The Securities and Exchange Commission is pursing three overlapping insider-trading investigations involving potential leaks of information by CMS, according to a report by The Wall Street Journal.
Here are five things to know about the investigations.
1. On June 7, 2010, CMS officials discussed whether new coverage limits should be set for a high-price prostate cancer treatment made by Dendreon Corp. The official in charge of the discussion told colleagues to keep quiet about the review of the coverage limits until later that month when a formal announcement would be made. However, the same day the discussion occurred, shares of Dendreon fell 10 percent, which caught the attention of federal investigators. A formal announcement regarding the coverage limits wasn't made until June 30, 2010.
2. The SEC is investigating whether any CMS officials leaked information to Marwood Group, a policy-research firm, about the review of the prostate cancer drug's coverage limits, according to The Journal. Marwood said it's cooperating with the SEC's investigation, and it knew nothing about CMS announcement until it was made.
3. A second probe is focused on David Blaszczak — a former CMS employee. He now runs his own firm, and is a prominent policy analyst in Washington, but there are questions around his accurate prediction regarding Dendreon's prostate cancer drug. On June 28, 2010 a CMS official's team circulated a draft of the June 30 announcement regarding the drug's coverage limits to colleagues at CMS. The email said the version of the letter would be used "later this week," according to The Journal.
4. On June 29, 2010, Mr. Blaszczak issued a research note that stated Dendreon's prostate cancer drug was likely being considered for a "Medicare NCD," which is the acronym for a government review of its payments. Mr. Blaszczak has said he will fight the allegations against him, as he has only prepared reports based on public information.
5. The Federal Bureau of Investigation and the SEC are also conducting an investigation involving a 2013 alert about Medicare Advantage policy from investment-research firm Height Securities. In April 2013, Height Securities sent out an email alert to more than 150 investors predicting CMS would turn a suggested 2.2 percent cut for Medicare Advantage providers in 2014 into a 3.3 percent pay increase. After markets closed less than an hour later, CMS issued a press release confirming the pay cut reversal, which prompted the SEC to investigate whether the alert issued by Height Securities violated securities regulations and whether anyone broke insider-trading rules by leaking CMS' decision.
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