Canada’s Valeant Pharmaceuticals International is under criminal investigation by US prosecutors for the Southern District of New York, over defrauding insurers by shrouding its ties to a mail-order pharmacy Philidor Rx Services.

The companies are believed to have hidden their close relationship to cheat the insurers that helped Valeant increase its drug sales.

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The investigation can conclude by this year and is expected to be the most serious that Valeant faces at present.

It can lead to criminal charges against the company as a whole, as well as against former Philidor executives, reported The Wall Street Journal.

"Valeant previously disclosed in October 2015 that the US Attorney's Office for the Southern District of New York commenced an investigation involving Valeant."

In a statement, Valeant Pharmaceuticals said: "Valeant previously disclosed in October 2015 that the US Attorney's Office for the Southern District of New York commenced an investigation involving Valeant.

“We have been fully cooperating with the authorities throughout the investigation, and we are in frequent contact and continue to cooperate with the US Attorney's Office for the Southern District of New York.

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“We do not comment on rumours about investigations, and cannot comment on or speculate about the possible course of any ongoing investigation.

“Valeant takes these matters seriously and intends to uphold the highest standards of ethical conduct as we move forward with our mission to improve people's lives with our healthcare products.”

Philidor, which is now no longer functioning, helped patients obtain insurance coverage on higher-priced drugs sold by Valeant, instead of their cheaper alternatives.

The federal lawyers are currently probing whether Philidor made false statements to insurers about its ties to Valeant.

The prosecutors for the Southern District of New York are also investigating some of the business practises of Philidor that included the rebates and other compensations offered by the company to Valeant-drug customers, along with its attempts to acquire reimbursement from insurers.