Tag: United States

September 15, 2023

G20’s inability to tackle territorial disputes will lead to its demise

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The opinions expressed in this article are those of the author and do not represent in any way the editorial position of Euronews.

The G20 has no choice. If it wants to stay relevant and play a vital role in providing the solutions humanity needs for our very survival, then it must reconsider its geopolitical squeamishness, Saman Rizwan writes.

On the surface level, this year’s G20 appeared to be a success. But beneath the PR spins and the friendly handshakes, the G20 is more fractious than ever.

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And its inability to address agenda-wrecking disputes will ultimately lead to the bloc’s irrelevance and demise.

After all, the world is facing a slew of competing emergencies: the escalating climate crisis, various humanitarian disasters, the seemingly endless Ukraine-Russia war, and the continued economic fallout from COVID-19 – all which require the diplomatic clout of the G20 to mitigate.

But unfortunately, this year’s G20 in India’s capital looked more insipid than ever before, drastically lacking a transformative edge and even leaving the bloc on the edge of a diplomatic cold war.

And it’s not only because Russia’s invasion of Ukraine has created a clear fault line throughout the bloc, or because commitments on transformative climate action were found wanting, with no mention of the critical net-zero goal of phasing out oil and gas.

It is because the G20 is failing to address the cataclysmic geopolitical divides, specifically the mounting territorial disputes, that are ripping apart the fabric of international collaboration.

If G20 can’t resolve geopolitical issues, who can?

Already in the run-up to this year’s summit, China threatened to derail President Narendra Modi’s big international moment by releasing its 2023 standard map which showed parts of Russia and India, as well as the entirety of the South China Sea, as Chinese territory.

China’s expansionist tendencies are nothing new but targeting nuclear-armed India on the eve of its big G20 moment, which resulted in the glaring absence of Chinese Premier Xi Jinping, should be a red flag for the international community.

See, Modi may have claimed that “the G20 is not the place to resolve geopolitical issues.” But G20 members account for over 70% of global GDP, half of the world’s population, and comprise the top five biggest CO2 emitters.

If this group of countries, that come together every year, can’t resolve geopolitical issues and territorial disputes, then who can?

This is no more apparent than in the South China Sea where China’s hostile aggression is threatening regional stability and economic security.

China’s role in rising tensions

The region is one of the world’s busiest shipping lanes home to billions of euros’ worth of oil and natural gas.

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But for decades China has been going to increasing lengths to protect its farcical “nine-dash-line claim” to the entirety of the South China Sea – which it still touts even though it was rejected by an arbitration court in 2016.

Over the years, China’s military presence and belligerence in the region have skyrocketed.

In recent months, the country has been accused of building military bases on disputed islands and even harassing fishing and coast guard vessels of neighbouring countries. And the rising tensions could easily turn deadly.

For example, in 1974 and 1988, China and Vietnam engaged in deadly clashes over disputed territory in the South China Sea.

It’s perhaps no coincidence that US President Joe Biden travelled to Vietnam after the G20 summit to announce the signing of the “Comprehensive Strategic Partnership” – a historic deal that boosts relations between the two former bitter enemies.

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After all, without the support of ASEAN nations, it will be impossible to curtail China’s staunch hold on the region.

The increasingly strange case of the Sultanate of Sulu

But Biden’s move is only the tip of the iceberg, and other G20 members must forge new partnerships to help ASEAN not only emerge from China’s economic shadow but come together in solidarity against China’s divisive strategies.

This means that world leaders must play a more prominent role in mediating longstanding disputes which are hindering unity in the South China Sea.

For example, relations between Malaysia and The Philippines have been strained following the result of a controversial arbitration case involving the defunct Sultanate of Sulu.

The Sulu heirs were awarded $15 billion (€14bn) after Malaysia allegedly stopped paying a colonial-era land lease fee to the Sulu after militants tied to the Sultanate clashed with Malaysian security forces in Sabah in 2013.

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The award was eventually annulled – and even the Spanish attorney involved faces criminal charges back home – but the case highlights how territorial disputes, left unresolved for decades, are undermining vital partnerships during times of increased regional tension.

G20 has to stop hesitating if it wants to survive

The G20 has no choice. If it wants to stay relevant and play a vital role in providing the solutions humanity needs for our very survival, then it must reconsider its geopolitical squeamishness and offer a counterweight to China’s imperialist agenda.

This means diplomatic partnerships shouldn’t happen in back rooms after the G20 but on stage in front of the world.

It also means that G20 countries should translate their words into action by solidifying long-anticipated economic trade agreements and military alliances that have remained uncertain for years.

After all, between the G20 members, there is a wealth of experience to draw upon that would provide a strong platform for constructive diplomacy.

Just consider Biden’s new trilateral agreement with Japan and South Korea, or how the US mediated talks between bitter neighbours Israel and Lebanon to hash out a lucrative maritime agreement that navigated complex claims to undersea gas fields.

Ultimately, if G20 members can’t find ways to mitigate mounting territorial disputes then not only will they fail to tackle the globe’s biggest challenges, but their hesitancy will also eventually lead to its, and perhaps our world’s, demise.

Saman Rizwan is a UK-based analyst on South Asian affairs. As a journalist and commentator, she frequently writes for publications including South China Morning Post, The Diplomat, The Nation, Forbes, and Newsweek.

At Euronews, we believe all views matter. Contact us at [email protected] to send pitches or submissions and be part of the conversation.

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September 15, 2023

What purpose does the India-Middle East-Europe Economic Corridor (IMEC) serve? | Explained

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From left, Prime Minister Fumio Kishida (Japan), Prime Minister Giorgia Meloni (Italy), President of the European Commission Ursula von der Leyen, Saudi Arabian Crown Prince Mohammed bin Salman Al Saud, Prime Minister Narendra Modi (India), President Joe Biden (U.S), President Sheikh Mohamed bin Zayed Al Nahyan (UAE) and President Emmanuel Macron (France) attend Partnership for Global Infrastructure and Investment event on the day of the G20 summit in New Delhi, India, on September 9, 2023.
| Photo Credit: AP

The story so far: At a special event on the sidelines of the recently concluded G20 summit in New Delhi, a memorandum of understanding (MoU) was signed to establish the ‘India-Middle East- Europe Economic Corridor’ (IMEC). Other than the two co-chairs of the event, Indian Prime Minister Narendra Modi and U.S. President Joe Biden, the signatories included leaders of Saudi Arabia, the United Arab Emirates (UAE), the European Union (EU), Italy, France and Germany.

The project, which forms part of the Partnership for Global Infrastructure and Investment (PGII), may also serve as a counter to China’s economic influence in the Eurasian region, observers have suggested.

What is the corridor?

The proposed IMEC will consist of railroad, ship-to-rail networks (road and sea) and road transport routes (and networks) extending across two corridors, that is, the east corridor – connecting India to the Gulf, and the northern corridor – connecting the Gulf to Europe. As per the MoU, the railway, upon completion, would provide a “reliable and cost-effective cross-border ship-to-rail transit network to supplement existing maritime and road transports routes”.

It would enable the transportation of goods and services from India to the UAE, Saudi Arabia, Jordan, Israel and Europe, and back. All in all, it is expected that the corridor would increase efficiency (relating to transit), reduce costs, enhance economic unity, generate jobs, and lower greenhouse gas emissions. This is expected to translate into a “transformative integration of Asia, Europe and the Middle East.”

The MoU states that participants, intend to enable the laying of cables for electricity and digital connectivity, as well as pipes for clean hydrogen export along the railway route.

The MoU states that participants will “work collectively and expeditiously” to arrange and implement all elements of the transit route. These relate to technical design, financing, legal and relevant regulatory standards. A meeting is planned in the next sixty days to carve out an “action plan” with “relevant timetables”.

How has it been received?

While Mr. Modi suggested the corridor “promises to be a beacon of cooperation, innovation, and shared progress,” Mr. Biden referred to it as the “real big deal”.

Ms. von der Leyen, President of the European Commission, said the corridor was “more than ‘just’ a railway or a cable, it is a green and digital bridge across continents and civilisations.” She called it the “most direct connection” between India, the Gulf and Europe: with a rail link that would make trade between India and Europe 40% faster.

Israeli Prime Minister Benjamin Netanyahu, whose country will also be a part of the corridor, also welcomed the move. He said that the link would help realise “a multi-year vision that will change the face of the Middle East, and Israel, and will affect the entire world.”

On the other hand, with the corridor being suggested as a competitor for China’s BRI, the announcement did not draw enthusiasm from the Chinese media. An editorial in the Global Times highlighted doubts from Chinese experts about the project’s credibility and feasibility. T “It is not the first time for Washington to make empty pledges to various countries and regions,” it read.

What geopolitics is at play here?

It has often been believed that China is utilising the Belt and Road Initiative (BRI) from the Indo-Pacific to West Asia to further their economic and political influence, particularly on sovereigns with relatively instable economies.  Financial Times  points out that, for the U.S., the project could also serve to counter Beijing’s influence “at a time when Washington’s traditional Arab partners, including the UAE and Saudi Arabia, are deepening ties with China, India and other Asian powers.”

Professor Michaël Tanchum, Senior Fellow at the Austrian Institute for European and Security Policy, said in August 2021 that a corridor connecting India to Europe via West Asia and the Mediterranean region could serve as an “alternative trans-regional commercial transportation route” to the troubled Chabahar-based International North-South Transit Corridor. “Instead of Chabahar, the ports of the UAE —India’s third largest trading partner — would serve as the Indian Ocean connectivity node,” he said.

He observed that from Mumbai, Indian goods shipped by this route could arrive on the European mainland in as less as 10 days — 40% faster than through the Suez Canal maritime route.

Professor Tanchum also observed that India’s “careful cultivation” of multilateral economic cooperation with such a corridor “was of paramount importance.” According to him, “Despite India’s favourable demographics, geography and commercial transportation infrastructure are not alone sufficient to ensure that India will realise its potential as a Eurasian economic power.” He further elaborated that, “Commercial corridors only emerge where requisite large investments in port and rail infrastructure are coupled with an industrial base anchored in manufacturing value chains”— precisely the purpose of the present corridor.

This corridor may also hint at further normalisation of ties between Israel and the countries in the Gulf.

How does this relate to the Israel and Gulf relationship?

Saudi Arabia and Israel do not have diplomatic ties —primarily because of differences of opinion about the Israel-Palestine conflict. In fact, Israel has official ties with only Egypt, Jordan, the UAE, Bahrain and Morocco in the Arab region. In this light, the transit network which seeks integration on multiple fronts assumes particular significance.

Financial Times learnt from a person briefed about the discussions, that the corridor’s passage through Jordan and Israel could also support the Biden administration’s effort to build on the recent normalisation of ties between Israel and several Arab states, including the UAE. This may push Saudi Arabia to follow suit and formalise ties. “China is one factor. The U.S. is also trying to refocus attention on the region, to reassure traditional partners and to maintain influence,” the publication learnt.

With Saudi Arabia being the world’s top exporter of oil and UAE being West Asia’s dominant finance centre, the publication writes that both are “seeking to project themselves as key logistics and trade hubs between east and west.”

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September 14, 2023

New US sanctions to plug loopholes that let Russia get Western tech

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The US has announced a raft of new sanctions aimed at people and companies in countries, notably NATO member Turkey, that sell Western technology to Russia that could be used to bolster its war effort.

The US is slapping sanctions on more than 150 businesses and people from Russia to Turkey, the United Arab Emirates and Georgia to try to crack down on evasion and deny the Kremlin access to technology, money and financial channels that fuel President Vladimir Putin’s war in Ukraine.

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The sanctions package is one of the biggest by the State and Treasury departments and is the latest to target people and companies in countries, notably NATO member Turkey, that sell Western technology to Russia that could be used to bolster its war effort.

The package also aims to hobble the development of Russia’s energy sector and future sources of cash, including Arctic natural gas projects, as well as mining and factories producing and repairing Russian weapons.

“The purpose of the action is to restrict Russia’s defense production capacity and to reduce the liquidity it has to pay for its war,” James O’Brien, head of the State Department’s Office of Sanctions Coordination, told the AP.

From Russia to Turkey to the UAE

The US is imposing sanctions on a newly established UAE company, which provides engineering and technology to Russia’s Arctic liquefied natural gas project, as well as multiple Russian companies involved in its development.

Putin wants the Arctic LNG 2 project to produce more liquefied natural gas and make Russia a bigger player in the energy market. In July, Putin visited the LNG site in Russia’s far north and said it would have a positive impact on “the entire economy.”

The US package includes sanctions on several Turkish and Russian companies that the State Department says help Moscow source US and European electronic components –such as computer chips and processors — that can be used in civilian and military equipment.

The department also is targeting Turkish companies that have provided ship repair services to a company affiliated with Russia’s Ministry of Defence.

Before the war, O’Brien said, Russia imported up to 90% of its electronics from countries that are part of the G7 wealthy democracies, but sanctions have dropped that figure closer to 30%.

Sanctions, he said, “are effective” and “put a ceiling on Russia’s wartime production capacity.”

“Russia is trying to run a full production wartime economy, and it is extremely difficult to do that with secretive episodic purchases of small batches of equipment from different places around the world,” O’Brien said.

However, analysts say Russia still has significant financial reserves available to pursue its war and it’s possible for Russia to import the technology it seeks in tiny batches to maintain defense production.

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“Russia could probably fill a large suitcase with enough electronic components to last for cruise missile production for a year,” said Richard Connolly, a specialist on Russia’s defense sector and economy at the risk analysis firm Oxford Analytica.

Russia, he said, also gets a lot of electronic components from Belarus, “so even if we whack all the moles, Belarus will still provide the equipment for as long as Lukashenko is in power.”

Both Turkey and the UAE have condemned Russia’s invasion of Ukraine but have not joined Western sanctions and sought to maintain ties with Russia.

Russian Industry and Trade Minister Denis Manturov said this year that trade between Russia and the UAE grew by 68% to $9 billion in 2022, according to Russian state news agency Tass.

Are sanctions effective?

Despite countries still doing business with Russia, the State Department believes sanctions are working, O’Brien said, noting that “the way to measure success is on the battlefield.”

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“Ukraine can shoot down most of what the Russians are firing, and that tells us that there’s a gap,” he said. “The battlefield debris shows us Russia is using less capable electronics or sometimes no electronics at all.”

Nonetheless, Russia has been pummeling Ukraine with frequent missile attacks, including two over the past week that killed at least 23 people in Ukraine.

This is partly because Russia is “still getting hold of these electronic components and they are largely functioning as they did before,” said Connolly, the Russia analyst.

The latest sanctions package targets multiple Russian companies that repair, develop and manufacture weapons, including the Kalibr cruise missile. But to really turn the screws on Russia, analysts say Western companies need to think twice before selling crucial technology to countries known to have a healthy resale market with Russia.

“We need to work much harder with companies in our own countries to ensure that they are not feeding the re-export market,” said Tom Keatinge, director of the Centre for Financial Crime and Security Studies at the Royal United Services Institute in London.

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“Many of them may be celebrating a rise in sales to the UAE or Turkey and not realising, or not choosing to realise, that the rise is being driven by re-export business as opposed to genuine business happening in the UAE and Turkey,” he said.

The United Arab Emirates has insisted it follows international laws when it comes to money laundering and sanctions. However, a global body focused on fighting money laundering has placed the UAE on its “grey list” over concerns that the global trade hub isn’t doing enough to stop criminals and militants from hiding wealth there.

Turkey, meanwhile, has tried to balance its close ties with both Russia and Ukraine, positioning itself as a mediator.

Turkey depends heavily on Russian energy and tourism. Last year, however, Turkey’s state banks suspended transactions through Russia’s payment system, Mir, over US threats of sanctions.

The extent of US sanctions

Including the latest sanctions, the State Department says the US has targeted almost 3,000 businesses and people since Russia invaded Ukraine in February 2022.

“The United States and its allies and partners are united in supporting Ukraine in the face of Russia’s unprovoked, unjustified and illegal war. We will stand with Ukraine for as long as it takes,” US Secretary of State Anthony Blinken said in a statement.

The State Department also sanctioned a Russian citizen for being associated with the Wagner mercenary group and for facilitating shipping of weapons from North Korea to Russia.

Also targeted were a Russian oligarch who the State Department says has personal ties to Russian Defense Minister Sergei Shoigu and organised crime, as well as a Russian Intelligence Services officer and a Georgian-Russian oligarch. The State Department has said Russia’s Federal Security Service worked with the oligarch to influence Georgian society and politics for Russia’s benefit.

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September 8, 2023

Labs: the (overlooked) building block of Universal Health Coverage

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Hepatitis C (HCV) — a potentially life-threatening virus that infects 1.5 million new people around the world every year — is highly treatable if diagnosed early.[1]

Unfortunately,  access to quality screening is far from universal. Countries like Egypt — one of the countries with the highest prevalence of HCV in the world — demonstrate the impact screening can have. In 2015, HCV was prevalent in an estimated 7 percent of the country’s population and accounted for 7.6 percent of the country’s mortality, presenting a significant health care and societal burden.[2]

But since then, Egypt has turned a corner. In 2018, the Egyptian Ministry of Health and Population launched a massive nationwide HCV screening and treatment campaign as part of its 2014-2018 HCV action plan.[3] The campaign’s results were inspiring: by July 2020, Egypt had screened more than 60 million people[3] and treated 4 million residents.[2] Today, Egypt is set to be the world’s first country to eliminate HCV within its borders.[2]

The results of Egypt’s HCV screening program speak to diagnostics’ power in contributing to improved health outcomes around the world. Among the essential components of any health system is the capacity for prevention, which includes timely screening and detection. But a preventive approach based on timely diagnosis won’t work without the right infrastructure in place.

Strong laboratories as a cornerstone of building better health care

Matt Sause, CEO Roche Diagnostics | via Roche

highlights the critical role well-functioning laboratory services play in health systems with good reason.[4] Around the world, clinicians increasingly rely on  laboratory tests for diagnostic and treatment decisions. These tests help them make more informed decisions that result in better care and potentially improved outcomes for patients.

The challenges facing labs today — and tomorrow

Two key challenges facing laboratory systems today are underfunding and insufficient resources. Despite their central importance, laboratories struggle to garner the political and financial support they need to be as effective as possible. For example, it’s estimated that while lab results drive approximately 70 percent of clinical decision making, laboratories make up only 5 percent of hospital costs.[5]

After all, it’s the health care systems with strong, resilient labs that will be best placed to manage future pandemics and ever-growing health threats like heart disease and dementia.

What’s needed is a political commitment to provide everyone with access to accurate and timely diagnosis that paves the way to effective treatment and health. And putting this commitment into practice can only be achieved and sustained through coordinated multistakeholder efforts and public—private partnerships. This is not just a worthwhile investment for patients, but also the wider health care system in the long run. After all, it’s the health care systems with strong, resilient labs that will be best placed to manage future pandemics and ever-growing health threats like heart disease and dementia.

Another challenge is the health care workforce. Effective use of diagnostics requires qualified people to drive it, with expertise in pathology and laboratory medicine. Yet the world currently faces a laboratory staffing shortage. For diagnostics in particular, baccalaureate degree programs in laboratory science have previously been on the ‘endangered list’ of allied health professions.[6] In the end, inadequately trained staff, frequent turnover and scheduling problems all make quality lab results more difficult to guarantee.

This UHC ambition is only possible when backed by a network of strong laboratories that help ensure individuals can access high-quality diagnostics services without financial burden in all health care systems.

concluded that 81 percent of these populations have little or no access to diagnostics.[7]

The path to Universal Health Coverage

Put simply, innovative diagnostics are only meaningful if they reach people where and when they’re needed. Advancing this equity is at the heart of the WHO’s vision for Universal Health Coverage (UHC) by 2030. The goal? To guarantee all people have access to high-quality services for their health and the health of their families and communities, without facing financial hardship.

This UHC ambition is only possible when backed by a network of strong laboratories that help ensure individuals can access high-quality diagnostics services without financial burden in all health care systems. To do this, UHC should explicitly include diagnostics services. Financially, it’s savings from screening, early diagnosis and targeted treatment that make UHC feasible. Health care systems will have to undergo a systemic shift from focusing on treatment to focusing on prevention. And that’s just not possible when clinicians don’t have access to fast, accurate and cost-efficient lab results to inform their clinical decision-making. Policies and regulations that safeguard UHC goals of access and health equity are essential to make progress toward UHC.[8] The Saving Access to Laboratory Services Act (SALSA), in the United States, is an example of how national policies can help to ensure sustainable laboratory networks and contribute to equitable access to essential healthcare.

Stronger labs can not only help health care systems make savings in the routine management of population health; investing in them also helps to reduce costs and prepare in advance for any future public health crises.

This year has already seen encouraging progress toward achieving UHC through enhanced diagnostics capacity. The adoption of the resolution on strengthening diagnostics capacity at the World Health Assembly in May was an important signal of growing international political support for diagnostics. It was also a call to action. The next step for this month’s United Nations General Assembly and Sustainable Development Goals (SDG) Summit is channeling political support for diagnostics into the development of an action-oriented declaration.

To put us closer to UHC, this declaration should commit to ensuring that national health plans include access to timely detection and prevention. That starts with supporting laboratory systems and establishing National Essential Diagnostics Lists that identify the most critical diagnostic tests to help diagnose patients quickly and accurately so that they can receive needed treatment. At Roche, we’re advocating that governments, industry, civil society and other policy stakeholders will come together around concrete plans and shared resources that strengthen diagnostics and the lab infrastructure that makes them effective. In line with our commitment to increase patient access to important diagnostic solutions by 2030, we plan to do our part.

[1] Hepatitis C. World Health Organization. Available at: https://www.who.int/news-room/fact-sheets/detail/hepatitis-c (Accessed 22.08.2023)

[2] Egypt’s Ambitious Strategy to Eliminate Hepatitis C Virus: A Case Study. Hassanin, A. et al. Available at:   https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8087425/ (Accessed 22.08.2023)

[3] Hepatitis C in Egypt – Past, Present, and Future. Roche Diagnostics. Available at: https://diagnostics.roche.com/global/en/article-listing/egypt-s-road-to-eliminating-hepatitis-c-virus-infection—a-stor.html (Accessed 22.08.2023)

[4] Monitoring the Building Blocks of Health Systems. World Health Organization. Available at: https://apps.who.int/iris/bitstream/handle/10665/258734/9789241564052-eng.pdf (Accessed 14.07.2023)

[5] The Cost-effective Laboratory: Implementation of Economic Evaluation of Laboratory Testing. Bogavac-Stanojevic N. & Jelic-Ivanovic Z. J Med Biochem. Volume 36, Issue 3, 238 – 242. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6287218/

[6] Ensuring Quality Cancer Care through the Oncology Workforce: Sustaining Care in the 21st Century: Workshop Summary. National Academy of Sciences. Available at: https://www.ncbi.nlm.nih.gov/books/NBK215247/ (Accessed 14.07.2023)

[7] Essential diagnostics: mind the gap. The Lancet Global Health. Available at: https://www.thelancet.com/journals/langlo/article/PIIS2214-109X(21)00467-8/fulltext (Accessed 14.07.2023)

[8] Private Sector Commitments To Universal Health Coverage. UHC Private Sector Constituency 2023 Statement. https://www.uhc2030.org/fileadmin/uploads/UHC2030_Private_Sector_Commitments_Statement_April2023.pdf (Accessed 29.08.2023)



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August 21, 2023

Weight loss drugs boost sales at retail pharmacies, but they may not help profits much

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A pharmacist displays boxes of Ozempic, a semaglutide injection drug used for treating type 2 diabetes made by Novo Nordisk, at Rock Canyon Pharmacy in Provo, Utah, U.S. March 29, 2023.

George Frey | Reuters

Drugmakers aren’t the only ones feeling the impact of the weight loss industry gold rush.

Retailers with pharmacy businesses, such as Walmart, Kroger and Rite Aid, said increased demand for prescription weight loss drugs helped boost sales for the second quarter.

But analysts note that those blockbuster treatments are minimally profitable for retail pharmacies – and may even come with margin headwinds.

“More recently, you’re starting to hear retailers talk about these drugs. But I wouldn’t say they’re necessarily beneficiaries of the increased popularity,” Arun Sundaram, an analyst at CFRA Research, told CNBC. “They’re really not making much of a profit on the drugs. So it’s really just a traffic driver and not really a profit pool for retailers.”

Buzzy drugs like Novo Nordisk‘s obesity injection Wegovy and diabetes treatment Ozempic have skyrocketed in popularity over the last year, with high-profile names like billionaire tech mogul Elon Musk among recent users.

Those treatments are known as GLP-1s, a class of drugs that mimic a hormone produced in the gut to suppress a person’s appetite.

Other drugmakers, such as Eli Lilly and Pfizer, are developing their own GLP-1s in a bid to capitalize on a weight loss drug market that some analysts project could be worth $200 billion by 2030. An estimated 40% of U.S. adults are obese, making successful treatments a massive opportunity for drugmakers.

But the boom in demand for GLP-1s is also being felt in other parts of the drug supply chain, including the pharmacies that dispense the prescription drugs to patients.

Are weight loss drugs profitable?

On an earnings call Thursday, Walmart CEO Doug McMillon said the company expects weight loss drugs to help drive sales for the rest of the year: “We still expect food, consumables, and health and wellness, primarily due to the popularity of some GLP-1 drugs, to grow as a percent total in the back half.”

In June, likewise, Rite Aid CFO Matthew Schroeder said a jump in pharmacy revenue and the company’s decision to hike its full-year revenue guidance was “due to the increase in sales volume in Ozempic and other high-dollar GLP-1s.” Schroeder was referring to the hefty price tags of GLP-1s, which range from around $900 to $1,300 in the U.S.

He said those drugs have high sales amounts per prescription, but emphasized that the increased volume of GLP-1s has a “minimal impact” on Rite Aid’s gross profit.

Kroger CEO Rodney McMullen similarly said during an earnings call in June that GLP-1 drug “sales dollars are a lot bigger than the margin dollars.”

“We would expect the GLP-1 type drugs to continue but remember, the impact on profitability is pretty narrow,” he said.

That’s because GLP-1s like Wegovy and Ozempic are branded drugs with “very, very low gross margins,” according to CFRA Research’s Sundaram.

He said retail pharmacies generate high sales for each GLP-1 prescription they dispense but rake in low profits, which is having a slight negative impact on the overall gross margins of retailers like Walmart and Kroger.

UBS analyst Michael Lasser similarly highlighted in a recent note that gross margins for Walmart’s U.S. business “would have looked even better had it not been for the contribution of the GLP-1 drugs since these carry very low profit rates.”

A selection of injector pens for the Saxenda weight loss drug are shown in this photo illustration in Chicago, Illinois, U.S., March 31, 2023.

Jim Vondruska | Reuters

Gross margins for branded medications are 3.5% on average for pharmacies, according to a 2017 study from USC’s Schaeffer Center for Health Policy and Economics. That suggests it may take years before a branded drug significantly contributes to a pharmacy’s bottom line.

In contrast, gross margins for generic drugs – the cheaper equivalents of branded medications – are 42.7% on average for pharmacies.

There are several reasons for the lower margins of branded drugs. For one, branded drugs don’t directly compete with other medications because they have patent protections. That gives drug manufacturers more power when they negotiate drug discounts with wholesalers, which purchase medications and distribute them to pharmacies.

As a result, there is “little room for wholesalers and pharmacies to capture large margins due to their relative lack of negotiating power,” according to the Association for Accessible Medicines, a trade association representing the manufacturers and distributors of generic prescription drugs.

What other impacts do retailers face?

But there are also other impacts of GLP-1s to consider beyond a retailer’s pharmacy business.

For companies like Walmart and Kroger, GLP-1 drugs may be indirectly impacting other business categories in a positive way.

That makes some analysts less worried about margin headwinds in pharmacy: “The gross margin headwind is less of a risk overall for Walmart because any footstep in the door often ends up with multiple items in a basket,” KeyBanc analyst Bradley Thomas told CNBC.

“Walmart is generally not a quick store that you just pop in on the way home,” he said. “They’re going to make multiple purchases, and I think we’re seeing a lot of discretionary categories actually see a lift from some of this incremental traffic they’ve been getting lately.”

Thomas added that GLP-1 drugs only fall under one part of Walmart’s business: “If you’re listing off the most important things that are driving Walmart’s strong sales performance right now, it’s probably not making the top 10,” he said.

It’s a slightly different situation for Rite-Aid and similar companies like CVS Health and Walgreens.

Those companies have retail pharmacies but also other business segments that are directly affected in different ways by the boom in GLP-1 drugs.

For example, CVS also operates a health insurer and pharmacy benefit manager, or PBM, which maintains formularies and negotiates drug discounts with manufacturers on behalf of insurers and large employers.

The increased demand for GLP-1 drugs is likely more of a headwind for health insurers since they have to cover the costly drugs for beneficiaries, but CVS says “the risk is manageable” in that business division.

Meanwhile, PBMs may benefit more from the increase in GLP-1 use since they negotiate significant discounts on drugs and drive competition between manufacturers – but they often don’t pass along all of the savings to insurers.

“Each of the businesses kind of has GLP-1 in them and they are impacting them in a variety of different ways,” CVS CEO Karen Lynch said during an earnings call last month.

Correction: The Association for Accessible Medicines is a trade association representing the manufacturers and distributors of generic prescription drugs. An earlier version misstated its name.

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August 19, 2023

How gas station economics will change in the electric vehicle charging future

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As electric vehicles proliferate, some gas stations are making expensive overhauls to add EV charging stations.

In most cases, they aren’t scrapping traditional liquid fuel pumps. But select locations, including an RS Automotive in Takoma Park, Md., and a Shell station in Fulham, England, have made a full switch.

Location, cost, power requirements and conversion time are among the multiple considerations that factor into a gas station’s decision to convert all or a portion of their existing infrastructure to allow for EV charging.

“Figuring out how to do this on an active site can be complex and challenging,” said Neha Palmer, chief executive of TeraWatt Infrastructure, which is developing a network of electric vehicle charging centers for fleet operations across California, Arizona, and New Mexico. “How do you sequence the construction when you have vehicles that might want to fuel there?”

Here’s what gas station owners need to know about the EV charging trend and their future.

The EV fast-charging model

Locations like office complexes, hospitals and hotels typically offer a slower charging option, since people generally stay put for hours at a time. Gas stations, however, are investing in Level 3 chargers, which are more powerful and generally charge a car in 20 to 30 minutes.

While slower charging stations are often free to motorists, that’s not generally true for fast charging stations, given ongoing operational expenses such as electricity and extra fees charged by utilities in commercial settings, said Seth Cutler, chief operating officer of EV Connect, whose software tools help companies build charging station networks.

Big oil company franchisers and car dealers are on board

For large oil giants, adding EV chargers is both a defensive and offensive play.

Gas station numbers have been decreasing at a sharp rate in the past three decades and the trend is expected to continue in the coming years, according to Shubhendra Anand, vice president of research and strategy at Market Research Future. In fact, at least a quarter of service stations globally are at risk of closure by 2035 without significant business model tweaks, according to consulting firm BCG.

The Biden administration has a stated goal of having 500,000 electric vehicle chargers nationally where EVs make up at least 50% of new car sales by 2030. By current administration estimates, there are more than three million EVs and more than 130,000 public chargers nationwide.

The European oil majors are among the energy sector leaders in the global EV charging push.

Shell has EV-charging-only mobility hubs in China and the Netherlands, in addition to the Fulham location. The company intends to own more than 70,000 public EV charge points worldwide by 2025, and 200,000 by 2030, according to an email statement from Barbara Stoyko, senior vice president of mobility for Shell Americas.

BP also sees the need for mixed-use hybrid refueling and EV charging stations, according to Sujay Sharma, chief executive of BP’s electric vehicle charging business in the U.S. “Today’s gas stations are well positioned to adopt EV charging due to locations in high-demand areas, in addition to their existing convenience offerings including restrooms, food and beverage,” Sharma stated in an email.

Franchise car dealers are also increasingly getting on board, thanks to pushes from automakers like GM and Ford.

As of late last year, 65% of Ford’s dealers had opted into the EV certification program (a little under 2,000, according to data shared by Ford), as it has started to make the role of car dealers central to the EV transition process.

The National Automobile Dealers Association said in a May release that franchise owners will spend an estimated $5.5 billion on EV infrastructure across OEM brands, with per store costs ranging from $100,000 to over $1 million.

Upfront costs can be jaw-dropping, incentives help

Adding EV charging capabilities is not a one-two decision that owners should take lightly. Indeed, the return on investment could be seven to 10 years on average, according to an estimate provided by Yair Nechmad, co-founder and chief executive of Nayax, a global commerce enablement and payments platform, which offers its services to gas stations.

The hardware and software for fast charging can run between $50,000 for one charger and $500,000 for multiple fast chargers and dispensers, said Michael Hughes, chief revenue officer of ChargePoint Holdings, a technology company that makes EV charging hardware and software to help drivers find local charging stations and amenities. The infrastructure, meanwhile, which includes the cost of breaking ground, running power, permits and contractors, generally costs about twice that, he said.

That makes it advisable to incur all the infrastructure changes upfront, even if a gas station only intends to make a few chargers available at the onset, said Rohan Puri, chief executive of Stable Auto Corporation, which helps make charging stations more profitable for companies that own and operate them. His advice: “Put in as much power as you think you’re going to need in 10 years.”

There are numerous federal, state and utility-based incentives for commercial businesses to purchase and install fast chargers. This includes the U.S. Department of Transportation’s Federal Highway Administration NEVI Formula Program, which provides generous funding to states to strategically deploy EV charging stations.

Gas station owners can search for information on incentive programs they may qualify for.

Location is a key factor, gas station franchise concerns

Even with incentives, there can be barriers to entry, location being a major factor. According to the U.S. Department of Energy, 80 percent of EV charging happens at home, which makes adding EV charging less appealing for in-town gas stations, Hughes said. Local gas stations also don’t generally have amenities to keep people entertained while they are charging their vehicles.

Real estate can also be prohibitive. A traditional gas station may have two islands with four pumps each for liquid fuel; the same utilization rate would require about 40 charging stations, Hughes said.

By contrast, gas stations along major highways between highly traveled destinations can be ideal for electric charging hubs. These locations tend to have multiple amenities, offering people the opportunity to grab a cup of coffee, get a quick bite to eat, stretch their legs or walk the dog while they charge their vehicle, Hughes said.

Convenience stores like Sheetz, Wawa, Royal Farms and Buc-ee’s that double as gas station operators are also starting to add electric chargers at certain locations, said Albert Gore, executive director of The Zero Emission Transportation Association, a federal coalition that advocates for EVs, and who is a former Tesla and SolarCity executive. It can’t be “a place that you’re just going to run in and buy a Snickers,” Gore said.

While there can be a first-mover advantage for gas stations, some owners, like Blake Smith, founder of SQRL Holdings, a gas station and convenience store operator, are taking it slow. His company operates more than 150 convenience store gas station locations and offers electric charging in select locations in Florida. By contrast, the company hasn’t installed any EV charges in Arkansas, where it has more than 60 stations.

“I would never recoup my investment,” he said, adding that a move to all electric charging could be decades away. “We’re not flipping a switch to where gas vehicles are getting off the road and it will be EV-only.”

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August 18, 2023

What Wall Street needs to know about UAW talks, a potential strike, and what it could all cost

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United Auto Workers members on strike picket outside General Motors’ Detroit-Hamtramck Assembly plant in Detroit, Sept. 25, 2019.

Michael Wayland / CNBC

DETROIT – The Oracle of Omaha is cutting exposure to the U.S. automotive industry amid union negotiations — potentially for good reason.

Warren Buffett’s Berkshire Hathaway this week said it nearly halved its stake in General Motors in the second quarter. While the firm didn’t disclose its reasoning, the sale front runs what is expected to be a challenging end of the year for the U.S. automotive industry, plagued by contentious contract talks between the United Auto Workers union and GM, Ford Motor and Stellantis.

The talks, which cover nearly 150,000 U.S. auto workers, could cost the automakers billions of dollars in additional labor costs, work stoppages or, in a worst-case scenario, both.

New UAW leadership team has dubbed these talks the union’s “defining moment.” President Shawn Fain has already deployed harsh messaging and a few theatrics, including throwing contract proposals by Stellantis in a trash bin, and there’s been little to no talk about “give and take” or “win-win” deals.

“They’re ready to strike if a deal does not happen,” said Melissa Atkins, a labor and employment partner at Obermayer. “Going in with that mindset, I anticipate it being very contentious … and just given the history, there probably will be a strike.”

Aggressive efforts by the union are great for organized labor and the embattled UAW, which is attempting to regain its footing after a yearslong federal corruption probe landed several top leaders in prison for bribery, embezzlement and other crimes — but not for the companies or their shareholders.

Here are the numbers investors should know ahead of the expiration date for current contracts between the Detroit automakers and UAW at 11:59 p.m. ET on Sept. 14.

first reported earlier this month.

“One might think of these UAW contracts as a set of three large purchase orders to secure the labor needed to assemble future vehicles, parts, and components—contracts that are collectively worth roughly $70–$80 billion over the course of the next four years,” Kristin Dziczek, automotive policy advisor for the Federal Reserve Bank of Chicago’s Detroit branch, wrote in a Wednesday blog post.

United Auto Workers President Shawn Fain greets workers at the Stellantis Sterling Heights Assembly Plant, to mark the beginning of contract negotiations in Sterling Heights, Michigan, U.S. July 12, 2023.

Rebecca Cook | Reuters

The demands include a 46% wage increase, restoration of traditional pensions, cost-of-living increases, reducing the work week to 32 hours from 40 and increasing retiree benefits.

If the UAW gets those demands, without any changes to other benefits, the all-in hourly labor cost for the automakers would more than double from at least $64 per hour to more than $150 per hour, according to media reports.

That would be a significant increase over wage hikes seen during the previous four-year agreements, according to estimates from the Center for Automotive Research. The 2019 deals were projected to increase average hourly labor costs over the length of the contracts by $11 per worker for then-Fiat Chrysler, now Stellantis, and $8 per worker at GM and Ford.

Under the current pay structure, UAW members start at about $18 an hour and have a “grow-in” period of four years to reach a top wage of more than $30 an hour.

$5 billion

A work stoppage by nearly 150,000 UAW workers at GM, Ford and Stellantis would result in an economic loss of more than $5 billion after 10 days, according to Anderson Economic Group, a Michigan-based consulting firm that closely tracks such events.

AEG estimates the total economic loss by calculating potential losses to UAW workers, the manufacturers and to the auto industry more broadly if the sides cannot reach tentative agreements before the current contracts expire.

In another analysis, Deutsche Bank previously estimated that a strike would hit earnings at each affected automaker by about $400 million to $500 million per week of production.

Strikes could take several forms: a national strike, where all workers under the contract cease working, or targeted work stoppages at certain plants over local contract issues. A strike against all three automakers, as Fain has alluded to, would be the most impactful but also the riskiest and most costly for the union.

$825 million

The UAW has more than $825 million in its strike fund, which it uses to pay eligible members who are on strike. The strike pay is $500 per week for each member – up from $275 in 2022.

Strike pay is available after the eighth day of a work stoppage. A bonus check is paid the week prior to the Thanksgiving and Christmas holidays. Members also must be in good standing with the union and participate in picket lines to receive the assistance.

UAW members can also seek outside employment from the union, however if their pay is $500 or more per week, then they will no longer receive strike pay. They will continue to receive medical and prescription drug assistance, according to the union’s website.

Assuming 150,000 or so eligible workers, that’s all-in weekly strike pay of about $75 million. A fund of $825 million, then, would cover about 11 weeks. One caveat: That doesn’t include health care costs that the union would cover, such as temporary COBRA plans.

The UAW is scheduled to hold a procedural strike authorization vote next week, which would grant union leaders the ability to strike, if warranted. The measure historically passes overwhelmingly.

1.5 million

If the union decides to strike against all three Detroit automakers, production losses would quickly add up.

S&P Global Mobility estimates a 10-week strike would mean lost production of roughly 1.5 million units, according to an investor note from Mizuho Securities USA.

A 40-day strike against GM during the last round of negotiations in 2019 led to a production loss of 300,000 vehicles, the company said then. It also cost the automaker $3.6 billion in earnings, GM said.

Industry experts argue that a strike against all or any of the automakers would likely impact the operations and bottom lines of the companies more quickly than four years ago since the U.S. auto industry is still recovering from supply chain problems caused during the coronavirus pandemic.

Vehicle inventory levels for the automakers also are lower than they were heading into the talks four years ago.

Heading into 2019 contract negotiations, U.S. vehicle supply was 3.73 million — essentially enough units to last 86 days of selling under normal conditions at the time, according to Cox Automotive. The industry is currently just under 2 million units, with 56 days’ supply.

“In 2019, there was quite a slack in there. There’s almost no slack now,” AEG CEO Patrick Anderson said Thursday during a webinar with the Automotive Press Association. “If we are to get a strike, within the first week, the numbers start to get serious for each of the automakers.”

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