EV Tax Credit Comes to an End & Why Trump Rx Will Not Fix High Drug Costs

Summary

Prof G Markets: "EV Tax Credit Comes to an End & Why Trump Rx Will Not Fix High Drug Costs"

Episode Date: October 2, 2025
Host: Ed Elson
Guest: John McNeil (CEO, DVX Ventures; Former President of Tesla; GM Board Member)
Segment Expert: Courtney Breen (Senior Analyst, Bernstein Research)

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Overview of the Episode

This episode of Prof G Markets explores two key stories shaping markets and public policy:

• The end of the U.S. federal electric vehicle (EV) tax credit and its implications for the auto industry, consumers, and global competition, with expert insights from John McNeil.
• President Trump's "Trump Rx" plan aimed at bringing down prescription drug costs, analyzed in depth with healthcare analyst Courtney Breen.

Throughout, host Ed Elson delivers sharp analysis on market movements, policy changes, and the underlying forces shaping these headline stories.

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Key Discussion Points & Insights

1. Markets Update and the End of the EV Tax Credit

[02:04]–[04:17]

• Market Recap:
  S&P 500 and Dow hit record highs on optimism that the government shutdown will be short-lived; treasury yields fell; ADP employment report indicated contracting private sector payrolls, supporting possible Fed rate cuts. Gold continues climbing.

• EV Tax Credit Ends:
  As of the episode’s air date, the $7,500 federal EV tax credit officially expired due to the Republican tax bill passed in July. EV sales surged before expiration, with electric vehicles capturing a record 12% of new vehicle sales in September and Tesla posting its best quarter of the year.

• Key Questions Raised:

  • What happens to EV prices and demand post-credit?
  • What is the impact on companies like Tesla?
  • How does this affect American competitiveness, especially with China?

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2. Electric Vehicles Without Federal Support: Industry Outlook

Interview with John McNeil
[04:17]–[17:14]

a) Impact on Pricing and Margins

[04:18]–[06:57]

• John McNeil:
  The US will likely mirror Europe, where subsidy removals produced a temporary drop, but long-term growth of EVs continued. The market trajectory will be “up and to the right, but it’s choppy…not a linear curve.”

  “Consumers…have a lot of choice… like 65 different models in the EV market that we didn’t have two years ago.” — John McNeil [05:29]

• On Price Increases:
  The burden will be split—some costs absorbed by automakers through incentives (compressing margins), some by customers via higher prices. More incentives likely at the lower end of the market.

b) Does the Market Still Need a Subsidy?

[06:57]–[08:25]

• Industry Sentiment:
  EV market is increasingly established—"one out of every four vehicles sold in the US is now electrified."

  “Had this happened two or three years ago, it would have had probably a very significant effect on the industry. But now…we’re able to bring the cost curve down.” — John McNeil [07:46]

c) U.S.–China Competition

[08:25]–[10:43]

• Pressure from China:
  Chinese EVs (like BYD) are much cheaper due to government subsidies, raising questions about U.S. competitiveness.

  “The US industry cannot settle for just being a North American regional player. We want to be able to export and compete too.” — John McNeil [10:34]

d) The Chinese Model: BYD and Industrial Policy

[10:43]–[12:54]

• On BYD:
  China’s policy subsidizes many players, lets “the best of the best emerge," then consolidates under winners for global export. “The reason that BYD’s sales went down…there’s been a price war in China. The government called timeout…and said, you need to stop this and raise prices.” — John McNeil [11:45]

e) Strategic Importance of Electrification for GM

[12:54]–[15:14]

• Electrification as “North Star”:
  Despite subsidy loss, electrification is central to GM’s future strategy, based on long-term consumer benefits (cheaper fuel, lower maintenance, improved handling).

f) Tesla: Beyond Cars

[15:14]–[17:14]

• Tesla’s Future:
  The company is consciously shifting to focus on autonomy and robotics.

  “I think Elon came back from China…and essentially said…the car business is lost and we need to now move on…and the existential products are autonomy and robotics. That’s the future…” — John McNeil [15:44]

  • “They’re guiding down in terms of the quarterly expectations of deliveries…really focused on an autonomous future.”
  • “It’s a car company in transition.” — John McNeil [16:42]

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3. Trump Rx & Drug Pricing Policy

[20:01]–[29:32]

a) What is Trump Rx?

• A government-run website for consumers to buy drugs directly from manufacturers.
• Launch includes a deal with Pfizer to offer discounts and to provide Medicaid patients with “most favored nation” pricing.

b) Is Trump Rx a Real Solution?

Interview: Claire Miller & Courtney Breen (Bernstein Research)

• Root Causes Remain:

  “Is this one step going to change the outcome? Not necessarily on a broad base…This could be a good channel for a patient…that can’t get access through insurance today. But…for many patients…for this to be the silver bullet solution [it isn’t].” — Courtney Breen [20:55–22:46]

• Pfizer’s Incentives:

  “In some ways, this was an opportunity for the industry to get on the front foot…[working] with this administration…to ensure enough profit so they can invest…in future innovation.” — Courtney Breen [23:11–24:15]

• Sector Impact:

  • Investors relieved to see a framework for negotiations, avoiding worst-case revenue scenarios.
  • Expect more deals with other companies.

• Key Limitations:

  • Actual impact depends on which drugs are listed.
  • Example cited: “the only drugs [named] are really pretty insignificant to the Pfizer portfolio.” — Ed Elson [29:07]

  “Trump Rx might have an impact for some people, but we won’t know the scale…until we actually see what drugs are listed.” — Claire Miller [26:11]

c) Winners and Losers

• Short-term, the biggest “winners” appear to be drug companies (who avoid harsh tariffs) rather than patients [27:36].

• Long-term Balance:

  • Industry needs profits to innovate and tackle major diseases, but avoids “exploitation” in pricing.

  “Taking a drug from discovery through to the end…about $2 billion. And very, very few drugs make it.” — Courtney Breen [28:33–29:32]

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4. Ed Elson’s Final Analysis

[29:37]–[35:54]

• Policy Context:

  • While Trump Rx makes a good headline, real crisis is in the broader healthcare system—specifically, the battle over health insurance subsidies in Congress.
  • Potential for massive price hikes (75%–136%) in health insurance premiums if subsidies are not renewed.
  • Policy tension: discounts on a few drugs may be dwarfed by the far greater impact of rising insurance costs and Medicaid cuts.

  “The idea that the cost of certain eczema drugs will come down by 50%…but health insurance premiums for the rest of America are going to double…suddenly that 50% discount doesn’t seem to really matter anymore.” — Ed Elson [31:55]

  “You have to look at this issue in an incredibly narrow way. You basically need to look at it through a straw. And that’s how Trump wants us to look at all these deals.” — Ed Elson [33:09]

  • Ultimately, the episode frames Trump Rx as a distraction from the deeper explosion in healthcare costs.

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Notable Quotes & Memorable Moments

• John McNeil (on EV market resilience):
  “When you look over the long run, the curve is up and to the right, but it's choppy.” [04:52]

• John McNeil (on China’s approach):
  “They start almost a Darwinian approach where they fund and subsidize 100 players…The second chapter is the winners get cheap capacity, free capacity and makes them even more competitive.” [11:24]

• Ed Elson (on the larger health policy story): “This whole Trump Rx-Pfizer situation starts to look a little bit insignificant, bordering on ridiculous.” [32:03]

• Courtney Breen (on innovation/limitations): “Taking a drug from discovery through to the end of the journey, about $2 billion. And very, very few drugs make it.” [29:02]

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Timestamps for Major Segments

• EV Tax Credit News & Analysis: [02:04]–[17:14]
• Interview with John McNeil: [04:17]–[17:14]
• Introduction to Trump Rx & Healthcare Reform: [20:01]–[21:00]
• Courtney Breen Interview: [20:45]–[29:32]
• Ed Elson’s Closing Analysis & Policy Rant: [29:37]–[35:54]

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Tone and Language

• The conversation is sharp, frank, and at times wry—typical of Prof G Markets’ “no mercy, no malice” brand.
• Technical details and industry data are paired with strong points of view, especially in Ed Elson’s closing segment.

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Final Takeaway

While headline policies like the end of the EV tax credit or the launch of Trump Rx spark flashy market reactions, Prof G Markets uncovers the complex and sometimes contradictory realities beneath: the EV market’s maturing resilience amid global competition, and the stark disconnect between drug price PR moves and the vast, systemic pressures driving American healthcare costs. For listeners, the message is clear: in a capitalist society, headlines often obscure bigger trends and deeper forces at play.

For further questions or comments, listeners are invited to contact: [e-mail]

Transcript

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[Ed Elson]

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[John McNeil]

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[Ed Elson]

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[Sponsor Announcer]

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[Ed Elson]

Welcome to Profit Markets. I'm Ed elson. It is October 2nd. Let's check in on yesterday's market vitals. The S&P 500 closed at its 29th record high of the year as investors were optimistic that the government shutdown would be short lived. The Dow also climbed to a fresh closing record. Meanwhile, treasury yields fell after the ADP employment report showed that private sector payrolls unexp contracted last month. That may strengthen the case for the Fed to cut rates later this month. In other news, as we predicted, the Supreme Court decided Lisa Cook can keep her job at the Fed until it Hears the case in January. And finally, Gold hit yet another record high. Okay, what else is happening? As of yesterday, the federal electric vehicle tax credit is officially over. The credit offered up to $7,500 off per electric vehicle. It was designed to incentivize Americans to buy electric vehicles. However, it was eliminated following the passage of the Republican tax bill in July. The last chance to use that tax credit was on Tuesday. Over the past few weeks, customers have been rushing in to take advantage of it before it expired. EVs captured a record 12% of new vehicle sales in September, with overall sales spiking 27% compared to last year. By the Tesla posted its best quarter of the year in terms of deliveries. This expiration explains why. Meanwhile, non EV car sales dropped 3% last month. But now that the tax credit is gone, there are many questions that are now being asked of the electric vehicle market. For example, what is going to happen to prices? What is going to happen to demand? And how will all of this affect the most valuable car company in the world, which is, of course, Tesla? Well, to answer these questions, we are Speaking with John McNeil. He is the CEO of DVX Ventures. He's also the former president of Tesla and a current board member at General Motors. John, thank you very much for joining me on the program.

[John McNeil]

Yeah, good to be here.

[Ed Elson]

So this EV tax credit has just expired. $7,500 disappeared overnight. Let's just start with a pretty basic question. What does this mean for consumers? More specifically, are prices on electric vehicles about to go up?

[John McNeil]

I think it's a good question, and I'd point to markets around the world where this has happened. So around Europe, subsidies have come off, and we've got the benefit of a couple of years of looking at what's happened. And so in France, Germany, some other markets, subsidies have come off and leases have gone away that are subsidized as well. So it's pretty similar to what just happened in the US and in those situations, the market continued to grow. There is definitely some demand pull forward in the weeks and months right after the expiration of the subsidy. But when you look over the long run, the curve is up and to the right, but it's choppy. It's not a linear curve. There's choppiness when you have these policy changes. But I think one of the differences now is that there's much more compelling product on the market and you have a lot of choice. And so consumers in Europe and the US Are both experiencing that, or we're a Few years behind, but we've got something like 65 different models of choice now in the EV market that we didn't have two years ago. And so I think over the long run, you're going to see the market continue to grow, probably like it has in Europe after the expiration of the subsidies.

[Ed Elson]

Just in terms of the pricing itself, someone, someone's going to eat the cost of this. Either it's the car companies who. And we'll see some compression on margins, or it's the consumer who will pay more. Who do you think is going to be eating more of the cost? Who is going to pay for this?

[John McNeil]

I think you're going to see a little of both, and it probably depends on market segment. So you're going to see car companies offering incentives which compresses margin, and you may see prices go up a bit. Where that may come to roost is at different ends of the market. So you've got the lower end of the market where there's now a lot of compelling product that's around 30 to $35,000. I would imagine you might see some incentives at that end of the market. But at the upper end of the market, where people didn't qualify because of income for these subsidies, you may see prices go up or prices just return to their normal levels without a subsidy. And so I think we're going to see a little bit of both.

[Ed Elson]

You're on the board of General Motors. You were the former president of Tesla when this tax credit elimination was being floated around. I think one thing that I was thinking about and wondering is, you know, yes, this may mean that prices are going to go up, but realistically, the electric vehicle market is, as you say, it's, it's, it's already so big, it's already growing so much. Perhaps it doesn't need a subsidy, perhaps it doesn't actually need an incentive. Was that the feeling among management and among boards in the auto industry, or was there some real concern about this?

[John McNeil]

I think there was both concern, but also, I just speak for myself, a realization that, hey, as you said, this market's established. Like if you take battery electric vehicles and hybrids, one out of every four vehicles sold in the US Is now electrified. And so that, that looks like a market that's established and is probably getting ready to stand on its own. Had this happened two or three years ago, it would have had probably a very significant effect on the industry. But now that, in GM's case, we're approaching 200,000 vehicles of production, we're able to bring the cost curve down. We're on our second generation of our batteries, heading to third. And so we're pulling out costs not only in advance of this, but really so that we can compete on a worldwide basis with the Chinese.

[Ed Elson]

Yeah, you bring up the Chinese, which I was going to ask you about. I mean, you mentioned the lower end of the price range for EVs in America, around $35,000. But you look at China, where the average across all new electric vehicles is actually lower than that. It's around 25,000. Their government is, of course, massively subsidizing this industry. Are there any concerns about how this will affect American competitiveness abroad? If BYDs are being sold at these incredibly low price points in Europe and around the world and we are not being subsidized in the way that we used to, are there concerns that this could bolster the Chinese competitiveness in the EV market?

[John McNeil]

I think we're really working hard to pull costs out and really maximize customer value at the same time, because we need to be competitive. The US industry needs to be competitive. This is a more than a trillion dollar impact on GDP in the US alone. So we've got to get as competitive as possible. I think policymakers are going to work on making the playing field as level as they can. As you said, China's a different situation. We enjoyed that when I was at Tesla. You get essentially a free factory, subsidized workforce, subsidized parts, and you get a real advantage as you're building up capacity to compete. We need to make sure that's a level playing field in the rest of the world. But at the same time, we've got to get to the point where we can offer a 20 to $25,000 EV that's competitive feature wise. The good news is GM is producing EVs in China with a Chinese partner. So we are learning all that we can because quite frankly, they're fantastic at automation and cost efficiency. And we're learning all we can and taking those learnings back to the US and applying those as fast as can, so we can be competitive. But right now, as you said, like, if I land in Tel Aviv, I see BYDs, I land in Paris, I see BYDs, I Land in Santiago or Mexico City, I see BYDs. And the US industry, I don't think can settle for just being a North American regional player. We want to be able to export and compete too.

[Ed Elson]

Yeah, just on byd, which they. We just saw some new data. Their sales actually fell for the first time in 19 months in September. But, you know, they've overtaken Tesla as the global leader. What are your overall views on byd? What do you think of the valuation? What do you think of the business? And I think the bigger question for BYD is how dependent are they on the government? Is the only way they can sell those cars that cheaply because of the subsidies they receive from the government? Or is there some other strategic advantage that BYD has over American companies?

[John McNeil]

I think we're about to see the next chapter play out in the way that Chinese industrial policy works. So essentially what they do is they start almost a Darwinian approach where they fund and subsidize 100 players, which they've done in the EV market. They let the best of the best emerge. So in this case it's byd, Geely, others, nio. And for those that are failing, they then consolidate that capacity underneath the winners. So the second chapter is the winners get cheap capacity, free capacity, and makes them even more competitive. And then the Chinese do what they're doing, which is they turn to the export markets. We're seeing that we're at the beginning of that chapter right now. The reason that B2ID's sales went down largely, I think, is because there's been a price war in China. And the Chinese government has called timeout on that price war and said, you need to stop this and raise prices, which obviously hurts consumer demand. But I don't think that is going to last long. I don't see BYD's sales decreasing again in another quarter. They'll likely continue to increase. And so I think what that means for worldwide markets is you're going to see a lot more Chinese capacity looking to penetrate. And they're very savvy. They know they need local factories to do that and local distribution and local supply chains. So they're those in Europe, they're building those in South America. But I think for political reasons, they've been very cautious in approaching North America.

[Ed Elson]

Just thinking long term, for gm, as an example, you're on the board of gm. How essential is electrification to the overall strategy? It seems with the elimination of this credit, there maybe is less emphasis on we need EVs anywhere and everywhere. But how essential is it for the business?

[John McNeil]

I think it remains our North Star. Like we've committed many billions of dollars to transition ourselves into an electric future. The reason for that is because you see where the consumer heads over time and in a number of the super cycles that are happening, the US is the leader and so you don't get a look externally in the EV super cycle or the vehicle electrification super cycle. Other areas of the world are five to ten years ahead of us. And so we get the benefit of looking at what happens over time. And over time you start to see that even in oil rich countries like Norway, a super majority of the cars sold now are EVs. And in China, a majority of the cars sold are EVs. And along the coast of the US you've got very high EV penetration. It's largely because people start to discover, hey, the fuel is less expensive, I don't have anything to maintain on this vehicle. So the maintenance costs are almost zero. And lastly, it just drives better because it solves 100-year-old problem in cars, and that is the weight of an ICE engine is in the front of the car. And so engineers have had to mitigate as much as they can to get that thing to move and drive the way that we all want it to as consumers. You don't have that problem in an ev. You get a battery in the center of gravity of the vehicle for the first time. It's low and it's heavy and the car drives like a race car as a result, or handles like a race car. And so you've got better handling, cheaper fuel, cheaper mainten. And so over time the consumers move to that. Which is why I think even post subsidy in Europe for the last two years, you've seen the consumers continue to move to that, but not as fast a pace as it is when it's subsidized, that's for sure. So it remains our North Star. But at the same time we're realizing it's really good to have the flexibility of a portfolio where you can meet the customer, where they're at, rather than trying to artificially lead the customer to a decision that they may not be ready for.

[Ed Elson]

Yes. So my final question here as the former president of Tesla, I'd love to hear what you make of Tesla. Right now. There's more emphasis on things that aren't just cars. Autonomous AI, humanoid robots. What do you make of all of it and what do you think about the business going forward?

[John McNeil]

I think the business has moved away. It moved its focus away from a car business. I think Elon came back from China about a year and a half ago and, and essentially said to his team, the car business is lost and we need to now move on. And the existential products that Tesla has to have, in his view, are autonomy and robotics. And that's the future of the business. So as you've seen, the evidence of that is they're guiding down in terms of the quarterly expectations of deliveries and the annual expectations of deliveries that are in Elon's pay plan are not aggressive. And so I think they are really focused on an autonomous future for both cars, which are essentially a robot on wheels and humanoid robots. And so I think that's the way the market's viewing the company. And I think that's the way the company intends to be viewed for sure.

[Ed Elson]

Is that the right way to do it? I mean, for the market seems to love it. Is the big question we keep having, is it a car company? Is it not a car company? But the market seems to like the idea that it isn't a car company.

[John McNeil]

My sense is it's a car company in transition. It's got the benefit of having more than $30 billion of cash on its balance sheet. To see it through this transition to the other side to robotics, and they're acting like that. There's not new models that are compelling or really groundbreaking. Where they're trying to break ground is on autonomy and then on the Optimus robot.

[Ed Elson]

All right, John McNeil is the CEO of DVX Ventures. John, we really appreciate your time. Thank you for joining us.

[John McNeil]

Yeah, thanks for having me.

[Ed Elson]

After the break, a look at the White House's plan to tackle soaring drug prices. If you're enjoying the show, give Profug Markets a follow.

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[Ed Elson]

We're back with Profg Markets. President Trump announced Trump Rx, a government run website for consumers to buy drugs directly from manufacturers. This move came alongside a new deal with Pfizer. Pfizer will sell some discounted drugs on the Trump Rx website. Pfizer also agreed to sell its drugs to Medicaid patients at the most favored nation price, in other words, the lowest price available to other developed nations. And in exchange the company will get an exemption from Trump's pharmaceutical tariffs. So lots of questions here. What actually is Trump Rx and what is Pfizer's role in this deal? Our producer Claire Miller spoke with Courtney Breen. She is a senior analyst at Bernstein Research.

[Claire Miller]

Let's just start with your initial reactions to Trump Rx. How big of a deal is this really? Does this address the root causes of high drug prices in a meaningful way?

[Sponsor Announcer]

I think there is a lot of layers in the healthcare system that lead to high drug prices and I think the pharma industry body has actually spent a lot of time educating the administration, but also trying to educate generally that the manufacturer of the drug tends to only get about 50% of what is calculated as overall drug spent. So when we think about the multitude of factors here, is this one step going to change the outcome? Not necessarily on a broad base. However, when we look at some of the needs that individual patients have where today, if they don't have coverage with their insurer for a particular product, they are currently having to buy that at a list price. This Trumprx platform will allow them to buy these products that are listed on there at a much reduced price relative to that list price, closer to what an insurer or another channel might pay, enabling those patients that perhaps fall between the cracks today to get access. The other thing I would say is this will be particularly relevant for those products that have consumer orientation. So the GLP1s, these are particularly relevant because you've got many patients who have limited access through their insurance and are willing to pay out of pocket. But generally the way to think about it is this could be a good channel for a patient who is able to pay a net price that is perhaps going to enable them to get access to a product that they can't get access to through their insurance today. Generally, however, the co pay that you would be paying with your insurer would tend to be lower than a total net price of a product. And so that's where there's a little bit of a challenge for many patients for this to be the silver bullet solution.

[Claire Miller]

Let's shift to the drug companies themselves for a minute. Why do you think Pfizer agreed to this? Is it really all about dodging the tariffs? Which by the way, I think are still like, the jury's still out on whether those are even legal or not. So why is Pfizer down to lower the prices of some of these drugs?

[Sponsor Announcer]

Two things if you look back in history, drug pricing and drug pricing in the US and this being a bipartisan issue, has forever been a debate about the sector. This has forever been a downward pressure that the industry has just kind of had to deal with non stop over time. And so in some ways this was an opportunity for the industry to get on the front foot and come to an agreement with this administration whereby they were helping to achieve the goal of reducing overall drug spend and overall healthcare cost in the US while also ensuring that it wasn't something entirely punitive that was landed on them. And they were able to be part of the solution and thereby ensure that they still have enough profit so that they can invest appropriately in future innovation as well. So this was very much about kind of perhaps taking an opportunity to collaborate and put this one to bed for a while in terms of drug pricing pressure, but ensure to do it in a way that you can still have a viable industry going forward when it comes to Drug pricing and the reductions we may see.

[Claire Miller]

What are you expecting in terms of deals with other companies? Pfizer's stock popped on this news. Do you see much upside for other pharma stocks?

[Sponsor Announcer]

We have seen the entire sector rally in response. And so what that means is we've kind of got a framework of what are the rules of the road or the various parameters that each of these companies are going to be negotiating on, what the details that are kind of playing out between kind of each company and the administration are which drugs are going to be included on something like Trump Rx, what the actual anchor most favored nation prices that they're going to compare to? Because there's a lot of different ways you could look at that. This isn't just a simple kind of easy way to say, all right, I look at all of UK prices or I look at all of Sweden's prices and those are the prices I take for everything. This is being negotiated on a drug by drug basis for each company. So we expect to see many more announcements in terms of kind of company specific deals because there are those company specific nuances. But in addition, the fact that there is a framework that we know that these are the realms in which the companies are negotiating, everyone feels a lot more comfortable. And this is because the uncertainty and the worst case scenario, which, the worst case scenario could be a 30 to 50% hit to the top line revenue of some of these companies, which would be disaster. And so now we're in a world where actually we've got a much better understanding of the scope, much better understanding of what the path looks like forward. And so now investors specifically are feeling a lot more comfortable with what the volatility and what that uncertainty might look like going forward.

[Claire Miller]

So if I had to summarize all of this, it sounds like Trump Rx might have an impact for some people, but we won't know the scale of the impact until we actually see what drugs are listed on there. Am I characterizing that right?

[Sponsor Announcer]

Absolutely. I think that's really important. I think the other pieces are, is kind of the MFN for Medicaid and kind of seeing what that does to overall Medicaid spending over time. And then the final thing that was agreed in terms of drug prices with Pfizer was guaranteeing MFN prices for new drug launches. And the concept here was the administration said, look, we don't want you to agree a drug price with us and then go and undercut it when you go and launch in one of these next European countries. And so we want to make sure that we're getting a good deal, but they were still investing appropriately to fund that future innovation. And so this is again where the industry has said, okay, this is something we can live with because this is a go forward situation where we can then play within these new rules going forward. And so again, we're going to see kind of a very slow evolution as these new drugs come out in terms of the strategies that the pharma companies take, the prices they're willing to accept in other countries, the length of time it perhaps takes to launch in these other countries around the world relative to those US Launches which tend to come first.

[Claire Miller]

So in the meantime, it seems like the biggest winners here are actually the drug companies companies because they now have a path forward to avoid the tariffs.

[Sponsor Announcer]

I think what we know is over the last couple of decades, drug pricing debate has kind of reached fever pitch at many points along the road. This is an opportunity for that to perhaps be put to bed for a while, for the companies to focus on kind of what they do best, which is investing in scientific innovation and having more certainty around kind of policy threats like tariffs or new drug pricing pressures. So hopefully this means that we have a much more fertile industry that's able to focus on the things that it can do that add impact to patients and populations over the long run rather than kind of reacting to the volatility of the policy environment that we may have been in had no deals been struck.

[Claire Miller]

And as far as patients being winners, we'll have to wait and see.

[Sponsor Announcer]

There are two potential populations we think about in patients, patients who are accessing drugs today and the prices that they're kind of having to pay or the access they have to those drugs, but also the potential patients the of the future. And so making sure that there is the right spend, the right innovation going on so that we're able to crack kind of the next big problem, pancreatic cancer, neurodegeneration, all of these disease states that don't have good, good kind of solutions today. And so this, I think is the balance that we're always trying to walk in the pharma sector of, of kind of ensuring that there isn't exploitation with price today, but ensuring that there is enough profit so that you can take the wild risks that you have to in the investment cycle when it comes to R and D. Because it is a very risky path, taking a drug from discovery through to the end of the journey, about $2 billion. And very, very few drugs make it all Right.

[Claire Miller]

Thank you, Courtney. We really appreciate you joining us.

[Sponsor Announcer]

Absolutely. Thank you so much, Claire.

[Ed Elson]

That was Courtney Breen, senior analyst at Bernstein Research. So let's be quite honest. If this agreement is carried out and it all goes to plan, well, it can only really be a good thing for Americans. Part of the plan here is to figure out a way to raise prices in the G7 nations and also in Switzerland and in the Netherlands. And the White House is reportedly going to be doing the negotiating on that front. And then the idea is to use that extra revenue from those price increases to bring down the cost of drugs in. In the US and supposedly, those cuts will amount to discounts on certain US drugs of roughly 50%. So half off. There's not a whole lot to dislike about that. And yes, the details are very vague, as Courtney described, and the terms are confidential. We don't really know how expansive these discounts will actually be. And the only drugs that they have mentioned by name are the drugs that are really pretty insignificant to the Pfizer portfolio. But anything you can do to get drug prices down, we'll take it. I mean, we spend more than $13,000 per capita on healthcare in America. That's more than twice the average of comparable nations. We pay eight times more for insulin than what Greece pays. We pay seven times more for Humira than what Germany pays. We pay more, more for drugs and healthcare in America than any nation in the world. And it isn't even close. So for Trump to come in and say, look, here is a creative idea to get costs down in America, yeah, it's got my name on it, but whatever, I'm listening. I'm all for it. But I will also remind you that this is coinciding with what may turn out to be one of the most significant political impasses in recent memory. And that is the reason the government is shutting down right now is because Trump and the Republican Party want to take more than 4 million Americans off of health insurance. Or I can be a bit more specific, it's because the Republicans want to subsidize their tax cuts with Medicaid and ACA cuts, which will result in an explosion in health insurance costs, and that will price out more than 4 million Americans. So it's not that they're literally taking them off of health insurance, is that they're pricing them out of health insurance. To be even more specific, health insurance premiums in America are going to rise by 75% next year if these subsidies are not renewed. And that is what the government is fighting over right now, that is what the Democrats. Democrats are fighting over. That is why the government is shut down. And by the way, that is only one small piece in this healthcare story. There are another 11 million Americans who are gonna lose their health coverage because of the big beautiful bill which is gonna cut Medicaid funding by about $800 billion over the next 10 years. And when you account for those cuts, you're now looking not at a 75% price hike. Hike, but a 136% price hike. Yes, Insurance premiums under this new spending plan are going to more than double. So once you realize all of that, suddenly this whole Trump Rx Pfizer situation starts to look a little bit insignificant, bordering on ridiculous. I mean, the idea that the cost of, of certain eczema drugs will come down by 50%. Oh, great. But at the same time, health insurance premiums for the rest of America are going to double. Well, suddenly that 50% discount doesn't seem to really matter anymore. Suddenly this whole announcement isn't very exciting at all. And in fact, it's starting to look a lot less like actual progress on policy. And it's starting to look a lot more like a distraction. Starting to look a lot more like a way to make us forget about the thousands more dollars we are going to pay in our insurance costs, essentially just because we wanted to give more tax cuts to rich people. That's the real story here. So look, there is a way to see this headline positively. There is a way to believe that this is a net good for the US Healthcare system. But in order to believe that, and in order to really get excited about this, you have to look at this issue in an incredibly narrow way. You basically need to look at it through a straw. And that's how Trump wants us to look at all of these deals. He wants us to see the deal, see it on the news, read the headline, and instinctively, without really asking any questions, just say, oh, great, great, he fixed it. Healthcare costs are coming down. Drug costs are coming down. But again, in this deal, as with every other deal we see, there is a lot more than what meets the eye. The headline is a very small component in a larger story which is not about the decline of healthcare costs in America. Actually, it's the opposite. It's about the explosion of healthcare costs in America, the explosion of healthcare premiums. And it is just very ironic that it is precisely this issue that has forced our government to shut down. And by the looks of what happened in the Senate yesterday, yet another failed vote. There is not really anything to suggest that this issue will be resolved anytime soon. Okay, that's it for today. This episode was produced by Claire Miller, edited by Joel Patterson and engineered by Benjamin Spencer. Our associate producer is Alison Weiss. Our research team is Dan Shalon, Isabella Kinsel, Kristen o', Donoghue, and Mia Saverio, and our technical director is Drew Burrows. Thank you for listening to Proftree Markets from Proftree Media. I'm Ed Elson. If you liked what you heard, give us a follow and join us tomorrow for our conversation with Claudia Saarm, the former section chief at the Florida Federal Reserve.

[Sponsor Announcer]

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