Polar Power Play

Plus: Drug costs go under the knife ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

November 21, 2022

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TOGETHER WITH

Good morning.

Disney pulled a classic bob and weave Sunday night as CEO Bob Chapek was ousted in favor of former CEO Bob Iger, effective immediately. Chapek has been CEO since 2020, and recently announced he planned to cut costs as the company’s streaming losses pile up.

Perhaps the company hopes it can recapture some magic with its unexpected Iger sequel — amusing timing given it just released Disenchanted, a sequel to its 2007 film Enchanted. With Disney stock up 9% pre-market, Iger’s already outshining Amy Adams.

Morning Brief

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It’s kickoff time in Qatar.

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The US looks to stay frosty in the Arctic.

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Will the IRA actually hinder pharma innovation?

Sports

The World Cup Started. Advertisers Happy, Humans Not So Much

One day in, Qatar’s World Cup is going about as well as FIFA’s most vocal critics expected.

The smallest nation to ever host a World Cup, Qatar is a hotbed of human rights abuses – underscored by numerous migrant workers who died building the gleaming new soccer stadiums. You’d think sponsors would be running for the hills. And you’d be dead wrong.

The Host with the Most

Already the most expensive World Cup in history, Qatar spent $300 billion outfitting its capital city of Doha with seven new stadiums, highway expansions, airport upgrades, hotels, and a metro system not only to host the month-long tournament but to jumpstart the Gulf country’s development.

All that construction and enthusiasm came at a cost. The Qatari government has confirmed roughly 40 workers, many migrants, died while working on World Cup projects since 2014, but outlets like The Guardian argue the real number is closer to 6,500. It’s an appalling figure, but sponsors are more concerned with the appealing figure of 5 billion fans who will be tuned in to watch the games:

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Bloomberg contacted the 76 companies sponsoring the tournament or teams, and the likes of Adidas, Coca-Cola, Volkswagen, and Microsoft said they aren’t making any changes to their global advertising plans to reflect concerns for human rights or the fact that homosexuality is illegal in Qatar.

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Some sponsors tried to play on both sides of the fence. Beermaker Brewdog launched an anti-world cup campaign, with one billboard saying “First Russia, then Qatar. Can’t wait for North Korea.” It also promised to donate all of its profits from the tournament to human rights charities. But many found the brewery disingenuous when it was revealed the company would still broadcast the games in its bars and had agreed to supply beer to the Qatari government-owned distributor.

“The public has become much more vocal about human rights than it was five or 10 years ago,” media analyst Sarah Simon told Bloomberg. “But it’s a one-in-four-year opportunity, so advertisers who advertise around the World Cup want to make the most of it.”

Red Card! In a virtually last-minute decision, the Qatari royal family announced no alcohol will be sold inside or near stadiums, appeasing the conservative population but ruffling the mane and tail of Anheuser-Bush, which paid $75 million to sponsor the event. Upon hearing the news, the Missouri-based brewery tweeted “Well, this is awkward…,” and it might be able to sue FIFA for the deal-gone-skunked. In an act of jovial defiance, Ecuadorian fans at the kickoff game against Qatar chanted “Queremos cervezas,” or “We want beer.”

Military

US Aims to Purchase Icebreaker Ship to Monitor Arctic Ocean

This might be the start of an actual Cold War.

The US is eyeing a new icebreaker – a massive ship capable of navigating frozen seas – to patrol contested waters in the Arctic, congressional aides told The Wall Street Journal.

On Top of the World

Since 1971, the Arctic has shed 31,300 square miles of ice each year – that’s nearly the size of South Carolina melting away every 12 months. Nevertheless, plenty of thick ice remains, clogging trade routes and giving the world’s superpowers a need for mighty ships to lay claim to the ever-expanding ocean for economic and military purposes.

Russia has 40 icebreakers, and China is bolstering its fleet to fulfill President Xi Jinping’s hopes of becoming a “polar great power.” With only two ships – the heavy Polar Star and the medium Healy, both of which are nearly half a century old and 10 years past their prime – the US is playing catch up. The States are building more ships but need something in the interim, so the Coast Guard is on the verge of acquiring a vessel from private energy company Edison Chouest Offshore for roughly $125 to $150 million:

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The Coast Guard needs colossal icebreakers because they’re the only way to approach foreign crafts in frozen waters, conduct search-and-rescue operations or launch pollution-control efforts. The Department of Defense also said there are plenty of opportunities for establishing commercial fishing and oil campaigns in the Arctic.

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Last month, the White House released a 10-year strategic plan to strengthen its homeland defense and deter Russian and Chinese activity in the region. Vladimir Putin’s war with Ukraine has also inflamed tensions, making “government-to-government cooperation with Russia in the Arctic virtually impossible,” the report says.

Cold Shoulder: Beyond a few icebreakers, the Pentagon has other major worries. Defense spending is up, but a number of private companies that previously provided materials, tech, and weapons are leaving the military business at an alarming rate, limiting competition and innovation. From 2011 to 2020, the number of small and large businesses receiving DoD contracts plummeted 43% and 7.3%, respectively. As opposed to having a wide pool to shop from, the US military now begrudgingly relies on a few “Walmarts of war” as University of California Professor Daniel Wirls put it. Don’t expect any blue light specials on Javelin anti-tank missiles.

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Pharmaceuticals

Bristol Myers Squibb Threatens New Rules Will Hinder Drug Production

(Photo credit: A 4/Flickr)

Big Pharma is bristling at new doctor’s orders.

As part of the Inflation Reduction Act passed earlier this year, the US Government now has the power to negotiate prices on the most expensive drugs purchased through Medicare — a seismic change for the US healthcare industry created by consumer advocates that drugmakers are none too happy about. Over the weekend, pharma giant Bristol Myers Squibb said it is now expecting to cancel several drug development programs, highlighting a central trade-off that’s long defined the American healthcare system.

Side effects may include gamesmanship

It’s no secret: Americans pay more — much more — for prescription drugs than patients in nearly every other developed country. According to research from the Rand Corporation, US drug prices are on average more than 250% higher than in 32 comparable nations, most of which have more nationalized healthcare systems. But drugmakers have long justified these high domestic prices as the cost of world-leading innovation. They cite research like a study from the Tufts Center for the Study of Drug Development that found new medicines on average take roughly 10 years and $2.6 billion to develop.

That high cost and risk, drugmakers argue, necessitates high reward…and the reason behind the US drug industry’s massively outsized role in pharmaceutical development. US pharma firms accounted for over half of all new drugs discovered from 2001 to 2010, according to the Milken Institute. Now, Bristol Myers Squibb is threatening that the IRA’s reforms — which remain way more limited than price controls in Europe — are enough to derail new discoveries:

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Bristol Myers Squibb is reviewing its portfolio and is likely to cut funding for some drug candidates, with oncology drugs in particular likely to be affected, CEO Giovanni Caforio told the Financial Times on Saturday.

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The company would be joining Eli Lilly, which earlier this month announced it is halting the development of a blood cancer treatment in the wake of the new pricing reforms.

Second Opinion: Under the new rules, only the 10 most expensive older brand-name treatments will be subjected to government negotiations and that list is expected to expand slowly over time, with plenty of exemptions remaining for new innovations. In all, the nonpartisan Congressional Budget Office expects the law to prevent just 15 of 1,300 new drugs from entering the market in the next three decades.

Extra Upside

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The Winklevoss twins’ Gemini Exchange may be the next addition to the crypto Hall of Shame.

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The COP27 agreed on a “loss and damage” fund for poorer countries ravaged by climate change.

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Just For Fun

Slightly terrifying.

Boom.

Written by Griffin Kelly and Brian Boyle.

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