Golf Makes Love, Not War

Plus: Does Merck have a constitutional right to keep drug prices high? ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

June 7, 2023

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TOGETHER WITH

Good morning.

Talk about scratching on the 8 ball.

The World Professional Billiards and Snooker Association has banned two high-profile pool players and suspended eight others for several years. In one of the sport’s biggest scandals to date, the governing body found the players guilty of fixing games, asking others to cheat, and betting on matches. Liang Wenbo and Li Hang got the worst of it. Not only were they barred from professional matches for life, but they must each pay £43,000 in fines. They’ll really have to hustle to replace that income.

Morning Brief

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The US wants cheaper drugs. Not so fast, says Merck.

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LIV, PGA want to play together.

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EVs face static over AM radio.

Policy

Drug Maker Merck Sues US Gov. Over Inflation Reduction Act

(Photo Credit: Hal Gatewood/Unsplash)

The war on drug prices faces a counter-offensive.

While many pharmaceutical companies have been moaning and groaning about the new regulations on the industry imposed by the Inflation Reduction Act, one has taken action. On Tuesday, Merck filed a lawsuit against US health agencies, calling the bill’s price negotiation policies a “sham” and unconstitutional.

Goliath vs Goliath

The driving goal of the IRA is to make it cheaper and easier to live in America. Part of the bill targets prescription drugs, specifically those covered by Medicare — the federal health insurance for seniors. New policies include allowing the Department of Health & Human Services to negotiate prices for certain expensive drugs, requiring pharmaceutical companies to pay rebates if their prices rise faster than inflation, and capping the monthly out-of-pocket cost of insulin to $35, among other provisions. That’s a boon for older citizens living with chronic ailments. Plus, the federal government hopes it will save nearly $100 billion on drug payments by 2031. But pharma giants are obviously not as enthusiastic.

Last month, Pfizer CEO Albert Bourla called the drug pricing reforms “negotiation with a gun to your head,” arguing it will hurt profits and delay the development of innovative medicines. Novartis CEO Vas Narasimhan had similar words in February, telling shareholders the policies will put an unnecessary burden on the creation of drugs. The furor was all building toward a lot of billable hours for lawyers:

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Merck jumped into the fray because two of its flagship medications — Keytruda and Januvia, which treat cancer and diabetes, respectively — are likely to be included in the drugs Medicare plans to negotiate new prices for in the next few years. Combined, both drugs are responsible for billions of dollars toward Merck’s bottom line, but the negotiations are expected to trim 5% from the company’s revenue in the first year of bargaining, according to Bloomberg.

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Merck argues that the IRA violates the Fifth and First Amendments by essentially taking property for public use but not offering just compensation while also forcing companies to agree to government pricing or risk high taxes or monetary penalties. In the lawsuit, Merck called the whole situation “government extortion.”

You Owe Me Money: In addition to price negotiation policies, Washington is working on other ways to get cash back from pharmaceutical companies. In two notable fraud cases, whistleblowers claimed Safeway and SuperValu were offering discounts on prescriptions to customers who were paying out of pocket, while knowingly charging the government (and taxpayers) more for drugs covered by Medicare and Medicaid. A lower court sided with the companies, but just last week, the Supreme Court threw out that ruling in an attempt to revive the cases. Now might be the time for Supervalu and Safeway to slip their arms in one of the blood pressure machines in their stores.

-Griffin Kelly

Professional Sports

PGA, LIV Golf Decide to Stop Fighting and Team Up

Call it a pro sports mulligan.

After roughly two years of fighting over players, money, morality, and fan attention, the PGA Tour and the upstart Saudi-backed, extremely well-capitalized LIV Golf League announced Tuesday they are putting their differences aside and merging into a singular commercial business — and, crucially, that they’ll start settling their differences on the links, and not in the courtroom.

Skins in the Game

In case you’ve been out of the loop, LIV Golf’s launch sparked something of a golf civil war. Backed by Saudi Arabia’s $620 billion Public Investment Fund (PIF), the LIV Tour lured many high-profile professional golfers — including Phil Mickelson, Dustin Johnson, and Brooks Koepka — by guaranteeing life-changing sums of money that a career on the PGA Tour simply could not match. But jumping ship came at a cost. For starters, LIV Golf players had to navigate tricky eligibility rules for entering into golf’s four major tournaments. And then there’s the moral cost of accepting money from a league essentially owned and operated by an absolute monarchy with a dismal human rights record.

But of course, all that’s behind them now, and the merger — which also includes the Europe-based and PGA-affiliated DP World Tour — couldn’t have come at a better time for LIV:

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In May, some three months and six events into LIV’s sophomore season, the league suddenly and quietly stopped reporting viewership data from its US broadcasts on the CW network. Prior to the stoppage, the league reported a ratings decline of 24% week-over-week between its first and second events, down to just 409,000, and some local-affiliate CW stations in major markets opted not to air its third event in May entirely.

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LIV also suffered a significant legal loss in April in its lawsuit alleging antitrust behavior from the PGA, when a federal judge ruled that the PIF and its governor, Yasir Al-Rumayyan, were both subject to depositions and discovery, which experts and analysts considered a setback. The merger will end all ongoing legal disputes, the two leagues said Tuesday.

“The LIV tour was dead in the water. It wasn’t working. Now, you’re throwing them a life jacket? Is the moral of the story to just always take the money?” one anonymous PGA player told ESPN.

Better Together? The details and specifics of the merger are still in flux, but in a memo to PGA players obtained by ESPN, tour commissioner Jay Monahan said PIF would make a significant financial investment — as much as $3 billion, according to the Financial Times’ reporting — in the merged league and serve as its premier corporate sponsor. Sounds tough to us: Golf can already be a challenging and frustrating game — the only thing that can make it worse is getting stuck playing 18 holes with your arch-enemy.

– Brian Boyle

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Media

Can AM Radio Survive the EV Revolution?

Video may have killed the radio star, but EVs are destroying all of AM radio.

Carmakers like Tesla and BMW are increasingly omitting the talk-radio frequencies from their vehicles, and, on Tuesday, a slew of AM radio executives stepped off their preferred live-studio soapbox and into the halls of Congress to make the case for why FM radio’s tamer, nerdier cousin still deserves to be heard.

Airing of Grievances

To be clear, AM radio has been on the decline for decades. Although the frequency once accounted for over half of all radio listening hours, that stopped being true… all the way back in 1978, according to the FCC. And today, only 15% of people older than 12 listen to AM radio at least once a week, according to Nielsen data seen by Bloomberg, down from 34% in 2000.

But 82 million Americans still tune in every month, and that’s enough for a bipartisan push in Congress to keep AM alive even if Elon Musk — and science — would argue otherwise:

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Both Tesla and BMW have slashed AM radio from dashboards, saying EV’s new-world electromagnetic waves clash with the old-world tech’s frequencies — and allowing both systems to coexist would be costly and disruptive.

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AM radio executives, and lawmakers supporting the AM Radio for Every Vehicle Act, say it still nonetheless provides an important communication function for many Americans, thanks especially to its role in US emergency information systems.

“When the power goes out and cell networks are down, the car radio is often the only way for people to get information, sometimes for days at a time,” Jerry Chapman, president of midwest AM network Woof Boom Radio, said in his witness testimony at the US House committee hearing Tuesday. All five people in the world who have sat in their cars glued to the radio during a blackout no doubt nodded in agreement.

– Brian Boyle

Extra Upside

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They took my job: Newsrooms are fighting back before AI steals their work.

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We’d gladly do their coffee runs: Citadel offers interns $5,000 a week, free housing, and a Four Seasons retreat.

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