Speaker 1: Hello, and welcome to the Votes and Verdicts podcast, hosted
Speaker 1: by the Litigation and Policy team at Bloomberg Intelligence, the
Speaker 1: investment research platform of Bloomberg LP. This podcast series examines
Speaker 1: the intersection of business policy and law, and today we'll
Speaker 1: be looking at the litigation and policy catalysts that we're
Speaker 1: watching in the second half of twenty twenty three and
Speaker 1: that we think will impact companies across a number of
Speaker 1: different sectors. My name is Elliott Stein. I'm a senior
Speaker 1: litigation analyst covering litigation in the financial sector, and I'll
Speaker 1: be your host for today, July seventeenth, twenty twenty three.
Speaker 1: If you have any questions about any of the matters
Speaker 1: we're discussing on today's episode, please don't hesitate to reach
Speaker 1: out to us at your convenience with questions. So we'll
Speaker 1: be discussing a handful of sectors and issues today. First, Jenrie,
Speaker 1: our senior antitrust analyst, will give us an update on
Speaker 1: the FTC's bid to block Microsoft's acquisition of Activision, and
Speaker 1: she'll also preview the Justice Department's upcoming trial in September
Speaker 1: against Google over its search business. Sticking with Tech, Matt
Speaker 1: Shettenhelm who covers TMT policy and litigation. We'll discuss in
Speaker 1: anticipated FTC rulemaking that threatens the targeted advertising business of
Speaker 1: companies like Alphabet and Meta, imperiling billions in revenue, and
Speaker 1: he'll also talk about the Supreme Court likely taking up
Speaker 1: a case that could shape Internet regulation as we know it.
Speaker 1: We'll then turn to financials and bring in Nathan Dean,
Speaker 1: our senior financials policy analyst, to discuss new capital requirements
Speaker 1: and post Silicon Valley bank rules that banks are likely
Speaker 1: to see. I'll discuss potential penalties that Swiss Bank QBS
Speaker 1: is likely to incur related to residential mortgage backed securities
Speaker 1: and our KAGOS issues that UBS inherited from Credit Suisse.
Speaker 1: And I'll also discuss key rulings in crypto cases, one
Speaker 1: of which came last week, and others that I expect
Speaker 1: to be issued in the second half of this year.
Speaker 1: After that, we'll turn to healthcare and Dwyane Wright, our
Speaker 1: senior healthcare policy analyst, will give us his thoughts on
Speaker 1: the government releasing a list of ten Medicare Part D
Speaker 1: drugs that will be subject to government price cuts, and
Speaker 1: he'll also discuss other potential rules targeting drugmaker revenue from
Speaker 1: Medicare Part D drugs cleared through the Accelerated Approval Pathway.
Speaker 1: Tis Walker, our senior healthcare patent litigation analyst, will preview
Speaker 1: an upcoming patent trial over Exelixis's cancer drug Cabometics, and
Speaker 1: last but not least, Holly from will discussed the Justice
Speaker 1: Department's upcoming trial against Teva over False Claims Act violations,
Speaker 1: and she'll also discuss an appeals court ruling that she
Speaker 1: expects in three M Earplug litigation. All of this research
Speaker 1: is available on the Bloomberg terminal at bi go And
Speaker 1: just a quick word about Bloomberg Intelligence for those who
Speaker 1: don't know. We are the investment research platform on the
Speaker 1: Bloomberg terminal, providing in depth research on industries, companies, and
Speaker 1: markets and delivering key data from bi analysts in their
Speaker 1: given industry. So with all that, let's get started with
Speaker 1: the content. Jen, Let's bring you in first to talk antitrust.
Speaker 1: Last week, Microsoft and Activision got a good ruling against
Speaker 1: the FTC, but it sounds like the FTC is appealing.
Speaker 1: And then you're also going to tell us a little
Speaker 1: bit more about the upcoming trial in the Justice Department's
Speaker 1: lawsuit against Google over its search business. So do you
Speaker 1: want to come in and tell us about these cases?
Speaker 2: Well, thanks Elliott.
Speaker 3: So for those of you not following the matter of
Speaker 3: Microsoft and activisions for post deal, it's been pending since
Speaker 3: January twenty twenty two and it's been a real roller coaster.
Speaker 3: So a few months ago this deal seemed really close
Speaker 3: to dead, but now it has new life. So what's
Speaker 3: happening is it's been cleared by about forty anti trust.
Speaker 2: Authorities globally, most with no conditions.
Speaker 4: The European Commission did clear with some commissions, and right
Speaker 4: now the only holdouts are the UK and the US.
Speaker 4: But in the US the companies have beaten efforts in
Speaker 4: court by the NTC to temporarily block the deal, so
Speaker 4: they are technically clear to cloaks. So UK is the
Speaker 4: only jurisdiction that stands in their way. And right now
Speaker 4: what they've done is they've offered up new remedies, or
Speaker 4: at least a new restructuring of the deal to the
Speaker 4: UK's Competition and Markets Authority, which is their anti trust agency,
Speaker 4: and that authority is reopened discussions and they think they
Speaker 4: need about four six weeks so I think the prospects
Speaker 4: for a settlement there are really good. We'll probably hear
Speaker 4: about that in about four weeks, and I think this
Speaker 4: deal is probably going to be able to close after that. Now,
Speaker 4: one thing is that they have an end date for
Speaker 4: their agreement as of July eighteenth, but they're probably going
Speaker 4: to extend that sometimes in sometimes in the next couple
Speaker 4: of days. Now the thing is in the US, the
Speaker 4: NTC could still pursue.
Speaker 2: A closed deal.
Speaker 4: They can continue to appeal, and they can seek in
Speaker 4: order to unwind it, but we think the agency's chances
Speaker 4: of success.
Speaker 2: Are really low.
Speaker 5: So at this point in time, I think the.
Speaker 2: Deal is going to close and it's good to go.
Speaker 1: Now.
Speaker 2: The second matter that Elliott mentioned is Google and the
Speaker 2: Department of Justice is basically has suit up for a monopolization.
Speaker 4: In the searge area and this trial is ready to
Speaker 4: start on September twelfth in a.
Speaker 2: Federal court in the District of Columbia. So what the
Speaker 2: Department of Justice is alleging, and by the way, there
Speaker 2: are also.
Speaker 4: Some states that have joined the Department of Justice, is
Speaker 4: that Google is unlawfully maintaining its monopoly in general search services,
Speaker 4: search advertising, and general search text advertising in the US,
Speaker 4: and this is because the company pays billions of dollars
Speaker 4: each year to distributors like device manufacturers such as Apple,
Speaker 4: or wireless carriers like AT and T, or browser developers
Speaker 4: like Mozilla to be the default search engine for.
Speaker 2: Their products or for their software.
Speaker 4: And what the DOJ says is that users rarely ever
Speaker 4: change the default search engine, so it gives that company
Speaker 4: a defacto way exclusivity and because of that, Google effectively
Speaker 4: homes the control search distribution channels, accounting for about eighty
Speaker 4: percent of general search quers in the US. Now, this
Speaker 4: is a pretty traditional theory under the antitrust laws, It's
Speaker 4: basically said the precedent is that exclusive agreements that tie
Speaker 4: up more than forty percent of available outlets can be illegal.
Speaker 4: But here the question is are these outlets really tied up?
Speaker 6: Is it real foreclosure?
Speaker 4: Because Google doesn't prevent users from changing their default search engine.
Speaker 2: Anybody can win and change.
Speaker 4: The default search engine being or duc dot Go anywhere
Speaker 4: they want to, and Google.
Speaker 2: Doesn't prevent that. So the question is going to be
Speaker 2: based on the evidence.
Speaker 4: And whether these default agreements search status agreements truly are foreclosure.
Speaker 2: If they are. I think the DJ has a really
Speaker 2: good shot.
Speaker 4: At winning this case, But even if that happens, I
Speaker 4: think the worst remedy would be that Google has.
Speaker 2: To drop these exclusive agreements.
Speaker 4: The DJ is seeking a break of the company, but
Speaker 4: it's highly doubtful that's what a judge would in goes
Speaker 4: just breaking up these exclusive agreements would target the harm
Speaker 4: and would be the least restrictive alternative, and that's usually
Speaker 4: where a judge would go on these kinds of matters.
Speaker 4: So all in all, probably not particularly impactful to Google,
Speaker 4: even if so.
Speaker 1: With that, back to you, Elliott, great, thanks for rot Jen,
Speaker 1: And just a reminder, we're recording this on July seventeenth,
Speaker 1: so when folks on the call say things like tomorrow,
Speaker 1: we're talking about July eighteen and by the time you
Speaker 1: listen to this podcast and maybe after that date. In
Speaker 1: any event, but with that caveat, Matt, let's bring you in.
Speaker 1: We're going to stick with tech. You expect the FTC
Speaker 1: to propose rules they're threatening the targeted ad business of
Speaker 1: companies like Alphabet and Meta, and you've also said that
Speaker 1: you expect the Supreme Court to take up a case
Speaker 1: that could shape Internet regulation. As we know. It sounds
Speaker 1: like super important stuff. Why don't you come in and
Speaker 1: tell us about it? Yeah?
Speaker 7: I think it could be an interesting second half for
Speaker 7: Internet companies in the policy space here, not just for
Speaker 7: the antitrust issues that GEN touched on, but while the
Speaker 7: FTC maybe has struggled in some of those enforcement actions,
Speaker 7: I think it's likely to try again to make rules
Speaker 7: to go directly after these companies, not through litigation, but
Speaker 7: by setting legal standards. So companies like Alphabet and Meta
Speaker 7: make hundreds of billions of dollars a year using data
Speaker 7: for ad and there are almost no direct legal limits
Speaker 7: in the United States on that. Congress has tried to
Speaker 7: pass a law to limit how they use data for advertising,
Speaker 7: but no bill has made it through the process to
Speaker 7: the finish line. That's where the FTC is likely to
Speaker 7: step in and likely moving ahead with the process in
Speaker 7: the second half of this year. It's likely to adopt
Speaker 7: the rules that go directly at when is it unfair
Speaker 7: or deceptive to use data, in this case for advertising purposes.
Speaker 7: The FTC first launched this rule making almost a year
Speaker 7: ago in August of twenty twenty two, and what we
Speaker 7: expect this in the coming months is the next key
Speaker 7: step in that process, and that's when the FTC is
Speaker 7: due to release a Notice of Proposed Rulemaking, when I
Speaker 7: expect they'll kind of more concretely set out what sorts
Speaker 7: of rules they envision. So far, they've been very open ended.
Speaker 7: I think we should have a much clearer sense of
Speaker 7: what they're going to go after, and this FTC has
Speaker 7: given us every indication that it will go big, that
Speaker 7: it will be aggressive in what it's trying to pursue.
Speaker 7: That will likely lead to an effort to push final
Speaker 7: rules in place in probably late twenty twenty four, and
Speaker 7: then you're going to see litigation over it following that.
Speaker 7: But the big development for this second half is I
Speaker 7: think we'll get a more concrete sense of what's in play,
Speaker 7: and I expect the FTC to be aggressive about what
Speaker 7: it's trying to pursue.
Speaker 1: There.
Speaker 7: The second thing that I wanted to highlight is another
Speaker 7: risk on the Internet policy front, and that involves the
Speaker 7: US Supreme Court. This doesn't involve the back end of
Speaker 7: the businesses from Meta and Alphabet how they use data.
Speaker 7: It involves the front end what you see when you
Speaker 7: go to their websites. States like Florida and Texas want
Speaker 7: to impose rules that control how the companies display content
Speaker 7: because there's a perception that the companies are biased in
Speaker 7: how they're presenting content, and so they have different ideas
Speaker 7: about how to regulate that, to mandate neutrality or to
Speaker 7: mandate that the companies operate like common carriers. And that
Speaker 7: presents a really big legal question under the First Amendment
Speaker 7: because the companies claim that they are protected as speakers,
Speaker 7: that they get to frame their message just as the
Speaker 7: New York Times or the Wall Street Journal gets to
Speaker 7: frame its message. But the Supreme Court has never really
Speaker 7: given a clear standard of how the First Amendment applies
Speaker 7: to regulation of the Internet. And so what I think
Speaker 7: will happen in the second half of this year is
Speaker 7: the Court is going to agree to take up this
Speaker 7: case about the Texas and Florida laws, and it's going
Speaker 7: to tee up a really important question about can these
Speaker 7: companies be regulated in how they display text. Is it
Speaker 7: the same as a newspaper or can they be regulated
Speaker 7: more aggressively, And it's all about how the First Amendment
Speaker 7: applies to that. So I think that fight's going to
Speaker 7: take shape in the second half of this year, and
Speaker 7: then I would expect a final decision by June of
Speaker 7: next year. With that, let me toss it back to
Speaker 7: you Elliott.
Speaker 1: Great, thanks a lot, Matt. All right, Nathan, enough tech
Speaker 1: for now. Let's bring you in and talk financials. The
Speaker 1: FED recently previewed new capital requirements that are come in
Speaker 1: for banks, and you also expect other rules to be
Speaker 1: proposed to address issues that became a parent during the
Speaker 1: regional bank issues in March and April. This is obviously
Speaker 1: a pretty big deal for banks. So why don't you
Speaker 1: come in and tell us more about what you're expecting.
Speaker 6: Yeah, So, if you're in the bank space, I highly
Speaker 6: recommend that you go to July tenth. There was a
Speaker 6: speech by FED Vice Chairmichael Barr on bank capital and
Speaker 6: this really laid out the endgame of what the regulators
Speaker 6: are going to do for the post SVB post BOZL
Speaker 6: three requirements. And I said endgame on purpose because the
Speaker 6: first proposal out there is known as the Bosle three endgame.
Speaker 6: And what this proposal does is it would raise capital
Speaker 6: requirements for the big banks. The general consensus view is
Speaker 6: about twenty percent. By what it would do is for
Speaker 6: every extra sorry, for every one hundred dollars of risk
Speaker 6: weighted assets. It would add two hundred basis points or
Speaker 6: two dollars to that. And so you know, this is
Speaker 6: one of those things where it was Basle. The Bossle
Speaker 6: three endgame is an international standard. It's already been designed
Speaker 6: in Europe. This is the American portion of it that's
Speaker 6: playing catch up. But you know the reason why the FED,
Speaker 6: or one of the when the FED went forward with
Speaker 6: this two hundred basis point increased the use words like humble,
Speaker 6: that the banking system needs to be humble now in
Speaker 6: within the BOSO three end game. There are two other
Speaker 6: things to keep a note is for firms trading activities,
Speaker 6: there's going to be new market risk capital requirements and
Speaker 6: this is going to hit the investment banks. It specifically
Speaker 6: is going to look at training books by these investment banks.
Speaker 6: We've heard anecdotally from the FED the capital requirements for
Speaker 6: specific desks could go up sixty percent. And it would
Speaker 6: also require standardization of credit risk models. So if you're
Speaker 6: Bank America or goldmin Sacks, you're not going to be
Speaker 6: able to use your own model. You're going to have
Speaker 6: to use the standardized credit risk model. So everything is
Speaker 6: now apples to apples. Now, the most important thing here
Speaker 6: to note is that if you were to take this proposal,
Speaker 6: you know, this two hundred basis point increase, it would
Speaker 6: wipe out pretty much all of the one hundred and
Speaker 6: twenty one billion dollars of access capital that the big
Speaker 6: gesips already have in play. However, the FED Vice chair
Speaker 6: also stated that he thinks that after a two year
Speaker 6: implementation period, if banks continue to maintain the profits that
Speaker 6: they have over the last few years, that they'll be
Speaker 6: able to get to this capital requirement without herming or
Speaker 6: being able to continue to pay out dividends. And that's
Speaker 6: the big question.
Speaker 1: Now.
Speaker 6: Obviously, when this proposal comes out, and we anticipate this
Speaker 6: to come out at the end of July or potentially
Speaker 6: in August via a virtual session at the FED, we'll
Speaker 6: know a little bit more. But right now that you know,
Speaker 6: the banks are, you know, not really thrilled about this
Speaker 6: a development, but you know, this was this was coming,
Speaker 6: This was actually planned prior to Silicon Valley. I should
Speaker 6: also note that this Bosle three endgame is applicable to
Speaker 6: banks that are one hundred billion in ups, so not
Speaker 6: just looking at Bank of America or Goldman Sachs. But
Speaker 6: if you're looking at fifth third, or you know, some
Speaker 6: of the smaller banks out there, like Citizens and so
Speaker 6: forth like that, this is also going to be applicable
Speaker 6: to them, probably just not on the same scale. The
Speaker 6: other thing that really keep in mind is that there
Speaker 6: are two other, really or three other major initiatives. Now
Speaker 6: this could come as part of the Bosle three proposal,
Speaker 6: or these could be separate proposals, but one is requiring
Speaker 6: regional banks to issue what is known as te LAC
Speaker 6: debt total loss absorbing capacity debt. Now, if you were
Speaker 6: to take the big bank t LAC rules, so the
Speaker 6: rule that's currently in place for the biggest banks, and
Speaker 6: apply it to the banks that are hundred billion and up,
Speaker 6: as we suspect the FED is going to do, you're
Speaker 6: looking at a six one hundred and sixty eight billion
Speaker 6: dollars in new debt that the regional banks have to issue.
Speaker 6: About ninety billion of that is for the banks that
Speaker 6: are hundred billion to two hundred and fifty billion, and
Speaker 6: then the rest is coming for those banks that are
Speaker 6: two hundred and fifty billion and up, like P and C, Truist,
Speaker 6: et cetera. Now, the regional banks. They're not thrilled about this,
Speaker 6: but from what we've heard, they're not as opposed to
Speaker 6: this as the big banks are to the capital requirements rule.
Speaker 6: But again it's something if you're on the credit side
Speaker 6: you should be paying attention to. We think this is
Speaker 6: going to come out right around the same side. We
Speaker 6: also are going to see changes to the accounting standards
Speaker 6: for what are known as available for sales securities. This
Speaker 6: is applicable to those banks one hundred billion and up.
Speaker 6: This is something in the Silicon Valley certainly was playing.
Speaker 1: A part of.
Speaker 6: And then you're going to see some more what I
Speaker 6: would call tweaks to the stress test framework. You're going
Speaker 6: to see minimal adjustments to the jiefs of surcharge and
Speaker 6: FED Vice chair Michael Barr said that you're not going
Speaker 6: to see any changes to the Enhanced Supplementary Leverage Ratio
Speaker 6: or the ESLR at this point. Now, like I said before,
Speaker 6: these proposals they need to come out fairly soon. The
Speaker 6: regulators need to get this done before the twenty twenty
Speaker 6: four elections because if you run, if the Republicans win
Speaker 6: the White House, you potentially could have a changing of
Speaker 6: the guard at the OCC and the FDIC, and so
Speaker 6: we anticipate the regulators will put these proposals out. You're
Speaker 6: probably looking at a sixty day comment period and then
Speaker 6: they're going to try and spend the rest of twenty
Speaker 6: twenty four putting this out there. As you can imagine,
Speaker 6: the banking industry is not overly happy about this, so
Speaker 6: they're going to be fighting this tooth and nail. But
Speaker 6: we're looking at finalization probably about a year from now,
Speaker 6: with a two year implement after that. We've got a
Speaker 6: lot more on the terminal available, but for right now,
Speaker 6: I'm going to push that back to you, Elliott.
Speaker 1: Great, thanks, Nathan, good stuff. All right, So we'll stick
Speaker 1: with financials and I'll jump in here to talk about
Speaker 1: some of the key litigation catalysts that I'm watching in
Speaker 1: the second half of the year. First, I think there
Speaker 1: is a good chance that UBS moves closer to settling
Speaker 1: with the Justice Department over a legacy residential mortgage backed
Speaker 1: securities case from the Financial crisis. Ubs is the only
Speaker 1: bank that didn't settle with the Justice Department, prompting the
Speaker 1: Justice Department to sue in twenty eighteen. The litigation has
Speaker 1: moved slowly, but UBS took a six hundred and sixty
Speaker 1: five million dollar provision in one queue for this case,
Speaker 1: suggesting the bank is gearing up for a settlement based
Speaker 1: on settlements by other banks over the same issue. I
Speaker 1: think UBS is likely facing the settlement of about two
Speaker 1: and a half billion dollars, so it's possible that the
Speaker 1: bank may still to take some additional provisions for this matter.
Speaker 1: I also expect UBS to settle government probes of Credit
Speaker 1: Suisse that stemmed from the Arcagos collapse in twenty twenty one.
Speaker 1: As I'm sure everyone knows, UBS bought its Swiss rival,
Speaker 1: Credit Swiese earlier this year, and as a result, Credit
Speaker 1: Sweez's multiple litigation issues are now UBS's problem to resolve.
Speaker 1: Among Archagos' prime brokers, Credit Sweez was the most exposed,
Speaker 1: given its outsized losses of about five billion dollars and
Speaker 1: its apparent risk management lapses. The Financial Times reported in
Speaker 1: June that the Federal Reserve could exact as much as
Speaker 1: a three hundred million dollars fine for Credit Sweez's failings,
Speaker 1: and the UK could seek up to one hundred million pounds.
Speaker 1: I think the SEC may also impose a fine, so
Speaker 1: Credit SWEE has reportedly only provisioned thirty five million dollars
Speaker 1: for fines related to Ourcagos, so it's possible that UBS
Speaker 1: will have to take additional provisions. Though I should note
Speaker 1: that UBS did take about four billion dollars in provisions
Speaker 1: for litigation and regulatory matters related to its acquisition of
Speaker 1: credit Suites, but it's unclear how much, if any, of
Speaker 1: that four billion dollars was related to our Chagos. Turning
Speaker 1: to crypto, we had a big decision in the SEC
Speaker 1: versus Ripple case last week, and that is going to
Speaker 1: have major implications for other crypto cases that we're watching,
Speaker 1: most notably the SEC's case against Coinbase. The issue in
Speaker 1: this line of cases is whether crypto assets or securities
Speaker 1: or not, since the SEC's jurisdiction over the crypto spase
Speaker 1: basically turns on that question. The Ripple ruling was notable
Speaker 1: because it said that only certain direct sales by Ripple
Speaker 1: of its XRP token were securities, but that sales by
Speaker 1: Ripple of XRP on public public exchanges we're not securities.
Speaker 1: The ruling also said that XRP itself is not a security,
Speaker 1: which is a major rejection of the SEC's theory that
Speaker 1: most digital assets are securities, and it underscores a point
Speaker 1: that we've been making, which is that a sale of
Speaker 1: a token in one context, let's say, for purposes of
Speaker 1: raising money, may be a security, but the sale of
Speaker 1: the same token in a different context, let's say, on
Speaker 1: the secondary market, might not be a security. And that's
Speaker 1: a critical distinction for platforms like Coinbase, which we expect
Speaker 1: will hit this argument really hard as it begins to
Speaker 1: mount its defense against the SEC in the second half
Speaker 1: of this year. Another crypto case that we're watching and
Speaker 1: in which we expect a key ruling in two h
Speaker 1: is gray Scales action against the SEC over the company's
Speaker 1: bid for a spot bitcoin ETF. Just as a reminder
Speaker 1: for maybe people who don't follow this space all that closely,
Speaker 1: Grayscale is a crypto asset manager and it's been seeking
Speaker 1: to convert its Grayscale Bitcoin Trust, known as GBTC into
Speaker 1: an ETF. The SEC rejected that application, and that prompted
Speaker 1: a lawsuit by Grayscale. The case was argued in March,
Speaker 1: which means we should get a ruin any day now.
Speaker 1: The ruins come out on Tuesdays and Fridays, so if
Speaker 1: you want to check the DC Circuit's website on those days,
Speaker 1: you can join me and refreshing your browser at eleven
Speaker 1: am every day on those days. Based on that oral
Speaker 1: argument in March, I do think Grayscale is a good
Speaker 1: shot of getting a favorable ruling, but the language of
Speaker 1: that ruin is going to be key. But we do
Speaker 1: think there's a good chance that opens up a pathway
Speaker 1: to the SEC approving a spot bitcoin ETF, which will
Speaker 1: then make it easier for investors, whether they be retail
Speaker 1: or institutional, to buy exposure to bitcoin. And last, let
Speaker 1: me just add that we found out last week that
Speaker 1: we'll have Supreme Court argument on October third in a
Speaker 1: key case that we're watching, which is a challenge to
Speaker 1: the constitutionality of the Consumer Financial Protection Bureau of the CFPB.
Speaker 1: In the interest of time, I won't go into too
Speaker 1: much detail, but I think given the conservative majority on
Speaker 1: the Supreme Court's disdain for what's perceived to be the
Speaker 1: administrative state or administrative overreach, the CFPB, we think is
Speaker 1: likely to be weakened in that case, and that would
Speaker 1: be a good outcome for companies that are under the
Speaker 1: CFPB's jurisdiction companies like banks, services, credit bureaus and sintechs.
Speaker 1: So with that, I think I will wrap up my
Speaker 1: portion and we will and with the financials discussion and
Speaker 1: go on to healthcare. So, Dwayne, let's bring you in
Speaker 1: to talk drugs, specifically Medicare drugs and steps you expect
Speaker 1: the government to take to reduce drug prices. Dwayne, you
Speaker 1: want to come in and tell us about that.
Speaker 5: Sure, So, pretty big couple of weeks in the pharma
Speaker 5: biotech space coming up as Madycare sets release the list
Speaker 5: of ten party drugs that will be subject to negotiated
Speaker 5: pricing by September first. So this is a key section
Speaker 5: of the Democrats Inflation Reduction Act that gives the government
Speaker 5: power to negotiate prices for high expenditure drugs. In lead
Speaker 5: up to release of this list, Weed to take a
Speaker 5: look at some of the symphony health data which you
Speaker 5: can find in the Drug Explorer section of the bi
Speaker 5: terminal to pull together the list of ten drugs we
Speaker 5: think Medicare will select based on their drug spending for
Speaker 5: June first, twenty twenty two. May thirtieth, twenty twenty three.
Speaker 5: It's the first piece of it and two whether they
Speaker 5: have a generic or biosimilar competitor that's been marketed based
Speaker 5: on what we have, based on what we saw in
Speaker 5: the data we have on our list, Drugs by Bristol Meyers,
Speaker 5: squid Eloquist, Genuvia by Merk, Serralto by Jane Jay, and
Speaker 5: Trusto by Novartis to name a few. Now, once this
Speaker 5: list comes out again by September first, Medicare will then
Speaker 5: negotiate prices of those drugs with manufacturers over a ten
Speaker 5: month period, with prices published September twenty twenty four and
Speaker 5: those prices implemented January one, twenty twenty six. And the
Speaker 5: law says cuts must be anywhere from twenty five percent
Speaker 5: to six percent off of the list price, depending on
Speaker 5: how long the product has been FDA approved and marketed.
Speaker 5: But it all assumes that there aren't any delays with
Speaker 5: the negotiating process, given some of the quote challenges brought
Speaker 5: by Merk, Bristol Myers and the Chamber of Commerce and
Speaker 5: a flag Merk and Bristol Myers, they filed large because
Speaker 5: there's a general assumption that they will be on that
Speaker 5: list not just for this upcoming year, but for future years.
Speaker 5: Giving their pipeline. So we're looking forward to the end
Speaker 5: of August for clarity on the drug selection process, what
Speaker 5: it means for upcoming discussions, as well as the implementation
Speaker 5: process moving forward. Who why that's happening. We think the
Speaker 5: Administration will use its regulatory authority to implement drug pricing
Speaker 5: demos targeted at a select group of Part B drugs
Speaker 5: or physician administrated administered drugs.
Speaker 8: You can't call that.
Speaker 5: The administration at least a white paper earlier this year
Speaker 5: outlining some steps it would like to take to address
Speaker 5: the cost of drugs approved through the Accepted Approval pathway,
Speaker 5: which are essentially drugs that are conditionally approved but have
Speaker 5: to go through additional clinical trials to prove their efficacy.
Speaker 5: Particularly concerned by this administration and other Medicare stakeholders is
Speaker 5: the lack of follow up data from confirmatory trials, with
Speaker 5: many deadlines missed. In fact, there's been a lot of
Speaker 5: activity with the FDA conducting a number of hearings, and
Speaker 5: out of those hearings, we've seen some drug companies pull
Speaker 5: their drugs off.
Speaker 9: The market because of a lack of subsequent data. But
Speaker 9: even though many of these companies missed their deadlines, companies
Speaker 9: can still market and receive payment for what are typically
Speaker 9: high cost therapy. So the Administration signaled and has signaled
Speaker 9: it would my team use its demonstration authority through the
Speaker 9: Centers for Medicare and Medicate Innovation to provide financial and
Speaker 9: centers for companies to complete their trials on time, their
Speaker 9: financial penalties for failing to complete their trials on time.
Speaker 9: The administration signal is part of that white paper that
Speaker 9: there'll be potential rulemaking this year, and I expect we'll
Speaker 9: see some additional detail on their thinking in the fall
Speaker 9: as a run up to the election, given the amount
Speaker 9: of time it would take to go through the notice.
Speaker 5: And comment period as well as implementation. So in terms
Speaker 5: of companies, looking at the list of companies that are
Speaker 5: currently marketed under the Accelerated Approval Pathway c gen, Genetech,
Speaker 5: kan J, they have not had those drugs converted to
Speaker 5: fall up the approval yet as we wait additional trial data.
Speaker 5: But by and large, the longer this demo is in place,
Speaker 5: it could impact just an any manufacturer that approves or
Speaker 5: pursues the Accelerated Approval pathway. So we'll have more to
Speaker 5: come on what the Administration is planning to do and
Speaker 5: we're looking forward to seeing what the details are in
Speaker 5: terms of the impact on payment and other patient access.
Speaker 5: So with that, I will stop and turn it back
Speaker 5: to Elliott.
Speaker 1: Great, thanks Dwayne. All Right, let's stick with healthcare. But
Speaker 1: let's move over to the litigation side of things. Fish.
Speaker 1: Let's bring you into talk patent litigation. I know Exolexis
Speaker 1: had a trial last year. I think over it's Cabo
Speaker 1: metics cancer drug, but now it sounds like there's another
Speaker 1: trial coming up. Do you want to come in and
Speaker 1: tell us what that's about.
Speaker 10: Sure, Thanks Elliot. So, as you mentioned, x Alexis had
Speaker 10: a trial last year and in this October they're going
Speaker 10: to have a key second patent trial that's scheduled to
Speaker 10: start October twenty third, as it's trying to keep generic
Speaker 10: copies of Caba metics at bay until expiration data various
Speaker 10: Orange Book listed patents, so Caba metics is Xelexis's top product,
Speaker 10: with nearly one point six billion of exilexises projected one
Speaker 10: point eight billion twenty twenty three revenue attributed to Caba Metics.
Speaker 10: At least MSN Pharmaceuticals, Teva and one other generic are
Speaker 10: pursuing generic copies of CABA metic with the patent litigations
Speaker 10: against other generic makers besides MSN on hold why Exolexis
Speaker 10: plays out its litigation with MSN. SO In a decision
Speaker 10: on the first patent trial that was held last year,
Speaker 10: the district court maintained the validity of Exolexis's twenty twenty
Speaker 10: six composition a matter patent so that prevents any at
Speaker 10: risk launch by MSN while these additional patent issues are
Speaker 10: resolved in October. The key second trial for October includes
Speaker 10: patents that expire in twenty thirty and twenty thirty two.
Speaker 10: We give Exolexis a sixty percent chance to prevail on
Speaker 10: the twenty thirty patents that would block MSN generic entry
Speaker 10: until at least January twenty. While MSN was able to
Speaker 10: avoid infringement of a related twenty thirty expiring patent in
Speaker 10: the first trial, we don't think they can do so
Speaker 10: in this second trial because the patents at issue in
Speaker 10: October don't require a specific crystalline form they just require
Speaker 10: a specific crystal in salt. With respect to the twenty
Speaker 10: thirty two expiring broad formulation patent that's an issue in
Speaker 10: the October trial. We don't think it will provide any
Speaker 10: exclusivity for Exlexis, as we favor MSN to invalidate the patent.
Speaker 10: As I mentioned earlier, Exolexis's litigation against Teva is currently
Speaker 10: on hold. That litigation against Teva includes additional tablet formulation
Speaker 10: patents that Exlicis has that expire in twenty thirty one
Speaker 10: to twenty thirty three, but those patents have not been
Speaker 10: asserted against. MSN will continue to monitor and analyze the
Speaker 10: litigation landscape as the parties move towards trial in October.
Speaker 10: And with that, back to you.
Speaker 1: Elliott, and speaking of Teva, Holly, let's bring you in.
Speaker 1: You're watching, or you're going to watch a trial brought
Speaker 1: by the Justice Department against Teva for improper donations made
Speaker 1: to charities to fund Packstone Code Pays. And you're also
Speaker 1: expecting an important appeals court ruling in three m ear
Speaker 1: Plug litigation, which is not healthcare obviously, but I wanted
Speaker 1: to come in and tell us about these two cases, Elliott.
Speaker 11: Teva faces a September trial and a False Claims Act
Speaker 11: case brought by the DOJ. It's accused of violating me
Speaker 11: into a kickback Statue by using a charity to pay
Speaker 11: patient copays for a copaxone, which is an MS drug.
Speaker 11: It's alleged tever received information from the charity about how
Speaker 11: much money was needed to fund Copaxxon scripts, and that
Speaker 11: Teva would then provide funding to the charity. The Anti
Speaker 11: Kickback Statute makes it.
Speaker 8: Unlawful to pay remuneration directly or indirectly to induce a
Speaker 8: person to purchase a federally funded drug, and a person
Speaker 8: violates the False Claims Act when she knowingly submits for
Speaker 8: federal reimbursement a prescription that resulted from the violation the
Speaker 8: Anti kickback Statute. Tevera recently lost its bid for summary judgment.
Speaker 8: It had argued that in order to show a false
Speaker 8: claim back violation, the government has to show that the
Speaker 8: prescription would not have been written absent the kickback, and
Speaker 8: here the government has not shown that any prescription was
Speaker 8: medically unnecessary, or any doctor would not have written the
Speaker 8: colpax on prescription, or that any patient would not have
Speaker 8: filled that prescription without the copaxu on cope. The court
Speaker 8: rejected the argument, so exposure could exceed one billion, but
Speaker 8: the highest settlement we've found for this kind of SCA
Speaker 8: case is three hundred and sixty million dollars. And so
Speaker 8: turning to three M ear plug litigation, we expect a
Speaker 8: decision in three Q on three AM's appeal of the
Speaker 8: first bell Weather verdict overclaims ear plugs are defective and
Speaker 8: cause hearing loss. Threem faces over two hundred thousand lawsuits
Speaker 8: by veterans who say they were injured by defect defective earplugs.
Speaker 8: Hearm argued to the Eleventh Circuit Court of Appeals on
Speaker 8: May first that three M had immunity because it was
Speaker 8: a government contractor which built the ear plugs to the
Speaker 8: government's specifications. The lower court, who tried the first bell
Speaker 8: Weather and which is presiding over the more than two
Speaker 8: hundred thousand cases, rejected that argument. The Eleventh Circuit panel
Speaker 8: that heard the appeal seems inclined to affirm the lower court,
Speaker 8: But if Threem wins that argument, which we think is unlikely,
Speaker 8: many cases likely have to be dismissed. We expect that
Speaker 8: decision in three Q. And with that, I'll turn it
Speaker 8: back to you Elliott.
Speaker 1: Great, thanks Holly. All right, with that, I think we'll
Speaker 1: wrap up this episode of Votes and Verdicts. As always,
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