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Health Affairs This Week places listeners at the center of health policy’s proverbial water cooler. Join editors from Health Affairs, the leading journal of health policy research, and special guests as they discuss this week’s most pressing health policy news. All in 15 minutes or less.
Hello and welcome to Health Affairs This Week. I'm your host, Jeff Beyers. We are recording on 10/22/2025. A quick plug, our third Health Affairs Insider trend report was released this week. It's on the influence of private equity in health care.
Jeff Byers:It's exclusive to Health Affairs Insiders. This is the third and final trend report for the year. Insider membership also includes the trend reports on artificial intelligence in health care and the health care workforce. We look forward to publishing more and hope you'll join us, So check that out. Today on the program, we have two health affairs premium newsletter writers, Stacy Disicina from Vanderbilt University Medical Center and David Simon from the University of Connecticut to talk about pharma drugs and tariffs and the economy.
Jeff Byers:I had this idea to have a drug policy expert and an economist to talk about how they viewed the news that the Trump administration would place pharmaceutical tariffs on October 1. Since that announcement and this recording has come to pass, the story has become a little bit more complicated. Since then, Pfizer has made a deal with the Trump administration, and maybe these tariffs will go into effect at some point. Who's really to say? As with everything this year, it's fast and loose on where information is as we hit record on these hit podcast for you, when it comes to evolving policy.
Jeff Byers:With that, Stacy and David, welcome to the program.
Stacie Dusetzina:Thanks for having us. Thank you.
Jeff Byers:Yeah. So what is the current state of tariffs? Like, as I just kinda mentioned, things are in flux. They were supposed to happen on October 1. It's October 22 now.
Jeff Byers:What do we know? What's happening?
David Simon:I, my understanding is for the pharmaceutical tariffs, they have threatened a 100% on branded drugs, but Pfizer's entered into a deal and now they're holding off at least for the time being as they try to make deals with these, companies.
Jeff Byers:What did that Pfizer deal look like?
Stacie Dusetzina:So the Pfizer deal, was a little bit unclear. I think this is a theme that we're gonna keep hitting on in this particular podcast. But Pfizer was responding to a list of demands that the Trump administration had sent to them and to other drug manufacturers, in the prior months, suggesting that they voluntarily lower their prices, to most favored nations pricing in the Medicaid program. They make more of their drugs available direct to consumers at cash pay prices and that they offer us similar prices to other countries. Now the details here are pretty muddy.
Stacie Dusetzina:You know, you can see from different, press releases from the White House, Pfizer, and then the press conference itself, there were some kind of conflicting details. But from looking at what Pfizer's press conference says, you know, they have made some price concessions. They have promised to use lower prices or most favored nations pricing in Medicaid. They mentioned that they would price their new drugs based on prices in what they call select markets, which is very different, I think, than, the idea that has been put forward in policy before about most favored nations. And they have made a big deal about having, Trump Rx, which is this like kind of direct to consumer platform or like a way to identify where to get branded drugs at lower prices.
Stacie Dusetzina:But Pfizer itself will be offering some of their drugs on, that website or through that portal eventually. For that, they get a three year, reprieve on having any tariffs applied to their branded products. They also have indicated that they are going to be investing substantially in manufacturing of drugs in The US, and I think that is a key part of how to get yourself out of the crosshairs of the tariff is to say, okay, we're gonna build manufacturing capabilities in The US or invest more in those. I think that's the current state of play and we're starting to see other drug manufacturers stepping up and making what appear to be similar deals. Though, I'll note that the details are confidential, and I don't think we're ever gonna know exactly what the agreements say.
Jeff Byers:Yeah. So hot off the presses this morning, Financial Times had a piece that Fierce Pharma wrote about since I don't have a subscription of Financial Times. My apologies in advance, Feet. The Fierce Pharma headline is Trump admin readies imminent probe into other nations' drug pricing raising new tariff threat. You can go check that out if you wanna hear, Fierce's reporting on Financial Times reporting.
Jeff Byers:So just really quick going back to tariffs in the current state. You know, David, can you give us a little bit of background on how tariffs generally work, who pays, or what the threat is to the drug industry specifically? Sure.
David Simon:Yeah. So a tariff is a tax on an imported good that is paid at the point of entry of the good into The United States. So it's paid, as it leaves the exporting country and enters the importing country. There's really volumes of evidence at this point that the majority of the tariff is paid, by the importers. So that's gonna be either The US company or the consumers.
David Simon:And and most of that we've seen, in research from the first Trump administration and what is well, it was also extended by the Biden administration on those tariffs. And and that's where a lot of our, like, really careful research is coming from, because there just hasn't been time enough to explore the new tariffs. Though from what we've seen so far of the Trump tariffs, we've seen a similar process where the majority of those tariffs are paid by the importers. And that that tends to be broken up between the companies taking a hit of some of those out of out of their profits and some of it being passed down to the consumer. And I think there are estimates commissioned by the pharmaceutical companies about how much the drug prices come in.
David Simon:I think they were transparently done, but again, it's hard to know that about 50% of the tariff prices are going to be passed down to consumers. So their example was a 25% tariff, would be about 12.5% goes to consumers, 100% would be 50% to consumers. That being said, pharmaceuticals is its own beast in a lot of ways. There are things about the pharmaceutical companies that can be different and behave differently than standard goods. Like there's a lot of regulations that might limit how quickly those prices can be passed on.
David Simon:On the other hand, pharmaceutical drugs tend to be, inelastic. That means consumers tend to buy them regardless of the price for a variety of reasons. And that tends to mean consumers bear more of the price in the long run. So, yeah, there's a lot of nuances there.
Jeff Byers:Yeah. I think one of the nuances to me is that, you know, when we talk about pharmaceutical drugs, that's a whole class of, that can do a lot of different things. It's not like there's one use case for pharmaceutical drugs. Maybe this is for David, maybe this is for Stacy. Is there any strategy behind using these tariffs at leverage, you know, noting that there are so many pharmaceutical drugs in existence?
Stacie Dusetzina:I mean, you know, tariffs have been working as a credible threat to business. So I think a lot of companies maybe would not have reacted the way that they are, not have provided, you know, price concessions in any way before, you know, if being threatened last year with something like this. But I think we've seen enough damage occurring to certain industries with tariffs that have gone into place and have harmed people's ability to, like, sell their products or to, you know, import goods. So I think that they've seen enough to say, okay, well, this is probably a pretty credible threat that we need to respond to and figure out like how to do that with the least pain to our bottom line. And in some cases, maybe they actually come out on the other side looking pretty good, you know, like your deals are a little bit more symbolic than they are actually changing your revenues.
Stacie Dusetzina:But I think that they are taking it very seriously that the administration could actually start to use more tools to affect their revenue if they don't show some sort of concession. So, think that's why everybody's coming to the table or at least some companies are initially. I think back to David's point about, you know, pharmaceuticals are different and how would a tariff affect your company and whether you pass that on to individuals. You know, I think things always come down to how much competition you have within the drug class you're selling in. So if you're able to get out of a tariff, so like you're Pfizer, now if you have a key competitor who sells a drug for the same condition and they get a tariff applied, they're gonna have to basically eat that tariff because they have to still keep their prices low.
Stacie Dusetzina:But I think the things I worry about more are if you have a company where there's not another substitute for that condition, like that company might then push those dollars and spending right onto health insurance, which comes right back to the consumer in the form of higher premiums and higher costs. So I think this has a potential to harm people who don't have so many treatment options more than people who do have a lot of treatment options.
David Simon:And I think that's really a great point Stacy's making all of those. I would just jump in too, even if the tariffs don't get passed down in higher prices, there is this concern that a lot of that profit from these companies get reinvested into additional research. So if they're eating out profits, think there's a legitimate, it's hard to know how much of that was just sort of fattening their pockets versus going in, but I think there's a legitimate concern that you could worry about what drugs get researched in the future, whether we're not, whether we're going to have innovation and whether we're going to specifically, have research into rare diseases that might pay out less in profit in the long run.
Stacie Dusetzina:You know, adding to that, uncertainty is not something that any company is that excited about, and I think the level of uncertainty, not just from the tariffs, which I think are a huge problem for companies if you get, you know, a 100% tariff applied to your product, that is very devastating for your ability to make money. But I think there's so much other uncertainty that's happening right now for the drug industry and thinking about getting a drug through the FDA even. You know, we've got government shutdown, we have workforce implications, we have long time, you know, people who've been in these roles, are very experienced at working with industry, who are not in those positions anymore. So I think there's just a lot of additional things going on in the background that, you know, you could imagine the industry relies a lot on investors to put their money in and to be able to move products forward. And, you know, like investors don't love uncertainty.
Stacie Dusetzina:So like, if you could go and put your money in something else, you might wanna do that. So I think the risk to innovation in the drug industry, if you weren't looking at these deals as being particularly, you know, impactful on revenue. It's like there are lots of other things going on that could make investors just a little bit less excited about putting their money into pharmaceutical development.
Jeff Byers:And so this might be someone's first episode and maybe they're in a different sector of the health care industry that they're listed. Maybe it's insurance coverage or etcetera. So would one of you be able to place, like, where the biomedical and life sciences industry is within, you know, America? Like, as far as like how important is it? How big is it?
Jeff Byers:Any kind of details like that?
Stacie Dusetzina:I think in general, when I try to explain, you know, the scope of the pharmaceutical industry and use of prescription medicines in The US, you know, you can look at things like how many people take prescription drugs. You know, it's something like sixty percent, if you just did a national survey and called people and asked about using medicines in the prior months, something like sixty percent of all adults use at least one prescription drug, and that increases as you age and have more comorbidity. So I think, you know, prescription drugs are ubiquitous. People use a lot of them in The United States, and we count on them for, you know, treating and helping to manage chronic conditions, acute conditions, so they're used by a ton of people. This is why it ends up being such a popular topic.
Stacie Dusetzina:Like if you, you know, look at national polling of the population, like everybody agrees prices are too high, we need to do something about it. But part of it is because most of us have had the experience of going to a pharmacy and facing a higher price than we thought we would for a medicine that we need. You know, I think from a scope of spending on the pharmaceutical industry, the estimates are all over the place. You know, industry will point at it's 10% of spending. If you were just looking at a narrow focus on retail drugs filled in the pharmacy.
Stacie Dusetzina:We have other estimates that it's, getting closer to 30% of spending if you're thinking about clinician administered drugs in addition. But medicines are used by a ton of people and we value them very much. So you look at COVID vaccines, you look at weight loss medications. There are a lot of medicines that people are really excited about and know have really helped benefit their health. You also know for those two examples that they're a little bit hard to get your hands on right now, which I think is another key issue of what's going on in The US.
David Simon:Yeah, the only thing I would add that we haven't talked about, which I think is related is hospitals being impacted by this, obviously buy drugs and use them. And with on the expiring ACA subsidies, they're already getting hit with a hit to their profit margin, particularly in rural areas. And you could see this having this unintended consequence of also having additional costs passed on to hospitals, which they may or may not be able to pass on to their consumers. Yep, go on Jeff.
Jeff Byers:We'll wrap this up shortly, but like what are some of the potential unintended consequences here with these tariffs on pharmaceuticals?
David Simon:Well, one thing that people have been concerned with with tariffs is whether or not there will be inflationary effects. What we've seen in previous tariffs was were small inflationary effects. So tariffs basically inflation is when there's too much demand for goods and too few of those goods. Tariffs raise prices directly, which increases the prices, which can decrease demand for those goods.
Jeff Byers:Yeah. I'm paying more for coffee now. It's not
David Simon:Right. Right.
Jeff Byers:It's not a hoax.
David Simon:And we've seen yeah. And on imported goods, we've seen the tariffs get passed on. Fed board of governors are a bit divided on whether this is sort of just a one time price increase or sometimes price increases through inflation can spur on more inflation, whether we'll see it sort of spur on more. Right now, the Fed is sort of betting that it's just a one time price increase, and that's probably if you had to say what it would be. But there's always this risk as you put on these tariffs that eventually it's gonna cause, a return of an increasing inflation.
David Simon:So
Jeff Byers:Yeah. And we saw in the, in ten years ago with the story of Daraprim being charged from $13.50 to $750 per pill, back with turning pharmaceuticals. People don't like that. People are not a big fan of increases for their drugs or for their coffee for that matter. Yeah.
David Simon:People don't like inflation.
Jeff Byers:Company in particular. But yeah. So I guess we will see. I'm not the expert. But one thing I did also as we close out have a question about so we talked about pharmaceutical tariffs and, you know, we'll we'll know more as we know more.
Jeff Byers:But also there's this aspect of Trump Rx. Stacy, anything you can tell us about Trump Rx?
Stacie Dusetzina:Sure. So this is one of the ways that drug companies I think have largely tried to show that they're doing something about drug prices that the administration has indicated that they want through their executive orders. This is basically that companies are setting up their own direct sales websites, and you've seen this not just with Pfizer, but with multiple companies doing this with their branded drugs. So you could go on to their website and find e prescribing or some sort of like, connection to someone who can prescribe a medicine for you and you can purchase the drug through their websites. Trump Rx, I think is basically the concept is to aggregate that information.
Stacie Dusetzina:So if you were a patient and you thought, okay, I need to go find my drug, I can go and look for that on this website, and then you would potentially be linked back to whichever manufacturer you would be buying from. So it sounds a little bit like it's just to help with the shopping experience. I've heard also that, you know, there has been some interest expressed by groups like, GoodRx, for example, as being also indexed here where like if people were searching for a generic drug, then it kind of reroutes them into the GoodRx system where you can find all types of generic drugs for lower prices. I would think about it more as like a way to help people shop effectively if they're paying cash. Now, the paying cash part is the key here.
Stacie Dusetzina:This is not for people with health insurance, this is for people who need specific branded drug who are gonna go buy it out of pocket, paying cash. Now, the bad news is, this is not really an effective solution for almost anybody. You know, we're still talking about most of these drugs costing well over a $100 per month, some thousands of dollars, for the ones that were being announced through Pfizer. That's unaffordable for pretty much everybody. And for people with health insurance, you might just be getting a bad deal.
Stacie Dusetzina:So it might seem more affordable, but then you're not thinking necessarily about, well, I could meet my deductible, I could hit my out of pocket max if I filled under my health insurance. So, this actually could be a really bad idea for a lot of insured people, but it really just doesn't help enough for uninsured people. You know, it's not like a harmful thing to have available, though I have started to hear examples of companies kind of pulling back on certain types of coverage of therapies under health insurance plans because of these cash pay options, and this is really popping up with the weight loss medications in particular. So, you could actually see that maybe this has more downsides than it first seems when you hear about the details. I would also say that, you know, in general, if a person is thinking that, you know, they're going to like a cash pay website or trying to figure out how to get affordable access to their medicines, don't forget to talk to your pharmacist or your healthcare provider.
Stacie Dusetzina:Like, they're gonna be able to help you understand all the choices that you have. I am a fan of providing information to patients so that they can shop and look at different options for themselves, but sometimes having someone who can provide you with, you know, other options, especially if you find all the options available to you are unaffordable, like talk to people who can help you to get access to medicines, because there is gonna be a lot going on over the next couple of years.
Jeff Byers:Yeah. That sounds as good as any place to say keep subscribing to Health Affairs This Week. With that, Stacy and David, thanks for joining us today on the program. And if you, the listener, enjoyed this episode, send it to the renovation contractor in your life, and we will see you next week.
David Simon:Thank you. Thank you, Jeff.