Could American banks get caught in the middle of US-China rift over Hong Kong?

A gateway to China, Hong Kong also serves as an important regional hub for America’s largest lenders

American banks accounted for about 5 per cent of total assets in the city last year, according to HKMA


THIS WILL APPLY TO CANADIAN BANK'S OPERATING OUT OF HONG KONG
https://en.wikipedia.org/wiki/List_of_banks_in_Hong_Kong


Chad Bray Published: 29 May, 2020  SCMP
It would be a ‘serious mistake’ to jeopardise Hong Kong’s special status, which is fundamental to its role as an attractive investment destination and international financial hub, the US Chamber of Commerce said this week. Photo: Felix Wong

A gateway for capital flowing in and out of mainland China, Hong Kong has for decades also served as a lucrative regional hub for America’s biggest banks operating in Asia.

But, rising tensions between the United States and China are threatening to leave foreign lenders – and billions of dollars in potential revenue as the mainland’s financial services industry opens up further – stuck in the middle.

On Wednesday, US Secretary of State Mike Pompeo said Hong Kong no longer maintained a “high degree of autonomy” from China, after the National People’s Congress (NPC) said it would adopt new national security legislation tailor-made for the city following months of anti-government street protests. The resolution was passed by a near unanimous vote on Thursday.

The Trump administration has not said what actions it might take in response other than President Donald Trump saying he planned to do “something” this week. The declaration represents the latest firestorm, as relations have deteriorated dramatically between the world’s two biggest economies in recent years.

“We expect the latest move to have considerable implications for the city, with the threat of higher tariffs, sanctions, as well as tougher investment and visa rules between Hong Kong and the US, including potential sanctions on businesses – particularly banks – operating in the city found to be supporting anyone in violation of the ‘one country, two systems’ model,” said Benjamin Quinlan, managing partner of consultancy Quinlan & Associates.

The US was Hong Kong’s second-largest trading partner after mainland China, according to Hong Kong’s Trade and Industry Department. American banks accounted for 5 per cent of the banking sector in the city in 2019, with about US$166 billion in total assets, according to the Hong Kong Monetary Authority, the city’s de facto central bank.

Since Hong Kong was returned to China in 1997, the special administration region has held a special status with the US, allowing it as a free port to avoid tariffs the US has placed on China and to import goods the US has restricted from being shipped to the mainland.

“It would be a serious mistake on many levels to jeopardise Hong Kong’s special status, which is fundamental to its role as an attractive investment destination and international financial hub,” the US Chamber of Commerce said on Tuesday.

The US response could range from sanctioning individuals and Chinese companies – including Hong Kong’s members of the NPC – and restricting visas to the “nuclear option” of using the International Emergency Economic Powers Act (IEEPA) to prevent future investment or transfer of funds to Chinese-related entities or persons.

Enacting the IEEPA would require the president to declare that there is an unusual and extraordinary threat to the US and consult Congress. It has typically been used to sanction countries that fund terrorism, or which are developing nuclear weapons, such as North Korea.

Martin Petch, senior credit officer in the sovereign risk group at Moody’s Investors Service, said changed international perceptions of Hong Kong could add downward pressure to the city’s credit rating. “This will particularly be the case if the international response, in turn, leads to a weakening of Hong Kong’s role as an international economic and financial centre,” he said.

For US banks, Hong Kong has been a significant hub for corporate and investment banking, both inside and outside mainland China, and, increasingly, wealth management, as China has grown wealthier.

Last year, American banks played key roles in some of the biggest listings in the city. Hong Kong has led global fundraising for seven of the past 11 years.

Citigroup, JPMorgan and Morgan Stanley all served as joint global coordinators for Alibaba Group Holding’s US$12.9 billion secondary listing in Hong Kong, the biggest listing in the city and the second-largest globally in 2019. JPMorgan and Morgan Stanley also were joint sponsors of the US$5.7 billion initial public offering last year of Budweiser Brewing Company APAC, the Asia-Pacific arm of Anheuser-Busch InBev.

Chinese technology companies JD.com and NetEase are preparing for their own secondary listings in the city later this year.

American banks accounted for 19 per cent of investment banking fees booked in Hong Kong last year, or about US$309.8 million, according to data provider Refinitiv. Overall, investment banks earned US$1.63 billion in fees last year.

Citigroup, which also operates 16 retail banking branches in the city, traces its history in Hong Kong back to 1902. The city serves as one of its main hubs in the Asia-Pacific region, with about 4,500 employees, and accounted for about 15 per cent of the bank’s revenue in the region.

The bank, which does not break out its results for Hong Kong, reported US$1.58 billion in profit from continuing operations in its global consumer bank in Asia last year, and profit from continuing operations of US$3.46 billion in its institutional clients business. Its regional chief executive is based in Hong Kong.

“Citi’s exposure to Hong Kong includes top local corporates and US and [multinational] names, and is around 3 per cent of our total exposure,” a bank spokesman said. The bank is monitoring events closely in Hong Kong and remains committed to the city, the spokesman said. The bank’s deposits and loans have increased in Hong Kong in the past year and it has not seen capital flight from the city, he added.

The city also serves as the regional headquarters for Bank of America, Goldman Sachs and Morgan Stanley. JPMorgan’s Asia-Pacific CEO, who oversees 17 markets in the region, is based in Hong Kong.

Goldman employs about 1,700 people in Hong Kong and another 250 onshore in mainland China, with most of the regional business heads at Goldman based in the city. Overall, Asia-Pacific accounted for 13 per cent of its revenue last year, or about US$4.65 billion.

Morgan Stanley has about 2,000 employees in the city, and Asia-Pacific as a whole accounted for US$5.13 in revenue in 2019, or about 17 per cent of the bank’s total revenue.

Like many of their American and European rivals, Goldman, JPMorgan and Morgan Stanley have moved to take majority control of their securities operations in mainland China in the past year, as Beijing has relaxed foreign ownership rules for securities firms, asset managers and insurance companies.

The opening of mainland China’s financial services sector, however, is not expected to represent a shift of personnel out of Hong Kong, but an opportunity to access the country’s domestic market, bankers said. Capital controls in mainland China mean Hong Kong will remain an attractive market for Chinese companies seeking to access foreign investors, they said.

Rising US-China tensions and the return of protests to Hong Kong’s streets over the national security law have also renewed questions about Hong Kong’s future attractiveness to expats.

“For much of my time here, it was seen from an earnings, career and lifestyle perspective as one of the best places in the world to work in financial services. A very attractive kind of career destination city,” said John Mullally, regional director for southern China and Hong Kong financial services at search firm Robert Walters. “That has definitely changed. The protests have played a big part in that.”

However, the lifestyle afforded to financial services workers in the city still makes it an attractive location for expats, according to Abimanu Jeyakumar, head of North Asia at headhunter Selby Jennings.

“At the moment, with the new bill being passed, it does cause another barrier to overcome when it comes to relocating staff,” Jeyakumar said. “[Hong Kong has] always been a conduit for Chinese investments into the international market and international investments into China. I think a lot of banks are waiting to see how this plays out. This could bode an opportunity, or a challenge.”

Additional reporting by Alison Tudor-Ackroyd.


Chad Bray
Chad is a senior business reporter focused on finance. He has previously written for The New York Times, The Wall Street Journal and Dow Jones Newswires.

Gabby Giffords' Group Condemned Trump For Sharing A Video Saying "The Only Good Democrat Is A Dead Democrat"

Giffords was almost killed by a gunman in 2011 when she was a Democrat representing Arizona in Congress.

Julia ReinsteinBuzzFeed News Reporter
Last updated on May 28, 2020Tweet

President Donald Trump retweeted a video on Thursday in which a supporter said that "the only good Democrat is a dead Democrat," earning the condemnation of prominent Democrats — including the anti–gun violence group founded by Gabby Giffords, the former Democratic member of Congress who was almost assassinated by a gunman in 2011.

Peter Ambler, cofounder of Giffords' organization, told BuzzFeed News the US had already "seen the deadly consequences of the twin threats of hateful rhetoric and loose gun laws."

"My hometown of El Paso suffered a horrific tragedy because a man motivated by hate drove 10 hours to slaughter Latinos with a gun," Ambler said. "We've already seen armed men enter state capitals in attempts to intimidate lawmakers navigating pandemic response."

"Trump’s encouragement of violence, harassment, and intolerance is a threat to our core democratic institutions, and it's going to result in further violence and tragedy," he said. "It must end now.”

Tom Brenner / Getty Images

In the video shared by the president, which was posted Wednesday by the account "Cowboys for Trump," Couy Griffin, an Otero County, New Mexico, commissioner, can be heard speaking at a rally against the state's restrictions to slow the spread of the coronavirus.

The May 17 protest in the city of Truth or Consequences was held after a local church received a cease-and-desist order for illegally holding in-person services, according to NM Political Report.

“I’ve come to a place where I’ve come to the conclusion that the only good Democrat is a dead Democrat," Griffin says in the recorded speech, to cheers and applause.



Donald J. Trump@realDonaldTrump

Thank you Cowboys. See you in New Mexico! https://t.co/aCRJeskUA804:00 AM - 28 May 2020
Reply Retweet Favorite


After the cheers die down, Griffin then adds that he does not mean that "in the physical sense."

"I don’t say that in the physical sense, and I can already see the videos getting edited where it says I wanna go murder Democrats," Griffin says. "No, I say that in the political sense, because the Democratic agenda and policy is anti-American right now."


Trump retweeted the Cowboys for Trump video at midnight on Thursday, saying, "Thank you Cowboys. See you in New Mexico!"

In response to questions about the tweet, a White House spokesman told BuzzFeed News the president condemns violence.

"The President and the entire administration condemn violence in all forms as we have stated many times," White House spokesman Judd Deere said in an email.

Griffin was photographed meeting Trump in the Oval Office in February, reportedly after he and a group of supporters rode horseback from Cumberland, Maryland, to Washington, DC, in support of Trump's declaration of a national emergency to build a wall along the US–Mexico border.

Trump's sharing of the video was also criticized by Beto O'Rourke, the former Texas representative who made an unsuccessful presidential run last year on a gun control platform.



Beto O'Rourke@BetoORourke
ter·ror·ism /ˈterəˌrizəm/ noun: terrorism the unlawful use of violence and intimidation, especially against civilians, in the pursuit of political aims.04:36 PM - 28 May 2020
Reply Retweet Favorite

New Mexico political leaders have called for Griffin to resign over his remarks, which Lt. Gov. Howie Morales called "incredibly irresponsible."

“Violent speech like this has no place in New Mexico politics,” said Democratic Party of New Mexico chair Marg Elliston.

Member of Griffin's own party denounced his statements, with the New Mexico Young Republicans calling for him to apologize and saying "such an outrageous statement is contrary to the pro-life Republican Party platform."

The New Mexico GOP tweeted that "any statements, whether in jest or serious about harming another individual are just plain wrong."

New Mexico GOP@NewMexicoGOP
The Republican Party of New Mexico wants to state for the record that any statements, whether in jest or serious about harming another individual are just plain wrong.07:11 PM - 20 May 2020
Reply Retweet Favorit

In an interview with ABC-7, Griffin said he would not resign.

"If their demand was warranted, then I would consider it," Griffin said. "But their demand for me to step down because of that instance in which I said 'the only good Democrat is a dead democrat' when I was talking about politics to begin with — I believe it's unwarranted."

In an interview with the Daily Beast, Griffin admitted he should have chosen his words better.

“I could’ve chosen a different verbiage, you know. I guess I need to be more careful when I choose the words that I speak,” Griffin said. “But you know, it’s just so hypocritical of the left how they’re blowing this up, like I’m some hate-speech murderer.”

But Griffin also said he would not rule out violence as a tactic for the reopening protests.


Jeenah Moon / Getty Images
Couy Griffi

“I’ll tell you what, partner, as far as I’m concerned, there’s not an option that’s not on the table,” Griffin said.

He also repeated to the Daily Beast that "the only good Democrat is a dead Democratic," and said he thinks some Democrats, including Virginia Gov. Ralph Northam and Michigan Gov. Gretchen Whitmer, could be guilty of treason and even suggested they be punished by execution for it.

“You get to pick your poison: You either go before a firing squad, or you get the end of the rope,” Griffin said.
Griffin has a history of calling for violence and the execution of Democrats.

According to KRWG, he has repeatedly said Democrats should be hanged for "treason" and has said laws requiring masks could result in "civil war."

Griffin did not immediately respond to a request for comment from BuzzFeed News.

Julia Reinstein is a reporter for BuzzFeed News and is based in New Yor

Friends Say George Floyd Always Went Out Of His Way To Help People Who Were Less Fortunate

"He was articulate. He was grounded. He was spiritual. He was an athlete. He was an organizer. He was a comforter. He was an encourager."

Amber JamiesonBuzzFeed News Reporter

Posted on May 27, 2020

Facebook: christina.u.dawson

“One day it’s going to be you and God. You’re going up or you’re going down,” George Floyd says in a video circulating on social media in which he calls on young people to avoid gun violence.

Floyd, 46, died in police custody on Monday after a white police officer pushed his knee into his neck on the ground outside a supermarket in Minneapolis. Video footage showed Floyd saying "I can't breathe" until he became unresponsive, but even then the officer continued to keep him in a neck hold.

Floyd's family did not immediately respond to BuzzFeed News' request for comment, but they, along with friends, have been sharing stories of his life online and with the media.

Floyd, also known as Big Floyd, reinvented himself over and over again. In the 1990s, he was part of a rap crew from Houston's Third Ward, working with DJ Screw, a well-known local musician.

“Floyd was my brother. We called each other 'Twin,'” former NBA player Stephen Jackson said in a video posted to Instagram on Tuesday. Jackson, who grew up with Floyd in the Third Ward, shared photos of him in his high school football uniform.

Instagram: @_stak5_

"Made it to state championship," Jackson wrote. "Bruh wasn’t no bum. Had hoop game too."

The mother of his 6-year-old daughter told the Houston Chronicle that he'd received a football scholarship to Florida State University after playing for Yates High School.

In recent years, Floyd moved to Minnesota.

"He was changing his life," Jackson said in the Instagram video. "He went to Minnesota. He was driving trucks. I just sent him up two or three boxes of clothes. My boy was doing what he was supposed to do."

Vanita Williams, a friend, met Floyd through his work driving trucks and as a security guard at a downtown Salvation Army homeless shelter.

Instagram: @_stak5_

"He was sober. He showed me resources," Williams said. "He gave us hugs and told us it was going to be OK. He told us we could make it. He was such a big brother to me."

Williams said Floyd embraced people of all backgrounds, including trans people, sex workers, people experiencing homelessness, and people with addictions.

"He gravitated towards the less fortunate," Williams said, "the downtrodden, the ones they said wasn't going to make it."

She said Floyd would give people a few dollars, new clothes, or whatever small thing he could.

"Whatever he needed to do, he would help you," she said.

He also worked as a security guard at Conga Latin Bistro in Minneapolis.

"This person was my employee, and a very good friend," Jovanni Thunstrom wrote on Facebook. Thunstrom also told local station KSTP that Floyd would drive patrons who were drunk home to make sure they were safe.

“He wanted me to teach him how to Bachata dance," Thunstrom said. "And I gave up because I couldn't turn him because he was [6 feet 6 inches]."

Facebook

His former girlfriend Christina Dawson shared photos of Floyd smiling, wearing his security T-shirt, and cuddling a dog.

"They really killed my baby!!" she posted. "THAT KING DID NOT HAVE TO DIE BEFORE HIS TIME."

Instagram: @_stak5_

Floyd was popular with women because of his charm and height, Williams said.

"There’s going to be so many women going to come out of the woodwork when they hear," she added. "He was a big teddy bear."

She added, "You could talk to a thousand people and nobody is going to have anything bad to say about him."

His brothers and cousin also spoke to CNN's Don Lemon about their search for justice after the four officers involved were fired.

"It definitely warms my heart to see we have so many people willing to support and to protest and to give him a voice," said his cousin Tera Brown, "and keep this going because he was a very loving person. And he didn't deserve what happened to him."

His friends agreed.

"He was articulate. He was grounded. He was spiritual. He was an athlete. He was an organizer. He was a comforter. He was an encourager," Williams told BuzzFeed News. "I could just go on and on and on about who he was."

• 
  Amber Jamieson is a reporter for BuzzFeed News and is based in New York.

  Contact Amber Jamieson at amber.jamieson@buzzfeed.com.

  Got a confidential tip? Submit it here.
• 
  

Congress Asked The CDC For Data On How The Coronavirus Is Affecting Communities Of Color. The CDC Sent Back Links To Its Public Website.

“The Trump Administration would prefer to ignore the disproportionate impact this crisis is having on communities of color,” said Sen. Patty Murray.

Kadia GobaBuzzFeed News Reporter

Reporting From

Washington, DC

Posted on May 28, 2020, at 11:05 a.m. ET

Robyn Beck / Getty Images

Local residents fill out paperwork at a mobile COVID-19 testing station in Compton, California, April 28. St. John's Well Child and Family Center is providing testing sites in African American and Latino communities that have been neglected in terms of testing as compared to wealthier areas of Los Angeles County.

BuzzFeed News has reporters around the world bringing you trustworthy stories about the impact of the coronavirus. To help keep this news free, become a member and sign up for our newsletter, Outbreak Today.

---

WASHINGTON — As communities of color are disproportionately dying from the coronavirus, Congress asked the CDC to collect national data on the race and ethnicity of COVID-19 cases and deaths.

On the day of the deadline set in law by Congress, the CDC responded with a page of links that referred back to its public website.

The Department of Health and Human Services, which oversees the CDC, “should be embarrassed by the lazy, incomplete, 2.5-page copy-and-paste job it calls a ‘report’ on the racial disparities of COVID-19 cases,” Sen. Elizabeth Warren tweeted last week.

Dr. Robert Redfield, the director of the CDC, sent the report to Congress on March 15. The links that CDC forwarded include some racial and ethnic data on the coronavirus, but it is incomplete. The report includes a link to the CDC’s updating data on cases and deaths across the US, but only includes race and ethnicity information for less than half of the 1.7 million people who have tested positive for COVID-19.

The report also linked to the CDC’s data on hospitalizations broken down by race and ethnicity, but that page only includes data from specific network hospitals in 14 states, totaling just about 10% of the US population.

“This wholly inadequate response tells us nothing except what we already knew: the Trump Administration would prefer to ignore the disproportionate impact this crisis is having on communities of color,” Sen. Patty Murray, the lead Democrat on a Senate Health Committee, said in a statement.

The CDC did not respond to several questions on how it obtained its data or the timeframe in which it will update the information. And while incomplete, Redfield wrote that the CDC data does suggest “a disproportionate burden of illness and death among racial and ethnic minority groups,” adding that “studies are underway to confirm these data.” The CDC did not respond to BuzzFeed News’ requests to specify what kind of studies are being conducted.

The report comes after Congress passed its most recent coronavirus stimulus package, which required the CDC to report COVID-19 race and ethnicity data to several congressional committees, as they investigate the disproportionate effects of COVID-19 on black and Hispanic people.

Last month, a group of bipartisan members of Congress urged the Trump administration to gather data on high-risk communities in order to better understand the racial disparity and aid those communities in response to the pandemic.

Health experts say complete reports are key to addressing COVID-19 disparities in communities of color.

“Thus far, the fragmented data we are getting from HHS, state, and local sources paint a very fragmented, but troubling picture,” Northeastern University health policy expert Leo Beletsky told BuzzFeed News in an email. “Systematic national data are necessary to understand the full scope of the issue and to target resources where they are most needed.

Beletsky went further to suggest the administration’s slow-walk of the data is an effort to avoid criticism of its coronavirus response and conversations about longstanding health disparities among people of color.

“Ultimately, these data will force some very difficult conversations about bungled responses so far, as well as about broader questions of race and racism in America. This is why agencies are dragging their feet on making these analyses available to lawmakers and the public.”

Massachusetts Rep. Ayanna Pressley, who also signed onto the initial letter to the CDC asking for race and ethnicity data for COVID-19, told reporters on Wednesday that black people represent nearly 40% of all COVID-19 cases in Boston (38% according to city data), despite being 25% of the population.

“We will use every tool at our disposal to uncover why this administration waited so long to take any action and make clear the grave consequences of their inaction,” Pressley told reporters on a call. “And while oversight is critical, we must also keep up the pressure on this administration to take action now before we are robbed, unnecessarily, of even more lives.”

Sen. Tim Scott, the lone black Republican senator and the only GOP member to call on the CDC to provide race and ethnicity data of COVID-19 victims, is instead urging states to report their own data.

“In South Carolina, we regularly receive and can readily access disaggregated demographic data on both cases and fatalities,” Scott told BuzzFeed News in a statement. “Our model is effective and consistent, and I hope other states and stakeholders would follow suit in reporting these critical numbers that can only help us stop the spread in our most vulnerable communities.”

As of Wednesday, black people, who make up about 27% of South Carolina’s population, accounted for 52% of the coronavirus cases, according to state data.

The House-passed Health and Economic Recovery Omnibus Emergency Solutions Act (HEROES) also would require the CDC to provide race and ethnicity data to Congress with money to assist states with their collection of data. But that bill has not passed the Senate, where Republicans have said the legislation is dead on arrival.

In the meantime, the CDC is still required to provide another report within 30 days of the one just released.

“We are not done pushing for answers and action here, not by a long shot,” Murray said.

The Trump Administration Wants To Cut Back A Billion-Dollar Healthcare Program. Hospitals Say Now Is A Really Bad Time.

The Trump administration has been fighting in court with public and nonprofit hospitals since 2017 over a plan to slash the reimbursement rates for drugs prescribed to Medicare patients.

REMEMBER WHEN AUSTERITY WAS THE NEWEST THING OF THE NEO-LIBERALS, ITS NOW THEIR OLD THING IN FACT ITS THEIR ONLY THING TO SOLVE ALL PROBLEMS  

Zoe TillmanBuzzFeed News Reporter
Reporting From Washington, DC Posted on May 27, 2020

Win Mcnamee / Getty Images
President Donald Trump makes remarks during an event on protecting seniors with diabetes in the Rose Garden, May 26.

WASHINGTON — In 2018, Park Ridge Health, a not-for-profit healthcare network in western North Carolina that serves a large population of lower-income patients, delayed plans to buy a new CT scanner for stroke patients.

The Trump administration had drastically scaled back a federal drug reimbursement program that benefitted public and not-for-profit hospitals. Park Ridge, now called AdventHealth Hendersonville, stood to lose $3.3 million per year, the hospital’s chief financial officer wrote in a court affidavit, and it wasn’t just the CT scanner on the line — that money went toward a variety of services for elderly and poor patients, including new cancer treatment facilities, women’s healthcare, and partnerships with nonprofits on issues like prescription drug abuse.

Park Ridge and other hospitals have been battling with the administration in court for three years over a plan to slash by nearly 30% the reimbursement rate that hospitals get for certain drugs prescribed to Medicare patients. The hospitals won the first round. The US Court of Appeals for the DC Circuit heard arguments in November and has yet to rule, and for now the cut is still in effect. In the meantime, the Centers for Medicare & Medicaid Services (CMS) is exploring another way to make the cut if they lose the case, over the objection of hospitals.

The litigation predates the coronavirus pandemic, but the stakes are higher as hospitals nationwide lose tens of billions of dollars weekly while nonessential services and elective surgeries are on hold because of the ongoing crisis.


“If [hospitals] lost that money now, it would make an already dire financial situation worse,” Lindsay Wiley, director of the Health Law and Policy Program at American University Washington College of Law, wrote in an email to BuzzFeed News.

Hospitals that serve a high proportion of lower-income patients can buy outpatient drugs at a discounted price through what’s known as the 340B program. Until 2017, these hospitals were reimbursed by the federal government for drugs prescribed to Medicare patients at a higher rate than the discounted price the hospitals paid.

The CMS announced in 2017 that it was slashing the reimbursement rate from 6% above the average price of the drugs to 22.5% below the average cost. The agency said the program gave hospitals an incentive to overprescribe drugs and cost patients more money, and shouldn’t provide a windfall to subsidize other services.

Hospitals that opposed the change argued that they had put money earned through the program — which can run in the millions of dollars for a hospital each year — into services for poor and underserved communities, as Congress intended.

The CMS estimated that cutting the reimbursement rate for the drugs would reduce the amount of money paid to hospitals by $1.6 billion in 2018 alone. Scaling back that funding would actually increase the rates paid by the government for other services for Medicare patients — the payment system has to be “budget neutral” — but Park Ridge and other hospitals that took the administration to court said they still expected net losses of millions of dollars.

Many hospitals that participate in the 340B program “are in the red to begin with,” said Maureen Testoni, president and CEO of 340B Health, a membership group for hospitals and health systems that participate.


“So on top of that, you add this pandemic and all the financial turmoil that this has caused,” Testoni said. The pandemic has highlighted “how critical [hospitals] are ... and what an important role they play. And, financially, they’re not in a situation where they can play that role when they have this big financial reduction.”

While waiting for the DC Circuit to rule, the CMS is exploring ways to move forward with the rate cut even if it loses. Last month, the agency launched a survey to collect data from 340B hospitals that the CMS says would address the issues that led the lower court judge to rule against the government. Hospitals opposed the survey and asked the agency to at least delay it, saying they’d have to divert resources that are already stretched thin during the pandemic to respond.

"Now is not the time to distract hospitals’ attention from the vital job at hand to complete a CMS survey on drug acquisition costs."


“Now is not the time to distract hospitals’ attention from the vital job at hand to complete a CMS survey on drug acquisition costs. By launching the survey with no notice on April 24 and providing less than three weeks to respond, CMS is creating an unnecessary burden on hospitals at the worst possible moment,” Testoni wrote in a May 4 letter to the agency. The agency didn’t respond.


Representatives of hospitals involved in the lawsuits declined interview requests, citing the pending litigation. The American Hospital Association, a lead plaintiff, declined an interview request but sent a statement:

“The COVID-19 pandemic has created the greatest financial crisis in history for America’s hospitals and health systems, with our field losing over $50 billion each month. While it is too soon to have precise data on the full impact of this pandemic, the unlawful Medicare cuts that we are contesting in federal court have added significantly to the financial pressure all hospitals face,” the group said.

A spokesperson for the Department of Health and Human Services did not return a request for comment. In court, the Justice Department has argued that the district court judge lacked authority to review the rate cut at all, and that even if he could, the government had the power to bring the rate in line with what the available data showed hospitals were paying for the drugs.

“[O]vercompensation for some drugs or treatments means reduced payments for other drugs and treatments, and correcting overcompensation permits more equitable distribution of limited funds,” Justice Department lawyers argued in the government’s brief to the DC Circuit. “The result of bringing the Medicare payment amount for 340B drugs into alignment with average acquisition cost was therefore the redistribution of the anticipated $1.6 billion in savings, resulting in a 3.2% increase in the Medicare payment rates for non-drug items and services.”

Congress created the 340B program in 1992. Healthcare providers eligible for the program can buy outpatient drugs at discounted rates from pharmaceutical companies. When hospitals prescribe those drugs to patients covered by Medicare — the federal insurance program for people who are over the age of 65 or have disabilities — they submit claims to the government for reimbursement.

Starting in 2006, Congress gave the CMS two options to set the drug reimbursement rate. It could rely on what hospitals were actually paying to buy drugs if it had “statistically sound survey data” or, if that wasn’t available, the average sales price of the drugs. If the agency used the second, alternative option, Congress set a default rate: the average sales price plus 6%.

In the summer of 2017, the Trump administration announced a plan to change the rate. Under the new rule, the Medicare agency said it would pay the average sales price of drugs minus 22.5%. That rate would come closer to matching the discounted rate hospitals were paying through the 340B program, the agency said.

Hospitals don’t have to track or disclose how they use money saved through the program. Kelly Cleary, who spent three years as the chief legal officer for the CMS, said hospitals had provided examples of how they were using the funds to expand services into underserved areas and provide free or low-cost care.

“The money was going toward a purpose that was consistent with their mission,” said Cleary, who was involved in the CMS’s effort to change the rate and defend it in court. She returned to private practice last month as a partner at the law firm Akin Gump Strauss Hauer & Feld.

The chief financial officer for the Henry Ford Health System, which serves patients in Detroit and Jackson, Michigan, wrote in a court affidavit that even if the cut meant that reimbursement rates increased for other Medicare services, the hospital network still expected to lose around $8.5 million by the end of 2018 — money that had gone toward services for patients with low incomes, such as free and low-cost medications, a free community clinic, and mobile health units.

The margin between what the Henry Ford Health System paid for drugs through the 340B program and what it received back from Medicare helped hospitals in that network provide care for “underserved and indigent populations … that would otherwise be financially unsustainable,” the officer wrote.

In support of the rate cut, the CMS pointed to a 2015 report by the Government Accountability Office that showed hospitals participating in the program had an incentive to prescribe more drugs than hospitals that weren’t in the program, and that meant higher copayments for Medicare patients who were prescribed more drugs or higher-priced drugs. The agency concluded hospitals were receiving too much of a net financial benefit.

“While we recognize the intent of the 340B Program,” the agency wrote in a November 2017 notice in the Federal Register, “we believe it is inappropriate for Medicare to subsidize other activities.”

It’s a position that aligned the government with the pharmaceutical industry, which argued that some hospitals had abused the program. Drugmakers pointed out that even with a cut to the reimbursement rate, the healthcare providers would still get the benefit of discounted drugs. A representative of PhRMA, a membership group for the pharmaceutical industry, declined an interview request, but sent BuzzFeed News a copy of comments the group submitted in support of the cut.

“PhRMA is concerned that the 340B program continues to grow rapidly and without patient benefits, thus increasingly departing from its purpose and statutory boundaries,” the group wrote. “This growth in the 340B program creates market-distorting incentives that affect consumer prices for medicines, shift care to more expensive hospital settings, and accelerate provider market consolidation.”

Hospitals that supported the program, meanwhile, said the proposal punished providers who work with vulnerable patients, and they urged the CMS to focus its efforts instead on bringing down drug costs.

The agency disputed that the plan was punitive and said that “lowering the price of pharmaceuticals is a top priority” but was outside the scope of what it was considering at the time.

Hospitals and hospital associations began suing the administration shortly after the rule became final in November 2017. They argued that the CMS had come up with the new rate using a process that Congress hadn’t approved. The agency admitted that it didn’t have the “statistically sound” survey data on what hospitals were actually paying for the drugs — the first method Congress had laid out — so instead it used an estimate of average purchase costs compiled by the Medicare Payment Advisory Commission, an agency that advises Congress.

The problem with the government’s approach, the hospitals argued, was that Congress had said the CMS could either use survey data on purchase costs or the average sales price of the drugs, but not a hybrid of the two. Congress had given the CMS authority to “adjust” rates, but cutting the reimbursement rate by nearly 30% was more than just an adjustment, the hospitals said.

US District Judge Rudolph Contreras in Washington, DC, sided with the hospitals. In a December 2018 opinion, he wrote that the rate cut’s “magnitude and its wide applicability inexorably lead to the conclusion” that the agency had “fundamentally altered” what Congress had spelled out.

The judge stopped short of blocking the rule and ordering the government to reimburse hospitals for the difference between the previous rate and the CMS’s new, lower rate, however, writing that it was “likely to be highly disruptive.” He noted that the payment system had to stay budget neutral, which meant the money would need to come from another source, a “quagmire that may be impossible to navigate” given how much money the government paid out of Medicare each year. He asked for more briefing on what the agency should do to fix the problem, but that issue was put on hold as the administration took the case to the DC Circuit.

A three-judge DC Circuit panel heard arguments on Nov. 8 and has yet to release a decision. In the meantime, hospitals have continued to file lawsuits as their claims for reimbursement at the previous, higher rate are rejected; earlier this month, a hospital system in Jacksonville, Florida, which is part of the University of Florida, filed a new suit in federal court in Washington. And the CMS is going ahead with its survey over the objections from hospitals.

“The pandemic amplifies the significance of this policy, but the fact remains that there were winners and losers with the policy and it’s always going to be a zero-sum game,” Cleary said. “If the court rules against the agency and the agency is forced to walk back the policy, that stands to negatively impact thousands of hospitals.”

Wiley, of American University, told BuzzFeed News that even before the pandemic, the fight over the 340B program highlighted how hospitals and drugmakers were “actively throwing each other under the bus” in the broader debate about who was to blame for the high cost of prescription drugs and what the federal government should do about it.

“Which stakeholders voters perceive to be the heroes of the pandemic response could affect health reform and reimbursement politics for years to come,” she wrote.

If you're someone who is seeing the impact of the coronavirus firsthand, we’d like to hear from you. Reach out to us via one of our tip line channels.


MORE ON THIS
Hospitals Expect To Lose More Than $200 Billion Because Of The Coronavirus

Venessa Wong · May 6, 2020

These Charts And Maps Show Where The Coronavirus Is Surging Across The US — And Where It Is In Decline

Peter Aldhous · May 26, 2020

The WHO Has Paused Human Tests On Hydroxychloroquine, The Drug That Trump Took, Out Of Safety Concerns

Lam Thuy Vo · May 25, 2020

Zoe Tillman is a senior legal reporter with BuzzFeed News and is based in Washington, DC.

U.S. judge orders 15 banks to face big investors' currency rigging lawsuit

CRIMINAL CAPITALISM BANK ROBBERY


IT INCLUDES THE ROYAL BANK OF CANADA 

NEW YORK (Reuters) - A U.S. judge on Thursday said institutional investors, including BlackRock Inc and Allianz SE's Pacific Investment Management Co, can pursue much of their lawsuit accusing 15 major banks of rigging prices in the $6.6 trillion-a-day foreign exchange market.

U.S. District Judge Lorna Schofield in Manhattan said the nearly 1,300 plaintiffs, including many mutual funds and exchange-traded funds, plausibly alleged that the banks conspired to rig currency benchmarks from 2003 to 2013 and profit at their expense.

"This is an injury of the type the antitrust laws were intended to prevent," Schofield wrote in a 40-page decision.

The banks, which sometimes controlled more than 90% of the market, included Bank of America, Barclays, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan Chase, Morgan Stanley, Royal Bank of Canada, Royal Bank of Scotland, Societe Generale, Standard Chartered and UBS or various affiliates.

In their complaint, the plaintiffs accused the banks of improperly sharing confidential orders and trading positions, and using chat rooms with such names as "The Cartel," "The Mafia" and "The Bandits' Club."

Banks were also accused of using deceptive trading tactics such as "front running," "banging the close" and "taking out the filth."

The banks countered that the plaintiffs pointed to no transactions where the alleged manipulation caused losses.

Schofield dismissed portions of some the claims, and dismissed some Allianz plaintiffs from the case.

Lawyers for the plaintiffs did not immediately respond to requests for comment.

The litigation began in November 2018, after the plaintiffs "opted out" of similar nationwide litigation that had resulted in $2.31 billion of settlements with most of the banks.

Those settlements followed regulatory probes worldwide that led to more than $10 billion of fines for several banks, and the convictions or indictments of some traders.

Investors typically opt out of litigation when they hope to recover more by suing on their own.

The case is Allianz Global Investors GMBH et al v Bank of America Corp et al, U.S. District Court, Southern District of New York, No. 18-10364.

(Reporting by Jonathan Stempel in New York; Editing by Aurora Ellis)

International students wonder if U.S. business school worth it in coronavirus era

Humeyra Pamuk
Jan Wolfe

By Humeyra Pamuk and Jan Wolfe

WASHINGTON (Reuters) - This summer, dozens of incoming students at New York's Columbia Business School had planned to sail around the coast of Croatia for a week to get to know each other. Instead, they are chatting online and playing icebreaker games on Zoom.

With the coronavirus still spreading, social gatherings like the sailing trip organized by students are on hold, and there is a good chance that when school starts in September, many classes and events will be held online.

Columbia and other elite U.S. business schools like Harvard Business School and the Wharton School at the University of Pennsylvania have said they will likely move to a "hybrid" model of virtual and in-person learning.

It is a far cry from the typical MBA experience which features close contact with fellow students, in-person networking events, trips overseas and lunch sessions with CEOs. The changes have some students reconsidering the value of a degree that can cost upwards of $100,000 a year in tuition, housing, and other fees.

International students, who make up roughly 35 percent of the student body at most elite U.S. business schools, are particularly unsure about the decision.

"The virtual environment might take away a chunk of the MBA experience," said a 27-year-old student from China who was admitted to Wharton and is considering whether to defer for a year.

"That's what a lot of people including myself are thinking through now," said the student, who declined to be identified because of concerns about his visa status and employment prospects.

The United States has been hard hit by the coronavirus outbreak, with more than 1.7 million cases and over 100,000 deaths. Higher education has been upended with most schools sending students home in the spring and moving classes online.

The U.S. hosts over a million international students at its higher education institutions, according to the State Department data. International candidates account for 36 percent of people who enroll in full-time U.S. MBA programs, according to Graduate Management Admission Council, an association of business schools.

If institutions do not resume in-person learning, enrollment, particularly among international students, is likely to take a hit, according to a GMAC survey.

Only 43 percent of the international MBA candidates surveyed said they planned to enroll if programs begin online. Forty-eight percent of them indicated they would defer in that scenario.

Half a dozen international students who have been accepted to the Class of 2022 at U.S. business schools told Reuters they have lots of doubts: Will online classes be fulfilling? What happens to on-campus recruitment events? Even if daily life resumes, will the job market take years to recover?

"The most important part of the MBA is recruiting and even that is going to be virtual," said a second Chinese student admitted to Columbia Business School, who spoke on the condition of anonymity. "I don't need people to teach me basic accounting. I already know all that."

He said he still plans to attend as it was too late to change his plans.

TRAVEL OBSTACLES

For international students who press ahead with the MBA, another challenge may be getting to the United States.

Most air travel has been restricted, and the State Department in March suspended routine visa services worldwide.

The department said it is engaging with U.S. schools to help international students navigate the visa process, but it declined to provide specifics.

With so much uncertainty, business schools are taking unusual steps to accommodate students.

Harvard is allowing students to defer for a year and Wharton has said it will grant a deferral to international students who cannot start the program on time because of a visa issue.

Columbia told students in May that it would not allow deferrals, but advised students who cannot matriculate for a particular reason to contact the admissions team.

Some students, facing visa delays, travel restrictions and the increased cost and hassle of flying, intend to start the semester online.

"I plan to stay at my home in Beijing and take the courses remotely," a third Chinese student admitted to Columbia said.

Sanjeev Khagram, the dean of the Thunderbird School of Global Management at Arizona State University, said he is telling international students that "virtual teams" are the future, so adjusting to online interaction has its upsides.

"Being effective in this virtual world actually gives them a competitive advantage," Khagram said.

Meanwhile, the sailing trip for incoming Columbia students is on hold indefinitely.

"Although this spring/summer isn't unfolding how we hoped it would, our class is developing a unique bond over this shared once in a generation experience," the organizers said on the event's website.

(Reporting by Humeyra Pamuk and Jan Wolfe; Editing by Noeleen Walder and Alistair Bell)