Insurers poised for US break on investment losses from high rates

 Some insurers operating in the United States stand to reap a windfall worth hundreds of millions of dollars from the relaxing of a 31-year-old rule on reporting interest rate-related losses, a Reuters review of regulatory filings and interviews with executives and analysts show.

U.S. regulators who met in Seattle on Sunday voted to change how insurers should recognize these losses after the industry lobbied for the move.

The change, whose scope and financial impact are first reported here, will free up cash which insurers can use to write new policies, invest in their business, or boost their share price through dividends and stock buybacks, according to their financial disclosures and analysts who cover them.

At least 23% of life insurers rated by credit ratings agency Fitch stand to benefit, because their interest rate maintenance reserves (IMR), which reflect gains or losses from interest rate changes, were negative as of the end of December. That is up from 8% a year earlier. A negative IMR forces insurers to tap pots of money they would have otherwise spent on their business or returned to shareholders.

The change, which would expire at the end of 2025 unless revisited, will allow insurers to realize some of these losses over time, rather than straight away, according to a draft of the proposal released by the National Association of Insurance Commissioners (NAIC).

The Reuters review, which included a search of the public filings of all insurers listed in the stock market as well as those rated by credit ratings agencies, shows the changes will be particularly advantageous for firms invested in long-term bonds. This is because bonds that were issued before the Federal Reserve raised interest rates more than 5 percentage points over the last year carry much lower rates, and insurers incurred losses when they sell them.

Among those insurers are Prudential Financial, OneAmerica Financial Partners, Principal Financial and Massachusetts Mutual Life Insurance Company, according to Fitch. In the case of Prudential, the reprieve would be worth more than $1.3 billion, according to the company's disclosures. That compares to $1.8 billion in net fixed income-related losses Prudential recorded in 2022.

The NAIC's move diverges with how banking regulators have approached the same issue. They do not give banks the option of deferring interest rate-related losses, fearing excesses that led to the 2008 financial crisis. Such losses were behind the collapse of major regional banks this year, including Silicon Valley Bank and First Republic Bank.

Some consumer advocates have criticized the NAIC for going ahead with the proposal. Edward Stone, a lawyer who has represented policyholders in cases where troubled insurance companies were liquidated, said the rule change would encourage more insurers to risk investment losses in order to juice returns. "Insurance companies, for decades, have been trying to kick the can down the road. This is just another attempt by them to say we should get some sort of favorable accounting treatment," Stone said.

An NAIC spokesperson said the change is in the interest of insurance policyholders, because they would make it easier for insurers to sell loss-making bonds to re-invest in higher-yielding ones, boosting their financial health.

A representative for the American Council of Life Insurers (ACLI), a lobby group that pushed for the change, said its intention is to harmonize the treatment of interest rate-related losses and gains. Under existing rules, insurers with a positive IMR realize the benefit over time, rather than immediately.

Insurers in the United States are regulated by individual states rather than the federal government, but the NAIC has said that all states will automatically adopt the change it backs. While the change sunsets in 2025, the NAIC is also considering a long-term tweak to the rules, insurers including Equitable Holdings and MetLife have said in filings with the U.S. Securities and Exchange Commission (SEC).

DEFERRING LOSSES

Following the rule change, insurers will be allowed to amortize interest rate-related losses over time equivalent to 10% of their statutory surplus. The statutory surplus is the difference between insurers' assets and liabilities, money that can be used to pay policyholders in unforeseen circumstances.

The new regime has some safeguards. A key metric of an insurer's financial health, its risk-based capital ratio, would have to be at least 300% after adjustments to be allowed to defer interest rate-related losses.

Prudential would have been able to reverse about $1.3 billion of $1.8 billion in bond losses last year had the new rules been in place, Chief Financial Officer Ken Tanji told analysts on the company's second-quarter earnings call.

The change will also increase Prudential's risk-based capital ratio to 409% from 383%, according to an SEC filing. Staying close to the 400% threshold is a target many insurers seek to achieve a better credit rating.

A Prudential spokesperson declined to comment beyond Tanji's remarks.

A spokesperson for MassMutual, which along with Prudential, OneAmerica, and Principal Financial ranks among the insurers rated by Fitch that have the largest negative IMR balances, declined to comment on gauges of the company's financial strength, such as its risk-based capital ratio. The spokesperson would only say that MassMutual had a negative IMR balance of $611 million as of the first quarter of 2023.

OneAmerica declined to comment, while Principal Financial did not respond to requests for comment.

Some insurers that do not carry large negative IMR balances also say they would benefit from having room to take more risk when hedging interest rates. Unum Group, which has "very little" negative IMR, would see little immediate financial impact from the change but would be able to be more flexible with its hedging program when it comes to accepting losses, chief financial officer Steven Zabel told analysts on August 2.

"That would be helpful to really ramp up the hedging program a little bit more," Zabel said.

https://www.marketscreener.com/quote/stock/PRINCIPAL-FINANCIAL-GROUP-39051261/news/Insurers-poised-for-US-break-on-investment-losses-from-high-rates-44605303/

Incyte drops Syros blood cancer partnership

 Incyte has ended a five-year collaboration with Syros Pharmaceuticals after seven targets were identified for myeloproliferative neoplasms and none taken back to the lab for further development.

Originally signed in January 2018 and announced during the J.P. Morgan Healthcare Conference that year, the companies had agreed to work together on developing potential treatments for myeloproliferative neoplasms. This is a group of blood cancers in which the bone marrow makes too many red or white blood cells or platelets. The disease can move slowly with only little treatment required but sometimes progresses into acute myeloid leukemia.

Syros received $10 million upfront and, after five years, that’s all the company has taken to the bank from the research deal. Incyte had agreed to pay $54 million for target selection and option exercise fees plus $115 million in other milestone payments. But since Incyte did not select any of the targets, none of those milestones have or will be paid out, according to Syros' August 9 Securities and Exchange Commission filing (PDF). Incyte would have had worldwide rights to the targets.

It's another round of bad news for Syros, which also saw Pfizer walk away from a sickle cell collaboration in June. The deal originally involved Global Blood Therapeutics, which Pfizer bought in 2022. The partnership is slated to end in October, and Syros pledged to find a new partner for the sickle cell program.

But Syros at least received some compensation for the work, as GBT agreed to reimburse for full-time employee and out-of-pocket expenses incurred in accordance with the agreed-upon research budget of $40 million. Syros will not, however, receive any milestone or royalty payments from the agreement.

In November 2022, Syros also expressed a need to find a partner for the oral CDK7 inhibitor SY-5609 in metastatic pancreatic cancer. The therapy is partnered with Roche in colorectal cancer.

https://www.fiercebiotech.com/biotech/incyte-drops-syros-blood-cancer-partnership-two-months-after-pfizer-does-same-sickle-cell

Gracell drops 3 CAR-T programs in hopes of speeding more advanced assets

Gracell Biotechnologies is shaving down its CAR-T pipeline, throwing several programs out the window in an effort to speed its most advanced programs to the finish line. 

The China-based biotech is keeping the “front-runners” and “slowing down some of the early programs,” CEO William Cao, Ph.D., said on an Aug. 14 earnings call. Gracell now has three candidates (PDF) in the clinic compared to six noted in the first quarter. 

GC019F, a CD19 program targeting advanced B-cell acute lymphoblastic leukemia, has been cut. The CAR-T was being assessed in a phase 1 clinical trial. The second program left behind is GC027, an allogenic CAR-T designed to treat relapsed or refractory T-cell acute lymphoblastic leukemia. Lastly, Gracell dropped GC503, a mesothelin program designed to treat solid tumors.

The company hopes to instead focus on the dual-targeting therapy GC012F derived from the company’s FasTCAR-T autologous platform made for next-day manufacturing. Last year at the American Society of Hematology 2022 annual meeting, Gracell revealed data on the BCMA/CD19 dual-targeting CAR-T therapy showing a 100% tumor response rate in patients with multiple myeloma during a phase 1 trial in China.

The asset is being studied in several indications, the most advanced of which is a U.S. phase 1b/2 trial in patients with relapsed or refractory multiple myeloma.

After completing a $150 million private placement financing earlier this month, Gracell anticipates its current cash will stretch into the second half of 2026, Chief Financial Officer Kevin Xie, Ph.D., said on the earnings call.

https://www.fiercebiotech.com/biotech/gracell-lightens-its-load-dropping-3-car-t-programs-hopes-speeding-more-advanced-assets

Georgia court website posts, removes docket of potential Trump charges in 2020 election probe

 Atlanta prosecutors appeared Monday to inadvertently reveal the offenses with which they plan to charge former President Donald Trump in connection with his bid to overturn the 2020 election result in Georgia.

A two-page docket briefly posted and then removed from the Fulton County court’s website showed the 77-year-old former president facing charges including racketeering, conspiracy and false statements, according to Reuters.

A grand jury convened by Fulton County District Attorney Fani Willis is scheduled to hear testimony Monday and Tuesday, with an announcement on charges against Trump and his allies expected soon after.

https://nypost.com/2023/08/14/georgia-prosecutors-mistakenly-reveal-likely-charges-against-trump-in-2020-election-probe-report/

Russian military planes ‘detected and tracked’ in Alaska air defense zone

 Four Russian military planes flew into Alaska’s air defense zone Sunday and again Monday morning, according to North American Aerospace Defense Command (NORAD), which said the planes were deemed not a threat.

NORAD said in a press release that it “detected and tracked” the four warplanes, which were operating in the Alaska Air Defense Identification Zone (ADIZ) surrounding the U.S. and Canada but remained in international airspace.

“This Russian activity in the Alaska ADIZ occurs regularly and is not seen as a threat,” NORAD officials wrote in a statement.

While the ADIZ lies within a stretch of international airspace, NORAD tracks and detects foreign activity in the zone.

The U.S. is on edge after Russian and Chinese warships earlier this month patrolled near Alaska’s Aleutian Islands.

Moscow and Beijing have said the patrols were part of a larger set of maritime drills across international waters.

American aircraft have also had several run-ins with Russian planes operating within or near the ADIZ for years.

https://thehill.com/policy/defense/4151560-russian-military-planes-detected-and-tracked-in-alaska-air-defense-zone/

Feds Suspend Research Support at New York State Psychiatric Institute

 The federal Office for Human Research Protections (OHRP) has taken the unusual step of suspending all federally supported research at the New York State Psychiatric Institute (NYSPI), which is affiliated with Columbia University.

The suspension — first reported by The New York Times — is the latest setback for Columbia's psychiatry program.

In February 2022, the university suspended psychiatry department chair Jeffrey Lieberman, MD — who was also director of the NYSPI — after a racist tweet. Lieberman was also, until his suspension, an advisory board member and columnist for Medscape Psychiatry.

Shortly thereafter, Columbia appointed Helen Blair Simpson, MD, PhD, as interim chair of psychiatry and interim director of the NYSPI, which is part of the New York State Office of Mental Health but shares staff with Columbia.

According to the autism publication Spectrum, in late July, Simpson was abruptly replaced by Jeremy M. Veenstra-VanderWeele, MD in the wake of the university stopping clinical trials conducted by Columbia psychiatrist Bret Rutherford, MD.

Rutherford was exploring whether levodopa might be used as a treatment for mobility and cognition issues in older people with depression. Spectrum reported that an individual in the placebo group died by suicide in 2019 and that the study was suspended before it was completed.

In a statement to Medscape Medical News, NYSPI director of communications Carla Cantor said she could not comment on the individual who died.

"Due to state and federal health information privacy laws, NYSPI is unable to provide information that identifies or may lead to the identification of any individual receiving treatment and cannot provide specific details about any individual involved in a research study," said Cantor.

Rutherford resigned from NYSPI on June 1 and is no longer a Columbia faculty member, Cantor said. Spectrum reported that two of Rutherford's papers on the levodopa studies had been retracted and that the National Institute of Mental Health had ended his studies and has not renewed funding for his grants.

NYSPI "voluntarily paused all research studies involving human subjects in early June," Cantor said, adding that 2 weeks later, the OHRP restricted US Department of Health and Human Services (HHS)–funded research involving human subjects at the Institute.

"OHRP takes very seriously the protection of people who volunteer for research studies and has procedures to ensure that those protections are in place," said Kate Migliaccio-Grabill, a spokesperson for the HHS.

The OHRP, part of HHS, "is investigating New York State Psychiatric Institute and has restricted its ability to conduct HHS-supported human subject research," she said, adding, "More details will be shared when possible."

National Institutes of Health (NIH) spokesperson Emma Wojtowicz told Medscape Medical News that "NIH is working closely with the HHS Office for Human Research Protections" on its investigation, adding that, "NIH does not discuss matters under review."

In the meantime, Cantor said that the NYSPI is "working with its federal partners to create a research safety review plan for HHS-funded studies, and out of an abundance of caution has begun a safety review of currently paused studies not funded by HHS."

The NYSPI reports on its website that "500 externally funded studies with budgets totaling $86 million are underway, most of them supported by the federal government."

The NYSPI safety review of research that is not funded by HHS "is expected to be completed sometime next month," said Cantor.

https://www.medscape.com/viewarticle/995413

Does Kratom Need Tighter Regulation?

 A few years ago, government agencies were debating how to handle kratom, a substance made from the leaves of a Southeast Asian tree, which was being used by millions of Americans for everything from pain relief to stress management. However, since then, efforts to regulate or ban kratom have largely fizzled.

In 2016, the Drug Enforcement Administration (DEA) announced plansopens in a new tab or window to make kratom a Schedule I drug, putting it in the same category as heroin and LSD. HHS initially issued a letter in supportopens in a new tab or window, which they later rescinded after public outcry. The DEA then changed courseopens in a new tab or window a few months later, though it still includes kratom in their Drugs of Abuseopens in a new tab or window resource guide.

As of now, kratom is considered to be an herbal supplement and therefore falls under the FDA's jurisdiction and is largely unregulated.

Mac Haddow, senior fellow on public policy for the American Kratom Association (AKA), said his advocacy group wants the FDA to regulate kratom for consumer safety reasons.

"Bad actors are using industrial-grade solvents, and you end up with a very powerful and potent product because they've enhanced it synthetically," he explained.

Of the thousands of kratom businesses and products, the AKA has only endorsed three dozen that meet their safety and quality standards.

Emily Einstein, PhD, chief of the science policy branch at the National Institute on Drug Abuse (NIDA), said the agency is working towards safety and efficacy data.

"Some of the research underway at NIH is working to produce a formulation of mitragynine [the primary compound in kratom] that is going to be standardized so it has established purity, stability, safety, and it'll have a reproducible way that it's absorbed by the body," Einstein told MedPage Today in an interview in which a NIDA press officer was also present.

Over the past few years, the NIH has gotten a better idea about why people use kratom, she noted. "People very frequently report self-treatment of pain, self-treatment of psychiatric disorders, and importantly, self-treatment of substance use disorders, including opioid, alcohol, and stimulant use disorders," she said.

What Do We Know About Kratom?

While considered an herbal supplement, kratom is technically an opioid. When mitragynine is ingested, it breaks down into a similar compound, 7-hydroxymitragynine, according to NIDAopens in a new tab or window.

In response to the Substance Abuse and Mental Health Services Administration's National Survey on Drug Use and Health, more than 1.7 million people in the U.S. said they used kratom in 2021opens in a new tab or window. That's down slightly from the 2.1 million people who said they used kratom in 2020opens in a new tab or window when the survey first asked questions about kratom use.

Kratom is sold in many places, from gas stations to health food stores, in powder, capsule, and liquid form. Online retailers charge more than $20 for an ounce of powdered kratom and more than $15 for a small bottle of it. Because kratom isn't regulated, it's nearly impossible to know the strength and quality of the product.

Both the pleasurable and dangerous effects of kratom vary with the amount, potency, and method of use, according to NIDA

opens in a new tab or window. In low doses, kratom has stimulant-like effects, and in higher doses, taking kratom can result in sedative or psychotic effects, though part of the problem is that research hasn't definitively proven the relationship between the amount of kratom ingested and the types of effects. Research from the past several years has identified outsized proarrhythmic risksopens in a new tab or window linked to kratom use, as well as kratom-associated liver injuryopens in a new tab or window.

Lewis S. Nelson, MD, chair of the department of emergency medicine at Rutgers University in Newark, New Jersey, said that even if a drug has a small risk, the risk to the broad public is significant when it's available to millions of people.

"There's nothing that's not toxic if you take enough of it," Nelson told MedPage Today. "It's all relative to the degree of toxicity of a compound. So there's no doubt that you could overdose on kratom or mitragynine. It probably takes a fair amount of it to do it, and most people don't take doses like that."

"The fact that kratom is not regulated, yet mitragynine is an opioid, is simply a regulatory issue, not a medical issue," he added. Nelson explained that kratom primarily binds to the mu-opioid receptor, and there is also activity in the serotonin and alpha-2 receptors.

In 2019, the CDC released a reportopens in a new tab or window on unintentional overdose deaths with kratom from 11 states. Among more than 27,000 overdose deaths from July 2016 to December 2017, 152 decedents tested positive for kratom. In 91 of those cases, kratom was determined to be the cause of death, yet there were only seven cases in which kratom was the only substance in their system.

Einstein noted that "the majority of ill effects that have been reported result from polysubstance use," while in other cases, kratom has been contaminated. For instance, in 2018, the FDA recalled kratom products from Triangle Pharmanaturalsopens in a new tab or window due to salmonella contamination.

Another popular use of kratom is as a treatment akin to buprenorphine for opioid use disorder. NIDA, among other government agencies, has noted kratom may have the therapeutic potential.

"I would urge people to view kratom use in the context of the overall overdose crisis," Einstein said. "People are employing new harm reduction strategies faster than we are able to develop the evidence to support them."

Nelson said that while it's exciting that kratom might be a new treatment option for opioid withdrawal, scientists still don't know enough about the drug. "The other side of the coin is if you're able to treat opioid withdrawal, you're also able to cause opioid intoxication," he cautioned.

Kratom's Victims

Susan Eppard hasn't been the same since her son Matthew died after using kratom in 2021. She said when Matthew first started using kratom years before, it gave him energy during the day and helped him sleep at night. But she said he soon became addicted to it. In 2021, Matthew had a seizure and was in cardiac arrest and suddenly died. His toxicology report noted "toxic effects of mitragynine."

Eppard is not alone. She and several other families of people who died from kratom banded together to form Kratom Awareness, Prevention and Education (KAPE)

opens in a new tab or window, which is now led by Dana Pope.

Unlike Eppard, Pope and her husband had never heard of kratom before their son Ethan died from it 2 years ago. They learned his cause of death was "cardiac arrest due to mitragynine toxicity" and found empty kratom containers in his apartment. Searching his credit card statement, they found that Ethan had first purchased kratom at a health food store and then started buying it at gas stations. While many people use kratom in conjunction with other substances, neither Ethan nor Matthew had any other drugs in their system when they died. Both were in their early 20s.

"I just keep thinking, how can you go to the gas station and buy this and then it kills you. How is this possible?" Pope told MedPage Today.

Pope and her husband filed a wrongful death lawsuit

opens in a new tab or window against a slew of kratom companies and manufacturers, as well as the AKA.

Once her name was public, families with similar stories of losing loved ones to kratom reached out to join her in raising awareness about the potential harms of its use.

Tamara J. Williams, an attorney at mctlaw, based in Sarasota, Florida, has represented more than a dozen clients alleging wrongful deaths from kratom in the last 5 years, including the family of a Florida momopens in a new tab or window who was just awarded $11 million in damages. She said that it's tricky to get to the bottom of kratom companies to find who to sue.

"Companies create a bunch of shell companies where it's really hard to target who's behind what product," said Williams, who is not part of Pope's legal team. "So you have a company within a company, and then sometimes you have individuals thrown in the mix. It's pretty much like the wild wild west."

Both Advocates and Critics Want Regulation

Some states, including Alabama, Arkansas, and Indiana, have banned or limited kratom. Others have passed the Kratom Consumer Protection Actopens in a new tab or window, which made 18 the minimum age for purchase and requires dealers to only sell products that meet quality standards. It also bans synthetic alkaloids, which both the AKA and NIDA call dangerous.

However, in most states, kratom is legal without restrictions. While KAPE warns about the potential dangers of kratom, Pope supports more research.

"There's just not enough studies, which is why I would like it to be banned or scheduled until there are more studies so we know how much kratom ... is safe," said Pope. "But because it's just not regulated, nobody knows. So it's just kind of a game of Russian roulette."

https://www.medpagetoday.com/special-reports/features/105872