Author: WorkCompAcademy

A renewal of the only catastrophe bond in the market that provides its sponsor with reinsurance protection for workers compensation claims caused by earthquakes is underway, as a currently $225 million Golden State Re II Ltd. (Series 2018-1) transaction has been launched to the market.

This is now the third cat bond transaction that will benefit sponsor the California State Compensation Insurance Fund, following its 2011 Golden State Re Ltd. deal and 2014 Golden State Re II Ltd. 2014-1 transaction.

The mechanics of the catastrophe bond are extremely similar, being a modelled loss triggered bond that pays out based on how a qualifying earthquake event is modelled to impact a portfolio of workers compensation insurance risk.

This still unique transaction in the cat bond market therefore links earthquake severity to workers compensation loss amounts, a paradigm that could be applied to other types of risks that could then be securitised and transferred to the capital markets.

Given the exposure to earthquake risk in the state of California, it makes sense to look to the capital markets for a source of reinsurance coverage that responds to earthquake occurrence and severity.

This cat bond marks the second time that this Golden State Re II Ltd. special purpose insurer, which is incorporated in Bermuda, has been used by the SCIF following the 2014 deal.

The Golden State Re II 2018 cat bond issuance will result in a single tranche of Series 2018-1 notes, currently sized at $225 million, being marketed and sold to investors, with the capital raised from the sale of the notes set to collateralize reinsurance agreements between the SPI and the sponsor SCIF.

The deal is expected to be sized at $225m or over, depending on ILS investor appetite for the transaction.

This cat bond will provide the California State Compensation Insurance Fund (SCIF) with a 4 year source of reinsurance protection, covering losses to its workers compensation insurance portfolio that are caused by earthquake events.

The reinsurance protection will be afforded on a per-occurrence basis and using a modelled loss trigger, designed and calculated by catastrophe risk modelling specialists RMS, in the same fashion as the previous Golden State cat bond issues.

The covered area is for earthquake events that strike anywhere across the entire U.S., but as with the previous cat bonds more than 95% of the SCIF’s insurance portfolio is focused on California, as its name gives away. Hence the risk associated with this cat bond is primarily focused on California or neighbouring area earthquake loss events.

The modelled loss trigger uses a variety of inputs and a calculation process to derive whether an event has triggered the cat bond.

The trigger is of similar construct to the previous Golden State cat bond deals, using the exposures of a notional portfolio of workers compensation risks in the SCIF’s portfolio, earthquake severity factors (ground motion etc), geographic distribution of the covered portfolio, types of buildings covered, time of day and the day of week an event occurs, as some of the weighting factors that will be used to determine whether the cat bond is triggered and a payout due.

After a qualifying event, which has to be an earthquake of magnitude 5.5 or greater, losses will be modelled deterministically, so not related to actual injuries and fatalities, using the earthquake event parameters and this will in turn be modelled against the notional portfolio using day/time weighting to determine an index value and notional modelled loss or payout amount.

The reason day/time is a factor is to ensure that the cat bond responds to quake events during standard working hours, when workplaces are at their fullest. The calculation process that runs after a qualifying earthquake event occurs will derive an index value that will be compared against the transactions attachment point.

The attachment point for this cat bond is at an index value of 1,000, and the exhaustion at 4,323.5, which is a larger layer of the SCIF’s reinsurance programme than the previous deals it appears.

This suggests the SCIF is using the cat bond to sit alongside its traditional protection, so paying a percentage of its losses for major quake events, which is a shrewd move as the fixed cost and pricing of a cat bond can sit there across the four-year term allowing the Fund to measure the cost-effectiveness of its traditional reinsurance protection against it.

The initial attachment probability for the notes will be 0.49% which is almost the same as the 2014 deal’s 0.5%, while the initial exhaustion probability will be 0.03% (lower than the previous deal’s 0.11% due to the much larger layer covered) and initial expected loss is 0.14% (roughly half the 0.25% EL of the 2014 Golden State Re cat bond).

Raul Oropeza Lopez, 51, and Ana Maria Oropeza, 45, both of Delano, were sentenced today by Chief U.S. District Judge Lawrence J. O’Neill. Raul Oropeza Lopez was ordered to serve three years and one month in prison and to pay $1,283,160 in restitution.

Ana Maria Oropeza was sentenced to three years of probation, and ordered to serve eight months on house arrest. The defendants were also ordered to forfeit over $167,00 in seized cash.

According to court documents, Raul Oropeza Lopez obtained social security numbers, names, and other personal identifying information of U.S. citizens and legal residents and then fraudulently used such information to provide undocumented workers with false identities required to work in the United States as farm laborers.

Then, when the undocumented workers were laid off at the end of the growing season, Raul Oropeza Lopez and his wife filed fraudulent unemployment insurance claims in the names of the assumed identities, relying on the work performed by the undocumented workers to fraudulently claim unemployment insurance benefits.

Over a period of six years, the couple submitted more than 520 fraudulent unemployment insurance claims on behalf of over 70 individuals.

This case was the product of an investigation by the U.S. Department of Labor Office of Inspector General; Homeland Security Investigations; Social Security Administration Office of the Inspector General; the Bureau of Alcohol, Tobacco, Firearms and Explosives; U.S. Postal Inspection Service; and the California Employment Development Department, Criminal Investigations Division.

Assistant United States Attorney Mark J. McKeon prosecuted the case.

Express Scripts announced it is introducing a novel formulary to provide employers and health plans a better opportunity to leverage changing dynamics to help lower their members’ out-of-pocket costs.

The Express Scripts’ National Preferred Flex Formulary provides a way for plans to cover lower list price products, such as new authorized alternatives that drug makers are bringing to the market, and reduce reliance on rebated brand products.

Drug makers set drug prices, and can lower them at any time. However, immediate list price decreases for products already on the market can pose challenges for employers and health plans that already have underwritten plan offerings and benefit designs for upcoming years based on existing economics.

By introducing authorized alternative products, through a new or additional National Drug Code (NDC) with a lower list price, we can create a competitive dynamic more similar to a generic coming to market. Cash-paying patients can have immediate access to the lower-priced medication. Meanwhile, employers and health plans can choose which product to cover that is best for their plan and their members: the lower-priced option or the original brand, which may have a rebate.

Over time, plans, pharmacies and others in the supply chain can transition to a new pricing model and the drug maker could ultimately retire their high list price product.

The National Preferred Flex Formulary is a comprehensive formulary that will mirror our industry leading National Preferred Formulary — covering more than 3,800 brand and generic medications — and will follow Express Scripts’clinical-first formulary decision process for all new therapies that come to market.

When a manufacturer launches a lower-cost authorized alternative to a branded medication currently on the market, Express Scripts will evaluate the product for placement on the National Preferred Flex Formulary.

If appropriate, the authorized alternative product will be added to the Flex formulary with preferred or possibly non-preferred status. The innovator brand-name product, and potentially other products in the therapy class, then will be excluded from coverage.

Members enrolled in the Flex formulary who have a high-deductible or co-insurance plan design can have immediate access to the lower-priced authorized alternative medication.

Branded innovator products will remain preferred or non-preferred on other formularies, including Express Scripts’ National Preferred Formulary, while the authorized alternative product may be excluded.

Prosecutors unsealed a 47-count Federal Indictment against two Richland, Washington based companies, Mid Columbia Research LLC and Zain Research LLC, and their owner, Sami Anwar. The Indictment charges the defendants with conspiracy to commit wire and mail fraud, fraudulently obtaining controlled substances, and furnishing false information to the U.S. Drug Enforcement Administration (DEA). The Indictment also seeks the forfeiture of at least $274,642.80 representing the proceeds of the alleged fraud.

The Indictment charges that the defendants fraudulently conducted and falsified a drug trial designed to study an experimental alternative treatment for daily opioid users who suffered from chronic pain. Prosecutors say the defendants enrolled ineligible study subjects and forged physician signatures and falsified medical records and other documentation designed to make it appear as though a licensed physician had determined that the subjects were eligible for the study.

The Indictment further charges that the defendants falsified records and study data designed to make it appear as though subjects were participating in the study and were receiving the experimental treatment when they were not, in order to falsely bill for the study and obtain over a quarter of a million dollars from the drug company that was sponsoring the study.

The Indictment charges that the defendants created false and fraudulent documentation to hide the fraud from the sponsor, monitors, and federal regulators. The Indictment also charges that the defendants fraudulently obtained controlled substances, including the narcotic opioids hydrocodone/acetaminophen (which is commonly sold as Vicodin) and morphine, by falsely representing that these drugs would be and were being used for legitimate research purposes when they were not.

Finally, the Indictment charges that the defendants submitted a false and fraudulent application to the DEA in a failed attempt to obtain Gamma Hydroxybutyrate (commonly known as “GHB” or the “date rape drug”) for a separate sleep disorder study that the defendants also hoped to obtain funding for.

United States Attorney Harrington said “Investigating fraud and opioid-related crimes is a top priority for the Department of Justice. The United States Attorney’s Office for the Eastern District of Washington will continue to use all of the investigative and legal tools available to us to do so.”

DEA Special Agent in Charge of the Pacific Northwest Region Keith Weis was extremely pleased with today’s announcement, stating that “Conducting legitimate research is the foundation in which modern medicine is built on. To exploit that under the false premise of conducting lifesaving research to aid those who suffer opioid dependency is appalling, illegal, and criminal.” Weis further added that, “This investigative action in Eastern Washington is part of a continuing state wide strategy addressing illicit opioid access and diversion currently endangering our communities.”

The conspiracy, mail, and wire fraud charges against Defendant Sami Anwar each carry a maximum penalty of a 20-year term of imprisonment; a $250,000 fine, or double the gross gain or gross loss, whichever is greater; a 3-year term of court supervision; and restitution. Following the grand jury’s return of the Indictment, United States Magistrate Judge Mary K. Dimke issued a warrant for the seizure of over $175,000 from one of Mr. Anwar’s bank accounts constituting some of the proceeds of the alleged fraud.

When President Trump declared a public health emergency over the abuse of heavy-duty painkillers like oxycodone and hydrocodone, he ordered all government agencies to take action in response to the death of 70,000 Americans last year from opioid overdoses.

The FDA told Reuters it has received over 200 submissions from companies seeking a speedy approval process for their devices. These range from Stimwave’s Halo to painkilling products made by Abbott Laboratories and other industry heavyweights as an alternative to opioids.

“We’re pleased by the robust interest in this innovation challenge and the acknowledgement from developers about the unique and important role medical devices, including digital health technologies like mobile medical apps, have the potential to play in tackling the opioid crisis,” FDA Commissioner Scott Gottlieb said.

The FDA has been increasingly reluctant to greenlight new opioids for market but earlier this month approved a potent opioid-based painkiller from AcelRx Pharmaceuticals Inc placing tight restrictions on its distribution and use. In a rare move, Gottlieb made a public statement at the time, explaining the decision.

The regulator’s push for alternatives to opioids has helped drive interest from venture capital funds and institutional investors this year in firms promising to develop alternatives, according to interviews with device companies, financial services firms and brokerage Cowen & Co.

For example, privately-held Virpax Pharmaceuticals, which makes an aerosol spray that delivers a non-opioid pain drug, said it had four or five banks interested in running its Series A investment round this summer versus just one in the past.

Abbott, like rivals Boston Scientific Corp and Nevro Corp, makes neuromodulation implants which stimulate the nervous system to mask pain signals before they reach the brain.

Abbott has submitted an entry for the competition in the hope it will slash waiting times, which often stretch several months just to get an initial meeting, according to Dr. Allen Burton, Abbott’s medical director of neuromodulation.

While neuromodulation is only a small part of Abbott’s large medical device business, the unit is seen as a growth engine for the company. Burton estimates between 10-to-20 percent of the growth Abbott has seen in its neuromodulation business could be tied to doctors prescribing its devices for pain after surgery or from injury to patients that are opioid averse.

Boston Scientific did not apply for the contest, but the company is investing “heavily” in its neuromodulation unit, which was its fastest-growing at nearly 23 percent in the latest quarter.

Although the FDA contest is limited to devices and app-based solutions for pain and addiction, the current regulatory climate is also conducive to companies developing opioid-alternative pharmaceuticals.

Drugmakers including Pfizer Inc, Eli Lilly and Co, Regeneron Pharmaceuticals Inc and Teva Pharmaceutical Industries Inc have been packing their pipelines with potential solutions to the crisis and there are 120 non-opioid drugs under FDA review this year, up some 650 percent since 2013, according to business intelligence firm Informa.