1 00:00:03,480 --> 00:00:07,560 Speaker 1: Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every 2 00:00:07,640 --> 00:00:10,440 Speaker 1: day we bring you insight and analysis into the most 3 00:00:10,480 --> 00:00:13,399 Speaker 1: important legal news of the day. You can find more 4 00:00:13,480 --> 00:00:18,040 Speaker 1: episodes of the Bloomberg Law Podcast on Apple Podcasts, SoundCloud 5 00:00:18,320 --> 00:00:22,560 Speaker 1: and on Bloomberg dot com slash podcasts. US regulators have 6 00:00:22,600 --> 00:00:25,680 Speaker 1: granted conditional approval to CVS and Etna for their proposed 7 00:00:25,680 --> 00:00:29,000 Speaker 1: sixty eight billion dollar merger that promises to transform the 8 00:00:29,040 --> 00:00:32,960 Speaker 1: healthcare sector. Speaking with Bloomberg, last month's CVS CEO Larry 9 00:00:33,040 --> 00:00:35,360 Speaker 1: Murlo told Bloomberg why the deal would be good for 10 00:00:35,400 --> 00:00:40,800 Speaker 1: the whole country. The need for uh innovation, disruption, transformation, 11 00:00:41,040 --> 00:00:45,200 Speaker 1: and the combination of CVS Health and Etna is going 12 00:00:45,320 --> 00:00:50,120 Speaker 1: to work absolutely on that. My guest is Nick kind 13 00:00:50,120 --> 00:00:52,600 Speaker 1: of Metis, a professor at n y U Stern School 14 00:00:52,640 --> 00:00:56,120 Speaker 1: of Business. Nick. The approval comes just a few weeks 15 00:00:56,200 --> 00:00:58,960 Speaker 1: after the Justice Department signed off on a fifty four 16 00:00:59,000 --> 00:01:02,840 Speaker 1: billion dollar deal binding Health Insure a signal with pharmacy 17 00:01:02,880 --> 00:01:06,920 Speaker 1: benefits manager express Scripts. Now it's approving the combination of 18 00:01:06,920 --> 00:01:09,319 Speaker 1: one of the top US drug store chains with the 19 00:01:09,440 --> 00:01:13,440 Speaker 1: third biggest health insurer. What's your take on this consolidation 20 00:01:13,560 --> 00:01:19,280 Speaker 1: in the healthcare market. Well, uh, First of all, I 21 00:01:19,319 --> 00:01:22,440 Speaker 1: wanted to note that the Department of Justice doesn't have 22 00:01:22,480 --> 00:01:25,319 Speaker 1: any problem with these vertical murders, while it did have 23 00:01:25,360 --> 00:01:29,400 Speaker 1: a problem with the A T and T Time Owner mergers. 24 00:01:29,440 --> 00:01:32,760 Speaker 1: So I don't quite understand how it can be consistent 25 00:01:33,160 --> 00:01:37,760 Speaker 1: to intervene in one vertical mergers and not intervening others. 26 00:01:37,800 --> 00:01:44,479 Speaker 1: But the crucial thing here is to understand whether UM 27 00:01:44,720 --> 00:01:51,160 Speaker 1: post the merger, there might be actions by one of 28 00:01:51,160 --> 00:01:56,400 Speaker 1: the parties, let's say ETHNA, to restrict UM It's ensured 29 00:01:57,280 --> 00:02:03,080 Speaker 1: customers to UM guide them to go only to CBS 30 00:02:03,200 --> 00:02:07,440 Speaker 1: UH to fulfill prescriptions, to do various things, and that 31 00:02:07,520 --> 00:02:11,799 Speaker 1: would be a serious concern. Now, of course, this is 32 00:02:12,200 --> 00:02:16,639 Speaker 1: something that hasn't happened yet, So the Department of This says, well, 33 00:02:17,040 --> 00:02:21,000 Speaker 1: we're we're going to approve the murderer and let's see 34 00:02:21,040 --> 00:02:24,720 Speaker 1: what happens. So but at the same time, after this 35 00:02:24,800 --> 00:02:27,400 Speaker 1: thing happens, it might be very hard for the Department 36 00:02:27,400 --> 00:02:30,200 Speaker 1: of Justice to do anything. Well. The deal was opposed 37 00:02:30,240 --> 00:02:33,880 Speaker 1: by consumer organizations who said consumers could end up with 38 00:02:34,040 --> 00:02:37,880 Speaker 1: higher drug prices and fewer choices, but making Delrahim, the 39 00:02:37,919 --> 00:02:40,640 Speaker 1: head of the Antitrust Division said the deal has the 40 00:02:40,680 --> 00:02:43,720 Speaker 1: potential to improve the quality and lower the costs of 41 00:02:43,760 --> 00:02:47,440 Speaker 1: the health care services for American consumers. Which side has 42 00:02:47,480 --> 00:02:53,079 Speaker 1: the better argument there? Well, you know, it's it's hard 43 00:02:53,120 --> 00:02:56,079 Speaker 1: to say. I mean they, I would say that it's 44 00:02:56,320 --> 00:03:00,480 Speaker 1: more likely I would find more with the consumer groups. 45 00:03:00,520 --> 00:03:05,400 Speaker 1: I would worry about the possibility that post murder, we 46 00:03:05,440 --> 00:03:08,880 Speaker 1: will see behaviors that are going to be restrictive for 47 00:03:08,960 --> 00:03:14,880 Speaker 1: consumers and expost more expensive for for for consumers. The 48 00:03:14,880 --> 00:03:18,040 Speaker 1: fact that the deals has a potential of a lot 49 00:03:18,080 --> 00:03:21,240 Speaker 1: of good new things, It's It's true one has to 50 00:03:21,280 --> 00:03:26,440 Speaker 1: ask the question whether a multi billion dollar merger is 51 00:03:26,480 --> 00:03:32,000 Speaker 1: required to create the positive stuff. I mean, couldn't that 52 00:03:32,080 --> 00:03:35,760 Speaker 1: these two companies have some joint agreement and created a 53 00:03:35,800 --> 00:03:38,960 Speaker 1: lot of the positive stuff without having to merge. I 54 00:03:38,960 --> 00:03:42,160 Speaker 1: mean that's something that people, especially in finance, and these 55 00:03:42,160 --> 00:03:45,280 Speaker 1: companies are exposed to significant amounts of that, have to 56 00:03:45,360 --> 00:03:49,960 Speaker 1: ask is it really necessary to merge to be able 57 00:03:50,000 --> 00:03:53,840 Speaker 1: to get benefits across the two companies? Could you still 58 00:03:53,920 --> 00:03:57,520 Speaker 1: also put pressure on rivals like Walgreens to come up 59 00:03:57,560 --> 00:04:01,680 Speaker 1: with their own deals? Absolut lutely, I think the pressure 60 00:04:01,760 --> 00:04:04,760 Speaker 1: is there and the pressure is huge. UM, They're going 61 00:04:04,800 --> 00:04:11,760 Speaker 1: to be a pressure to UH combine UM retailers, PBMs, 62 00:04:12,040 --> 00:04:17,440 Speaker 1: personal benefit managers and insurance companies to the extent possible 63 00:04:17,880 --> 00:04:20,840 Speaker 1: to be able to rival to to be able to 64 00:04:21,400 --> 00:04:25,320 Speaker 1: deal with the rivalry with. Now the combined ETHNO CBS 65 00:04:25,800 --> 00:04:33,640 Speaker 1: UH and the SIGNA Express Express Prescripts Murders explain for 66 00:04:33,839 --> 00:04:39,160 Speaker 1: you know, for in Layman's terms, how consolidation has increased 67 00:04:39,200 --> 00:04:44,880 Speaker 1: across the healthcare sector and the effects you see. Well, 68 00:04:46,080 --> 00:04:51,479 Speaker 1: you know, there are three pieces, the insurer, the personal 69 00:04:51,560 --> 00:04:57,480 Speaker 1: benefits manager, and the retailer. UM. The insurer gets a 70 00:04:57,560 --> 00:05:01,680 Speaker 1: prescription from a from a doctor and pays it the 71 00:05:01,080 --> 00:05:06,640 Speaker 1: the PBM, the termines essentially how much money the retailer 72 00:05:06,760 --> 00:05:08,839 Speaker 1: is going to get and how much money the insurance 73 00:05:08,920 --> 00:05:13,640 Speaker 1: is going to get, and then the retailer fulfills the prescription. Now, 74 00:05:14,080 --> 00:05:16,800 Speaker 1: in the beginning, we have three different parties and each 75 00:05:16,800 --> 00:05:19,400 Speaker 1: one place it's role and each one in in in 76 00:05:19,400 --> 00:05:22,479 Speaker 1: in a competitive market dealing with rivals. Now, if you 77 00:05:22,560 --> 00:05:28,560 Speaker 1: start combining them vertically, UH, then you reduce the amount 78 00:05:28,560 --> 00:05:32,840 Speaker 1: of competition that can expect you can expect horizontally between 79 00:05:32,880 --> 00:05:36,280 Speaker 1: insurer in insurance PBM and PBM and retailer to retailer. 80 00:05:36,640 --> 00:05:39,279 Speaker 1: So that's kind of the danger here that we create 81 00:05:39,400 --> 00:05:45,919 Speaker 1: silos going all the way vertically, which might reduce the 82 00:05:45,960 --> 00:05:51,440 Speaker 1: consumers choice and also increase what the consumers ultimately pay, 83 00:05:52,320 --> 00:05:57,400 Speaker 1: not directly, but what the employers pay, for example, for insurance. Right, 84 00:05:57,480 --> 00:05:59,840 Speaker 1: always a pleasure to have you on Nick with your insight. 85 00:06:00,080 --> 00:06:02,680 Speaker 1: That's Nick Economyties. He is a professor at n y 86 00:06:02,800 --> 00:06:11,280 Speaker 1: U Stern School of Business. Yesterday in Washington, FBI Director 87 00:06:11,440 --> 00:06:15,760 Speaker 1: Christopher Ray testified before the Senate Homeland Security Committee, where 88 00:06:15,760 --> 00:06:19,680 Speaker 1: he warned lawmakers of the threat coming from China. China, 89 00:06:19,720 --> 00:06:24,520 Speaker 1: in many ways, represents the broadest, most complicated, most long 90 00:06:24,680 --> 00:06:28,000 Speaker 1: term counterintelligence threat we face joining us. As William Banks, 91 00:06:28,000 --> 00:06:32,360 Speaker 1: professor at Syracuse Law School, bill, Russia is being investigated 92 00:06:32,400 --> 00:06:37,679 Speaker 1: for interference in the election. Did Ray downplay the Russia 93 00:06:37,760 --> 00:06:43,440 Speaker 1: threat and stress the China threat for some reason? Well, 94 00:06:44,000 --> 00:06:46,000 Speaker 1: it's hard to know. I think that, you know, the 95 00:06:46,160 --> 00:06:52,040 Speaker 1: China um issues have become more prominent lately, as you know, 96 00:06:52,279 --> 00:06:55,600 Speaker 1: we've actually been able to bring to the United States 97 00:06:55,600 --> 00:06:59,359 Speaker 1: pursuing too an extradition one of those indicted for economic 98 00:06:59,560 --> 00:07:04,040 Speaker 1: espion on behalf of China. Uh. And indeed, even late 99 00:07:04,080 --> 00:07:06,920 Speaker 1: in the Clinton I mean, in the Obama administration, there 100 00:07:06,920 --> 00:07:11,200 Speaker 1: were indictments against Chinese hackers. So I think, you know, 101 00:07:11,240 --> 00:07:14,520 Speaker 1: with the election put to one side, I think it's 102 00:07:14,520 --> 00:07:17,000 Speaker 1: fair to say that China has been the more dominant 103 00:07:17,080 --> 00:07:20,480 Speaker 1: cyber threat for the United States over the last several years. 104 00:07:21,160 --> 00:07:24,520 Speaker 1: He also said that the policy won't allow him to 105 00:07:24,560 --> 00:07:28,600 Speaker 1: even confirm or deny if there's an investigation into that 106 00:07:28,680 --> 00:07:30,920 Speaker 1: story that you saw in Bloomberg business Week about the 107 00:07:31,000 --> 00:07:36,080 Speaker 1: use of malicious chips in servers. Uh. I know he said, 108 00:07:36,120 --> 00:07:38,320 Speaker 1: don't read anything into that, but it's really hard not 109 00:07:38,360 --> 00:07:42,520 Speaker 1: to read something into that. That story has caused a 110 00:07:42,520 --> 00:07:46,120 Speaker 1: lot of controversy, and indeed, you know that because of 111 00:07:46,160 --> 00:07:50,440 Speaker 1: the need to protect the intelligence sources and methods that 112 00:07:51,040 --> 00:07:54,840 Speaker 1: could have given the story and could have given the 113 00:07:55,160 --> 00:07:57,760 Speaker 1: Bureau what it needed to know or the other parts 114 00:07:57,760 --> 00:08:01,200 Speaker 1: of the intelligence community what it needed to know to 115 00:08:01,240 --> 00:08:04,640 Speaker 1: trace down the hackers and to try to supply patches 116 00:08:04,720 --> 00:08:09,760 Speaker 1: and the like. It's uh, it's a very unsettling developed 117 00:08:09,800 --> 00:08:12,440 Speaker 1: set of developments. But I think we're probably going to 118 00:08:12,560 --> 00:08:16,400 Speaker 1: learn more about the exact extent and nature of that 119 00:08:16,480 --> 00:08:20,880 Speaker 1: damage before too long? Bill, Has the FBI suffered in 120 00:08:20,960 --> 00:08:25,640 Speaker 1: any respects and has has our counter terrorism operations and 121 00:08:25,720 --> 00:08:30,080 Speaker 1: intelligence operations suffered because of the attacks on the FBI 122 00:08:30,120 --> 00:08:34,480 Speaker 1: and the pressure that's been put on them. I would 123 00:08:34,559 --> 00:08:38,080 Speaker 1: say that it has not suffered so far. But you know, 124 00:08:38,200 --> 00:08:43,439 Speaker 1: the condemnation and the partisan bashing that's gone on for 125 00:08:44,440 --> 00:08:46,280 Speaker 1: a good part of the last year and a half, 126 00:08:46,320 --> 00:08:48,920 Speaker 1: are you in two year and three quarters almost as 127 00:08:49,760 --> 00:08:52,280 Speaker 1: bound to take an effect if it continues. I think 128 00:08:52,320 --> 00:08:55,880 Speaker 1: the professionals at the top and the line people and 129 00:08:55,960 --> 00:09:00,679 Speaker 1: the jobs that are doing this work are dedicated professionals 130 00:09:00,679 --> 00:09:03,920 Speaker 1: who are committed to public service, and they won't be 131 00:09:04,760 --> 00:09:07,720 Speaker 1: derailed by the kind of attacks that have been given. 132 00:09:07,920 --> 00:09:11,800 Speaker 1: But again yesterday, in addition to Mr Ray, the former 133 00:09:11,840 --> 00:09:16,560 Speaker 1: General Council Jim Baker also testified, and you know he's 134 00:09:16,640 --> 00:09:19,400 Speaker 1: no longer in the job, he's off doing other things now, 135 00:09:20,000 --> 00:09:23,200 Speaker 1: but he was I think very uh much of the 136 00:09:23,280 --> 00:09:26,199 Speaker 1: mind that the Bureau was is doing the job that 137 00:09:26,280 --> 00:09:29,240 Speaker 1: it's set out to do without any kind of effect 138 00:09:29,280 --> 00:09:33,319 Speaker 1: of political interference at all. Ray also told senators I 139 00:09:33,360 --> 00:09:35,240 Speaker 1: want to push back on that a little bit, because 140 00:09:35,280 --> 00:09:38,319 Speaker 1: they did that. Kavanaugh investigation, they reopened it, they did 141 00:09:38,360 --> 00:09:40,600 Speaker 1: more of a background check on him, and he said 142 00:09:40,640 --> 00:09:43,440 Speaker 1: that it followed the usual process, although he did concede 143 00:09:43,559 --> 00:09:46,760 Speaker 1: that it was a very limited scope, limited by the 144 00:09:46,800 --> 00:09:50,880 Speaker 1: White House. Can you square that circle for us? Well, yeah, 145 00:09:50,920 --> 00:09:54,319 Speaker 1: it's true. He didn't say very much at all, Chris 146 00:09:54,400 --> 00:09:57,760 Speaker 1: Ray about the investigation, other than to say it was 147 00:09:57,840 --> 00:10:01,680 Speaker 1: like other limited background investigate. What he did say, in 148 00:10:01,720 --> 00:10:05,120 Speaker 1: addition was that the direction for the scope and nature 149 00:10:05,200 --> 00:10:08,000 Speaker 1: of the investigation came from the White House, not the Senate. 150 00:10:08,679 --> 00:10:11,160 Speaker 1: That's unusual, of course, and that it was the Senate 151 00:10:11,160 --> 00:10:15,120 Speaker 1: who was passing muster on Judge Kavanaugh. The White House 152 00:10:15,160 --> 00:10:18,000 Speaker 1: they had already selected him for the position. So you 153 00:10:18,160 --> 00:10:20,200 Speaker 1: think that the Senate should have set the terms of 154 00:10:20,200 --> 00:10:23,560 Speaker 1: the investigation. But here, uh, you know, some kind of 155 00:10:23,640 --> 00:10:27,480 Speaker 1: arrangement was made between the leadership of the Senate Judiciary 156 00:10:27,520 --> 00:10:29,520 Speaker 1: Committee and the White House, and the White House then 157 00:10:29,559 --> 00:10:33,320 Speaker 1: became the points and in striking the terms of the 158 00:10:33,360 --> 00:10:36,800 Speaker 1: investigation with the FBI, I suppose it was Don McGann 159 00:10:37,200 --> 00:10:40,800 Speaker 1: and White House counsel, which would explain the very narrow 160 00:10:41,360 --> 00:10:44,079 Speaker 1: focus of the investigation. In other words, the Bureau did 161 00:10:44,080 --> 00:10:46,959 Speaker 1: what it was told The New York Times did report 162 00:10:47,000 --> 00:10:50,079 Speaker 1: that Don the Gan was the one giving instructions, the 163 00:10:50,160 --> 00:10:55,120 Speaker 1: limiting instructions to the FBI, but in raised testimony he 164 00:10:55,240 --> 00:10:58,320 Speaker 1: was between the proverbial rock and a hard place in 165 00:10:58,800 --> 00:11:01,880 Speaker 1: thinking about what the president, how the President might react, 166 00:11:01,920 --> 00:11:06,959 Speaker 1: and what he would say. Well, that's true, Chris Ray 167 00:11:07,040 --> 00:11:09,600 Speaker 1: had an incentive not to say very much and simply 168 00:11:09,640 --> 00:11:12,680 Speaker 1: to repeat the sort of boilerplate that had been offered 169 00:11:12,720 --> 00:11:15,480 Speaker 1: since last week when the investigation was agreed to, that 170 00:11:15,520 --> 00:11:17,800 Speaker 1: it was going to be limited, that they were going 171 00:11:17,880 --> 00:11:19,960 Speaker 1: to see that, you know, they were going to interview 172 00:11:20,000 --> 00:11:23,400 Speaker 1: those few witnesses and not expand or look at others 173 00:11:23,400 --> 00:11:27,520 Speaker 1: who had come forward, or to further check the or 174 00:11:27,559 --> 00:11:33,280 Speaker 1: corroborate or or investigate whether Judge Kavanaugh had lied during 175 00:11:33,400 --> 00:11:36,960 Speaker 1: his testimony about his high school activities. He did say 176 00:11:36,960 --> 00:11:39,720 Speaker 1: that there was a lot of communication about this and 177 00:11:39,800 --> 00:11:42,360 Speaker 1: during the process between the White House and the FBI. 178 00:11:42,520 --> 00:11:49,080 Speaker 1: How appropriate, how normal is that? Well, it's it's it's uh. 179 00:11:49,440 --> 00:11:53,400 Speaker 1: The FBI Security Division works uh for the Department of Justice, 180 00:11:53,440 --> 00:11:56,840 Speaker 1: but both in turn work for the President United States. 181 00:11:56,840 --> 00:12:02,400 Speaker 1: So he's he's certainly enable to UH supplied direction as 182 00:12:02,440 --> 00:12:05,800 Speaker 1: he may. I think it's uh, it has the parents 183 00:12:05,840 --> 00:12:08,840 Speaker 1: that he might have been trying to tilt there, you know, 184 00:12:08,920 --> 00:12:11,240 Speaker 1: the scope of the investigation or the terms of it, 185 00:12:11,320 --> 00:12:15,319 Speaker 1: and in a direction more favorable to Judge Kavanaugh. And 186 00:12:15,360 --> 00:12:18,040 Speaker 1: you know, I'd say that's too bad. The Senate could 187 00:12:18,040 --> 00:12:21,800 Speaker 1: have done, could have taken control of it and broaden 188 00:12:21,840 --> 00:12:25,160 Speaker 1: the investigation. We're told the FBI to simply go where 189 00:12:25,160 --> 00:12:28,720 Speaker 1: the facts leaded, but it didn't take that opportunity either. 190 00:12:29,240 --> 00:12:33,120 Speaker 1: Bill Ray also made his most forceful comments so far 191 00:12:33,200 --> 00:12:36,480 Speaker 1: about the threat from weaponized drones. And that's just as 192 00:12:36,960 --> 00:12:40,520 Speaker 1: US law enforcement and homeland security agencies have gotten legal 193 00:12:40,559 --> 00:12:44,840 Speaker 1: authority to monitor and at times, if necessary, disabled drones. 194 00:12:45,200 --> 00:12:47,760 Speaker 1: What does that tell you about the what the FBI 195 00:12:47,880 --> 00:12:51,720 Speaker 1: knows the information coming in? Well, I think it is 196 00:12:51,720 --> 00:12:55,600 Speaker 1: a worrisome development, and it comes at a time within 197 00:12:56,400 --> 00:12:59,400 Speaker 1: the so called jurisdiction to use the legal term over 198 00:12:59,559 --> 00:13:04,600 Speaker 1: drawn domestic drone US is unclear. Department of Homeland Security, 199 00:13:04,640 --> 00:13:09,520 Speaker 1: the Department of Transportation, the Federal Aviation Administration, state and 200 00:13:09,600 --> 00:13:14,840 Speaker 1: local governors, state and local legislatures, the FBI, state and 201 00:13:14,880 --> 00:13:20,640 Speaker 1: local police martial services all have a hand in monitoring 202 00:13:20,720 --> 00:13:25,400 Speaker 1: and perhaps regulating the domestic drone ears. So when intelligence 203 00:13:25,440 --> 00:13:28,839 Speaker 1: comes in that suggests there's some nefarious possibilities of foot 204 00:13:28,840 --> 00:13:32,880 Speaker 1: doing the States one that shouldn't be a surprise. Uh 205 00:13:32,920 --> 00:13:35,280 Speaker 1: and too, it's going to I think put pressure on 206 00:13:35,320 --> 00:13:39,480 Speaker 1: the government to figure out who's in charge in this respect. 207 00:13:39,640 --> 00:13:42,880 Speaker 1: So maybe we won't have Amazon drones around yet for 208 00:13:43,000 --> 00:13:46,240 Speaker 1: quite a while. Thanks so much, Bill. That's William Banks. 209 00:13:46,280 --> 00:13:50,080 Speaker 1: He's a professor at Syracuse Law School. Thanks for listening 210 00:13:50,080 --> 00:13:53,360 Speaker 1: to the Bloomberg Law Podcast. You can subscribe and listen 211 00:13:53,400 --> 00:13:56,959 Speaker 1: to the show on Apple Podcasts, SoundCloud, and on Bloomberg 212 00:13:57,040 --> 00:14:01,760 Speaker 1: dot com slash podcast. I'm June Basso. Oh this is Bloomberg. 213 00:14:02,600 --> 00:14:07,720 Speaker 1: M hm.