New Hampshire Governor Latest to Flock to Canadian Drug Imports

December 10, 2003 (PLANSPONSOR.com) - Pretty soon, the train of local and state government officials vowing to import prescription drugs from Canada is going to be standing room only with New Hampshire Governor Craig Benson the latest to climb aboard.

Benson plans to go the Canadian import route to save on his state’s prescription drug costs even it means defying the US Food and Drug Administration (FDA), according to the Boston Globe.In a Globe interview, Benson brushed aside the FDA’s repeated warnings about the safety of drugs shipped from Canada and dismissed the FDA’s caution that importation would expose states to civil lawsuits if someone dies or is injured by an illegally imported drug.

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“The FDA and drug companies have been spreading this notion that it is unsafe, but I have a different take,” Benson said. “We have a lot of people who are not taking prescription drugs because they can’t afford them. I think there’s a liability for sitting still.”

Importing drugs from Canada is illegal under US law. The FDA said it wants to talk to Benson about his program but does not plan to take any action before New Hampshire begins importing drugs. Thus far, the only government entity to operate a program is the City of Springfield (See Springfield, Mass. Pushes Canadian Drug Order Program ). But Boston Mayor Thomas Menino appeared before the City Council Tuesday to say he would set up a pilot program for city workers and retirees in July that could save $1 million a year (See Boston Hops On Canadian Drug Train ).

In Boston, quality and safety concerns moved to the forefront of discussions last night about Menino’s proposed pilot program. Pharmacists and representatives of the biotech industry voiced their own concerns about safety, urging the City Council to be circumspect before embarking on importation. But council members appeared eager to begin importing drugs

Benson’s plan, part of which could be up and running in 10 days, could make New Hampshire the first state to formally adopt a Canadian drug plan. Minnesota Governor Tim Pawlenty has said he plans to move aggressively to set up a program. Illinois, Iowa, and Michigan have been studying the idea (See MN Governor Brings Canadian Drug Buying Plan to the Streets ).Though Massachusetts officials have rejected the idea of importing drugs for state employees, New England is emerging as an epicenter of interest in Canadian drug importation. The decision by Benson, a Republican, also emphasizes the bipartisan appeal of Canadian importation.

In addition to Boston and Springfield, Burlington, Vermont, said it plans to import drugs early next year, and Cambridge is studying the issue. Cost savings from Canadian imports are difficult to calculate. Mayor Michael Albano of Springfield has estimated that his city will save $4 million to $9 million a year, but in its first year the program is on pace to save less than $2 million.

New Hampshire Plans

Benson said he did not have any estimates on how much New Hampshire might save. He plans to establish a state-sponsored Web site within 10 days that will provide any New Hampshire resident with access to Canadian Internet pharmacies that are certified as safe by the state Department of Health and Human Services.

That will be followed by a program to import drugs for the state Department of Corrections, which he said will save “millions of dollars” every year. New Hampshire will also give retired state workers the option to buy Canadian drugs. The state will purchase drugs for Medicaid patients as well. But because of contractual obligations, the only drugs for Medicaid patients that New Hampshire can purchase from Canada will be for the treatment of mental illness, Benson said.

The FDA won a federal court injunction last month shutting down RxDepot, a chain of sales agents for Canadian Internet pharmacies (See DoJ Presents Case Against Canadian Drug Store Fronts ). The FDA has said it reserves the right to pursue action against city or state governments that import drugs, but so far it has declined to go after Springfield.

Morningstar Cautions Investors in Wake of Canary Scandal

September 12, 2003 (PLANSPONSOR.com) - The Spitzer investigation of hedge and mutual-fund trading misdeeds continues to reverberate through the financial world with one research firm now calling for investors to dump their shares in the four affected providers' funds.

In a series of scathing analyses posted to its  Web site , Morningstar blasted Bank of America, Janus, Strong, and Bank One over the allegations of trading misdeeds leveled by New York State Attorney General Eliot Spitzer and said shareholders should consider heading for the exits in all four cases.

Spitzer has contended that units of those fund families agreed to give hedge fund Canary Capital Partners LLP manager Edward Stern preferential treatment by allowing Stern to buy and sell fund shares at prices not available to other investors.

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None of the fund companies have been charged with any wrongdoing, however two types of trading violations have been tagged “fraudulent” by the  Spitzer complaint :  Late trading, or buying mutual-fund shares after the market close at that day’s closing price; and timing, which involves taking advantage of market-moving events after the close of the market, when the funds’ daily price is set based on the net-asset value of the portfolio. (See   Spitzer Fund Abuse Probe Pumps Out More Subpoenas ).

But Morningstar by far reserved its harshest blast for Janus, with a strongly worded  commentary by analyst Brian Portnoy charging that Janus put its own profitability ahead of the interests of investors in its funds. Portnoy also cited poor performance of Janus funds in the bear market and a string of management departures – the combination of which constituted “three strikes” against the Denver-based fund.

Getting Out

As a result, Portnoy not only recommended that investors skip over Janus’ in-house funds but that those already with a position in those funds seriously consider getting rid of it.

“We think that the Janus fund family does not deserve investors’ confidence,” Portnoy wrote. “As has been splashed across the financial press over the past week, Janus, in addition to several other prominent asset managers, has been implicated in what is arguably the mutual fund industry’s worst scandal ever. What has soured our stomachs with Janus in particular is that the firm already had two major strikes against it: poor bear-market performance and noteworthy management departures. This ethical breach is the third strike against it. Three strikes, you’re out.”

If the fund company is willing to own up and make shareholders whole, Portnoy said Morningstar would once again consider putting certain Janus funds back on its recommended lineups. “When Janus cleans out the bad apples and pursues a myriad of other remedies to both pay back shareholders and rebuild a culture of integrity, we will consider recommending certain Janus funds once again.,” the analyst said (he also noted that this recommendation does not affect the Morninstar star ratings of the funds, which “are a purely quantitative measure of risk and return”).

However, Morningstar’s Christine Benz cautioned investors in a separate  commentary  about overreacting to the Canary scandal.   “This news, though dismaying, shouldn’t undermine investors’ trust in mutual funds as a whole,” wrote Benz. “Many fund shops – from behemoths like Vanguard and Fidelity to boutiques such as Davis/Selected Advisors and Longleaf Partners – have long histories of putting shareholders first. We continue to believe that mutual funds run by such shareholder-friendly firms represent worthwhile investment opportunities for most investors.”

A Phoenix-based trustee/custodian also named in the Spitzer investigation recently fired back with an announcement that it’s own in-house showed that trades it handled for Canary didn’t harm any of its other customers (See   STC: Canary Trades Didn’t Harm Other Clients).

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