Paramount Goes Hostile in Fight for Warner Bros. Discovery

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Alex Ossola (0:18)

President Trump announces billions of dollars in aid for US farmers. Plus, Paramount launches a hostile takeover bid for Warner Bros. Discovery. And why pharma companies are building websites so patients can buy drugs straight from them.

Peter Loftus (0:33)

There is a segment of patients that just either doesn't have insurance or doesn't have great insurance. And so sometimes it's to their advantage for the companies to offer those patients a significant cash discount because otherwise they might not even get their business at all.

Alex Ossola (0:48)

It's Monday, December 8th. I'm Alex Ossola for the Wall Street Journal. This is the PM Edition of What's News, the top headlines and business stories that move the world today.

Berkshire Hathaway is losing one of its top stars in Todd Combs, who led the turnaround of the company's Geico auto insurance arm. Combs is leaving for JPMorgan Chase as Berkshire prepares for a new era without CEO Warren Buffett, who's retiring at the end of the year. Berkshire's stock has dropped nearly 8% since Buffett said he would step down as CEO. Paramount has launched a nearly $78 billion hostile takeover offer for Warner Bros. Discovery, taking its case directly to shareholders just a few days after Warner agreed to a $72 billion deal with Netflix. Paramount argues that its offer is a better deal for shareholders and is more likely to win approval from regulators. Here's Paramount chairman and CEO David Ellison speaking about the deal on CNBC this morning.

David Ellison (1:52)

What we're creating by putting these two companies together is a real competitor to Netflix, a real competitor to Amazon, a real competitor to Disney, not something that is so anti-competitive. There will be no more competition in Hollywood if this deal is allowed to come to pass.

Alex Ossola (2:07)

Netflix says Paramount's bid was expected and that Netflix is confident its deal will get done. As for Warner, the company says it'll advise shareholders on what to do within 10 business days and that it's recommending supporting the Netflix deal for now. There's a big shift going on in how people buy medicine. Drug makers are cutting out middlemen called pharmacy benefit managers, setting up their own websites and selling straight to patients. I'm joined now by Peter Loftus, who covers Pharma for The Journal. Peter, how do these services work?

Peter Loftus (2:43)

It often starts with a website that the drug manufacturers have set up. Patients can go there if they already have a prescription from the doctor or they could actually connect you with certain doctors, which then could eventually lead to ordering that company's drug or maybe another company's drug. The price is often discounted and they could order the drug online, like you would go through Amazon to do and then have it delivered to your home.

Alex Ossola (3:11)

Why are drug makers doing this? What's the advantage for them?

Peter Loftus (3:14)

There is a segment of patients that just either doesn't have insurance or doesn't have great insurance.

Sometimes it's to their advantage for the companies to offer those patients a significant cash discount because otherwise they might not even get their business at all. This has become particularly popular for the weight loss drugs. There's sort of intrinsic demand from patients. They want to be on this drug, but also there's still not great insurance coverage. And so they would, normally they would have to pay the full list price, which could be like $1,000 a month or more. The manufacturers are saying, we can offer you a discount that brings it down to as low as $150, $200 a month because it's better than not getting any business from the patient, essentially.

Alex Ossola (4:04)

Who stands to lose as part of this shift?

Peter Loftus (4:06)

Pharmacy benefit managers, which are companies that administer drug benefit plans on behalf of insurers or your employer plan. They've been this sort of middleman in the industry that negotiates prices for these drugs. CVS Caremark is one, Express Scripts is one, OptumRx. The drug companies say that that can really distort the pricing. And so by going directly to the patient, that's a way to get around the middleman and just offer a discounted price that is what it is. As the industry trade group for these pharmacy benefit managers, they say that they believe they offer valuable services that also result in lower net pricing for everybody involved. And if patients are dealing with their pharmacy, that's an extra level of protection, making sure that they're taking the right drug and not having drug interactions, that sort of thing.