Business

Column: How a legal loophole allows antiabortion prosecutors to obtain women's secret health data

Published

2 years ago

January 12, 2024

Column: How a legal loophole allows antiabortion prosecutors to obtain women's secret health data

The American legal system has a message for women concerned about their abortion rights: Don’t make the mistake of thinking that your pharmacist is your friend.

Thanks to a gaping loophole in federal healthcare regulations, some of our leading drug store chains turn over customers’ most sensitive private healthcare information to law enforcement agencies, even without a warrant.

That’s the finding of a subcommittee headed by Sen. Ron Wyden (D-Ore.), which learned that all eight of the nation’s largest pharmacy chains have routinely turned over prescription records of thousands of Americans to law enforcement agencies or other government entities secretly without a warrant.

Medical care procured outside a patient’s home state increasingly leaves a digital trail that will easily make its way back to the patient’s domicile.

— Carleen M. Zubrzycki, University of Connecticut

The chains are CVS, Walgreens, Cigna, Optum Rx, Walmart, Kroger, Rite Aid and Amazon. CVS, Kroger and Rite Aid, which have a total of about 11,000 locations nationwide, don’t require store staff to run the requests past company lawyers before complying.

Only Amazon notifies customers that it received a subpoena or warrant for their prescription data.

Wyden’s committee sought briefings from the pharmacy chains after the Supreme Court’s 2022 Dobbs decision overturned nationwide abortion rights.

Since then, Wyden told me by email, “Republican states across the country have criminalized abortion.” That placed privacy “under threat like never before.” He said his goal is to urge “the executive branch to do everything in its power to stop far-right prosecutors and politicians from using women’s private records against them.”

The briefings, Wyden and fellow subcommittee Democrats informed Health and Human Services Secretary Xavier Becerra in a Dec. 12 letter, “made clear that these companies’ privacy practices vary widely, in ways that seriously impact patient privacy.”

None of the pharmacies require a warrant before turning over requested data; all “will turn medical records over in response to a mere subpoena,” which often doesn’t have to be signed by a judge.

That’s a flaw in the Health Insurance Portability and Accountability Act of 1996, or HIPAA, which purports to protect individuals’ health information from disclosure by providers except in narrow circumstances.

CVS spokeswoman Amy Thibault told me by email, “HIPAA does not require law enforcement to obtain a warrant or judge-issued subpoena before they make a lawful request for records containing PHI.” She said that CVS staff “are trained how to appropriately respond to lawful requests from regulatory agencies and law enforcement.”

HIPAA applies to pharmacies as well as physicians and hospitals. What sets them apart, however, is the breadth of their networks— it’s a rare hospital or physician’s practice that maintains a database that can be accessed coast to coast.

Wyden and his colleagues urged Becerra to tighten HIPAA regulations to require pharmacies to “insist on a warrant” before turning over private health data, so that law enforcement agencies have to defend their demands in court.

Some of America’s leading drug store chains turn over customers medical records to law enforcement agencies without even requiring a warrant, exposing women seeking abortions to prosecution by anti-abortion states.

(Senate Finance Committee)

Health and Human Services isn’t the only agency concerned with the misuse of personal data. The Federal Trade Commission on Tuesday charged the data broker Outlogic with selling consumers’ location information extracted from smartphone apps without their permission.

The geolocation data, the FTC said, “could be used to track people’s visits to sensitive locations such as medical and reproductive health clinics, places of religious worship and domestic abuse shelters.” According to a statement by FTC Chair Lina Khan, in at least one contract the company had tracked “Ohio residents who visited specific doctors, including cardiologists, gastroenterologists, or endocrinologists, and then pharmacies or specialty infusion centers.”

The FTC’s legal complaint said the result could include “loss of privacy, exposure to discrimination, physical violence, emotional distress, and other harms.”

In a settlement with Outlogic reached Tuesday, the FTC prohibited the company from selling or sharing any “sensitive location data,” including data involving “locations that provide services to LGBTQ+ people such as bars or service organizations,” “locations of public gatherings of individuals at political or social demonstrations or protests” and data that could be used “to determine the identity or location of a specific individual.”

Outlogic will also have to delete or destroy any such data already collected, and provide consumers with easy ways to refuse permission for their data to be sold and to find out to whom it has already been sold.

Becerra hasn’t responded to the committee’s letter, but his agency did launch a rule-making procedure in April aimed at prohibiting the disclosure of personal information about a person’s reproductive healthcare by a provider, including a pharmacy, in a state where the healthcare is legal, but sought for an investigation or prosecution in a state where it’s banned.

But the Health and Human Services initiative is still only a proposal, not a rule. Several factors have made it more urgent.

The so-called interoperability of medical data is generally reckoned to be a good thing. Pharmacists should have access to the full range of a customer’s prescriptions, for example, so they can watch out for dangerous interactions among medicines that may have been missed by doctors, especially if one patient is treated by multiple physicians.

Those checks have been made even easier by the growth of national drug chains, which have supplanted the mom-and-pop drugstores that used to be common in America. Now one database can provide patient information to thousands of affiliated pharmacists coast to coast.

But the Supreme Court’s overturning of abortion rights in 2022 converted that boon into a potential peril by turning judgments about medical procedures over to the states.

“There are now categories of care in which states have taken dramatically different approaches to whether that care should be available,” says Carmel Shachar, an expert on health law and policy at Harvard Law School. Abortion is the most evident area, but divergences in state law increasingly apply to gender-affirming care and substance abuse treatment.

Those divergences, Shachar told me, make the relevant medical records especially sensitive to the point where they need to be protected from law enforcement.

But expansive databases may make that difficult — a prosecutor in antiabortion Texas might be prevented by a medical shield law from accessing data about a Texan’s legal treatment in Massachusetts, but theoretically could subpoena it from a pharmarcy chain’s branch in Texas.

The challenge goes beyond simply shielding direct evidence of a legal abortion — such as a prescription for mifepristone — from prying law enforcement eyes in an antiabortion state.

“There’s a perception that abortions or gender-affirming care exist on their own islands separate from other medical care,” Shachar says. “But somebody who is medically literate can read between the lines of a medical record to see if an abortion happened.”

For instance, consider if a medical record showed that a woman was pregnant and records show a bit later that she’s begun to take chemotherapy treatment for cancer that would be incompatible with pregnancy.

“That might be suggestive that she was pregnant and is no longer pregnant, with no baby to show for it,” Shachar says. “How much of a medical record you need to protect to truly protect the privacy of people who have had abortions or gender-affirming care is murky.”

Placing a legal moat around medical records of an out-of-state abortion may be difficult. “Medical care procured outside a patient’s home state increasingly leaves a digital trail that will easily make its way back to the patient’s domicile,” observed Carleen M. Zubrzycki of the University of Connecticut in a 2022 law review paper.

When any such patient “receives any subsequent medical care — abortion-related or not — in her state of residence,” she wrote, “the odds are high that her home-state providers will access and incorporate her entire medical record into their own records.” That would undermine the efforts of safe-haven states to protect visiting patients by providing “slam-dunk evidence that could be used in out-of-state litigation to punish abortions.”

The determination of antiabortion activist politicians to narrow women’s reproductive healthcare options is explicit and persistent.

On July 7, 2022 — just two weeks after the Supreme Court handed down the Dobbs decision — a dozen right-wing Texas state legislators warned the Dallas law firm Sidley Austin that it might face criminal charges for having “decided to reimburse the travel costs of employees who leave Texas to murder their unborn children” — i.e., who leave Texas to obtain legal abortions elsewhere.

Last February, the attorneys general of 20 red states, led by Missouri Atty. Gen. Andrew Bailey, sent threatening letters to CVS, Walgreens, Rite Aid, Albertsons, Walmart, Kroger and Costco warning them that federal law prohibited them from using the mail to distribute drugs for medication abortion, such as mifepristone.

The letters cited the antique and long-discredited 1873 statute known as the Comstock Act after its bluenosed progenitor. The law’s applicability to abortion rights has long been dismissed by legal scholars. But it was at the core of a ruling by U.S. District Judge Matthew Kacsmaryk of Texas invalidating the Food and Drug Administration’s approval of mifepristone.

The FDA’s rules on mifepristone, which allow the drug to be taken by patients outside a hospital or doctor’s office, are currently before the Supreme Court.

The quest by antiabortion prosecutors for data pertaining to out-of-state medical procedures is destined to grow. The proportion of patients traveling out of their home states to obtain abortions has doubled over the last three years to 20% in the first six months of 2023 from 10% in the same period in 2020, according to the Guttmacher Institute.

The rate is especially high in safe-haven states bordered by antiabortion states, such as Illinois, where out-of-state patients increased in early 2023 to 18,870 from 5,570 three years earlier. New Mexico and Colorado experienced sharp increases for the same reason. In California, where abortions increased by 15,200 in the statistical period, only 16% of the increase was due to out-of-state patients — presumably because abortion is legal in the nearby states of Nevada, Oregon and Washington.

What is becoming clear as state legislators take advantage of the Supreme Court’s evisceration of medical privacy rights in the Dobbs decision, is that the stakes are destined to become magnified in the absence of federal action. People suffering from infectious diseases linked to what legislators disdain as immoral behavior such as HIV or hepatitis C might face increased discrimination or limits on access to public healthcare programs, for example.

“In terms of states diverging in what medical care is allowed or isn’t allowed,” Shachar says, “abortion and gender-affirming care might be the tip of the iceberg.”

Business

Commentary: Yes, California should tax billionaires’ wealth. Here’s why

Published

10 hours ago

January 8, 2026

Press Room

Commentary: Yes, California should tax billionaires’ wealth. Here’s why

That shrill, high-pitched squeal you’ve been hearing lately? Don’t bother trying to adjust your TV or headphones, or calling your doctor for a tinnitis check. It’s just America’s beleaguered billionaires keening over a proposal in California to impose a one-time wealth tax of up to 5% on fortunes of more than $1 billion.

The billionaires lobby has been hitting social media in force to decry the proposed voter initiative, which has only started down the path toward an appearance on November’s state ballot. Supporters say it could raise $100 billion over five years, to be spent mostly on public education, food assistance and California’s medicaid program, which face severe cutbacks thanks to federal budget-cutting.

As my colleagues Seema Mehta and Caroline Petrow-Cohen report, the measure has the potential to become a political flash point.

The rich will scream The pundits and editorial-board writers will warn of dire consequences…a stock market crash, a depression, unemployment, and so on. Notice that the people making such objections would have something personal to lose.

— Donald Trump advocating a wealth tax, in 2000

Its well-heeled critics include Jessie Powell, co-founder of the Bay Area-based crypto exchange platform Kraken, who warned on X that billionaires would flee the state, taking with them “all of their spending, hobbies, philanthropy and jobs.”

Venture investor Chamath Palihapitiya claimed on X that “$500 billion in wealth has already fled the state” but didn’t name names. San Francisco venture investor Ron Conway has seeded the opposition coffers with a $100,000 contribution. And billionaire Peter Thiel disclosed on Dec. 31 that he has opened a new office in Miami, in a state that not only has no wealth tax but no income tax.

Already Gov. Gavin Newsom, a likely candidate for the Democratic nomination for president, has warned against the tax, arguing that it’s impractical for one state to go it alone when the wealthy can pick up and move to any other state to evade it.

On the other hand. Rep. Ro Khanna (D-Fremont), usually an ally of Silicon Valley entrepreneurs, supports the measure: “It’s a matter of values,” he posted on X. “We believe billionaires can pay a modest wealth tax so working-class Californians have Medicaid.”

Not every billionaire has decried the wealth tax idea. Jensen Huang, the CEO of the soaring AI chip company Nvidia — and whose estimated net worth is more than $160 billion — expressed indifference about the California proposal during an interview with Bloomberg on Tuesday.

“We chose to live in Silicon Valley and whatever taxes, I guess, they would like to apply, so be it,” he said. “I’m perfectly fine with it. It never crossed my mind once.”

And in 2000, another plutocrat well known to Americans proposed a one-time tax of 14.25% on taxpayers with a net worth of $10 million or more. That was Donald Trump, in a book-length campaign manifesto titled “The America We Deserve.”

“The rich will scream,” Trump predicted. “The pundits and editorial-board writers will warn of dire consequences … a stock market crash, a depression, unemployment, and so on. Notice that the people making such objections would have something personal to lose.” (Thanks due to Tim Noah of the New Republic for unearthing this gem.)

Trump’s book appeared while he was contemplating his first presidential campaign, in which he presented himself as a defender of the ordinary American. His ghostwriter, Dave Shiflett, later confessed that he regarded the book as “my first published work of fiction.”

All that said, let’s take a closer look at the proposed initiative and its backers’ motivation. It’s gaining nationwide attention because California has more billionaires than any other state.

The California measure’s principal sponsor, the Service Employees International Union, and its allies will have to gather nearly 875,000 signatures of registered voters by June 24 to reach the ballot. The opposition is gearing up behind the catchphrase “Stop the Squeeze” — an odd choice for a rallying cry, since it’s hard to imagine the average voter getting all het up about multibillionaires getting squoze.

The measure would exempt directly held real estate, pensions and retirement accounts from the calculation of net worth. The tax can be paid over five years (with a fee charged for deferrals). It applies to billionaires residing in California as of Jan. 1, 2026; their net worth would be assessed as of Dec. 31 this year. The measure’s drafters estimate that about 200 of the wealthiest California households would be subject to the tax.

The initiative is explicitly designed to claw back some of the tax breaks that billionaires received from the recent budget bill passed by the Republican-dominated Congress and signed on July 4 by President Trump. The so-called One Big Beautiful Bill Act will funnel as much as $1 trillion in tax benefits to the wealthy over the next decade, while blowing a hole in state and local budgets for healthcare and other needs.

California will lose about $19 billion a year for Medi-Cal alone. According to the measure’s drafters, that could mean the loss of Medi-Cal coverage for as many as 1.6 million Californians. Even those who retain their eligibility will have to pay more out of pocket due to provisions in the budget bill.

The measure’s critics observe that wealth taxes have had something of a checkered history worldwide, although they often paint a more dire picture than the record reflects. Twelve European countries imposed broad-based wealth taxes as recently as 1995, but these have been repealed by eight of them.

According to the Tax Foundation Europe, that leaves wealth taxes in effect only in Colombia, Norway, Spain and Switzerland. But that’s not exactly correct. Wealth taxes still exist in France and Italy, where they’re applied there to real estate as property taxes, and in Belgium, where they’re levied on securities accounts valued at more than 1 million euros, or about $1.16 million.

Switzerland’s wealth tax is by far the oldest, having been enacted in 1840. It’s levied annually by individual cantons on all residents, at rates reaching up to about 1% of net worth, after deductions and exclusions for certain categories of assets.

The European countries that repealed their wealth taxes did so for varied reasons. Most were responding at least partially to special pleading by the wealthy, who threatened to relocate to friendlier jurisdictions in a continent-wide low-tax contest.

That’s the principal threat raised by opponents of the California proposal. But there are grounds to question whether the effect would be so stark. For one thing, notes UC Berkeley economist Gabriel Zucman, an advocate of wealth taxes generally, “it has become impossible to avoid the tax by leaving the state.” Billionaires who hadn’t already established residency elsewhere by Jan. 1 this year have missed a crucial deadline.

The initiative’s drafters question the assumption that millionaires invariably move from high- to low-tax jurisdictions, citing several studies, including one from 2016 based on IRS statistics showing that elites are generally unwilling to move to exploit tax advantages across state lines.

As for the argument that billionaires could avoid the tax by moving assets out of the state, “the location of the assets doesn’t matter,” Zucman told me by email. “Taxpayers would be liable for the tax on their worldwide assets.”

One issue raised by the burgeoning controversy over the California proposal is how to extract a fair share of public revenue from plutocrats, whose wealth has surged higher while their effective tax rates have declined to historically low levels.

There can be no doubt that in tax terms, America’s wealthiest families make out like bandits. The total effective tax rate of the 400 richest U.S. households, according to an analysis by Zucman, his UC Berkeley colleague Emmanuel Saez, and their co-authors, “averaged 24% in 2018-2020 compared with 30% for the full population and 45% for top labor income earners.” This is largely due to the preferences granted by the federal capital gains tax, which is levied only when a taxable asset is sold and even then at a lower rate than the rate on wage income.

The late tax expert at USC, Ed Kleinbard, used to describe the capital gains tax as our only voluntary tax, since wealthy families can avoid selling their stocks and bonds indefinitely but can borrow against them, tax-free, for funds to live on; if they die before selling, the imputed value of their holdings is “stepped up” to their value at their passing, extinguishing forever what could be decades of embedded tax liabilities. (The practice has been labeled “buy, borrow, die.”)

Californians have recently voted to redress the increasing inequality of our tax system. Voters approved what was dubbed a “millionaires tax” in 2012, imposing a surcharge of 1% to 3% on incomes over $263,000 (for joint filers, $526,000). In 2016, voters extended the surcharge to 2030 from the original phase-out date of 2016. That measure passed overwhelmingly, by a 2-to-1 majority, easily surpassing that of the original initiative.

But it may be that California’s ability to tax billionaires’ income has been pretty much tapped out. Some have argued that one way to obtain more revenue from wealthy households is to eliminate any preferential rate on capital gains and other investment income, but that’s not an option for California, since the state doesn’t offer a preferential tax rate on that income, unlike the federal government and many other states. The unearned income is taxed at the same rate as wages.

One virtue of the California proposal is that, even if it fails to get enacted or even to reach the ballot, it may trigger more discussion of options for taxing plutocratic fortunes. One suggestion came from hedge fund operator Bill Ackman, who reviled the California proposal on X as “an expropriation of private property” (though he’s not a California resident himself), but acknowledged that “one shouldn’t be able to live and spend like a billionaire and pay no tax.”

Ackman’s idea is to make loans backed by stock holdings taxable, “as if you sold the same dollar amount of stock as the loan amount.” That would eliminate the free ride that investors can enjoy by borrowing against their holdings.

The debate over the California wealth tax may well hinge on delving into plutocrat psychology. Will they just pay the bill, as Huang implies would be his choice? Or relocate from California out of pique?

California is still a magnet for the ambitious entrepreneur, and the drafters of the initiative have tried to preserve its allure. Those who come into the state after Jan. 1 to pursue their ambitious dreams of entrepreneurship would be exempt, as would residents whose billion-dollar fortunes came after that date. There may be better ways for California to capture more revenue from the state’s population of multibillionaires, but a one-time limited tax seems, at this moment, to be as good as any.

Business

Google and Character.AI to settle lawsuits alleging chatbots harmed teens

Published

22 hours ago

January 8, 2026

Press Room

Google and Character.AI to settle lawsuits alleging chatbots harmed teens

Google and Character.AI, a California startup, have agreed to settle several lawsuits that allege artificial intelligence-powered chatbots harmed the mental health of teenagers.

Court documents filed this week show that the companies are finalizing settlements in lawsuits in which families accused them of not putting in enough safeguards before publicly releasing AI chatbots. Families in multiple states including Colorado, Florida, Texas and New York sued the companies.

Character.AI declined to comment on the settlements. Google didn’t immediately respond to a request for comment.

The settlements are the latest development in what has become a big issue for major tech companies as they release AI-powered products.

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Last year, California parents sued ChatGPT maker OpenAI after their son Adam Raine died by suicide. ChatGPT, the lawsuit alleged, provided information about suicide methods, including the one the teen used to kill himself. OpenAI has said it takes safety seriously and rolled out new parental controls on ChatGPT.

The lawsuits have spurred more scrutiny from parents, child safety advocates and lawmakers, including in California, who passed new laws last year aimed at making chatbots safer. Teens are increasingly using chatbots both at school and at home, but some have spilled some of their darkest thoughts to virtual characters.

“We cannot allow AI companies to put the lives of other children in danger. We’re pleased to see these families, some of whom have suffered the ultimate loss, receive some small measure of justice,” said Haley Hinkle, policy counsel for Fairplay, a nonprofit dedicated to helping children, in a statement. “But we must not view this settlement as an ending. We have only just begun to see the harm that AI will cause to children if it remains unregulated.”

One of the most high-profile lawsuits involved Florida mom Megan Garcia, who sued Character.AI as well as Google and its parent company, Alphabet, in 2024 after her 14-year-old son, Sewell Setzer III, took his own life.

The teenager started talking to chatbots on Character.AI, where people can create virtual characters based on fictional or real people. He felt like he had fallen in love with a chatbot named after Daenerys Targaryen, a main character from the “Game of Thrones” television series, according to the lawsuit.

Garcia alleged in the lawsuit that various chatbots her son was talking to harmed his mental health, and Character.AI failed to notify her or offer help when he expressed suicidal thoughts.

“The Parties request that this matter be stayed so that the Parties may draft, finalize, and execute formal settlement documents,” according to a notice filed on Wednesday in a federal court in Florida.

Parents also sued Google and its parent company because Character.AI founders Noam Shazeer and Daniel De Freitas have ties to the search giant. After leaving and co-founding Character.AI in Menlo Park, Calif., both rejoined Google’s AI unit.

Google has previously said that Character.AI is a separate company and the search giant never “had a role in designing or managing their AI model or technologies” or used them in its products.

Character.AI has more than 20 million monthly active users. Last year, the company named a new chief executive and said it would ban users under 18 from having “open-ended” conversations with its chatbots and is working on a new experience for young people.

Business

Warner nixes Paramount’s bid (again), citing proposed debt load

Published

1 day ago

January 7, 2026

Press Room

Warner nixes Paramount’s bid (again), citing proposed debt load

Paramount’s campaign to acquire Warner Bros. Discovery was dealt another blow Wednesday after Warner’s board rejected a revised bid from the company.

The board cited the enormous debt load that Paramount would need to finance its proposed $108-billion takeover.

Warner’s board this week unanimously voted against Paramount’s most recent hostile offer — despite tech billionaire Larry Ellison agreeing in late December to personally guarantee the equity portion of Paramount’s bid. Members were not swayed, concluding the bid backed by Ellison and Middle Eastern royal families was not in the best interest of the company or its shareholders.

Warner’s board pointed to its signed agreement with Netflix, saying the streaming giant’s offer to buy the Warner studios and HBO was solid.

The move marked the sixth time Warner’s board has said no to Paramount since Ellison’s son, Paramount Chief Executive David Ellison, first expressed interest in buying the larger entertainment company in September.

In a Wednesday letter to investors, Warner board members wrote that Paramount Skydance has a market value of $14 billion. However, the firm is “attempting an acquisition requiring $94.65 billion of [debt and equity] financing, nearly seven times its total market capitalization.”

The structure of Paramount’s proposal was akin to a leveraged buyout, Warner said, adding that if Paramount was to pull it off, the deal would rank as the largest leveraged buyout in U.S. history.

“The extraordinary amount of debt financing as well as other terms of the PSKY offer heighten the risk of failure to close, particularly when compared to the certainty of the Netflix merger,” the Warner board said, reiterating a stance that its shareholders should stick to its preferred alternative to sell much of the company to Netflix.

The move puts pressure on Paramount to shore up its financing or boost its cash offer above $30 a share.

However, raising its bid without increasing the equity component would only add to the amount of debt that Paramount would need to buy HBO, CNN, TBS, Animal Planet and the Burbank-based Warner Bros. movie and television studios.

Paramount representatives were not immediately available for comment.

“There is still a path for Paramount to outbid Netflix with a substantially higher bid, but it will require an overhaul of their current bid,” Lightshed Partners media analyst Rich Greenfield wrote in a Wednesday note to investors. Paramount would need “a dramatic increase in the cash invested from the Ellison family and/or their friends and financing partners.”

Warner Bros. Discovery’s shares held steady around $28.55. Paramount Skydance ticked down less than 1% to $12.44.

Netflix has fallen 17% to about $90 a share since early December, when it submitted its winning bid.

The jostling comes a month after Warner’s board unanimously agreed to sell much of the company to Netflix for $72 billion. The Warner board on Wednesday reaffirmed its support for the Netflix deal, which would hand a treasured Hollywood collection, including HBO, DC Comics and the Warner Bros. film studio, to the streaming giant. Netflix has offered $27.75 a share.

“By joining forces, we will offer audiences even more of the series and films they love — at home and in theaters — expand opportunities for creators, and help foster a dynamic, competitive, and thriving entertainment industry,” Netflix co-Chief Executives Ted Sarandos and Greg Peters said in a joint statement Wednesday.

After Warner struck the deal with Netflix on Dec. 4, Paramount turned hostile — making its appeal directly to Warner shareholders.

Paramount has asked Warner investors to sell their shares to Paramount, setting a Jan. 21 deadline for the tender offer.

Warner again recommended its shareholders disregard Paramount’s overtures.

Warner Bros.’ sale comes amid widespread retrenchment in the entertainment industry and could lead to further industry downsizing.

The Ellison family acquired Paramount’s controlling stake in August and quickly set out to place big bets, including striking a $7.7-billion deal for UFC fights. The company, which owns the CBS network, also cut more than 2,000 jobs.

Warner Bros. Discovery was formed in 2022 following phone giant AT&T’s sale of the company, then known as WarnerMedia, to the smaller cable programming company, Discovery.

To finance that $43-billion acquisition, Discovery took on considerable debt. Its leadership, including Chief Executive David Zaslav, spent nearly three years cutting staff and pulling the plug on projects to pay down debt.

Paramount would need to take on even more debt — more than $60 billion — to buy all of Warner Bros. Discovery, Warner said.

Warner has argued that it would incur nearly $5 billion in costs if it were to terminate its Netflix deal. The amount includes a $2.8-billion breakup fee that Warner would have to fork over to Netflix. Paramount hasn’t agreed to cover that amount.

Warner also has groused that other terms in Paramount’s proposal were problematic, making it difficult to refinance some of its debt while the transaction was pending.

Warner leaders say their shareholders should see greater value if the company is able to move forward with its planned spinoff of its cable channels, including CNN, into a separate company called Discovery Global later this year. That step is needed to set the stage for the Netflix transaction because the streaming giant has agreed to buy only the Warner Bros. film and television studios, HBO and the HBO Max streaming platform.

However, this month’s debut of Versant, comprising CNBC, MS NOW and other former Comcast channels, has clouded that forecast. During its first three days of trading, Versant stock has fallen more than 20%.

Warner’s board rebuffed three Paramount proposals before the board opened the bidding to other companies in late October.

Board members also rejected Paramount’s Dec. 4 all-cash offer of $30 a share. Two weeks later, it dismissed Paramount’s initial hostile proposal.

At the time, Warner registered its displeasure over the lack of clarity around Larry Ellison’s financial commitment to Paramount’s bid. Days later, Ellison agreed to personally guarantee $40.4 billion in equity financing that Paramount needs.

David Ellison has complained that Warner Bros. Discovery has not fairly considered his company’s bid, which he maintains is a more lucrative deal than Warner’s proposed sale to Netflix. Some investors may agree with Ellison’s assessment, in part, due to concerns that government regulators could thwart the Netflix deal out of concerns about the Los Gatos firm’s increasing dominance.

“Both potential mergers could severely harm the viewing public, creative industry workers, journalists, movie theaters that depend on studio content, and their surrounding main-street businesses, too,” Matt Wood, general counsel for consumer group Free Press Action, testified Wednesday during a congressional committee hearing.

“We fear either deal would reduce competition in streaming and adjacent markets, with fewer choices for consumers and fewer opportunities for writers, actors, directors, and production technicians,” Wood said. “Jobs will be lost. Stories will go untold.”