidor Rx Services, a specialty mail-order pharmacy formed in January 2013 with Valeant’s direct assistance. Valeant provided a $2 million initial advance, helped build the infrastructure, hired key employees, and steered providers to Philidor for Valeant products. By the third quarter of 2015, sales through Philidor accounted for more than 14 percent of Valeant’s U.S. organic growth, and over 90 percent of the drugs Philidor dispensed were Valeant-branded. Valeant also held an option to buy Philidor for $133 million with up to $100 million more in milestone payments. None of that was disclosed in SEC filings, earnings reports, or investor presentations.²³

The second was improper revenue recognition. On April 29, 2016, Valeant filed a restatement that reduced 2014 revenue by approximately $58 million, net income by roughly $33 million, and basic and diluted earnings per share by $0.09. Revenue on sales to Philidor had been booked at delivery to the pharmacy rather than when drugs reached patients.²

The third involved the diabetes drug Glumetza, which Valeant acquired in April 2015. Management approved a 500 percent price increase in June 2015, followed by another 50 percent hike in July. The first increase alone generated $110.4 million in price-appreciation credit revenue from wholesalers. Rather than attributing that revenue to Glumetza, Valeant spread it across 106 unrelated products, inflating reported growth across its neurology, dermatology, and ophthalmology divisions. Reported same-store organic growth for the second quarter of 2015 was 19 percent; without the reallocation, it would have been 14 percent. Reported Cash EPS was $2.56 rather than $2.34.²

The relationship with Philidor surfaced publicly on October 21, 2015, when Citron Research published a report comparing Valeant to Enron. The stock fell more than 39 percent intraday before recovering to close down about 19 percent. Valeant terminated its relationship with Philidor on October 30, 2015.⁴

The $1.21 Billion Settlement

The lead plaintiffs were the City of Tucson and the Tucson Supplemental Retirement System, represented by Robbins Geller Rudman & Dowd LLP. The defendants included Valeant itself, former CEO J. Michael Pearson, former CFOs Howard Schiller and Robert Rosiello, former controller Tanya Carro, and outside auditor PricewaterhouseCoopers.⁵

The company and every defendant except PwC agreed to the $1.21 billion settlement. Judge Shipp granted final approval on February 1, 2021, and awarded Robbins Geller $157.3 million in fees, or 13 percent of the fund.¹

The Claim Against PwC Is Still Open

PwC, Valeant’s outside auditor, did not settle and remains the sole defendant in the class action. PwC has tried repeatedly to exit the case, but Judge Shipp denied its motions to dismiss, accepting a special master’s finding that investors had sufficiently alleged PwC “ignored red flags and violated professional audit standards” in its 2014 audit.⁶

On June 1, 2026, a special master recommended certifying a class of Valeant stockholders to pursue PwC, rejecting the argument that the lead plaintiff’s claims were atypical. The case continues to move toward trial.⁷

Investors Who Opted Out

Dozens of large institutions declined to participate in the class settlement and filed their own suits. Bausch Health’s SEC filings identified 37 groups of opt-out investors, including T. Rowe Price, Lord Abbett, USAA Mutual Funds, Northwestern Mutual, the State Board of Administration of Florida, the Regents of the University of California, BlackRock, New York City employee retirement funds, and the Public Employees’ Retirement System of Mississippi.⁸

In 2021, opt-out plaintiffs told the court they were owed more than $3 billion for stock losses. Bausch Health called that figure “wildly overstated.” Some opt-out actions have since been dismissed voluntarily or settled; others remain pending in the United States and Canada, according to Bausch Health’s most recent filings.⁹¹⁰

The SEC Penalty and Fair Fund

Separate from the class action, on July 31, 2020, the SEC settled administrative proceedings against Bausch Health and three former executives. Neither the company nor the individuals admitted or denied the findings. The penalties:³

Bausch Health: $45 million civil penalty.
J. Michael Pearson: $250,000 civil penalty plus $450,000 in incentive compensation reimbursement.
Howard B. Schiller: $100,000 civil penalty plus $110,000 in incentive compensation reimbursement.
Tanya R. Carro: $75,000 civil penalty and a suspension from practicing before the SEC as an accountant for at least one year.

The SEC established a Fair Fund under the Sarbanes-Oxley Act to route the penalty money to harmed investors. The distribution plan was approved on August 22, 2024. On March 13, 2026, the Commission ordered the transfer of $43,333,356.49 from the Fair Fund to an escrow account at Huntington National Bank for distribution, and the fund administrator was authorized to begin paying eligible investors.¹¹¹²

The Criminal Case Against Tanner and Davenport

Two individuals faced federal criminal charges. Gary Tanner, a Valeant executive, and Andrew Davenport, Philidor’s CEO, were prosecuted for a kickback scheme running from late 2012 through September 2015. Prosecutors said Tanner secretly advised Davenport against Valeant’s interests during the option negotiations, and Davenport funneled $9.7 million of Valeant’s $133 million option payment back to Tanner through shell companies including Befrielse Consolidated. Tanner used a secret email account under the alias “Brian Wilson,” and at least once impersonated “Brian Wilson” in a business meeting, while repeatedly certifying to Valeant that he had no conflicts.¹³

A jury convicted both men on May 22, 2018, of conspiracy to commit honest services wire fraud, honest services wire fraud, conspiracy to violate the Travel Act, and conspiracy to commit money laundering. On October 30, 2018, Senior U.S. District Judge Loretta A. Preska sentenced each to one year and one day in prison and ordered each to forfeit approximately $9.7 million. The Second Circuit affirmed the convictions on appeal but vacated the restitution order and the individual forfeiture orders, holding that the two defendants should be jointly and severally liable for one forfeiture amount not exceeding the $9.7 million in actual scheme proceeds.¹³¹⁴

The Canadian Class Action

Canadian investors pursued a parallel case in the Superior Court of Québec, Catucci and Aubin v. Valeant Pharmaceuticals International Inc. et al. (No. 500-06-000783-163). The court approved a CAD $94 million settlement on November 16, 2020, plus CAD $3 million for administration costs, with no admission of liability. Class counsel received 30 percent of the fund. Claims were due by February 16, 2021. The initial distribution has been completed, and a second distribution went to eligible claimants whose share was at least CAD $50. All cheques had to be cashed by May 26, 2026; stale-dated cheques would not be replaced.¹⁵¹⁶

A Separate Case Brought by Insurers

Health insurers and benefit funds brought their own action, In re Valeant Pharmaceuticals International, Inc. Third-Party Payor Litigation (No. 16-3087), under the Racketeer Influenced and Corrupt Organizations Act. The payors said Valeant used a “secret network of captive pharmacies” to block generic substitution and force reimbursement of expensive branded drugs. The case settled for a combined $23.125 million: $23 million from Valeant and $125,000 from the Philidor defendants. Judge Shipp granted final approval on February 22, 2022. This case is separate from the shareholder settlement and does not distribute money to investors.¹⁷

Where Things Stand

The $1.21 billion U.S. securities class action settlement was finalized in early 2021. The SEC Fair Fund distribution was ordered disbursed in March 2026. The insurer RICO case closed in 2022, and the Canadian settlement has completed its payouts. The criminal convictions of Tanner and Davenport were affirmed, with only the forfeiture and restitution calculations sent back for recalculation.

Two threads remain live. The securities fraud claims against PwC continue in the District of New Jersey, with a class certification recommendation issued in June 2026. And some of the original 37 opt-out investor suits are still pending against Bausch Health in the United States and Canada, according to the company’s most recent SEC disclosures.⁷¹⁰

1
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2
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