The Hidden Toll of Tariffs

Welcome to Thoughts on the Market. I’m Terence Flynn, Morgan Stanley’s Head of U.S. Pharma and Biotech Research. Today: the next phase of growth in obesity medicines – the GLP-1 unlock.

It’s Friday, April 17th, at 2pm in New York.

There are moments in healthcare where innovation, policy, and patient demand all converge. And when they do, the impact can extend far beyond medicine. Now we believe GLP-1 therapies are at one of those moments. We estimate that the obesity medications market could reach around $190 billion at peak across obesity and diabetes. Now, that’s a meaningful step up from prior expectations – and it reflects a shift from early adoption to a much broader, more scalable opportunity.

Despite the surge in attention to GLP-1s in the last couple of years, penetration actually remains relatively low today. Only about 6 percent of eligible obesity patients in the U.S. are currently using GLP-1 therapies, and just 2 percent outside the U.S. So, while the growth has been significant, the reality is that we’re still early. And that’s what makes this moment so important.

So, we see five drivers that are pushing the next phase of adoption.

The first is a shift of oral medications. These therapies have historically been injectables, which limits adoption. But newer oral options are changing that. Notably, just under 80 percent of oral GLP-1 users are new to the category. And this signals real market expansion.

Second, expanding access through Medicare. A new U.S. framework is opening these drugs to millions of older patients, with out-of-pocket costs potentially around $50 per month. Now, that’s a meaningful shift, and one that could significantly broaden utilization.

Third is lower costs and broader insurance coverage. We’re already seeing progress here. Average monthly out-of-pocket costs have declined to about $120, down from $170 last year. Now, at the same time, employer coverage for obesity treatments is expected to rise from just under 50 percent last year to around 65 percent by 2027.

Fourth is global expansion. Outside the U.S., adoption is more price-sensitive, but the opportunity is large. As costs come down and access improves, especially in markets like China and Brazil, we expect uptake to accelerate.

And fifth is innovation beyond weight loss. These therapies are increasingly being studied across a range of conditions: from cardiovascular and kidney disease to inflammation and neurological disorders. And that has the potential to further expand the addressable market over time.

So how big could the GLP-1 market get? Well globally, we estimate there are about 1.3 billion people eligible for these therapies. Now our base case assumes roughly 12 percent of that population is treated by 2035, including about 30 percent penetration in the U.S. Now, even at those levels, we’re looking at a $190 billion market – with a potential bull case of around $240 billion.

But this story doesn’t stop at healthcare. We estimate GLP-1 adoption could reduce U.S. calorie consumption by about 1.6 percent by 2035. Now, that may sound modest, but at scale it has real implications, with ripple effects across consumer behavior and industries like food, retail, and healthcare services.

So, stepping back, this is what defines the GLP-1 unlock. We’re approaching a key inflection point that’s driven by oral therapies, broader access, and ongoing innovation. With adoption still low relative to the eligible population, the growth runway remains significant. At its core, this is a long-term structural shift in how chronic disease is treated, and how that reshapes markets.

Thanks so much for listening. If you enjoy the show, please leave us a review wherever you listen and share Thoughts on the Market with a friend or colleague today.

Welcome to Thoughts on the Market. I’m Michelle Weaver, Morgan Stanley’s U.S. Thematic and Equity Strategist. Today, we’re bringing you an update on the U.S. consumer as we try and understand the outlook for the economy.

It’s Thursday, April 9, at 10 AM in New York.

You’ve probably noticed shopping these days feels like a mixed bag. You spend money on your everyday staples like groceries, personal care or clothes. But you might be second-guessing those big ticket items like a new piece of furniture or a new TV. And you're not alone. Our newest AlphaWise survey of U.S. consumers reveals a pretty mixed signal. On the surface, things look solid. Consumers are still spending. We’ve seen that borne out in some of the recent economic data. And our survey work reveals around 34 percent expect to spend more next month, compared to just 15 percent who expect to spend less. That leaves us with a net spending outlook of +18 percent, which is actually above the long-term average.

But when we start to dig in and look beneath the surface, the story shifts. Confidence is deteriorating. Nearly half of consumers expect the economy to get worse over the next six months, while only 32 percent expect an improvement. This results in a net outlook of -17 percent, a meaningful drop from what we saw last month.

So how do we reconcile that? That spending with that deterioration in confidence. It’s really a balance of timelines. Consumers are spending today, but they’re increasingly worried about tomorrow. And these worries are grounded in very real concerns. Inflation remains the dominant issue, with 57 percent of consumers citing rising prices as a key concern – reversing what had been a fairly short-lived improvement on consumers' view on prices.

At the same time, of course, with the tensions in the Middle East, geopolitical concerns are increasing quickly. They’ve jumped to 33 percent from 22 percent just last month. And concerns around the U.S. political environment remain elevated at 43 percent. When you combine all these pressures, it’s not surprising that consumers are becoming more cautious in how they plan to spend.

We’re also seeing that caution show up in the mix of expenditures. In the near term, consumers are still increasing spending across most categories – especially the essentials like groceries, gasoline, and household items. But when we look over a longer horizon, the outlook becomes more selective. Discretionary categories are weakening. Apparel spending expectations have dropped to -16 percent, domestic travel to -11 percent, and international travel to -14 percent. That shift – from discretionary to essentials – is something we tend to see when consumers are bracing for a more uncertain environment.

Now, one factor that’s supporting the near-term – a brighter spot here – is tax season. This year, 46 percent of consumers expect to receive a larger tax refund compared to last year. And what’s interesting about that is where people are going to put the money. About half of consumers plan to save at least a portion of the refund. About a third plan to pay down debt. And only around 30 percent intend to spend it on everyday purchases. So even when people receive a cash boost, the instinct isn’t to spend freely. It’s to shore up finances.     

Putting it all together, the picture of the U.S. consumer today is one of resilience but also rising caution. Spending is holding up in the near term, supported by income and tax refunds. But confidence is weakening, savings behavior is increasing, and discretionary demand is softening. These divergent trends are important. We’ll continue to watch them closely and bring you updates.

Thanks for listening. If you enjoy the show, please leave us a review wherever you listen and share Thoughts on the Market with a friend or colleague today.