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- [00:01]
John Podhoretz
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- [01:04]
John Podhoretz
Hope for the best, Expect the worst Some preach and pain Some die of thirst no way of knowing which way it's going Hope for the best Expect the worst for the best welcome to the Commentary Magazine Daily Podcast. Today is Thursday, March 20, 2025. I am Jon Podhorts, the editor of Commentary Magazine and I am happy to announce for all of you who have been pressuring us, asking us, begging us for new Commentary merch, and particularly those of you who have thrilled to one of our now classic sound bites. Our first classic sound bite of course being Crushing Morosity, which was the subject of previous commentary. We have new limited edition Commentary merch dedicated to the sound bite It's Worse Than that, voiced as you know, by our own Abe Greenwald whenever we are going into a threnody about the nature of the destruction of our values, our principles, the West, Israel and everything that we hold dear. And I talk about how terrible things are. Matt talks about how terrible things are. Abe is always going to come in with that it's worse than that and then explain to us how even our most horrible projections of the future do not capture the true horror that we are about to descend into. So it's worse than that if you are watching on YouTube and again if you can, should go subscribe to our YouTube channel, Commentary magazine. I am now going to show you the merch. There are two. There are two pieces of merch. One is a cap that says it's worse than that. Here it is. It's worse than that. As you can see, there's the Commentary Podcast logo here. And then as I turn it around, you will see it says Commentary on the back so that everybody will know what you like. And then, even more exciting, our first thermal tumbler. Yes. Also red. Also says it's worse than that. Also has the Commentary logo. Thermal tumbler. So that you can carry your hot or cold drink with you wherever you go in your car, to a ball game, when you're running to your shelter. I don't care what thermal tumbler, but I don't know, it looks to me like it's like 20 ounces, maybe 24 ounces. Anyway, if you go to commentary.org you look at our top banner, you will see the word merch in the center of our top banner, just below the word Commentary. Click on merch. And the limited edition Commentary cap and Commentary thermal tumbler with the it's worse than that slogan will be yours for a not insubstantial price. I'm not gonna lie to you. We're not selling it cheap. These are incredibly high quality goods. It's an embroidered cap. This is a high end thermal tumbler. If you're getting stuff from Commentary, you're not getting it cheap. We don't make it cheap and we don't sell it cheap. But you wanted it. We're selling it. Let's see how it goes. Commentary.org merch tumblr cap, it's worse than that. And of course, the author of that slogan. Here with us today, executive editor Abe Greenwald. Hi, Abe.
- [04:43]
Abe Greenwald
Hi, John.
- [04:43]
John Podhoretz
I'm honored First. What? I'm honored, you're honored, you're honored, and you don't even have yours yet. In what may be a Commentary First, Abe is the only permanent member of the Commentary crew who is here today. We have two guests. Two. Both of whom have been on the show before, both of whom are contributors to Commentary. First, managing partner of the Bahnsen Group, author of the Daily Dividend Cafe newsletter, author of the book Full Time, our friend David Bonson. Hi, David.
- [05:16]
David Bonson
Hello, John.
- [05:18]
John Podhoretz
And Author of the April 2025 Commentary lead article in Praise of Big pharma. Author of 98,000 books, the most recent of which is the Power and the Glory, our friend Tevy Troy. Hi, Tevy.
- [05:37]
Tevy Troy
Hi, John. Thanks for having me.
- [05:39]
John Podhoretz
Okay, so we are here in large measure to discuss Tevy Troy's article, the lead article and commentary in Praise of Big Pharma, which is not only an article about the reason that Americans should celebrate rather than attack our pharmaceutical industry and its products, but also, it's worth pointing out, we will get to David to Talk about some of this, just how central to our economy, health care and pharma are to stock market, to our innovation, to America's export economy and all kinds of things. So we will get to that. But first, David Bonson, action On the macroeconomic front, Jerome Powell, Jay Powell, head of Federal Reserve, yesterday said, I'm going to do, I'm going to try to do what I can to calm people about the economic uncertainty that seems to have been introduced into our political conversation by the behavior of the new Trump administration. And I before we get to Powell's specific, specific comments on that, there was a Talmudic Jesuitical discussion on Twitter yesterday led by Breitbart's John Carney, claiming that Powell did not say what I'm pretty sure he said, which is that both the uncertainty and the failure of inflation to start restricting, resetting itself was due in some measure to the tariffs that Trump is putting on. And John Carney said that's not what he said, even though he directly said it. That would seem to be the direct quote, but that he meant that the tariff possibility and the thoughts of the tariffs might have an effect on not stabilizing. So in fact, he didn't say that the tariffs were causing inflation or might be a cause of influence of inflation. I, not being a particularly good student of the Talmud or of macroeconomics or of the volatility of the market, turn to you, David Bonson, to cast some light on whether or not John Carney's comment about Powell was right and that Powell wasn't saying that inflation was being sparked by the tariffs or whether he was just saying we really need to calm things down, things need to calm down.
- [08:14]
David Bonson
It's a much more constructive talk to discuss what the tariffs are doing and what the Fed is doing and what inflation is doing versus what Carney meant about what Powell meant about what Trump meant. You know, the kind of speculating on other people's speculation is the hard part and I guess tailor made for Twitter. But in reality, is Powell referring to something that's actually happening or not? Is there an inflationary move higher? Well, the direction actually month over month was, was disinflationary. And so everyone right now, John, I talked to you about this on this podcast. We talked about it a lot privately, that my big fear with the right's run to politicize the price increases of a couple of years ago was that they were just setting the table to have the same thing happen the other way. Now it's equally irrational. Tariffs are inflationary and anyone who says otherwise is making it up. But tariffs that don't happen aren't inflationary. Tariffs that haven't yet happened aren't inflationary. They can do other economic damage. I would argue they are. And we're in early innings of reaping what we sow around uncertainty around a downward move in capital investment, capital goods, durable goods, industrial production. So those things all matter. And those things stem from uncertainty about what the administration's tariff policy will be. I spent half a day at the Treasury Department yesterday and I came away more convinced than ever that what we're dealing with is largely a split within the administration that they are keeping out of the public eye, that there is a philosophical disagreement within the administration and that's not from potus. I don't think President Trump is part of the philosophical disagreement. I think he loves the chaos, loves the palace intrigue. But there is a Commerce Department that believes chaos will lead to a better deal. And there is a Treasury Department that believes this is unsettling for financial markets and ultimately becomes a negative, self fulfilling prophecy. But the inflationary part bothers me because we are looking to run to our priors. So the left is going to stick any price increases on Trump and largely because the right was so quick to stick price increases on Biden. Some of the times there's merit to it and other times it's totally incoherent, but I guess that's the nature of the times.
- [10:59]
John Podhoretz
So just to just to clarify, for idiots like me, inflation is one of those things that can't be talked up. It literally is a phenomenon that happens when prices increase and people's purchasing power goes down because goods are more expensive than they were before as a result of various trends. Whereas uncertainty is something that happens in the entirely subjective frame of are you going to buy a stock or sell a stock, are you going to hold or hold for the long term or give up the ghost quickly? How are you going to make quick, how are you going to make investment decisions? That's not. Inflation is off to the side. That's the net effect of large scale moves involving the things you talked about, you know, capital format, capital flows and what's happening. You know, you could have a storm that makes it harder for, you know, oranges get killed in a store and therefore there are fewer oranges and the price of oranges goes up. And that's not.
- [12:19]
David Bonson
But John, hold on. Everything you said was right until there, okay, that's not inflationary. All that means if there's no new money and there's less oranges. But then there's other things. It changes the price. It makes one thing more expensive and one thing less.
- [12:35]
John Podhoretz
You mean you don't buy, you don't eat oranges, but you'll eat apples? Because apples.
- [12:39]
David Bonson
What I'm, what I'm getting at is this is where Milton Friedman and the Chicago School are indisputably correct, that inflation is always and forever a monetary phenomena, and it is caused by too much money chasing too few goods and services. So the argument that some would make is that tariffs do not increase the money supply. So, yes, they might make certain products go up more, but in theory that should cause other products to come down. My argument, though, is the second half of Milton Friedman's statement, chasing too few goods, that tariffs put downward pressure on production so they impact the supply side and that overall lower trade because of more impediments to trade, which, you know, it's the conservatives who have been saying forever correctly, that you tax more of something, you get less of it. So a tariff is a tax on trade. You get less trade, you therefore get less production. That's the inflationary component. But inflation, in regular parlance, in the way normal people talk and think, if they go to the store and eggs cost more, it's totally understandable. They're going to say, look at this inflation. But that's why economists try to refer to inflation as what we call the aggregate price level. And that's obviously very difficult because how do you measure the aggregate price level? So they try. They do a monthly measurement of cpi. The Fed does a monthly measurement of what's called pce. And they're pretty good, and they're not perfect, but they represent a kind of relative basis sequentially of where we think the aggregate price level is. And so eggs are clearly not a byproduct of inflation when it's relative to a bird flu. And the argument I've had for some time is if it's mass inflation we're dealing with, why are goods prices lower? Is it because people said I'm going to buy less goods because my rent went higher? Or do we have, as has been the case most of my adult life, particularly bad price increases, so regular people call it inflation in health care, in housing, and. And in. What am I missing? The three major government subsidies and higher education. Those are the three areas we've had real inflation. Now, what happened a few years ago, John, that you and I talked about a lot and became a national story was we had a real price level increase across the board and, and people will always debate over what the causes were. And someone like me who had a multi causal explanation, nobody wants to hear it. The only explanation had to be either Biden did it or Trump did it, did it or the Fed did it. But the idea that there were a lot of things going on at once, what gets lost right now on the tariff side, people should be far more worried about targeted inflation. Like what if lumber prices go higher and housing prices which are about to seemingly come lower. Finally all of a sudden it kicks off, it stops production of new supply. That's a very big problem.
- [15:53]
John Podhoretz
And let's, let's, let's go, let's just delve into that. Just as one example of the tariffs, right? Housing. How would tariffs affect housing? Because new construction, right, requires lumber. And Trump wants to put a 25% tariff on Canadian lumber. Is that what you're referring to?
- [16:14]
David Bonson
Or 25. The number today is 50.
- [16:17]
John Podhoretz
I don't know what it is. It was 10, it was 2025, it was 35. I don't know.
- [16:21]
David Bonson
It would be very difficult to think of a more ridiculous tariff and a more ridiculous country than that one, the lumber one, because it is such an unbelievable benefit to the United States on our access to cheaper lumber as a byproduct of our ability to import from our neighbors to the north. But yes, that's a great low hanging fruit example that it would push lumber prices higher and make access to the supply harder and therefore impede construction costs where we have a supply side crisis in housing.
- [16:59]
John Podhoretz
So in housing, just this week, I believe, or yesterday before this neoliberal book has been released by Ezra Klein and Derek Thompson of the Atlantic called Abundance. And the whole idea is the left has gone the wrong direction. It doesn't understand that what we need is a policy that supports abundance and their main topic is housing, that we are with a housing crisis in the United States, there isn't enough housing at the lower end of the market because of policies pursued in their view, but not nars, but in their view, you know, to, for honorable reasons, to help the environment and all that. All of which have increased the price of housing through regulatory frameworks and through neighborhood zoning and things like that. And that therefore we have a growing population, we do not have a growing housing market and there is not abundance in the United States. People can't move the way they want to. They don't have enough choice. And if the left just embraced how the left on earth is going to embrace deregulatory and policies that do not Put the environment at the center of all decision making. I don't know. Since that is like a betrayal, that's like telling a Jew to start, you know, sort of counting the rosary. I don't know how that happens, but it is sort of an interesting moment for this to become part of the national conversation.
- [18:30]
David Bonson
It sure is. A guy like Matt Iglesias has been on this kick for a while too. There's been other kind of center left folks that have tapped in. Actually, I haven't read Ezra's book, but agree with that premise entirely. That embracing yimbyism, yes, in my backyard approach to greater supply of housing, to more deregulation, to less environmental insanity is a political winner regardless of which party does it. The problem is that NIMBYISM is a bipartisan affair. And by the way, how does the left just go turn on a switch and say we now want deregulation and a sort of non environmental, a kind of mutism about environment when it comes to housing. Well, Gavin Newsom showed us how he does it. You have big fires in LA and then you say we need to rebuild. So we're just going to suspend all these nonsensical regulations that have been impeding the construction of new housing. The left knows the answer to this.
- [19:27]
John Podhoretz
And you're saying that the blue states need to set themselves on fire in order literally to suspend regulations.
- [19:36]
David Bonson
Well, but see that's the thing is if they know that it's the right solution after a fire, then I guess they know it's the right solution when you don't have a fire too. So in that case you can have your cake. You need it too. You can not have the fire and still deregulate and get a really good policy outcome. The only thing I think is missing from Ezra's analysis is that that is a huge part of it. It's city council problems, it's state and local zoning issues. It's one of the great frustrations when any presidential or anybody in D.C. talks about addressing housing as if I'm right, that this is largely supply driven. The vast majority of this regulatory headwind is not federal, it's state and local. But I would add the capital supply that is a huge part of the problem here, that financial deregulation is a big issue too, because home builders and the way in which regulations of banks work. If it's going to take you seven years to get permits and zoning and approval, very few people have the capital patience to go invest in a project. So there has to be room on the regulatory side that also invites more capital inflows. And since the financial crisis I lose my mind, John, when I hear people demonize and more and more. It's the populist right, demonize private equity for coming in buying housing. They own about 0%, 0.6% of single family residences in America. If I were us, I would say thank you and go on my way because the only people willing to put in long term patient capital into the construction of new housing supply which is what is needed to drive down prices, create more affordability and center, create an equilibrium between supply and demand has been private equity. But there's a capital side and then yes, a regulatory that is needed to fix this housing epidemic.
- [21:36]
John Podhoretz
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- [21:50]
Will that be cash or credit?
- [21:52]
David Bonson
Credit.
- [21:53]
John Podhoretz
4 Galaxy S25 Ultra the AI companion.
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- [22:01]
John Podhoretz
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- [22:35]
Abe Greenwald
Yeah, no, you were joking when you said so what you're saying is these blue states need to literally set themselves on fire to do the right thing here. But in a sense it's true they can only do it in cases of emergency. Otherwise what are they? They're not supposed to stand for deregulation. That's their problem. I mean they can't so easily simply adopt more conservative economic policies.
- [23:06]
John Podhoretz
I mean I'll give you an example of this as I'm looking at a chart here which David knows, you know, back of his hand question about construction, right. Which is what we're talking about tariffs, lumber construction. So construction is in the private sector in terms of an individual sector of private industry employs about 6 million people. Manufacturing overall employs 12 million people. But this one part of the manufacturing economy, the construction of housing is the Largest single, I believe the largest single private making things employer in the country, state, federal, state and local government employs 22 million people. And what do they do? Those 22 million people do? A lot of stuff. But here we have the conflict, right? You have 6 million people employed in construction, you have 22 million people employed in regulation, I mean, or the management, the macroeconomic management of the country. A lot of which we need to do, right? We need to have highway workers repaving potholes and all kinds of stuff like that. But if you have in the world that we're talking about here, and maybe this is where we can both, we can start segwaying into Tevy's area. Because of course, health care is the largest or the second largest sector of our economy. That's not pharmaceuticals. Health care as a whole, I think is now 17 to 18% of our economy. And so the weird hostility which is the subject of Tabby's article in praise of Big Pharma, the weird hostility to the most, the only really innovative sector of the healthcare economy, which is efforts to create medications that keep people out of hospitals or keep them from dying or keep them from becoming infirm and going on Social Security disability, or keep them or make them more productive because they are not sick and all of that, on the one hand, we are incredibly dependent on that to make that economy work. And on the other hand, we are increasingly hostile to the businesses, the private businesses that maybe we're not increasingly hostile. I think maybe we've been sort of like at a plateau of hostility. But we are hostile to this sector of the economy that unlike other sectors of the economy, like, I don't know, entertainment or gaming or something like that, it isn't really, there isn't really a negative aspect to it whatsoever, except if something goes wrong, then it's negative. But you can't say there's anything wrong with what happened to the, you know, in pharmaceuticals.
- [26:18]
Tevy Troy
Yeah, so I think that's a good segue, especially because David was talking about long term patient capital. And that's what the pharmaceutical industry is. They invest long term patient capital on these massive innovative projects. It costs $2 billion plus to bring a new drug to fruition through all the regulatory maw that we have. And regulations are a huge part of the issue here. And then some of these drugs are incredibly transformative. You know, you and I, John, love the show. The Odd couple where Oscar was getting ulcer surgery seemingly every week, every time he had Mexican food or something. Now, ulcer surgeries are not a Thing because of pharmaceutical innovation, heart disease is way down. I was at a funeral yesterday for a cancer doctor, an oncologist, who over the course of his lifetime saw the survival rate for cancers go from 30% to 80%. And a lot of that is to do this. Biomedical innovation, which is a huge employer in our economy, is a huge indicator of how innovative we are. But also it saves and improves and transforms people's lives. And you said that the hostility has reached a plateau. I would say largely true, except there is one area where the hostility is increasing and that is the Republican Party has now joined the party. And in addition to Democrats and Hollywood and trial lawyers bashing pharmaceuticals, you increasingly have Republicans bashing it as well. And I think that adds and compounds to the problem.
- [27:44]
John Podhoretz
So the original pharmaceutical, you could say in some weird way is the vaccine, right? I mean, like, like who? Or you know, maybe pasteurization of milk or something. But I mean that the discovery that a small application of a, of a, of a disease into the body to create the antibodies to fight off the disease in future, which was a 19th century kind of like, like eureka moment, right. Essentially began, I think, in some ways, aside from aspirin, the, you know, the pharmaceutical business. And yes, here we are 150 years later saying that vaccines are bad for you when we have life expectancy having essentially doubled over the last hundred years on the planet Earth, and, and child, and child mortality, infant mortality or child mortality declining to almost, you know, precipitously, to almost nothing, in part because kids are vaccinated against the diseases that killed them en masse. You know, of course, we all know from reading 19th century novels, you have 10 kids and five of them are going to die before they're five years old from things that we, you know, like from scarlet fever, which, you know, I know you don't get vaccinated against, against, against strep throat, but I mean, whatever and whatever, measles, whatever. And here we are with a, with the Secretary of Health and Human Services believing that vaccines are harmful, which is a kind of reactionary fundamentalism that is pretty horrible to contemplate and is a terrifying fact. But we don't go into that much in the piece. I think your piece is a history of how the pharmaceutical industry started getting taken for granted. And we bank all the successes and then pay no attention to them, and then we accentuate the failures or the moments at which things go wrong.
- [29:48]
Abe Greenwald
I think about, you know, part of the problem is that the pharmaceutical industry is a victim of its own success. And that when you address so many problems, the remaining ones become highlighted. And whatever problems you have with the industry, then people are freed up to focus on those because you take the rest for granted.
- [30:12]
Tevy Troy
That's definitely built into the case. But people assume that, oh, well, now we can take an aspirin or now we have penicillin. So that is already baked into the cake. That is what we are faced with now. But I think what I'm trying to get at in the article is this idea that there's so much more that can be discovered. Vast majority of diseases don't really have a cure. And we are on the cusp of biomedical revolution that could really transform our bodies and our ability to live longer, to live more prosperous, happier lives with fewer health issues. And thanks to AI and the unlocking of the human genome and the power of informatics, we really can do so much more. But if there's this unremitting hostility to this industry and if they're going to be sued out of existence by the trial lawyers, then the companies and the biomedical researchers who might go into this field will say, you know, I'm not going to do this in America, or I'm going to go into a different field. I'm a, I'm a biochemist. Let me go look into fabrics or food or a whole bunch of other industries. And I think the incentive effect of driving people away from this industry is something that really needs to be considered.
- [31:21]
John Podhoretz
Just in the last five years, seven years, we have what appears to be the cure for obesity, right? The semi glutides, as you say, essentially discovered this Gila monster. Discovering that the digestive system of the Gila monster could be applied to the human stomach to forestall hunger. The hunger message and, and, and mean that you store food better, more efficiently over, over the course of time. And that now I read somewhere, I don't know if the stat is right, that 13% of the people in the United States are taking some form of semi glutide. And that, you know, doctors that I speak to people, that this is a, you could see it at award shows. You know, literally like every single person in Hollywood now looks like, like a lollipop. Like they, they have no body and they have a giant head. And that's. Last year they didn't look this way, right? It's, and this, these, the weight loss is startling. And whatever the ancillary benefits of the reduction in obesity are, they're probably pretty substantial, right? I mean, you have low lowering of the diabetes, which is I think the single most expensive disease we face, maybe, except for cancer. Right. Isn't something like 1% of the federal government's budget go to paying for diabetes care?
- [32:56]
Tevy Troy
Yeah, obesity. Diabetes are incredibly expensive. And yeah, there are all kinds of second order potential effects of reducing obesity. Even if you just think about the military recruitment problem, they can't recruit enough people to serve in the military because there are too many people who are obese. So yes, obesity has, has a huge impact on our fiscal situation, on our health situation. And solving that problem would be a good thing. But also, cancer is still an issue. You know, multiple presidents have declared war on cancer, but cancer unfortunately is still here, even though we've made improvements. And there are just so many more things to cure, so many more things to improve. And I worry that the industry won't be around or won't be willing to take it on. I've heard of boardrooms where they say, well, I'm not gonna invest in this particular cure. Cause it's not a complete absolute home run. And if it's not a home run, when you take into account the regulatory costs and the legal costs and just the reputational costs of any time you bring out something. And when they bring them out, they have a high price initially, price goes down over time, so they get hit with that as well. So whatever the incentives, they, they think about it through the lens of how much can I make off this product? And if I'm not going to make enough money, I'm not even going to bother putting out the new product.
- [34:08]
John Podhoretz
And of course you also talk about the fact that as this gets more specific and as we know more and more, you're talking about treatments for diseases that are not mass and scope, like diabetes and obesity. You could be talking about a relatively minor cancer that affects 1 in 10,000 people, that they discover how to turn the off switch, the genomic off switch on. And yet the problem there is that because so few people are going to take it, and the development cost and the cost of testing it over seven years and all of that so large that when it comes to market, it's going to cost. The per patient cost is going to be astronomical. And then people get all angry because it's like, oh, they found the way that I'm not gonna die, but it costs $75,000 per year. That's not fair. And that's now become a kind of legitimate way to look at how we talk about healthcare.
- [35:17]
Tevy Troy
Yeah, it's one of the things I talk about in the article is that there's this expectation that the drug, new drugs are some kind of right or you have a moral ability to get these drugs even though another company produced it at great cost to themselves. And the expectation that we should get these because we pay for the nih, which provides basic research but does not, the applied research, doesn't actually bring the products to market. Or we have the fda, which doesn't actually do the clinical trials, it just regulates the clinical trials. So people have these expectations that the drugs are going to be free because of the amount of money the government spends on these various programs. And it's just not the way it works and it's not realistic. And as Sally Pipes, who might quote in the piece, says, the high prices of pharmaceutical products, it's not greed, it's math. They have to charge these prices in large part because of all the regulatory costs and the trial lawyer costs. The trial lawyers brag about sucking tens of billions of dollars from the industry. Well, that's great. They take tens of billions of dollars, they divide amongst themselves, they give a tiny amount to the people in the class action lawsuits. But every one of those tens of billions of dollars gets added to the price of new products because it has to be priced in to how the pharmaceutical companies pay for the products that they're trying to develop.
- [36:33]
John Podhoretz
Also you have the problem of employment in this sector, right, in terms of innovation. And David, this is something that happens in all industries that become controversial. So you have 20 year olds now, right, who are, you know, who are like the best and the brightest in the world of research, of scientific research. And 30 years ago, maybe none of them would have thought twice about taking a job at Pfizer because it was high status. Like you got out of school, you got a well paying job at a nice suburb of New Jersey and you were going to develop the next Viagra or the next Rogaine or the next, or something that was really going to cure cancer or something like that. If you're 20 years old today and you're that person, do you want to go work for Big Pharma? You probably, if depending on how raised your consciousness is or something like that, you might well think, well, I don't want to do that there. It's like, it's almost like saying you want to go work at a tobacco company in 1995 after the class action suits like you, you don't want to, you don't want people, oh, you're working for them. Aren't they the, aren't they the people who Got everybody addicted to fentanyl or, you know, made every, you know, or, you know, are charging these poor people $10,000 for their, for their diabetes drug or something like that. So the status issue, which is a big issue in terms of how people decide where they're going to go for employment, is not nothing.
- [38:13]
David Bonson
You know, what's really ironic, John, is that I remember early in my wealth management career meeting doctors and they were more and more saying, I wish I had gone into pharmaceutical sales because I couldn't understand why the sales rep at Pfizer had more money with me than the internist and family office doctors, family practice doctors that they covered. And it was like the medical field was less appealing and the pharma thing was more appealing. And now you're right, they're demonizing pharma. And it occurred to me while you were talking, they better be careful or they're going to make investment banking look good again. They're going to drive everyone back to Wall Street. So you're running out of things to demonize. You know, I think my question to have you that's very interesting is around that issue of the monies that pharmaceutical companies get from NIH or other federal grants or whatnot. I know that when the TARP issue is happening on Wall street and various elements of federal money that ends up in the private finance sector's hands, that the rule of thumb became don't take it like, like any situation that comes up, it's going to bite you later. You're better off not receiving the money. And I was surprised that the noise on this issue didn't intensify even more. Bernie Sanders was real big on it as it pertained to the MRNA vaccines after Covid, with both the Pfizer, Biontech and the, and the Moderna, that they believed that the government should have an impact in the pricing decisions because of some, as you point out, very small component, an early stage research not bringing to market and so forth. But it does seem that optically that you're going to want to get to a point where, you know, like what Hillsdale does with student loans, right? Like just don't touch federal money. And yet I would think that would hurt research process, but end up becoming maybe a cleaner way for pharma to avoid the PR nightmare.
- [40:24]
John Podhoretz
Well, you know, that's a very interesting observation to make right now since of course we have this war on government funding that is going on and one of the places that Trump is being successfully challenged on the suspension of grants and things like that is precisely there, right? It's like NIH and C cdc. How can, how can you, how can you possibly do this? Because that money is seed money for univers. So you get it on two fronts. A, it's seed money for universities. You're trying to get the universities to, you're trying to get universities to stop behaving badly. So you're spending their grants and you are suspending NIH and NIMH and all kinds of grant money because it may be going to have projects that are, seem politically distasteful or something like that. So if there were a route for Big Pharma to essentially create its own, what do they call it, accelerator system that isn't the federal government funding.
- [41:32]
David Bonson
But there is, I mean they have that now and most micro cap biotech companies, that's exactly what they are to.
- [41:39]
John Podhoretz
I know people who, you know, start those and are running those. But, but the question is, are they working off a discovery that was made in a lab that is funded by the federal government? So would that funding system over time, because you want to get out of this cycle, would it be better for you know, Pfizer to essentially have its own private university, you know, like hire 200 academics to work in their lab and instead of going through this process of grant getting from the federal government to do the research that finds the Gila monster. That whatever. I don't even know how that would work.
- [42:22]
Tevy Troy
But there's two things going on here. There's the reality and the perception. The reality is, yeah, the federal government sometimes gives money that go to pharmaceutical companies like Moderna got almost a billion billion for the vaccine, but they put five times as much into it. So yes, the federal government gave some, but Pfizer specifically did not take federal money for the development of the vaccine because they wanted to be free of federal limitations. But on the perception part, there's this sense that because NIH spends $48 billion or so on development of new ideas in the biomedical sphere that they're paying for the drugs. But they are not, that is not direct payments to pharmaceutical companies in any way, shape or form. And there's this perception that, well, NIH spends a lot of money on research, so we should get drugs for cheaper prices or for free. And that is where the perception of the American people is really off. And I even have this great thing in the piece, you know, I love to do presidential history. I have this point that LYNDON Johnson in 1968, after being president for five years didn't realize that NIH didn't bring drugs to market itself, that it was actually the pharmaceutical companies that did it.
- [43:28]
John Podhoretz
You know, I have a friend who does oncological research and has since he got out of medical school and he works at a, you know, he works, was an academic, worked at academic institutions and he had this idea about how to study certain pediatric cancers using organisms with very few cells so that you could, you know, sort of turn them on and off and, and all this and, and got a lot of federal grant money over, over the years because it seemed very promising and sadly the results were inconclusive in terms of the basic science, like whether or not the thing that he wanted to do was going to work. And it's very valuable even in failure. Right. Because that means, okay, here was a, here was a pathway that was attempted and it turned out, you know, that it led, you know, to a dead end and therefore people after him don't have to follow that path any longer. But you know, he didn't like get the big score or something like that. But that's just an example of the things you never hear about or know about, which is that a lot of this research doesn't pay off. You're talking about, baby, you mentioned these are mini cap companies off, which usually have. Or mid cap, which usually have one big drug. Right. They have one. It takes 10 to 14 years to bring a drug to market. And they have one drug and they are paying for trials and they are paying for double blind studies and they are going through the FDA approval process and the FDA raises questions and they go into more and this. And the number of those drugs that actually end up being approved and coming to market is 15% or something like that.
- [45:20]
David Bonson
Very low.
- [45:21]
John Podhoretz
Very low. And enormous amounts of investment capital. This is why, you know, investment capital is a risk. Right. If you back something.
- [45:29]
David Bonson
But John, the investment capital being at risk is. You're understating it how significant it is with this. Because it is not debt. Okay. You can have industries that attract a lot of debt and it's coupon bearing. They're getting an interest payment along the way because there's some cash flow.
- [45:47]
John Podhoretz
Yeah.
- [45:48]
David Bonson
This is entirely a binary outcome.
- [45:51]
John Podhoretz
Right.
- [45:51]
David Bonson
It's either going to pay off big or you're losing everything.
- [45:55]
John Podhoretz
Yeah.
- [45:55]
David Bonson
And, and you're exactly right. These microcap companies are generally sort of incubators for the larger cap. There's a ton of M and A in pharma and a lot of what the big guys are doing is acquiring smaller cap companies that took huge risks, huge trial and error to get something near the end of market. And maybe after phase two, they're getting acquired going into phase three or even after phase three. But the point being that the investment capital necessary to finance this is high risk capital and that needs to be priced accordingly into the way we think about this. And it just simply isn't. But I still come back to my question, which is the R and D tax credit and the NIH funding that does exist, would it be at this point, and I'm just speaking of mega cap, I'm talking literally about the Pfizers, Mercks, Eli Lilly and those that are over a $30 billion market cap pharma company. Would they be better off taking a Hillsdale approach to this stuff?
- [47:02]
Tevy Troy
Yeah, they might look at it and say, sure, I'll take less government money. I won't take the R and D tax credit if I will diminish this unrelenting hostility against us. But that's not a deal that's makeable because the hostility is really built into the culture at this point. And I'd love to get John's thoughts on this because the Hollywood piece of it is really, I think, pernicious. I mean, you talk about the number of movies where a pharmaceutical executive is the villain and you just go back 30 years. I mean, the Fugitive in Jurassic park and the Constant Gardener. And John kindly added to my piece the example from Matlock, which is a new hit series that I happen not to watch but has the pharmaceutical company is a bad guy again. And you're more likely to see a pharmaceutical exec as a bad guy than some kind of Russian, you know, former KGB agent.
- [47:51]
John Podhoretz
Or you're never going to see a Chinese, you're never going to see anybody from China.
- [47:55]
Tevy Troy
Right?
- [47:55]
John Podhoretz
Because they won't release movies in China. It's the world's largest market. So the Chinese villain is gone. Right. The environmental villain is boring because the environmental villain dominated things in the 70s and 80s, right? The capitalists who bury, you know, the, the sort of, the tobacco companies are.
- [48:13]
David Bonson
Gone, you still got finance.
- [48:18]
John Podhoretz
But you know what?
- [48:20]
Abe Greenwald
But the pharma villain, you have the benefit. There can be a sci fi element, right? Because they're tinkering around with genes and things.
- [48:29]
John Podhoretz
And there is a victim. The problem with the financial sector in terms of pop culture is who's the victim really? I mean, in the end, the victim ends up.
- [48:38]
David Bonson
The victim is the person who didn't pay back the money, money they were given.
- [48:41]
John Podhoretz
Well, there's that or, or, you know, like the Madoff Victims are victims, but they're all rich people mostly, so they don't really make. They're not like the guy who's living next to the poison canal who gets cancer, you know, like that. That or the Aaron Brockovich or. That's right. That. That kind of. That kind of type of villain. And so Hollywood ran through all of its villains. And then, of course, came this villainous moment. And the. Something else we should talk about a little bit, because it's an interesting point of the piece, is that there was this moment in the 90s when the deregulatory atmosphere in the United States in general, in terms of how things were dealt with, led to the decision that it was okay to advertise drugs. And now I believe if you go to broadcast television, do you. We mentioned this number. 70% of the advertising on over the air linear television is now pharmaceutical. All you have to do. People don't really watch television the same way anymore. But if you watch cbs, every ad is a drug. And it could be all kinds of drugs that involve people that people don't. Very few people take an HIV drug, you know, a drug for a very specific kind of like eye. Irritated eye syndrome or something like that. But that is where television advertising has gone. And the question is, was that a deal with the devil for the pharmaceutical industry? Should they have stayed out of the advertising business because the ads now make them look predatory, like they're just selling, you know, cornflakes. And there is that moment in every ad where it's like, don't take this. If you have this, don't take this. If you have that, don't take this. If you're allergic to it, don't take this. Ask your doctor if you have suicidal thoughts, stop taking the drug. The ad itself features a kind of horror, a moment of horror. You know, it's like just in order to get the ad on, the regulations require that you mention all the possible and potential side effects. And maybe they should never have gotten. They have. So.
- [50:59]
Abe Greenwald
And there's also something weird about it to me, when this first started happening, where I thought, why are they advertising this drug to me? Traditionally, you know, medicine in my experience, isn't about me going to a doctor and saying, hey, I'd like to try this drug, right? The doctor says, oh, you may have this or you have this. This may work, right?
- [51:27]
John Podhoretz
That was the point, is to see if there was a way to use the consumer market to pressure doctors into trying new therapies.
- [51:39]
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- [52:39]
John Podhoretz
Right?
- [52:39]
Tevy Troy
And Eve got a really good point there because then these consumers would go to the doctor and say I want this drug that was advertised in this way. And then the doctor feels constrained and can't offer a lower cost, perhaps generic alternative. But I totally agree John, that I think it was a deal with the devil. The so called DTC direct to consumer ads. The pharmaceutical companies thought maybe the great boondoggle they could advertise directly to consumers and there's a way to make money. But just think about any time you watched a sporting event with your kid and the E Day ad comes on and you have to distract the kid so they're not going to ask you what this ad is for. So yeah, it definitely engendered a lot of resentment among the American people and also undercut the pharmaceutical companies big argument which was we need all this money with high prices so that we can funnel it into R and D so we can make new biomedical innovations as opposed to we need money so we could advertise more on TV and annoy you while you're trying to watch a sports sporting game with your kids.
- [53:30]
John Podhoretz
Now there's of course an answer to that, but it's too sophisticated or too complicated an answer which is that we need to market to make sure that the drugs get to enough people so that we make enough money off the drug so that we have money for the R and D pipeline and for everything else. I just think culturally it's been more than a generation of our familiarity with this advertising and Hostility toward the industry that is creating the advertising has risen. And so therefore you can really make the claim that we've had a real world test of whether or not this was a good idea. And the test has come back with an unambiguous answer. Of course, we also have.
- [54:14]
David Bonson
But it's interesting, John, I think that I'm sitting here thinking about a parallel in finance because, you know, hedge funds are not allowed to advertise. And the reason is that hedge funds are not allowed to be bought unless the investor is a credit investor, a qualified purchaser. There's different degrees of regulatory apparatus.
- [54:35]
John Podhoretz
Well, you have to be willing to lose all your money, right? The point about a hedge fund is the deal between the hedge fund and the person who invests in the hedge fund is it is understood that the investor is willing to take a risk that the entire investment will disappear.
- [54:51]
David Bonson
But it's not just willingness, though, it's suitability. And that you can, plenty of people can say, I'm willing to lose all my money, but they have to be perceived to be able to lose money, right? And so they have net worth requirements and liquidity requirements, and people can agree or disagree with that regulation. But my point is on the advertising, that there's no point in allowing advertising to people who can't buy what you're advertising anyways. And this pharmaceutical thing is fascinating because unless we're allowed to write our own script, we are being advertised to for a product we can't buy. But it's meant to. It's basically meant to impact the pressure we put on our own doctors. And, and I'm not. It has to work. They just simply wouldn't do it unless it worked. Right?
- [55:42]
Tevy Troy
Yeah, it definitely raises awareness of these drugs and doctors hear about it and look, the whole reason that those pharma salesmen that John was talking about earlier, or that you were talking about earlier were making so much money is because you need the doctor to purchase your product when he's making a choice among a menu of options. And this makes it more likely that your product will be chosen from that menu of options.
- [56:02]
John Podhoretz
I mean, so as I say, it's a deal with the devil. In other words, like there's nothing unmixed in this world. So it works. But then it also has this terrible consequence. Just like I'm sure you could make the claim that the $48 billion in funding for NIH works, but as David, you would say, maybe it's a deal with the devil. Maybe the cost of it, taken in terms of what this means in terms of what people think the regulatory framework should be on, the pharmaceutical industry is injurious to the future development of innovative technology. So why don't we, why don't we sort of end this conversation on that point, which is you say we are on the cusp of unimaginable possibility with the combination of biologics, informatics, and the fact that AI may be a way of substituting for the most ticklish parts of biomedical research. Right. Which is you gotta test drugs on actual people and they may get sick and die from them. And therefore there's, you know, from the 18th century onward, this has always been the conundrum about how you figure out whether, whether a cure is going to work or not is that somebody, people are going to die when you try to cure them with it. And all efforts have been made to figure out how to do this in a way that will not make people die while you test a drug. And it's possible that AI represents a way around this, that it can, using its unimaginable ability to generate outcomes in the billions or trillions that you can get pretty quick and dirty stats over whether or not this thing that you might spend $2 billion trying to get to market, but will ultimately not succeed because the risks are not worth the reward. That you can find that out pretty early on in the process and not go down that path or go down that path or, or see an answer to what's hindering that development and fix it and then go and then clarify it and then you're in an entirely new frame of mind. So, Tevi, your idea is that this is where we are, but it really does matter what the American people and what the public thinks of this industry as it moves forward. Because this could also be the next science fiction plot, as Abe would say, right? AI develops a drug and then we all become zombies because AI did it.
- [58:44]
Tevy Troy
Yeah, look, you know, you've got smart people right now who are making the decisions. Where am I going to go to school, if I graduate school, what industry am I going to work in? And all of the noise out there about the pharmaceutical industry is a deterrent. It makes them less likely to do it also makes a judge more likely to rule against the industry when there's a lawsuit or a jury more likely to vote for a big finding against a company or a regulator to be more skeptical when weathering, when trying to assess a product. You know, AI can also help on the regulatory front because one of the rate limiting factors that they, the FDA is the number of pages they have to go through in massive submissions that people have to look through. If you could have AI look through it, perhaps the regulatory process could go faster and we can get approvals, come through faster. So there's a lot of possibility out there, and I think that our war against pharma is hurting the ability to get the fruition of this possibility.
- [59:35]
John Podhoretz
Can I bring up one other point? You know, America in the. This is not really in the article, but America in the 1950s, we remain 70 years later fixated. And the Trump administration's trade policies and other things seem to be based in a fundamental misunderstanding of what the American economy was like when it was so unbelievably dominant after World War II. Right? When we had 60% of the world's industrial production inside the United States. And people are like, can't we get back to that somehow? The reason we had that was because the world, world's other advanced economies had literally been leveled in a war and they had to rebuild their infrastructure and get back to normal before they could start producing goods and services again. And we were left completely unmolested by the consequences of war. And therefore we were just the world's machine. For some reason, very complicated reason, America has adv. Had very little competition over the last 30 or 40 years in the world of Big Pharma. I mean, there are a couple of cuts. Switzerland, obviously. Is it, is it Denmark that is producing the semi glue tides? Right? So Denmark, like it's now the second largest or it's the largest part of the economy of Denmark because Novo Nordisk is making Mountjaro and Ozempic. Or maybe it was epic. And then you actually see the problem there because it's a country of like 7 million people. They developed this drug that then suddenly the entire world wants. And there was a massive shortage because they could not ramp up production facilities fast enough to produce the drug fast enough in secure conditions. That doesn't happen in the United States. Like if we. We're at scale, right? So if you need the MRNA vaccine, it comes in place and suddenly you need 400 million doses, 400 million vaccines in five seconds. We can kind of do that. You know, we can build an entire export oil economy with fracking in five years. If we are in the position to do that and these other countries can't. But our ability to control and contain and be the world's largest pharma creator, I don't feel like the 21st century is just going to leave that to us alone. That somehow whatever reason we had, that nobody else really came and because everybody had single payer health care, made it financially, price controls made it financially impossible for anybody to make money on it. Well, what if somebody wakes up one morning and says, you know what? Nah, we'll, we'll do it. If America's not going to do it, we'll do it now. What if India, which is a highly regulated economy, goes radically in the other direction? Or Brazil, which is a hundred million, which is a economy people have been waiting to turn into a world monster. What if Brazil says we're going to go, America's become uncompetitive, we're going to be competitive. So is that a real prospect or how, you know, David, do you, it just, it stands to reason that you have this massive opportunity and that we're not just going to be sitting here fighting with ourselves over it. Someone's going to come in on the side and take it over.
- [63:03]
David Bonson
Well, and again, I keep coming back to certain financial market parallels because I think they're actually pretty good analogies here. It's one of the great arguments for why heavy, a heavy hand in an American financial system is counterproductive because people do have options. You know, the Cayman Islands only exist because of hedge funds that realize that there is the ability to not have to deal with some of this regulatory nonsense. And even on a global banking scale, it's not just obscure island domiciles for financial products and regulatory oversight, but European markets and Asian markets. There's globalization. For all of its demonization, one of the big advantages has always been that it keeps your own country in check because there's global competitiveness. So John, I totally agree with you. Why would that not apply to pharmaceutical innovation? There is an incentive to us behaving in the way we treat our pharma sector because we have options outside of our own borders.
- [64:12]
John Podhoretz
It's just, it's expensive, right? I mean building the infrastructure to be, to produce this kind of stuff, including intellectually, right? I mean what the countries that, that, that are, have made advances in this regard, including in high tech, like Switzerland and Israel for example, are countries that prize innovation and have found ways to stimulate and reward innovation that other maybe more developed economies or older economies because of high bound ways of doing things have not been able to achieve.
- [64:52]
David Bonson
But Tevi knows a lot more about this than I do, so I would love to hear. My understanding is that we talk all the time about European innovation, lagging America in tech, in finance and industrial, but the one area does seem they've still been reasonably successful in is pharma. And I would think that the area that is most challenging for companies, companies globally is not just the R and D and innovation, but its distribution. That can always be built, that can always be scaled. It takes time, it takes investment. But I think there's intellectual capital all over the world that can create life enhancing drugs.
- [65:37]
Tevy Troy
Well, one of the reasons that the Europeans have been lagging behind us in biomedical innovation is price controls and the fact that the US can develop these products and actually charge what it costs them to develop. And so that has been a big deal. At the same time there are studies that show that some of the reasons our costs are higher are because of the tort imposed costs that the lawsuits are priced into our products and that makes our products more expensive. The one country that we haven't mentioned here is China, which doesn't really care about the niceties of human trials and, and you know, is willing to wipe away regulations because they have this authoritarian system. And you know, I'm not one of these Thomas Friedmans who says if only we could be China, but I do worry about China supplanting us down the road in terms of pharmaceutical innovation if we make it unpleasant. There's a great stat I have in the article that says that 40% of the scientific workers at pharmaceutical companies in America are immigrants. That means they were willing to move here once, they might be willing to move again if this place becomes inhospitable to pharmaceutical innovation.
- [66:38]
John Podhoretz
Yeah, you would say that what we know about China would be slightly inimical to, to, to this industry which has, actually does require, just talk about the Wuhan Lab for example, does require extraordinarily high standards for how the industrial plant is built, contained, kept, you know, kept pure, you know, not, not, you know, not damaged by you know, the introduction of foreign bodies and things like that that can get into not only the, the manufacturing part, but the R and D part and all of that. And that you know, we have developed a culture in which we have the, you know, we have industries that know how to run themselves at an extraordinarily high level of purification. And that's just not the, the case with, with, with, with China where you will cut a corner because some, some commissar there is going to complain that you're not working fast enough to meet the, to meet the five year Plan's demands. And then you know, you're going to let people in whose hands are dirty and they're going to be making stuff and then people are going to sicken and die by the tens of thousands because your facility isn't, you know, isn't pristine enough.
- [67:56]
Tevy Troy
Yeah. Related to that is the ability to disagree. And that's one of the reasons why we can be so innovative, because people can disagree to get to a better result. And in China, you don't have that right.
- [68:05]
Abe Greenwald
Yeah, for China, it may be a crisis because if we stop being inventive and innovative here, there's less for them to steal.
- [68:14]
John Podhoretz
Well, there is that, too. Absolutely. Yeah. But. Okay, so I'm going to mention once more that the merch is up. The new limited edition Commentary it's worse than that merch. Once again, if you're on YouTube, you can see here is the cap, the beautifully embroidered cap, the it's worse than that cap. And of course, our thermal tumbler. It's our it's worse than that thermal tumbler. Go to commentary.org merch and we will sell this to you and ship it to you. And you and your family can enjoy walking around your cities and towns and wherever you are preaching the gospel of Abe Greenwald that no matter how bad you think it is, it's worse than that. Tevy Troy, David Bonson, thank you so much for joining us and for enlightening us in matters that we don't ordinarily talk about. We'll be back tomorrow. So Abe and I will be back tomorrow, and we'll be back with our. With our people and keep the candle burning.