Oversight & Investigations Informer – October 26, 2021
NOTABLE DEVELOPMENTS
What We Are Watching:
DEMOCRATIC LEADERS SAY THEY ARE CLOSE TO A RECONCILIATION DEAL: Senate Majority Leader Chuck Schumer and Senator Joe Manchin (D-WV) met with President Biden at his Delaware home on Sunday, and while all parties say they are close to a deal, key differences remain. Manchin says he wants the bill’s topline number at around $1.5 trillion, and he has concerns about proposals to expand Medicaid and Medicare and paid leave provisions. Critical differences within the Democratic party also remain regarding state and local tax deductions.
FACEBOOK FACING A BARRAGE OF NEGATIVE MEDIA REPORTS AMIDST GROWING CONGRESSIONAL SCRUTINY: Documents leaked by Facebook whistleblower Frances Haugen have led to numerous damaging news stories this week. In the midst of this, Politico reports that the House Democratic Caucus will hold a dinner discussion on Monday evening about anti-trust enforcement, featuring Tim Wu, the special assistant to the president for technology and competition policy.
Week Ahead:
The Senate and the House are both in session.
Key hearings include: A Senate Commerce hearing on protecting kids online; A House Education and Labor Workforce Protections Subcommittee hearing on vaccine requirements; a Senate Judiciary hearing on Department of Justice oversight, featuring testimony from Attorney General Merrick Garland.
CYBERSECURITY
What We Are Watching:
COMMERCE DEPARTMENT ANNOUNCES NEW RULE TO PREVENT SALE OF HACKING TOOLS TO RUSSIA AND CHINA: The rule, which has been years in the making, would require a license to sell hacking software and equipment to China and Russia and other countries of concern. Among the software included in the regulation would be Pegasus, a spyware product sold by the Israeli firm NSO Group.
JUSTICE DEPARTMENT USES LIABILITY PROTECTION TO ENCOURAGE HACKING DISCLOSURES: NextGov reports that the Justice Department has told private companies that they can protect themselves from legal challenges by quickly disclosing hacks to the government once the companies discover the breach.
MICROSOFT PRESIDENT CALLS FOR PRIVATE AND GOVERNMENT COLLABORATION TO PREVENT CYBERCRIME: Brad Smith, President of Microsoft, told the Wall Street Journal’s Tech Live conference that it is critical for private tech companies to support the government in combating cybercrime. At a meeting on cybersecurity at the White House in August, Microsoft committed to investing $20 billion over the next five years in developing cybersecurity tools.
Week Ahead:
The Senate Judiciary Committee will hold a hearing on Department of Justice oversight, featuring testimony from Attorney General Merrick Garland. Wednesday, October 27 at 10:00 A.M.
ENERGY SECTOR
What We Are Watching:
DEMS PROMOTE DRILLING BANS AS GAS PRICES SOAR: Congressional Democrats at an oversight hearing on the California oil spill last week accused the pipeline operator of waiting to notify authorities until the day after the leak was first detected. Amplify Energy, which wasn’t invited to the hearing, said in a statement that it reported the leak as soon as it was made aware of it. Democrats used the hearing as an opportunity to promote legislation to permanently ban offshore drilling in California, even as gas prices topped $5 a gallon within the state amid supply shortages. California’s statewide average price for gas was the highest in the country last week.
PANEL DETAILS FINANCIAL RISKS OF CLIMATE CHANGE: The Financial Stability Oversight Council – an interagency panel that includes the heads of the Federal Reserve Board, Consumer Financial Protection Bureau, Securities and Exchange Commission and others – approved recommendations Thursday that detail the steps the U.S. should take to match the stronger climate-related financial regulations of other countries. Activists had hoped for stronger recommendations to limit investments in fossil fuel projects, but the recommendations do call on banks to study and disclose their climate risks at a time when SEC is dramatically increasing their scrutiny of those disclosures.
Week Ahead:
The House Committee on Oversight and Reform will hold a hybrid hearing Thursday, October 28 at 9 A.M. on “Exposing Big Oil’s Disinformation Campaign to Prevent Climate Action.”
Key Insights:
FERC NOMINEE BREEZES THROUGH HEARING: Last Tuesday’s confirmation hearing for Willie Phillips to become the next Federal Energy Regulatory Commission Commissioner came and went without any major surprises or fireworks. Phillips told Senators he supports an “all of the above” approach to addressing America’s energy needs in response to a question from Committee Chairman Joe Manchin (D-WV), potentially addressing concerns from some Republicans. Absent any major surprises (and we’re talking about FERC here), Phillips seems on track to be confirmed by the full Senate by the end of the year, giving Democrats a 3-2 majority on the Commission.
FINANCIAL SERVICES SECTOR
What We Are Watching:
SHOW ME THE DATA: The Consumer Financial Protection Bureau (CFPB) has published orders that will require influential technology companies to produce information on their business practices. The CFPB has said the purpose of the orders is to learn more on how these companies use and handle personal payment data.
CLIMATE RISK FINANCIAL REPORT has been The Financial Stability Oversight Council (FSOC) declared climate change as an emerging threat to the country’s financial instability in its recent report. Some next step actions on this issue include enhancing climate-related data for better risk measurement and increasing expertise to recognize the threats.
A TRUMP REGULATOR GAVE LEGAL OK TO CRYPTO TRADE: A decision was made in the last days of Trump’s presidency that legally approves the trading of cryptocurrencies by banks on behalf of clients. If fully approved, this would lead to very profitable outcomes for banks but would likely be met with pushback from those who want strict financial regulation.
Week Ahead:
The House Committee on Financial Services is hosting two hearings this week:
- October 26, 2021: Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets: “Taking Stock of China, Inc.: Examining Risks to Investors and the U.S. Posed by Foreign Issuers in U.S. Markets”
- October 27, 2021: Full Committee: “Bringing Consumer Protection Back: A Semi-Annual Review of the Consumer Financial Protection Bureau”
The Senate Banking, Housing, and Urban Affairs Committee is also hosting two hearings this week:
- October 26, 2021: “Nomination Hearing” for Ms. Reta Jo Lewis to be President of the Export-Import Bank; and Ms. Elizabeth de Leon Bhargava to be an Assistant Secretary of Housing and Urban Development.
- October 28, 2021: Full Committee: “New Era for Consumer Protection: The Consumer Financial Protection Bureau’s Semi-Annual Report to Congress”
The Bank Policy Institute is hosting a Financial Inclusion Symposium on October 26, 2021. The symposium will focus on barriers to financial inclusion, solutions to increase financial inclusion, and regulatory and credit access dimensions.
Key Insights:
The impact of climate change on the financial services sector continues to deepen as the FSOC’s report is the first inter-agency report on the topic ahead of the upcoming United Nations Climate Change Conference. Climate concerns have also surfaced regarding the energy usage of mining cryptocurrencies as discussed by an entire panel dedicated to the topic during last week’s DC FinTech Week.
We expect the focus of newly confirmed CFPB Director Rohit Chopra’s appearance in front of the Senate and House this week to examine his decision to look into Big Tech’s business practices around a variety of consumer protection issues.
HEALTHCARE SECTOR
What We Are Watching:
SENATE FINANCE CHAIR SUGGESTS PBMs MAY DRIVE PHARMACY CLOSURES: Senate Finance Chairman Ron Wyden (D-OR) wrote a letter to Centers for Medicare and Medicaid Services (CMS) Administrator Chiquita Brooks-LaSure asking her to investigate recent pharmacy closures with a particular focus on how pharmacy benefit managers (PBMs) may be driving the closures. In the letter, the Chairman expressed concern that recent closures “are caused by the negative financial impact of direct and indirect remuneration (DIR) fees imposed by Part D plans and pharmacy benefit managers (PBMs) on local pharmacies in Oregon and other states.”
UNITEDHEALTH SUES GILEAD, ACCUSING THEM OF ANTITRUST VIOLATIONS IN HIV PREVENTION DRUG MARKET: UnitedHealth Group filed a lawsuit against Gilead Sciences, claiming that Gilead allegedly engaged in an illegal scheme to crowd out competitors in the HIV drug market by delaying generic alternatives to its drug Truvada from entering the market. The suit claims that Gilead built a “business empire and generated enormous illegal profits” by going to “extraordinary lengths” to “extend its monopoly power in violation of federal and state law, causing higher prices for and restricting access to these life-saving drugs.”
UNITEDHEALTH NAMED AS PRIMARY OFFENDER IN $9.2 BILLION IN QUESTIONABLE MEDICARE ADVANTAGE PAYMENTS: Federal investigators announced that UnitedHealth produced $3.7 billion in dubious Medicare Advantage payments in 2016. This follows a report released by the OIG report last month which found that 162 MA insurers received $9.2 billion in risk-adjustment payments. The report claimed that one insurer, which we now know was UnitedHealth, played a particularly large role.
Week Ahead:
On Tuesday, October 26 at 10:30 A.M., the Subcommittee on Health of the House Committee on Energy and Commerce will hold a hearing entitled “Caring for America: Legislation to Support Patients, Caregivers, and Providers.” The witness list includes leadership and experts from Ballad Health, Augusta University, National Association of County and City Health Officials (NACCHO), Dr. Lorna Breen Foundation, University of Alabama at Birmingham, UsAgainstAlzheimer’s and IUPUI School of Health & Human Sciences.
Key Insights:
Novavax’s COVID-19 vaccine may fail to meet regulators’ quality standards, potentially causing a major delay in global vaccination efforts. Despite the U.S. government’s $1.6 billion investment in the Novavax vaccine in 2020, the company experienced a string of production consistency challenges. For instance, while the FDA generally requires that each vaccine batch reach at least 90 percent purity, recent Novavax purity levels fell short at approximately 70 percent. The company plans to file for emergency use authorization in the U.S. by the end of the year and in the U.K., Europe, and Canada in the coming weeks, however, it is yet to be seen if the vaccine will be authorized amid continued manufacturing challenges.
INDUSTRIALS SECTOR
What We Are Watching:
BIDEN ADMINISTRATION TO REGULATE PFAS: The EPA said it is urgently working to establish enforceable drinking water limits on certain polyfluoroalkyl and perfluoroalkyl substances. Once the regulations are put in place, local water utilities will face penalties if they don’t meet the standard. Additionally, the EPA plans to designate some PFAS substances as hazardous under the Superfund law.
AIR CARGO COMPANIES WARN OF DISRUPTIONS FROM FEDERAL VACCINE MANDATE: In the midst of global supply chain issues and a shortage of pilots and other workers, air cargo companies are warning that vaccine mandates will exacerbate retention and hiring problems. The Cargo Airline Association wrote a letter to the Biden administration expressing concern about the employer mandate for vaccination. Members of the Cargo Airline Association include FedEx, UPS, DHL Express, and Atlas Air.
MEMBERS OF CONGRESS URGE THE WHITE HOUSE TO FUND THE F-35: A bipartisan group of 85 House members, led by co-chairs of the congressional Joint Strike Fighter Caucus, Marc Veasey (D-TX) and Mike Turner (R-OH), wrote to the White House urging full funding of the F-35 fighter program. The letter requests that the Pentagon buy at least 100 F-35 planes a year and invest in new technologies to stay ahead of rivals.
Week Ahead:
The House Select Subcommittee on the Coronavirus Crisis holds a hearing on the impact on the coronavirus on meatpacking workers. Wednesday, October 27 at 2:00 P.M.
TECH, MEDIA & TELECOM SECTOR
What We Are Watching:
HOUSE PASSES TELECOM BILLS: Last week the House passed and sent three bills to the Senate aimed at protecting U.S. telecom systems from foreign interference, all of which passed with large bipartisan majorities. The three bills require the FCC to block authorization of products from countries on the agency’s “covered” foreign entities list, instruct the FCC to establish a council to increase the security of U.S. telecom networks, and ask the Commerce Department to produce a strategy for U.S. economic competitiveness in the telecom supply chain.
MICROSOFT BOWS TO OPEN SOURCE CONCERNS: Microsoft announced last week it will reverse its decision to remove a key feature of its Hot Reload software in the upcoming release of .NET 6, which allows developers to modify source code while an app is running and immediately see the results. The company faced strong backlash from the open source development community, as well as its own employees.
REPUBLICAN CHINA HAWKS URGE TOUGHER CONTROL: In a letter signed by the House Foreign Affairs Committee’s top Republican, Rep. Michael McCaul of Texas, and 16 other Republicans to Commerce Secretary Gina Raimondo, House Republicans urged the Commerce Department to strengthen export controls and protections on semiconductors, aviation and emerging technology.
Week Ahead:
The Senate Commerce, Science and Transportation Consumer Protection, Product Safety, and Data Security Subcommittee holds a hearing on Tuesday at 10 a.m. on “Protecting Kids Online: Snapchat, TikTok, and YouTube.”
Key Insight:
As leaked documents continue to surface from Facebook, the company’s own words may be boon for antitrust regulators, who have to date yet to nail down a concise case for the social media giant’s market dominance. In internal documents Facebook employees cited goals to become a “super app” used in all consumer activities, while its internal metrics estimate nearly all U.S. teenagers use one of its products. In June, a judge tossed out the FTC’s suit against the company for failing to establish a clear monopoly in the market for Personal Social Networking (PSN) Services.
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The views expressed herein are those of the author(s) and not necessarily the views of FTI Consulting, Inc., it’s management, its subsidiaries, its affiliates, or its other professionals.
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