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Today many investors often exchange their investment properties to avoid paying federal and state capital gain taxes. This exchange often requires the involvement of a qualified intermediary or 1031 Exchange Company

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

to avoid constructive receipt. Otherwise your transaction may not be qualified for 1031 tax-deferred exchange. This means the exchange company will keep all of the funds from the properties you just sold when you a

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

Examples of combination products may in

e looking for a replacement property to complete the exchange. However, many investors do not know these companies are in a business that is not regulated by both the Federal government and any of the 50 states. So

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

technically, these exchange companies can use your money to invest in anything they want. Occasionally there have been sad stories about exchange companies losing investors money and then declaring bankruptcy. Inve

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

stors can only recover a fraction of their money. On top of that, they may have to pay capital gain taxes because they do not complete the transaction within 180 days! So how do you avoid being a victim?

To answer

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

Combination pro

this question, you will need to understand a little bit about the exchange business, the fees structure as they may influence your decision on choosing an exchange company. Most exchange companies make money by char

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

ing a fee per transaction. They also make money on the difference between the money they earn from the investment of your money and the interest they pay you. There are 3 main types of exchange companies:

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

Some exchange companies are just division or subsidiary or an entity owned by an escrow company. For example First American Exchange Company (FAEC) is separate Limited Liability Company (LLC) owned by First

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

merican which is also in title & escrow business. FAEC occupies the same office and even has the same phone number as the First American Title office.

Some banks, e.g. Washington Mutual (Wamu) also offer

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

1031 exchange service.

Companies that specialize on 1031 exchange. They could be a single-location company or a franchise with offices in many states. For example:

Equity 1031, LLC; www.eq

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

ity1031.com.

Equity Preservation, Inc.; www.equitypreservation.com.

The fees charged by these companies vary from $200 to $750. However there are different restrictions:

The com

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

Following aspects would a

pany that charges low fee (Wamu charges $200) often does not pay interest on your fund or only pays interest if your fund is above a certain amount. If your sales proceed is significant, e.g. several hundred thousan

dd to the challenges in developing combination products:

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

dollars, you may save on the fee but may lose a significant amount on the interest payment.

Some companies may offer to pay savings account rate while another may pay higher money market rate.

Some com

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

anies charge higher fee, e.g. First American Exchange charges $750, but may allow you to make as many offers as you want. Each time your offer is accepted, the exchange has to review the contract, and wire the money

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

to the seller's escrow account.
To ensure your money is safe, you should ask the exchange company if

Your money is deposited in the general account or separated trust account under your

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

name. When the money is in the general account, the exchange company can use it for anything; e.g. pay salary for its employees. Should the company declare bankruptcy, all of your money could be lost. On the other

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

Professional from academic institutions, pharmaceutical industries, health care indust

hand, the trust account is intended to keep your money just for own use. This kind of account is regulated by the federal government and the exchange company cannot use money for its business. So this is a safe acc

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

ount to keep your funds. Normally if you don’t say anything, your money is deposited in a general account.

Your money is FDIC insured.

Your money is invested in the US. If it’s invested outside the

.

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

S, there may be a delay from the time you request your money to the time you actually get it.

Your money is safe. As a general rule of thumb, if the exchange company pays you high interest then chances are yo

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

Companies that provide selfless information through particip

r money may be invested in a higher risk investment.

So when you choose a exchange company, you should consider its fees, services, and more importantly if the company is trustworthy enough to keep your money

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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Every businessman knows that the key to turning customers into raving fans is to give exceptional customer service, to provide not only for the customer's needs but for their every want and desire even before they know that they have a want or desire. What eludes many business owners is how to provide that level of customer service. Literally hundreds of books have been written and seminars sold on how to improve customer service. Experts have employees imagining everything from mailboxes to Caribbean beaches all in the hope of improving customer service.

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