Warren Buffett calls Valeant strategy 'flawed'

Investor Warren Buffett said Berkshire Hathawayhas called the business model ofValeant Pharmaceuticals flawed and panned the company's leadership.

Speaking Monday morning live onCNBCin Omaha, Neb., Buffett said:"I don't think you'd want your son to grow up and run a company in the manner thatValeantwas run," he said.

• Valeant restates earnings, names new board members
• Valeant names Joseph Papa its next CEO
• Valeant Pharmaceuticals blasted by U.S. lawmakers over drug price hikes

Laval,Que.-based Valeant has been under a microscope recently over thecompany's practice of rapidly boosting prices for some of itsdrug products.

J. Michael Pearson, who presided over the company's strategy of buying up smaller companies and boosting prices on some drugs, wasdue to be replaced early this month as CEO of Valeant by Joe Papa.

Buffett said at least two largeinvestors in Valeant urged Berkshire to buy into the company "and part of the pitch was essentially what they could do with the pricing of products they bought from other places."

On April 30,at Berkshire Hathaway's annual general meeting in Omaha, Buffett said Valeant'sbusiness model was "enormously flawed," according to Bloomberg.

In the wake of Buffett's comments on Monday, shares of Valeantwere down more than four per cent on the TSX, trading at $40.06 in afternoon trading.

Ackmanboosts role

Last week, Pearson and billionaire hedge fund managerWilliamAckman, whosefund holds a large stake in Valeant and controls two seats on its board,testifiedbefore the U.S. Senate'scommittee onaging, which has been looking at rapid drug pricehikes.

Pearson said he and Valeant were too aggressive in their strategy of jacking up prices.

"I regret pursuing transactions where a central premise was a planned increase in the prices of the medicines," he said.

During his testimony,Ackman said Valeant's strategy can do "more for innovation in pharma by acquiring other drug companies" than by developing its own drugs.

He also saidsome of the sharpprice hikes including those that first attracted congressional scrutiny were mistakes that have caused "great reputational damage."