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Column: A Trump judge slaps down Big Pharma's attack on Biden's drug price cuts
The pharmaceutical industry’s all-out attack on President Biden’s drug negotiation initiative for Medicare — comprising nine federal lawsuits (so far) and lots of heavy breathing by lobbyists — has just run into a major snag.
That it came from a judge appointed by Donald Trump is just one of its man-bites-dog aspects. Another is the forceful skepticism expressed by a federal judge in normally business-friendly Delaware in his ruling, issued March 1 against the British drugmaker AstraZeneca.
“Understandably, drug manufacturers like AstraZeneca don’t like the IRA,” wrote Judge Colm F. Connolly, referring to the Inflation Reduction Act of 2022, which authorized Medicare to negotiate with drugmakers over how much it would pay for prescription drugs taken by its enrollees.
No one is entitled to sell the Government drugs at prices the Government won’t agree to pay.
— Federal Judge Colm F. Connolly
“Lower prices mean lower profits,” Connolly continued. “Drug manufacturers like AstraZeneca desire the old pricing regime, and they lobbied and perhaps expected Congress not to pass the IRA in 2022.”
However, he wrote, “No one is entitled to sell the Government drugs at prices the Government won’t agree to pay.”
Connolly tossed out the lawsuit by granting the government summary judgment. His opinion has no sway over the federal judges hearing the other lawsuits, which have been brought by Merck, Johnson & Johnson, Novo Nordisk, Bristol Myers Squibb, Novartis, Boehringer Ingelheim, the industry lobbying arm Phrma and the U.S. Chamber of Commerce.
But his opinion can serve as a window into how the other judges might view those lawsuits, most of which bear such strong resemblance to AstraZeneca’s that they might all have been spit out by ChatGPT if it were asked to draft any industry lawsuit over any distasteful government regulation.
That makes it a useful counterbalance to the claims in those cases, which I earlier described as “windows into the mind of Big Pharma, revealing the industry’s grotesque level of entitlement and its cynical exploitation of Americans’ desire for better healthcare in order to claim profits well beyond the level that any thinking person would consider moral.” Those cases have been filed in federal courts in Ohio, New Jersey and the District of Columbia.
So let’s take a closer look. First, a word about the judge. He doesn’t appear to be cut from the same cloth as some Trump-appointed judges who have given the federal judiciary something of a bozoid flavor, such as James Ho of the 5th Circuit Court of Appeals in New Orleans or Matthew Kaczmarek of the Northern District of Texas, sitting in Amarillo, who have riled the legal system with extreme right-wing rulings.
A former U.S. attorney in Delaware under George W. Bush, Connolly is the chief judge of his district. His ruling in the AstraZeneca case comes as a meticulously researched analysis of the issues and the legal background. That doesn’t mean it will stand up as higher courts ponder AstraZeneca’s inevitable appeal.
A quick primer on the IRA’s Medicare negotiation initiative will be useful here. This implemented a long-cherished idea of drug price reformers, which is to give Medicare, the largest buyer of prescription drugs, the right to dicker over prices with drugmakers, overcoming a prohibition that Congress imposed on Medicare in 2003, when it created Medicare’s Part D prescription drug benefit.
The negotiation system also applies to drugs administered to patients under Medicare Part B, which typically are administered in hospitals or doctors’ offices, not at home. Medicaid can also benefit from price cuts reached through the Medicare process. Here’s how it works:
In September, the Department of Health and Human Services compiled a list of 10 branded, non-generic drugs from the roster of those on which Medicare spends the most; 30 more drugs will be added in 2025 and 2026, and more in subsequent years.
Drug companies have 30 days after the selection to agree to negotiations on a price, which must be at least a 25% to 60% discount from a drug’s average price on the non-federal market. For the first round, the negotiation process will last through July, with prices to take effect in 2026.
Companies that refuse to participate in this process or reject Medicare’s designation of a “fair” price will be subject to an excise tax starting at 65% of a drug’s U.S. sales and rising over time to 95%. To avoid the penalty, those companies have the option of pulling out of Medicare and Medicaid entirely.
AstraZeneca filed its lawsuit in August 2023. That was before HHS named the first 10 drugs to be negotiated, so the company couldn’t assume it would be directly affected by the program.
But it plainly had an inkling that its diabetes and kidney disease drug Farxiga would be on the list, because Medicare was spending about $3.3 billion a year to provide it to about 800,000 patients, so it mentioned the drug in its legal complaint, almost in passing. When Farxiga indeed was named as one of the first 10 drugs, the company amended its complaint with a three-word change to bring it up to date. About a week later, the company agreed to participate in the negotiation process, though it continued to pursue the lawsuit. I believe this is known in courthouse corridors as “hedging your bets.”
In its lawsuit, AstraZeneca asserts that the negotiation process hurts it in several ways — assertions aimed at showing that the company suffered concrete injuries from the IRA, the threshold established by the Constitution for allowing lawsuits to be heard in federal court — the principle known as “standing.”
The company claimed that the government’s plan to treat all permutations of a drug, including the conditions it can be used to treat, as a single drug will sap it of the incentive to search for new uses, “which in turn will narrow patient access to new treatments.” It also said that its “decision-making about other drugs” will be affected by the government’s negotiation rules, in part because how the negotiations will unfold is so uncertain “we don’t know the impact” of the process “on our ability to negotiate.”
Connolly found both claims to be too vague to give AstraZeneca standing. In any event, he wrote, AstraZeneca plainly does know how the negotiations will be conducted, since it described the process in detail in its 44-page legal complaint and 100 pages of briefs.
“The only uncertainty,” Connolly found, “comes from the filing of this lawsuit,” which calls for the IRA to be found unconstitutional. That won’t do, he observed. “A plaintiff,” he wrote, “cannot create standing to file a suit by filing the suit.”
The meat of AstraZeneca’s case is its contention that the negotiation provision of the IRA represents government coercion — that the threat of penalizing drugmakers with steep taxes for not coming to the negotiating table is tantamount to “a gun to the head.”
Connolly dismissed that out of hand by pointing to a flaw in the argument remarked on by other legal experts: For drug companies, selling their products to Medicare is an entirely voluntary choice. No law requires them to participate.
It’s true, as he noted, that by commanding 40% of the prescription drug market in the U.S. — nearly 50%, including Medicaid — Medicare is a customer crucial, perhaps even indispensable, to every drug company’s business model.
But here’s the trade-off: Reaching the 49 million Medicare and Medicaid members provides an incentive that the government is fully within its rights to use to extract better prices from the manufacturers. There’s “nothing sinister” about it, Connolly wrote.
He’s right, of course. It’s not as if drug companies themselves haven’t used their monopoly rights over blockbuster drugs to demand parasitic prices for those products. That’s the impulse, after all, that drove Gilead Sciences in 2015 to demand $100,000 per treatment for Harvoni, its miracle cure for hepatitis C, when it could have made a healthy profit at half that price, or less. AstraZeneca, by the way, reported an operating profit of $14.5 billion in its 2023 fiscal year on revenue of nearly $46 billion.
Aware that Connolly’s ruling might be used as a road map by the judges hearing the other drug industry lawsuits, HHS Secretary Xavier Becerra made sure that it was entered into the record in the other courts. One can expect the other plaintiffs to do what they can to distinguish their claims from AstraZeneca’s.
Merck, which was the first to sue to overturn the IRA, responded promptly. On Monday, it notified the judge in its case that it “does not assert a right to sell its drugs to Medicare at a market price; rather, it asserts a right not to be compelled to sell its drugs to Medicare at the government-dictated price.” (Emphasis Merck’s.)
To non-lawyers, this may seem to cut the baloney mighty thin. To lawyers, perhaps it cuts to the essence of the case. One way or another, it’s a signal that the pharmaceutical industry isn’t about to give up. Why would it, with billions of dollars at stake, never mind access to life-giving drugs for millions of Americans.
The Minions took over theaters this weekend as Universal Pictures and Illumination’s “Minions & Monsters” won the top spot at the box office, though with a lower-than-expected domestic haul.
The animated movie, which follows the Minions’ takeover of Hollywood, took in $61.4 million in the U.S. and Canada for the five-day Fourth of July holiday weekend, according to studio estimates. That haul was lower than analysts’ expectations for a domestic opening of about $68 million. The movie’s three-day total was $36.4 million.
But the Minions performed well internationally, bringing in about $85 million. In total, “Minions & Monsters” made $159.9 million worldwide on a production budget of about $85 million.
The film is the latest in the powerhouse franchise that began with “Despicable Me” in 2010. Across its previous six installments, the “Despicable Me” and “Minions” franchise has made more than $5.6 billion at the global box office. The last movie, 2022’s “Minions: The Rise of Gru,” made more than $940 million worldwide.
“Minions & Monsters” marks the lowest opening for the franchise. Part of the issue could be timing — the box office can be negatively affected when the Fourth of July lands on a Saturday, said Paul Dergarabedian, head of marketplace trends at Rentrak.
Walt Disney Co. and Pixar’s “Toy Story 5” came in second at the box office this weekend with a domestic three-day gross of $31 million. Angel Studios’ biopic “Young Washington” ($20.8 million), Warner Bros. and DC Studios’ “Supergirl” ($9.6 million) and Universal’s “Disclosure Day” ($6 million) rounded out the top five, according to Rentrak.
The haul for “Minions & Monsters,” coupled with the strong holdover performance of “Toy Story 5,” proved again that family films are making a dent in the summer box office.
“Toy Story 5” has now brought in a total of $764.3 million worldwide, and last month, Universal, Illumination and Nintendo’s “The Super Mario Galaxy Movie” crossed $1 billion at the global box office, becoming the first film of any kind to do so this year.
The rest of the summer theatrical lineup is also expected to bring in audiences and push domestic box office totals closer to pre-pandemic figures. Next week, Disney will release its live-action “Moana,” followed by Christopher Nolan’s “The Odyssey” and Sony Pictures’ “Spider-Man: Brand New Day.”
To date, the summer box office is now about $2.3 billion, a nearly 12% increase compared with the same period a year ago, according to Rentrak data. Compared with pre-pandemic 2019’s numbers, however, it is still down about 7%.
Earlier this year, a widely circulated 15-second AI-generated video of Brad Pitt fighting Tom Cruise on a rooftop sparked outrage across Hollywood. One screenwriter called the cinematic clip “terrifying.” The Motion Picture Assn. demanded the company behind the artificial intelligence tool — Chinese tech giant ByteDance — halt its “infringing activity.”
Despite the uproar, the former majority owner of TikTok has quietly continued to court filmmakers, independent artists and executives who are eager to adopt the AI video generation model called Seedance.
Seedance was launched in the U.S. this spring at a Santa Monica event hosted by a group linked to the Chinese government.
ByteDance began hiring for 100 open roles, signed multiple independent filmmakers and artists and held private conversations about financing AI films. The company threw a lavish caviar party at Cannes and in May hosted panels promoting its cinematic tool at Amazon’s AI on the Lot event in Culver City.
“Like any new technology, Hollywood ultimately has no choice but to react to market realities. And that reality is that the new crop of AI-empowered Hollywood creatives see Seedance as having the most powerful video generator in the market right now,” said Peter Csathy of Creative Media, an entertainment and AI business advisory firm.
Joel Kuwahara, the animation producer on early seasons of “The Simpsons,” echoed Hollywood’s quiet embrace.
“Within the industry, I know that a lot of studios haven’t approved Seedance, but yet with a wink and a nod, they’re allowing Seedance to be used. … It’s kind of like a ‘don’t ask, don’t tell’ kind of a thing,’” Kuwahara told The Times.
ByteDance declined to comment on its U.S. expansion.
The race to build the dominant AI video model has created a fierce rivalry, pitting U.S. companies against the fast-closing Chinese competitors. On the American side, there are Google Veo and startups such as Runway and Luma. OpenAI’s Sora has discontinued its video tool.
The Chinese challengers Seedance, Kling and Alibaba’s HappyHorse have rapidly closed the gap on cinematic realism and have upstaged their American rivals by undercutting them on cost.
According to Artificial Analysis, a company that tracks cost and performances of different AI models, China’s Seedance is currently the most cost-effective and high-quality option compared with U.S. competitors. Seedance costs $9 per minute for video with audio generation, significantly lower than the $24 per minute required by Google’s Veo model.
That makes it an attractive tool for independent filmmakers like Rupert Wainwright, who recently met with Seedance executives at AI on the Lot.
He wants to use the the tool to help make his feature-length film called “Sebastian,” about a Christian saint set in 3rd century Rome. The hybrid AI film will be shot partly on location in Europe and partly generated with artificial intelligence.
“It’s the equivalent to when streaming a movie over the internet onto your TV finally became possible,” Wainwright said.
Kavan Cardoza.
(Kayla Bartkowski/Los Angeles Times)
A scene from “The Chronicles of Bone.”
(Kayla Bartkowski/Los Angeles Times)
In May, Steven Schneider, the producer of “Paranormal Activity,” famous for its handheld grainy footage-style filmmaking, announced “Terrarium,” his first hybrid AI horror production. The film’s director, Jason Zada, said it will be entirely generated using Seedance’s model.
Zada’s filmmaking workflow involves writing, casting, prompting and editing all simultaneously, allowing him to rewrite scripts based on “dailies” generated by AI that day.
He estimates that generating 15 seconds of high-definition video costs only $5.
“We could go from a very detailed outline, very detailed characters and have it be a bit more fluid, because we could regen[erate] as much as we want,” Zada said.
Zada plans to shoot the movie first on a soundstage with real actors and will decide later which parts work better traditionally and what should be done synthetically. He’s a member of the Directors Guild of America and said he will be employing union actors for his hybrid AI film.
Seedance also has continued building ties by offering indie creators, AI-native studios and filmmakers free monthly credits and access to unreleased features. These “tastemakers” beta test its models, offer feedback on what works, and use it for their personal filmmaking projects — which creates corporate brand awareness.
Kavan Cardoza is one such breakout filmmaker. His AI fantasy series, “The Chronicle of Bones,” which uses Seedance, features half a dozen distinct storylines and an ensemble of characters. New episodes, each not more than 30 minutes, are released on YouTube once a month. The solo filmmaker averages 3 million views per episode and has cultivated a YouTube audience of 500,000.
Most filmmakers are tool agnostic, but lately Cardoza has become completely dependent on Seedance, he said, because it solves a persistent problem: maintaining character consistency between shots.
Kavan Cardoza unmasked.
(Kayla Bartkowski/Los Angeles Times)
To create one of his characters, “the last lost boy,” Cardoza took self-portraits wearing a three-faced mask and a tattered brown jacket. He used those reference images for the AI character and transforms them into a stylized person, with a personality, backstory and visual details. He fed those images back to Seedance to get consistent characters — repeating the process for each member of the cast.
“I can’t go get Brad Pitt because he costs like $5, 10, 20 million to be in my film,” Cardoza said. “I can probably get a synthetic actor that will act just as good as Brad Pitt in the future. That’s crazy to me.”
Cardoza has copyrighted his script and characters, and aims to eventually attract major studio interest to turn his intellectual property into a film which comes with a built-in fan base.
Such plans are likely to face resistance from the performers union SAG-AFTRA, which has decried the use of synthetic actors such as Tilly Norwood.
“The rise of Seedance comes down to [its] focus on pleasing filmmakers and making things that look filmic,” said Stephan Vladimir Bugaj, senior vice president of JioStar, a joint venture between Disney and India’s Reliance Industries.
ByteDance introduced timeline-based prompting so filmmakers can actually pick specific moments and tweak them, and improved the understanding of camera direction, physics, lighting and fluidity of action. All of this, Bugaj said, “unlocked a kind of spectacle filmmaking that the other models are not delivering quite as well.”
The company’s tool has been in such high demand, Zada said, that Seedance has been quoting some major Hollywood studios $2 million for unrestricted special access.
While acknowledging Seedance’s popularity and its U.S. expansion, Amit Jain, chief executive of Luma, said its ceiling in Hollywood is severely limited. Traditional studios might adopt Chinese models for some preproduction tasks such as concepting, but the geopolitical and intellectual property risks for commercial generations are too prohibitive.
“Can you imagine Disney using the ByteDance model for the next ‘Snow White’? No way,” Jain said. “This is not even a technical argument, really. That’s the reality.”
Luma has been making inroads into Hollywood selling its software but has separately funded a production service company to teach filmmakers to make hybrid AI films using its tools.
Despite conservative production budgets, AI spending by media companies is projected to grow from $2.6 billion to $12.5 billion from 2024 to 2029, according to a State of Generative AI Media report.
Kavan Cardoza flips through pages of his fine-art photography book.
(Kayla Bartkowski/Los Angeles Times)
Bugaj warned that the quality and competitive price of Chinese models should be a “wake-up call” for American players fighting for market share.
“We’re not loyal,” said Zada, the filmmaker. “Whatever is the best, we’re going to use it.”
Nearly a year after the expiration of a $7,500 federal tax incentive for new electric vehicles, California is stepping in to try to motivate buyers to go electric.
Gov. Gavin Newsom allocated $135 million in his new state budget to provide incentives for new and used EVs. Participating automakers will match the funds.
California leads the nation in EV adoption, though the market has taken a hit under the Trump administration.
The state budget — a more than $350-billion spending plan — went into effect Wednesday. The EV incentives will take effect in the coming weeks as the California Air Resources Board irons out agreements with dealerships.
Here’s what you need to know.
What are the incentives worth?
Senate Bill 168 tasked the California Air Resources Board with setting incentive amounts for new and used electric vehicles sold in California.
Eligible buyers will receive $3,500 off for new EVs and $1,750 off for used ones. Unlike the federal tax credits that expired in September, these incentives offer an instant discount and don’t require buyers to apply for credit later.
State funds will cover half of the incentive amount, and auto manufacturers will cover the other half.
The rebates will mean that most eligible buyers will effectively get between 4% and 7% of their money back.
For used EVs, “this incentive helps what’s already a good deal become an even better deal,” said auto analyst Brian Moody. “I think that’s the perfect use of these kinds of dollars.”
What are the rules and exceptions?
The new incentives can’t be used on all electric vehicles — they apply only to new EVs with a manufacturer’s suggested retail price of $50,000 or less, and used EVs with a sale price of $25,000 or less.
The $50,000 maximum rules out many options on the market, but legislation outlining the incentive program makes a special exception for California-based companies. Buyers purchasing a new or used EV from a company with headquarters in California can claim the discount regardless of the vehicle price.
That’s good news for Lucid, with headquarters in Newark, Calif., and for Irvine-based Rivian. Neither company currently offers new vehicles for less than $50,000. Rivian said it plans to launch a $44,990 SUV in 2027.
Who is eligible?
California’s new EV discounts are available only to first-time EV buyers, according to the legislation.
SB 168 says the buyer’s eligibility will be “confirmed by a buyer attestation” that they have not previously owned a zero-emission vehicle.
The new EV incentive is less than half of the federal incentive that expired nine months ago. Whereas the federal incentive may have been enough to spark interest in a range of buyers, Moody said the lesser amount will probably appeal mainly to people who already have their eye on an EV.
“I think you have to already be considering it, or in the market,” Moody said. “I think that the amount is just right for that.”
What are California’s clean car goals?
The incentives are intended to help California reach its electric vehicle and air quality goals as those targets have been under fire from President Trump.
Shortly after taking office, Trump signed an executive order that revoked California’s authority to set its own EV regulations, which included a goal of having 100% of new vehicle sales in the state be zero-emission by 2035.
California sued the administration in response. The state also has goals, including some that have been in place since 2012, that set declining limits on smog-causing pollutants and required automakers to sell increasing percentages of electric and hybrid vehicles through 2025.
In March, the administration filed a new lawsuit again trying to block California’s ability to set stricter-than-federal emissions standards for cars.
Early this year, California announced that more than 2.5 million zero-emission vehicles had been sold in the state since 2010, surpassing a target to put 1.5 million zero-emission vehicles on the road by 2025.
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