Costco Connection - June 2006

CONSUMERconnection

Battle brews over

Also: Tax privacy Interest rates

generic drugs

Ask David

Horowitz

I READ A COUPLE OF STORIES recently on ques- Consumer groups and privacy advocates are tionable tactics drug companies are using to protect urging taxpayers who oppose the changes to contact their patents and brand names, preventing more- the IRS and their representatives in Congress. affordable generic drugs from being marketed.

First, a major drug maker agreed to pay $14 mil- New rates cost an arm and a leg lion to settle a multistate action claiming that it Millions of Americans who over the past four blocked the manufacture of generic versions of its years stretched themselves too far financially to buy major seller, an antidepressant medication. The states homes could lose them, as monthly payments on argued that keeping generic drugs off the market adjustable-rate mortgages (ARMs) get higher. forced consumers to pay higher prices for the widely Several years ago, when interest rates bottomed prescribed drug. out, lenders relaxed their standards by offering cre-

Then, the Federal Trade Commission (FTC) ative financing to man y who could announced plans to subpoena some 200 pharma- nothave otherwise qualified for home ceutical companies to investigate other alleged anti- loans. But now, as initial “low inter-competitive marketing practices. At issue is whether est” periods are running out on pharmaceutical companies are blocking competi- many of these ARMs, borrowers are tion by releasing generic copies of their own brand- facing “resets” of their interest rates. name drugs to coincide with the debut of generics The result is a jump in monthly made by competitors. payments between 10 percent

Federal law allows a generic-pharmaceutical and 50percent. company to challenge a patent held by a brand- Some homeowners name manufacturer. If successful, they have six willbeabletorefinanceto months of exclusivity during which they can market a better 15- or 30-year fixed-their new product without competition. Afterward, rate loan. But many others other manufacturers can seek approval for their own will have difficulty meet-generic versions, further increasing competition. ing the higher payments.

But a loophole in the law allows the original A recent study by branded company to authorize their own generic First American Real versions, which increasingly enter the market at the Estate Solutions pro-start of the supposed six-month exclusivity period jects about one in eight that generic challengers rely on. households with ARMs

The FTC plans to examine whether this loop- that originated in 2004 hole can unfairly benefit brand-name companies in and 2005 could possi-the long run. Whatever is decided can greatly affect bly default on those loans. consumer prices for generic prescription drugs. To prevent higher casualties, government

Is your tax information private? regulators are pushing

In a move that may threaten the privacy of tax- lenders to tighten their payers, the Internal Revenue Service (IRS) is propos- lending standards, which ing that accountants and other tax preparers may could make it more diffi-sell information from tax returns to marketers and cult for many to qualify data brokers. for refinancing. C

I RECEIVED a letter from a national department store saying that as a “preferred customer” they’d issue me a special credit card within one month, unless I called and canceled within two weeks. The thing is, I don’t shop at that store.

I called the “opt out” number, and before they canceled the offer they put me through a verification process that included asking all sorts of confidential information. This sounded really suspicious to me!

Daley Los Angeles

DALEY, your instincts
are sharp. This could
be a ploy by an ID
thief. Or, it could
be an affiliate
of a credit-card
company that
got your name
from a database
it purchased,
which is legal if
you did not opt
out of informa-
tion disclosure with
your current credit-
card issuer.
One option is to
ask the rep if they are
verifying data they
already have and, if
so, to read you a por-
tion of the data they are
requesting, such as the
last two digits of your
Social Security number.

But you should contact the department store directly and let them know your objections to this marketing campaign.

The IRS says the changes are housecleaning _{AMY CAN TRELL}measures needed to update outmoded regulations David Horowitz is a leading consumer advocate. adopted before it began accepting electronic returns. His “Fight Back!” commentaries are heard daily on Critics call it an invasion of privacy for profit. the Jones Radio Network. For stations and times,

Current IRS rules now prohibit the sale of tax check the radio page at www.fightback.com. returns to third parties for marketing purposes. The © 2006 FIGH T BACK! INC. ALL RIGH TS RESERVED. new proposal would allow a tax preparer to sell information, or even an entire return, by obtaining written consent from a client. Do you have a question for David?

However, critics say the requirement for signed Just log on to www.fightback.com and “Ask David.” He will personally respond to consent would prove meaningless for many taxpay- your problem if you follow the instructions printed on his Web site. (Costco members ers, who may unwittingly sign such a consent form receive a rebate off the normal fee.) Questions and answers of the greatest interest to if it’s included in the stacks of documents presented Costco members will be used in this column with the permission of the contributor to them before filing. and will be posted on www.fightback.com.