LISTEN TO ARTICLE 1:40 SHARE THIS ARTICLE Share Tweet Post Email

Billionaire investor Bill Ackman’s argument for increasing his bet on besieged drugmaker Valeant Pharmaceuticals rests on a simple reality: Pharma companies get in trouble all the time. That doesn’t mean they’re bad investments.

By way of explanation, he cited a $390 million settlement Novartis announced over kickback allegations this week. To Ackman, such penalties are just the cost of doing business.

“If you’re an investor in pharma, you have to be comfortable that the companies you invest in are likely to suffer sanctions,” he said on a marathon conference call on Friday. “Some of the most well-regarded companies in the country are repeat offenders.”

He’s right. Drugmakers have agreed to pay at least $9.5 billion in settlements since the start of 2011 with federal and state authorities in the U.S., over such accusations as offering kickbacks to doctors, promoting drugs for unapproved uses, and bribing foreign officials.

Valeant’s market value has dropped by nearly half—from $60 billion to $33 billion—since Oct. 14, when the company disclosed it had received subpoenas from federal prosecutors over drug pricing and other issues. Much of the dive took place in the nine days since a short seller’s report on Oct. 21 accused the company of inflating sales through a network of specialty pharmacies.

Valeant has not been charged with wrongdoing. Today it said it will end its relationship with a specialty pharmacy called Philador, which has come under scrutiny. Valeant Chief Executive Officer J. Michael Pearson has defended his company’s practices. “We operate our business based on the highest standards of ethics and are committed to transparency,” he said on an Oct. 26 conference call.