December 3, 2017

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Business December 3, 2017

What's Behind Bitcoin's Recent Price Surge?

The bitcoin value has soared recently and continues to rise as more and more people invest in the currency. NPR’s Michel Martin asks business writer Roben Farzad what’s behind the sudden skyrocketing value.

MICHEL MARTIN, HOST:

So while we’re talking about money, you may have heard over the last few weeks bitcoin is hot. As of today, one bitcoin is worth – well, I don’t even want to say because by the time we finish this conversation, it could have changed. But let’s just say for now that it’s been bouncing between $11,000 and $12,000 all day, which is quite a leap from yesterday or last week or even 2009 when the digital currency was created. We’re wondering what all this volatility means – if anything – so we called Roben Farzad. He is a business reporter and the host of Full Disclosure, which covers topics related to business and economics. Roben, thanks so much for joining us.

ROBEN FARZAD, BYLINE: Michel, how are you?

MARTIN: I’m great. Thank you. So as we just said, the bitcoin prices have been changing hour to hour. What do you make of all this?

FARZAD: You know, I’m like so many of those other people on the sidelines on the cheap seats, saying, oh, it’s a speculative bubble, it’s a speculative bubble and once it breaks – what was it? – $800 last year, breaks 1,000, 2,000, 3,000. At every step in the game even with crashes, it has managed to break $10,000. And increasingly, the cold-eyed observers on Wall Street can’t make sense of it. I mean, what does it represent? It’s kind of a Rorschach for whatever you want it to be.

MARTIN: Well, you know, it was created in 2009. But until pretty recently – I think I’m fair to say this – it had a somewhat of a negative reputation as the currency of cyber criminals. I mean, people – some people who’ve had the unfortunate experience of being hacked will say that, you know, that people offer to unlock their information if they’re paid in bitcoin. Has the reputation changed?

FARZAD: We do not see it accepted at many places. It’s not like you can walk into a Dairy Queen or something and pay with bitcoin. I mean, there are occasional Tech Crunch articles about a bitcoin atm. But it doesn’t have as much in the way of practical application right now. I think for people who are skeptical about currencies like the euro and the dollar, that those central banks have just been printing left and right to get out of the global economic crisis, they just want something that’s decentralized – in theory, that is person-to-person, that cuts out the man and the middle man.

In practice, it really hasn’t gotten there yet. It’s more something that’s really run ahead of itself. It reminds me of the Internet browsers like Netscape and Mosaic when they first came out in ’93 and ’94, and everybody just thought that they were going to lead to a brave, new world. And they had to crash several times for people to understand what the true business justification for a price was.

MARTIN: And I’m wondering if a number of people heard about bitcoin from family members over the Thanksgiving weekend or just because there’s been – there have been a number of stories in the media about it because of all these, you know, this wild kind of volatility. And so that makes me wonder if some of this sudden surge is from people jumping into it just because they’ve heard about it.

FARZAD: Indeed, Michel. I regret to inform your dear listeners that the Roben Farzad Iranian contrarian relative index has been triggered. When I hear from people I didn’t even know were related to me – Farzad, bitcoin is good. Should I buy it? That means you need to stay the heck away or get out. And we are close to that.

MARTIN: Before we let you go, what would it take to give this digital currency more legitimacy among professional investors and, frankly, users? I mean, what is the business case?

FARZAD: For a system to work like this, you really need a major economy or a major corporation to somehow be able to bring it online and show that it can work in real time. Right now, I think it remains something in theory that sounds great. You know, it sounds rebellious. It sounds like opting out of the system. It sounds like you’re being an iconoclast by adopting it. In practice, you are hardly seeing it anywhere but these headlines about it running up 1,000 percent in a year.

MARTIN: That’s Roben Farzad, business reporter and host of the podcast Full Disclosure on NPR One. He’s also the author of a book that has nothing to do with bitcoin called “Hotel Scarface.” Roben, thanks so much for speaking with us.

FARZAD: My pleasure, Michel.

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Health December 3, 2017

CVS To Buy Health Insurer Aetna For $69 Billion

A CVS store is pictured in 2015 in San Francisco. CVS Health is reportedly preparing to purchase Aetna for $69 billion.

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Updated at 8 p.m. ET

CVS is preparing to buy the health insurance giant Aetna for $69 billion, the companies say.

The acquisition, which has been reportedly in talks for months, would be one of the largest such mergers in the history of health care. It would combine CVS Health Corp, which has more than 9,000 pharmacy stores and more than 1,000 walk-in clinics, with an insurance company that covers more than 22 million members.

In a press release Sunday, CVS says it will pay $207 for each share in cash and stock, reflecting a 29 percent premium over Aetna’s share price on Oct. 25, The Associated Press reports. (Oct. 25 is the last day not affected by talk of the sale; on the 26th, The Wall Street Journalreported on CVS and Aetna’s acquisition talks.)

The companies say, “This transaction fills an unmet need in the current health care system and presents a unique opportunity to redefine access to high-quality care in lower cost, local settings — whether in the community, at home, or through digital tools.”

In October, Amanda Starc, associate professor of strategy at Northwestern’s Kellogg School of Management, spoke with NPR about the implications of any deal between CVS and Aetna.

She noted that CVS is not just “the drugstore on the corner.”

“In practice, CVS provides a lot of drug insurance through something called a pharmacy benefits manager,” Starc says. Large national insurers like Blue Cross Blue Shield already contract with CVS for their pharmacy benefits.

In fact, that program accounts for “the majority of their revenue,” Starc says. “So while you might think of them as the drugstore, they’re ultimately a big insurance company.”

Buying Aetna will make CVS even moreof an insurance company, instead of a retail pharmacy, she says.

“It will allow them to have a large, captive audience for that insurance arm, and that might allow them to do a couple of things. They might be able to negotiate lower drug prices from manufacturers by virtue of their sheer size,” Starc says, while noting that doesn’t necessarily mean lower prices for consumers.

“They might also be able to better align your pharmacy benefits and your health care benefits,” she says. For instance, an integrated insurer could “provide pharmacy benefits to incentivize you to do things like fill your blood pressure pills so that you don’t end up in the hospital.”

As The Wall Street Journalpreviously noted, and The New York Times and Bloomberg emphasize today, Amazon is one motivation for CVS to buy Aetna. The web-based behemoth, which has shaken up so many industries, is now eyeing the pharmacy business, prompting companies like CVS to worry about their future.

The Wall Street Journalnotes that Aetna also faces challenges of its own — “A judge’s decision led Aetna earlier this year to give up its planned acquisition of Humana Inc. and [Aetna] has retreated from the unprofitable Affordable Care Act exchange business, leaving it with an unclear path to future growth, analysts say. It also lacks the diversity of larger rival UnitedHealth Group Inc., which has a fast-expanding health-services arm that includes a pharmacy-benefits manager as well as doctor practices and surgery centers.”

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Sports December 3, 2017

New Jersey Takes On Major Professional Sports Leagues In Sports Betting Case

The justices of the U.S. Supreme Court have been known to play a long shot in an election betting pool or to bet a colleague about the outcome of the World Series. But the stakes are usually just a few dollars. Not so for the winners and losers in a case to be heard Monday that tests whether the federal ban on sports betting in most states unconstitutionally tramples on state sovereignty.

The Bradley Act

The ban was known as the Bradley Act, after its chief promoter, Sen. Bill Bradley, D-N.J.

New York Knicks player Bill Bradley is shown in New York City in Oct. 1970.

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Bradley played 10 years for the New York Knicks, helping them win two NBA championships. The former Princeton star and Rhodes scholar went on to serve three terms in the Senate, winning accolades as a serious legislator.

In all of his 18 years on Capitol Hill, Bradley introduced just one bill related to sports — a ban on sports betting.

The bill, which passed easily, banned gambling on sports in 46 states, exempting four states — Delaware, Montana, Nevada and Oregon — that had already legalized it, and giving all the rest a year in which to legalize sports gambling if they wanted to.

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In an NPR interview, Bradley said his motivation was simple, and personal. “Betting on sports was betting on human beings, and I thought that was wrong,” he explained. “It turns players into roulette chips. It makes the game, which is a game of high-level competition and excellence, into slot machines, and I don’t think that should be what we do in this country.”

Bradley said there was virtually no congressional opposition to his bill back in 1992. Though Bradley added that Donald Trump, with failing investments in Atlantic City casinos, lobbied against it, believing that sports betting was the answer to his financial problems there.

After the bill passed, New Jersey did not seek to legalize gambling in its one-year window of opportunity.

That was then, and this is now, however.

Now the American Gaming Association estimates that illegal sports betting has grown to $150-billion-a-year market. And cash-starved states are salivating at the thought of raising billions from legalizing and licensing that activity, not to mention taxing the proceeds.

Down the shore

Enter New Jersey, home to at least a half dozen shuttered Atlantic City casinos, and a state where Republicans and Democrats since 2011 have been trying to overturn the federal ban or somehow get around it.

Casinos are seen along the boardwalk in Atlantic City, N.J., in June. In the background is the former Revel Casino.

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“We intend to go forward to allow sports gambling to happen,” Gov. Chris Christie, R-N.J., said bluntly at an event to promote Atlantic City in 2012. “If someone wants to stop us, then they’ll have to take action to try to stop us.”

Twice the state has tried to legalize sports betting. Twice, the major sports leagues and the NCAA have taken the state to court, each time contending that the state is violating the federal ban enacted in 1992. And twice the state has lost in federal appeals court.

Now, however, the issue has reached the Supreme Court, with the state contending that the federal law unconstitutionally commandeers the states to enforce the federal ban.

Playing puppet master or just business as usual vis-a-vis states?

Arguing Monday’s case will be two men, each of whom served as solicitor general in the George W. Bush administration.

Representing New Jersey is lawyer Ted Olson who argues that the federal government cannot tell the states they have to carry out the federal ban on sports betting.

He contends the federal government cannot say to the states: “You’re just working for us. You take the responsibility. We’ll give the instructions. We’ll be the puppet master.”

He rests his case on two prior Supreme Court cases holding that the federal government cannot commandeer a state’s apparatus to enforce a federal law. Most notably, in 1997 the Supreme Court ruled that the federal law requiring state and local officials to carry out background checks on gun buyers was unconstitutional because it commandeered, or conscripted, state and local officials to enforce a federal law.

But lawyer Paul Clement, representing the sports leagues and backed by the Trump administration, says this case is very different. He contends that the federal ban on sports betting doesn’t commander anything. All it does is set out what states may not do.

Clement says that the federal ban simply says that the states “can’t authorize sports betting. They can’t authorize a state lottery system that involves a component of sports gambling.”

Clement argues that “it’s just not that unusual for Congress to tell states that they can’t do things that they want to do.”

Congress, in such cases, is establishing a federal policy that pre-empts what the states can do.

The Supreme Court has often upheld such federal pre-emption statutes — for example, barring states from adding to federally approved labels for pharmaceuticals, or barring states from setting trucking rates.

The clash of constitutional theories in this case, however, may be besides the point in the real world. In the modern economic landscape, there is a growing tolerance for sports betting. Even among the sports leagues that are fighting New Jersey in this case there is more interest in Congress in changing the federal law.

Money, money, money

The reason boils down to one simple word: money.

Everybody sees a chance to profit, from the states to the professional sports leagues.

In 2014, Adam Silver, commissioner of the National Basketball Association, wrote an op-ed piece in the New York Times calling for “a federal framework” to legalize sports betting.

The National Football and National Hockey Leagues have decided to move major sports teams to the capital of sports betting, Las Vegas.

Odds are displayed on a screen at a sports book owned and operated by CG Technology in Las Vegas in 2015.

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Major League Baseball, as well as the NBA and the NHL, have invested in sports fantasy companies. And the NFL, as well as Major League Baseball, are increasingly partnering with data dissemination firms for gambling purposes overseas.

So it is no surprise that even if the court does not uncork the bottle of legalized sports betting, Congress just might revisit its ban.

For the man who started it all — Bill Bradley — that is dispiriting.

“A lot of things make money,” he said. “The question is what’s right and what’s wrong. Do you want your children involved in betting on sports? How about little league? How about junior high school?”

After all, he says, there’s money to be made by betting on the spread in those games, too.

A decision in the sports betting case is expected later in the Supreme Court term.

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