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It was only a few years ago that interest rates plunged to historic lows. Conservative investors who needed guaranteed income and preservation of principal were in a bind. In many cases, returns at

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

the bank were below two percent and fixed annuity accounts yielded only marginally better. Many of these cautious investors purchased fixed annuities rather than bank instruments in order to capture

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

higher returns.

How times have changed. The United States economy improved significantly. Inflation pressure grew, and the Federal Reserve began to ratchet up interest rates while treasury yields i

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

ncreased in kind. While much of this was good news, it created problems for the annuity purchaser from just a few years ago.

Concerns with Older Annuity Accounts

If you invested in a traditi

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

nal fixed annuity account during these low yielding years, you may find yourself in a dilemma. The problem: many of these accounts have fallen to their guaranteed minimum yields. Currently, they mig

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

ht only offer a paltry return between 2 and 3.5 percent. There are several reasons for this decline. To begin with, many annuity accounts have a first year bonus that will not be paid in subsequent

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

years. In addition, these accounts often provide a floating rate of return. Their returns are not locked in. A floating rate annuity is quick to go down in years where yields are decreasing, but sl

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

w to come back up when yields in the treasury market increase. In essence, if you purchased an annuity in the lean years, you may have locked in poor yields for the duration of your account.

There a

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

re other issues as well. If your annuity has not reached maturity, you will have to pay surrender penalties if you cash in the account early. In addition, if you purchased a non-qualified annuity ac

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

count, you may have accumulated tax deferred interest. Should you transfer your annuity to anything another than another annuity account, you could have income tax to pay. Taxes and penalties will q

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

ickly lower your account value upon early surrender.

How to Improve Your Fixed Annuity Returns

Rest assured ─ this is not a story of doom and gloom. The fix to this problem is simple.

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

You simply exchange your old annuity for a new account. Rates have increased dramatically over the last three years, and newer annuities can lock in much higher yields. Furthermore, it may be a wis

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

e decision to lock in rates with a guaranteed fixed yield as oppose to a floating rate of return.

Unless your account is very new, the higher guaranteed yields can more than make up for any surrender

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

penalties your may have. A sizeable account can accumulate thousands of additional dollars by making this change. (It is important to note that many economic pundits are already predicting that the

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

Federal Reserve Board will begin to lower rates in 2007. This will most certainly force treasury markets and annuity yields lower for those who have not locked in higher rates.)

Income Taxes on T

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

ax Deferred Interest ─ 1035 Exchange

Additionally, if income taxes are a concern, you should understand that taxes are not due if you transfer your old non-qualified annuity to a new annuit

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

y account. This is why owners simply transfer from one annuity to another in what the I.R.S. has deemed a 1035 tax-free exchange. Income taxes will only be due if and when you decide to take out you

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

interest. If yours is a retirement account (also called a qualified account) you can simply perform a rollover. If done properly, (with the help of an experienced agent and/or accountant), a qualif

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

ied rollover is not a taxable event either.

In summary, no longer do you need to dread your quarterly annuity statements. There are several reputable insurance companies providing very reasonable gu

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

aranteed returns. These products will provide you with higher yields, potentially shorter durations, liquidity and peace of mind. An annuity rollover or 1035 exchange can be a wise investment choice

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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