May 19, 2022

Senators Question Plan to Stall Generic Lipitor

The action came as the patent expired on Lipitor, the best-selling drug in history.

Pfizer has taken unprecedented actions to preserve market share during the next six months, while generic competition is limited and prices remain fairly high. Pfizer is offering discounts to companies that will reject generic prescriptions and substitute Lipitor.

While some companies say they will save money, others do not. The senators said they were concerned about longer term impacts on employers, Medicare and health care costs.

“We need to take a close look to ensure we’re protecting both taxpayer dollars and access to the medicine patients need,” Senator Max Baucus, the chairman of the Finance Committee, said in a statement released with the senators’ letters.

The letters were signed by Senators Baucus, a Montana Democrat; Charles E. Grassley, an Iowa Republican; and Herb Kohl, the Wisconsin Democrat who is chairman of the Special Committee on Aging.

“Consumers and taxpayers foot the bill when drug benefit companies and insurers manipulate the marketplace to prevent access to generic drugs for millions of Americans,” Senator Kohl said in the statement.

Pfizer, in a statement, said, “Our intent is to offer Lipitor to payers and patients at or below the cost of the generic during the 180-day period.” The senators’ concerns are based on “incomplete or incorrect information,” MacKay Jimeson, a Pfizer spokesman, said in an e-mail. “Participation in Pfizer’s programs by a health plan is entirely voluntary,” he said.

The letters said pharmacy benefit managers might pocket the Pfizer discounts while charging employers and Medicare the full price for Lipitor — a situation the companies insist will not occur. The companies say they will pass the Pfizer discounts on to employers, Medicare and consumers.

“We are concerned that arrangements like this will hinder access to generic drugs today and in the future,” the letters said.

Watson Pharmaceuticals shipped a generic to 28,000 pharmacies on Wednesday. Ranbaxy Laboratories is seeking approval for another, but Ranbaxy has been under federal scrutiny.

The letters went to the chiefs of Pfizer; the insurance companies UnitedHealthcare and Coventry Health Care; and the pharmacy benefit management companies Express Scripts, Medco Health Solutions and Catalyst Rx, which act as middlemen between manufacturers and insurers.

Express Scripts and Medco have recommended that their clients sell generics, not Lipitor, because they say the Pfizer offer, even with a discount, could cost more in the long run. But those two companies are also buying Lipitor at the generic price for their mail order operations.

United, Coventry and Catalyst have said the Pfizer discount will save them money until more generics enter the market in June. Lipitor will also match or beat the copayment rate for generic drugs.

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DealBook: SAC Capital Said to Face Insider Trading Inquiry

Steven A. Cohen, the head of SAC Capital Advisors.Steve Marcus/ReutersSteven A. Cohen’s firm, SAC Capital Advisors, is under scrutiny.

The Securities and Exchange Commission is investigating whether trades in health care stocks by the hedge fund SAC Capital Advisors as recently as last year were made using inside information, a person briefed on the matter said Wednesday.

The investigation comes as SAC, one of the most prominent hedge funds in the world with $12 billion in assets under management, has become something of a focal point for authorities. Two former SAC portfolio managers have pleaded guilty to criminal charges of using inside information to trade technology stocks.

And Senator Charles E. Grassley, Republican of Iowa, has questioned how the S.E.C. handled referrals from Wall Street’s self-regulator, the Financial Industry Regulatory Authority, regarding 20 stock trades by SAC.

But the S.E.C.’s investigation into trading by SAC appears to be much broader. In addition to the inquiry into trading in health care stocks — trades that took place from at least 2007 through 2010 — the agency is examining SAC’s use of expert network firms, companies that connect Wall Street investors with outside experts in various industries, the person briefed on the matter said.

Separately, the S.E.C. is looking into whether the hedge fund used inside information about the 2007 takeover of MedImmune, a biotechnology company, the person said. The Wall Street Journal earlier reported about the inquiry into MedImmune.

A spokesman for the S.E.C. declined to comment.

Neither SAC nor its billionaire founder, Steven A. Cohen, has been accused of wrongdoing by the S.E.C. or by any other authority. A spokesman for SAC declined to comment on Thursday.

The inquiries into the SAC trades are part of an accelerating effort by the S.E.C. and the United States attorney’s office in Manhattan to crack down on insider trading, with a particular focus on hedge funds. The criminal investigations by federal prosecutors have resulted in charges against 49 people, 39 of whom have pleaded guilty.

Two people who have pleaded guilty were the former SAC employees Noah Freeman and Donald Longueuil. Mr. Freeman is expected to testify Thursday at the trial of Winifred Jiau, a consultant for an expert network firm who is charged with leaking inside information. SAC has said that it is “outraged” by the conduct of the two former employees.

The cases against Mr. Freeman and Mr. Longueuil are part of the government’s examination of expert network firms, which developed over the last decade alongside the proliferation of hedge funds. The government has filed criminal charges against 13 people connected to the firms, eight of whom have pleaded guilty.

The former SAC employees admitted to obtaining inside information about public companies and then using it to make profitable trades. The charges against the men detailed a cover-up straight from a television drama that involved destroying a hard drive with pliers and spreading the parts throughout the city.

Others with past ties to SAC have also been ensnared in the insider trading investigation. Earlier this year, Federal Bureau of Investigation agents raided two hedge funds founded by former SAC executives, Level Global Investors and Diamondback Capital Management. In 2009, Richard Choo-Beng Lee pleaded guilty to insider trading related to activity after he left SAC.

The S.E.C. has faced criticism that it failed to bring significant cases against prominent hedge funds as well as cases stemming from the financial crisis.

In April, Senator Grassley asked the Financial Industry Regulatory Authority in a letter to provide information on the “potential scope of suspicious trading activity” at SAC.

Last month, he followed up with a letter to the S.E.C. requesting to know how it handled past referrals about SAC’s trading activity.

MedImmune is not among those trades referred by Finra, according to people briefed on the matter.

SAC executives including Peter Nussbaum, the firm’s general counsel, and its outside lawyers met with staff members in Mr. Grassley’s office to discuss his inquiry.

Additionally, federal prosecutors are examining trades in an account overseen by Mr. Cohen.

Court filings related to the cases of the two former SAC portfolio managers who have pleaded guilty to insider trading, indicate that the government is reviewing trades made in Mr. Cohen’s account at the suggestion of the former employees.

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DealBook: Grassley Investigating Trades Made by SAC Capital

Senator Charles E. Grassley, Republican of Iowa, is examining 20 stock trades by the hedge fund SAC Capital Advisors, a spokesman for the lawmaker said Saturday.

The inquiry is the result of a letter sent by Mr. Grassley on April 26 to the Financial Industry Regulatory Authority asking it to provide information on the “potential scope of suspicious trading activity” at SAC, the hedge fund run by the billionaire investor Steven A. Cohen.

Mr. Cohen’s firm, one of the largest hedge funds in the world, has become ensnared by the government’s vast investigation into insider trading at hedge funds. The investigation resulted in the conviction earlier this month of Raj Rajaratnam, the head of the Galleon Group.

As part of an investigation separate from the one involving Mr. Rajaratnam, two SAC portfolio managers have pleaded guilty to making illegal trades based on secret corporate information. Neither SAC nor Mr. Cohen has been charged with any wrongdoing. A firm spokesman has said that SAC was “outraged” by the conduct of the two portfolio managers, Noah Freeman and Donald Longueuil.

Steven A. CohenSteve Marcus/Reuters SAC Capital Advisors, run by Steven A. Cohen, is one of the largest hedge funds in the world.

In his letter to the financial authority, known as Finra, Mr. Grassley, the ranking Republican on the Senate Judiciary Committee, said that “while SAC Capital itself has not been charged, these allegations raise serious questions about the corporate culture at SAC Capital and undercut investor confidence in a fair and balanced playing field.”

Finra provided Mr. Grassley with details of SAC’s trading last week. The stock transactions were made over the last decade and previously were referred to the Securities and Exchange Commission. They included trades made around the time of merger announcements or other market-moving events.

News of the SAC trades that Finra provided to Mr. Grassley was first reported by The Wall Street Journal.
Earlier this month, SAC executives, including Peter Nussbaum, the firm’s top lawyer, and its outside counsel met with staff members in Mr. Grassley’s office to discuss his inquiry.

“We welcomed the opportunity to meet with the staff to educate them about the firm and our compliance efforts, and had an entirely appropriate, professional and cordial meeting. We will continue to cooperate in any way we can,” SAC said in a statement provided Saturday by a firm spokesman.

Mr. Grassley’s aggressive stance toward SAC follows the senator’s past criticism of the S.E.C. for not being vigilant enough in its pursuit of illegal activity on Wall Street, including its failure to uncover frauds including Bernard L. Madoff’s Ponzi scheme. Now Mr. Grassley’s attention has turned to insider trading.

“The use of nonpublic information for insider trading purposes is sadly alive and well in our nation’s financial markets,” Mr. Grassley wrote in his letter to Finra. “More must be done to investigate and bring these criminals to justice.”

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