NEW YORK (TheStreet) -- Horizon Pharmaceutical (HZNP - Get Report) stock is down by 4.10% to $14.64 in midday trading on Wednesday, as it and Valeant Pharmaceuticals (VRX) are scrutinized for their use of specialty pharmacies.
Pharmaceutical companies such as Horizon and Valeant have developed a way to heavily overcharge patients for combinations of generic drugs that would cost much less when sold separately, the New York Times reported on Monday.
In a method termed "Prescriptions Made Easy," the manufacturers work around insurers' and pharmacists' generic drug recommendations by asking doctors to submit prescriptions directly to a mail-order pharmacy connected to the drug maker, according to the Times.
The benefit of such a relationship was reflected in Horizon's 2015 second quarter revenue of more than $100 million, Horizon CEO Timothy Walbert said in defense of the practice, which is legal, the Times adds.
"What was started as administering complex, costly drugs has been co-opted as a sales/marketing tool to drive the growth of minor differentiation standard retail drugs," Ronny Gal, a pharmaceutical analyst at Bernstein, said in a note on Friday, according to the Times.
Insight from TheStreet's Research Team:
Jim Cramer commented on Horizon Pharmaceutical in a recent post on RealMoney.com. Here is a snippet of what Cramer had to say about the stock:
...there is absolute hatred going on of the once-loved drug and health care stocks. The money that is coming into the industrials? I think it is cascading, not slowing, but actually cascading out of health care. Ever since some hedge fund manager turned pharma exec took pride in jacking up prices for some old drugs, this cohort's become just too dangerous to own. It's an election year and no one likes to champion the drug business.
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Separately, TheStreet Ratings team rates HORIZON PHARMA PLC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
We rate HORIZON PHARMA PLC (HZNP) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The area that we feel has been the company's primary weakness has been its disappointing return on equity.
You can view the full analysis from the report here: HZNP