Drugmakers are prioritizing complex biotech medicines over treatments that can be given as pills because recent U.S. legislation gives biologics a longer runway before becoming subject to government price limits, top industry executives said this week.

The Inflation Reduction Act (IRA), which Democrats passed last August, for the first time allows the government’s Medicare health plan for people age 65 and over to negotiate the prices it is willing to pay for certain medications.

The pharmaceutical industry, whose members gathered in the thousands this week in San Francisco for the annual JP Morgan Healthcare conference, opposed the legislation and has begun implementing strategies to mitigate its impact.

Such a shift in focus could result in the availability of far fewer cheap, generic pills in the long run.

All other developed nations negotiate drug prices, making the United States the most lucrative market for the industry. The Congressional Budget Office estimates that the IRA’s drug pricing provisions will reduce the federal deficit by $237 billion over the next decade.

Medicare will select the first 10 drugs for the program this year. The number of medications subject to price negotiation will increase over time, but newer drugs are not included.

The law sets a nine-year exemption period for “small-molecule” drugs, which are mainly pills, while “large molecule” biologics, generally injections or infusions, are protected from negotiation for 13 years.

“The difference between a nine- and 13-year product line is about 50 or 60% of the value,” Eli Lilly Chief Executive Officer Dave Ricks said in an interview. “In 10 years, we’ll have far fewer small molecules being developed than we do today.”

He questioned the benefit of “rules that really just disincentivize investment in what ends up being convenient drugs, drugs for tough conditions like cancer and drugs that get really cheap when they go generic.”

Lilly has already dropped a small-molecule blood cancer drug from its pipeline because “we just couldn’t make the math work,” Ricks said.

The Indianapolis-based company is considering culling more early-stage pill programs and is directing its small molecule development group to only pursue opportunities “that would be clearly good enough within nine years to be winners.”

U.S. Congresswoman Katie Porter, a Democrat who has pressed for drug price limits, described the companies’ strategy for dealing with the law as “treating potential new drugs as bargaining chips instead of as cures to save lives.”

Most medicines on the market today are small molecules, which can be taken by mouth, absorbed into the bloodstream and easily penetrate cell membranes. Common examples include aspirin, statins for high cholesterol and blood pressure drugs.

In recent decades, pharmaceutical development has moved into more complex, difficult to manufacture large molecules, derived from living cells that can target a specific location or mechanism in the body. These biologics, like AbbVie’s (ABBV.N) rheumatoid arthritis drug Humira, need to be injected or infused and can require special handling or monitoring of patients.

But the industry has also come up with innovative pills, which patients often prefer. Lilly and other drugmakers, for instance, are developing oral drugs for a diabetes and obesity- related target that is currently reached only by injected drugs.

When pills lose patent protection, generic copies usually enter the market at price discounts of up to 90%, while the competing “biosimilar” versions of large molecule drugs is much less robust and the discounts much lower.

Steven Pearson, president of the influential drug pricing research group Institute for Clinical and Economic Review, said the IRA overall should help lower prices for Medicare patients but acknowledged new laws like it can have “unintended consequences.”

He noted it is not unusual for pharmaceutical companies to choose not to pursue a drug they once thought promising.

“We have only made it more complicated now,” he said.

Stephen Ubl, president of Pharmaceutical Research and Manufacturers of America (PhRMA), said the industry trade group believes the IRA should not set different exemption periods based on drug type. “We would like that provision to be fixed,” he said.

Executives at U.S. biotech Amgen Inc (AMGN.O) said the IRA will have broad industry impact, but that Amgen is well-positioned for growth due to its strong position in biologics.

“Large molecules are relatively favored under the IRA as opposed to small molecules,” David Reese, head of Amgen research and development, said in an interview. “Given our history and our focus in protein therapeutics, that’s one advantage.”

PhRMA said that when asked in a recent survey if they expect to shift research and development investment away from small molecule medicines, 63% of member companies who responded to the question said yes.

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Russia said on Friday that its forces had taken control of the salt-mining town of Soledar in eastern Ukraine, claiming to have made its first big battlefield gain after half a year of military setbacks.

Russian forces captured the town, long the focus of heavy fighting and bombardment, on Thursday evening, the defence ministry said.

It said this would make it possible to cut off Ukrainian supply routes to the larger town of Bakhmut, to the southwest, and trap remaining Ukrainian forces there.

Reuters was not able to immediately verify the claim. Ukraine said earlier on Friday that its forces were still holding out in Soledar after a “hot” night of fighting in what has become one of the bloodiest battlegrounds of the entire war.

“The capture of Soledar was made possible by the constant bombardment of the enemy by assault and army aviation, missile forces and artillery of a grouping of Russian forces,” Moscow’s defence ministry said.

Its statement credited the town’s capture to Russian troops and aviation without mentioning the role of the Wagner mercenary group founded by Yevgeny Prigozhin.

Prigozhin issued a premature claim earlier this week that Soledar had already fallen, and said the fighting there was exclusively being waged by his men.

The capture of the town, if confirmed, would mark Russia’s first significant gain since last July. It follows months of Russian battlefield defeats and major retreats near Kharkiv in northeastern Ukraine and from Kherson in the south.

It comes two days after a reshuffle in which Russia’s Chief of General Staff Valery Gerasimov was placed in direct charge of the war in Ukraine, in a move some analysts saw as slapping down Prigozhin but also lining up Gerasimov as the fall guy if the war continues to go badly for Russia.

Both sides have endured heavy losses in the battle for Soledar.

For Russia, it is a stepping stone towards capturing Bakhmut, which lies less than 10 km (6 miles) to the southwest, and marks incremental progress towards Moscow’s declared aim of capturing the entire Donbas region of eastern Ukraine.

Soledar is the site of huge salt mines which have commercial value and could also be used to store weapons and ammunition out of range of Ukrainian missiles.

Ukraine says Russia is throwing wave upon wave of soldiers into a pointless fight for a bombed-out wasteland.

U.S. officials said a Russian victory in Soledar, or even in Bakhmut, a city ten times larger where the Russians have so far been repelled, would mean little for the overall trajectory of the war.

“Even if both Bakhmut and Soledar fall to the Russians, it’s not going to have a strategic impact on the war itself,” U.S. National Security Council spokesman John Kirby told reporters at the White House, “and it certainly isn’t going to stop the Ukrainians or slow them down.”

Australian Cardinal George Pell was lying in state on Friday, with funeral preparations overshadowed by revelations that he was the author of an anonymous memo that branded Pope Francis’ pontificate a catastrophe.

Pell’s closed dark brown wooden coffin was placed on the floor of the small church of St. Stephen of the Abyssinians, inside the Vatican walls just metres (yards) away from the Santa Marta residence where Francis lives.

Early on Friday, a reporter saw about 20 people kneeling in prayer in the church when it opened for 10 hours of lying in state.

Pell, 81, who spent more than a year in jail before being acquitted of sexual abuse allegations in his native Australia, died on Tuesday night in a Rome hospital of heart failure.

The small church, which is normally used for baptisms and weddings, is one of the oldest in the Vatican. Parts of it date back to the fifth century and it is one of the few structures not demolished to make way for the building of the current St. Peter’s Basilica, which began in the early 16th century.

His funeral is due to take place on Saturday just across the road in St. Peter’s.

In keeping with tradition for deceased cardinals, the Mass will be said by the dean of the College of Cardinals, currently Italian Giovanni Battista Re, and the pope will give the final blessing and commendation.

His surprise death of cardiac arrest during what was expected to be routine hip replacement surgery was followed by another shock the next day.

Last year, respected Italian journalist Sandro Magister, who has a long track record of receiving leaked Vatican documents, published an anonymous memo circulating in the Vatican condemning Pope Francis’ papacy as a “catastrophe”.

Magister disclosed on his widely read blog Settimo Cielo (Seventh Heaven) that it was Pell who wrote the memo and gave him permission to publish it under the pseudonym “Demos” – Greek for populace. It included what the author said should be the qualities of the next pope.

“Everyone here is talking about it,” said one Vatican official who spoke on the condition of anonymity.

The official said he did not doubt that Pell was the author but said the revelation should have been held back until after his funeral “out of respect for the dead”.

Father Joseph Hamilton, Pell’s personal secretary, declined to comment on Magister’s report and Vatican spokesperson Matteo Bruni said he had no comment.

Pell will be buried in the crypt at St. Mary’s Cathedral in Sydney, where he served as archbishop, the Australian Church has announced.

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The cyberattack on Royal Mail, Britain’s postal service, is a ransomware attack that was linked to the LockBit ransomware operation.

Royal Mail, the British multinational postal service and courier company, this week announced that a “cyber incident” has a severe impact on its operation. The incident only impacted Royal Mail’s international export services, the company said it is temporarily unable to despatch items to overseas destinations.

The company did not provide details about the attack, it confirmed that is working around the clock to restore operations.

“[we] are working around the clock to resolve this disruption and we will update you as soon as we have more information.” reads a statement shared by the company. “Some customers may experience delay or disruption to items already shipped for export,”

The company recommends customers hold any export items while it recovers the operations.

The company said it “immediately launched an investigation into the incident” and had brought in external experts to assist.

“We are aware of an incident affecting Royal Mail Group Ltd and are working with the company, alongside the National Crime Agency, to fully understand the impact.” said a spokesperson for the UK’s National Cyber Security Centre.

The British government’s National Cyber Security Center is investigating the incident along with the National Crime Agency.

While Royal Mail, The Telegraph reported that the systems of the company have been infected with an encryptor used by LockBit operation.

According to The Telegraph, the ransomware encrypted devices used for international shipping and sent the ransom notes to printers used for customs operations.

“The attack, which has paralysed the postal service’s ability to send letters and parcels abroad, was carried out by a gang called Lockbit.” reads the post published by The Telegraph.

“Sources familiar with the Royal Mail investigation said Lockbit’s ransomware, known as Lockbit Black, had infected machines used by the postal operator to print customs labels for parcels being sent to overseas destinations. The ransom note, seen by The Telegraph, says: ‘Lockbit Black Ransomware. Your data are stolen and encrypted.’

The ransomware group, as usual, threatened to publish alleged stolen data on its dark web leak site. 

Follow me on Twitter: @securityaffairs and Facebook and Mastodon

Pierluigi Paganini

(SecurityAffairs – hacking, Royal Mail)

The post LockBit ransomware operation behind the Royal Mail cyberattack appeared first on Security Affairs.

President of Ukraine Volodymyr Zelensky has addressed the solemn session of the Seimas of Lithuania on the situation of the Liberty Defenders Working day and the ceremony of awarding the Freedom Prize of the Republic of Lithuania.

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The post Zelensky addresses solemn session of Lithuania’s Seimas appeared first on Ukraine Intelligence.

Western countries, at first concerned about meddling in the war with their military assistance, will soon change their approach, Reznikov says.

Hiya, I’m Jake Swearingen, a deputy editor on Insider’s tech analysis desk, stepping in for Diamond Naga Siu.

Bubbles! It’s always fun to predict them, because if you’re right you look smart and if you’re wrong nobody remembers. 

So it’s also fun to wonder if the surge in funding for generative AI may be the start of a bubble, as ChatGPT maker OpenAI becomes one of the most valuable startups in the world in just a few weeks. 

It’s the hunt for big paydays that keeps VC markets a little frothy when new tech like generative AI hits the scene. And a bubble is only a bubble in the rear-view — in the moment, it’s just making sure you don’t miss out on the future.

Let’s get started.

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Generative AI tools can be used to create a variety of texts and images like this one, which was produced by OpenAI’s DALL-E 2.

Courtesy of OpenAI

1. Tech’s next boom — or next bubble? OpenAI’s release of ChatGPT has put generative AI on the map for venture capitalists and tech firms eager to put money into a smart idea during a downturn where smart ideas feel scarce. VC and others want to get in early on something that has the potential to be transformative. But could generative AI be the next bubble in tech? Let’s take a look.

• Valuations are getting wild. Marketing firm Jasper AI secured a $1.5 billion valuation from $75 million in revenue, a x20 multiple.
• OpenAI may pull in $10 billion in funding for a $29 billion valuation. Its revenue in 2021 was in the “tens of millions.” That means a multiple of somewhere between x290 and x2,900. 
• These valuations would make sense if there was a clear path for AI firms to make money. But the current state of AI is still expensive — OpenAI is burning cash — and profits are theoretical.

Click here to read whether the next tech bubble is already here.

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In other news:

In this Sept. 24, 2013, file photo, just cut stacks of $100 bills make their way down the line at the Bureau of Engraving and Printing Western Currency Facility in Fort Worth, Texas. Big U.S. companies have been piling up cash for years, but have spent little of it on buying equipment and raising wages and other things to grow the economy. Republicans say they know how to fix this: Give companies even more money by cutting their taxes.

LM Otero/AP

2. Cash is king. Slumping stock prices and a dismal market are hurting tech execs’ pocketbooks. Since high-profile execs fleeing for the doors is a terrible market signal, insiders say tech companies will be looking to structure comp packages that include cash payouts for sticking around as a way of inducing loyalty in the C-suite.

3. Meta momentum. It’s easy to miss amongst all the talk about the Metaverse, but Meta’s really just a very large advertising company, and advertisers say they’re spending more with the company thanks to its AI-powered tools and tracking. The bad news for Meta: ad spend on the ol’ big blue Facebook is still sagging.

4. Learning to live with Musk. Top brass at Twitter is quietly telling advertisers to get comfortable with CEO Elon Musk’s unpredictability because it’s not going away, as per The Information. The world’s largest ad-buying company has cut spending on the social media platform by 40% to 50%. Telling your main source of revenue to like it or lump it is a bold strategy, let’s see how it plays out for them.

5. New Apple TV+ boss. Oliver Schusser, Apple’s VP Music and Beats, will take on oversight of the streamer. It’s the latest shakeup since Peter Stern, one of Apple’s top subscriptions executives, resigned. Apple TV+ has had some big wins — Ted Lasso was a phenomenon, and it won an Oscar for “Coda” last year — but its viewership numbers have been described as a “rounding error.”

6. Cook’s pay cut. Tim Cook is taking a 40% pay cut, at his own request, after activist investors raised a stink about Cook’s compensation. Before you start a GoFundMe, his salary is still $49 million a year, so we’re pretty sure he’s going to be able to make rent this month.

7. Guarding Zuck. Brooks Scott is a former state trooper who spent time as an executive protection manager at Meta. What’s an executive protection manager, you ask? Basically, he was a part of Zuck’s security detail. He tells us what the job was like, and how he knew he needed to leave to find a job he loved.

8. H-1B blues. The US’s mismanaged visa system already stymies the American tech industry’s ability to remain competitive on the global stage. Raising the cost of the H1-B visa used by foreign-born tech workers during a massive season of layoffs makes a bad situation worse.

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Odds and ends:

Bill Gates attended the 2022 TIME 100 Gala on June 08, 2022 in New York City.

Dimitrios Kambouris/Getty Images

9. Bill Gates: Still a nerd. During a Reddit AMA, Bill Gates revealed he’s still Team Android — his daily driver phone is the very dorky Samsung Galaxy Z Fold4. It’s great to see an icon stay so on-brand.

10. TikTok’s “food godfather.” Meet Keith Lee, the pro fighter who has become the savior of local Las Vegas restaurants in a matter of months thanks to his wildly entertaining food reviews.

Curated by Jake Swearingen in New York. (Feedback or tips? Email jswearingen@insider.com or tweet @jakeswearingen.) Edited by Hallam Bullock (tweet @hallam_bullock) in London.

Ukrainian servicemen from the Volyn Territorial Defence brigade are seen on their positions near the border with Belarus, amid Russia’s attack on Ukraine, in Volyn region, Ukraine, on January 12, 2023.

Arterra/Universal Images Group via Getty Images/Gleb Garanich/Reuters

• Kyiv is bracing for the possibility of Russia opening a new front via the border with Belarus.
• But the area is tough to penetrate due to its swampy conditions, Reuters reported.
• This is in part because of beavers building dams, with nobody stopping them due to the war.

Local beavers are helping Ukraine defend itself from a potential new front in Russia’s invasion, Reuters reported on Thursday.

The animals are unwittingly helping Kyiv by building dams that keep the ground marshy and impassable, a military spokesman told the agency.

This helps Ukraine by making it less likely that an attack could come via Belarus, which borders Ukraine not far north of the capital Kyiv.

Ukrainian officials had warned that Russia may wage an offensive through its ally Belarus into a region of Ukraine called Volyn. 

Defense forces there, however, have been reassured by conditions on the ground, left impassable by miles of burst river banks, thick mud, and waterlogged fields.

The swampy conditions have given Ukrainians an advantage, and time to prepare: a local military unit called the Volyn territorial defense has been conducting daily training exercises in the area, according to Reuters.

Its spokesman, Serhiy Khominskyi, praised the beavers, which he told Reuters were more working unimpeded, unlike in other years. 

“When [the beavers] build their dams normally people destroy them, but they didn’t this year because of the war, so now there is water everywhere,” he said.

Map showing Volyn and its proximity to the Belarus border with Ukraine.

Google Maps

Viktor Rokun, one of the brigade’s deputy commanders, told Reuters: “On your own land, everything will help you to defend it — the landscape, lots of rivers, which have burst their banks this year.” 

Beavers are known to be remarkable builders, using tree branches, vegetation, rocks, and mud to create dams that protect them from predators.

The unusually mild winter has created ideal conditions for Ukrainians to defend their country. 

Analyst Konrad Muzyka, who runs the defense consultancy Rochan Consulting, told Reuters that Volyn would be a “horrible place to conduct an offensive operation.”

“There are many watercourses there, very few roads,” he said. “This makes it easy for Ukrainian forces to channel the movement of Russian forces into specific areas where they would be shelled by artillery.”

Since October, Russia has deployed troops in Belarus for joint military drills, which some observers worry could transform into an invasion effort.

Russian President Vladimir Putin and Belarus President Alexander Lukashenko have remained close allies through the war in Ukraine. Lukashenko previously called Russia “his closest ally and strategic partner.”

Travelers queue up at the check-in counters for Southwest Airlines in Denver International Airport, December 30, 2022.

AP Photo/David Zalubowski, File

• Southwest shareholders are suing the airline following its mass flight cancellations in December.
• The lawsuit accuses it of downplaying or not noting previous issues in its scheduling system.
• The company cancelled almost 17,000 flights in December and said its scheduling system was a factor.

A group of Southwest Airlines shareholders are suing the carrier, alleging that the airline hid problems that led to its major meltdown in December, when thousands of flights were cancelled across the country, stranding fliers sometimes overnight in airports as they looked to travel during the holidays.

The shareholders filed a class action lawsuit against the airline, its CEO, CFO, and executive chairman on Thursday, in federal court in Houston, alleging that the airline had downplayed or did not note failures in its scheduling system earlier.

The lawsuit describes the airline as having a “meltdown over the 2022 holiday season” and said the company had tried to “downplay” previous issues with its scheduling.

As such, shareholders “have suffered significant losses and damages” because the company’s market value dropped, it said.

It’s not clear how many shareholders have joined the lawsuit.

Southwest canceled almost 17,000 flights in December, and pointed to its scheduling system as a factor.

The cancelled flights meant staff and customers were stranded across the US, with some customers making days-long journeys to get to their destinations, some saying they lost thousands of dollars, and with staff sometimes needing to book their own hotel rooms after they got stuck.

Southwest cancelled significantly more flights than any other airline during the severe December weather.

The vice-president of the Southwest Airlines Pilots’ Association, Mike Santoro, told Insider that the company’s “outdated” scheduling system made the disruption worse, saying it also meant that the airline could not figure out where its own crew was.

Last week the airline’s CEO, Bob Jordan, took responsibility in an interview with Reuters, saying that there were a lot of reasons that this happened “but it’s on me at the end of the day.”

He added that “it just can’t happen again.”

The union that represents the airline’s pilots has also been scathing in its response.

The vice captain of the  Southwest Airlines Pilots’ Association accused former Southwest Airlines CEO Gary Kelly, who stepped down in January 2022 but is still the company’s executive chairman, of turning the airline “into a headquarters-centric cult.”

It also said that “our executives continue to apologize and ‘accept responsibility’ out of one side of their mouths while making banal excuses that deflect from the true cause out of the other side.”

This new lawsuit adds to its woes.

Sam Bankman-Fried arrives at Manhattan federal court on January 3.

AP Photo/Craig Ruttle

• Law firm Sullivan & Cromwell has been criticized for its involvement in FTX’s bankruptcy having worked with the crypto exchange before.
• The firm described its relationship with FTX as “largely transactional” in a statement.
• In a Substack Thursday, however, Sam Bankman-Fried said he sometimes worked out of the firm’s New York offices.

Sam Bankman-Fried said he sometimes worked out of the offices of the bankruptcy lawyers under fire for their past relationship with the crypto exchange, in a Substack post on Thursday.

An FTX customer filed a motion in the Delaware bankruptcy court on January 4, saying that law firm Sullivan & Cromwell couldn’t properly investigate the collapsed crypto exchange due to their past relationship.

The filing, seen by Insider, says FTX paid the law firm $20.5 million before its bankruptcy, and FTX US’s general counsel was once a partner at the firm.

Four senators, including Elizabeth Warren, then wrote to the judge overseeing the bankruptcy case to raise their concerns about Sullivan & Cromwell.

The judge, John Dorsey, criticized this intervention as “inappropriate,” per CoinDesk. He added that the letter “will have no impact whatsoever on my decisions in this case, which will only be based upon the facts and law presented by the parties.”

In a statement, the law firm said it “had a limited and largely transactional relationship with FTX.”

In his Substack, however, Bankman-Fried contradicted that statement and described Sullivan & Cromwell as “one of FTX International’s two primary law firms prior to bankruptcy,” and “FTX US’s primary law firm.”

“FTX US’ GC came from S&C, they worked with FTX US in its most important regulatory application, they worked with FTX International on some of its most important regulatory concerns, and they worked with FTX US on its most important transaction,” Bankman-Fried wrote.

“When I would visit NYC, I would sometimes work out of S&C’s office,” he added.

On Substack, Bankman-Fried repeated his claim that he didn’t “steal funds” from customers, and blamed the law firm for “strong-arming and threatening” him into naming bankruptcy veteran John J. Ray III as CEO.  

He added that he believes FTX customers could have been reimbursed if it didn’t file for bankruptcy.

On Wednesday, the court heard that SBF had a “secret” backdoor which gave his trading firm a $65 billion line of credit from customers’ funds.

Andrew Dietderich, of Sullivan & Cromwell, told the court that line of credit was used to fund political donations and lavish purchases. Court filings show FTX owned $256.3 million of Bahamian real estate, and spent $6.9 million on “meals and entertainment” in nine months.

Dietderich added: “We know that all this has left a shortfall, in value to repay customers and creditors.”

Sullivan & Cromwell did not immediately respond to Insider’s request for comment, sent outside normal working hours.