India’s pharmaceutical majors could see a mixed impact of US President Trump’s executive order to lower domestic drug prices, as most Indian drug exporters are in the generic space, though Sun Pharma could be hit due to its presence in the specialty segment.
Analysts also told Moneycontrol that Trump’s decision could indirectly discourage Indian drug makers from pursuing specialty business in America. Among these, Sun Pharma has the largest exposure in the branded and specialty drug segment in the US.
In its latest note, Nomura pointed out that Sun Pharma’s specialty sales to the US are estimated at around $1.04 billion in FY25, potentially at risk of being impacted by Trump’s latest decision.
“In our coverage universe, Sun Pharma has the largest exposure to branded sales in the US. We estimate that US specialty sales are at ~$1036 mn (FY25F)… The largest product Ilumya (FY25F US sales of ~$570mn) is largely supported through Medicare Part B, which possibly accounts for 50%+ of the sales of the company, in our assessment,” Nomura note said.
“The listed price of Ilumya in the US is ~4x that in other developed countries, in our view. Therefore, the implementation of lower pricing can have a significant negative impact on revenues and earnings, in our view,” the report added.
Also Read: Cautious Indian pharma awaits clarity on Trump’s prescription drug plan
More importantly, Nomura believes that the move by Trump could “likely discourage other Indian pharmaceutical companies to pursue specialty business in the US.”
Shares of Sun Pharma ended nearly a percent higher on May 13, with the overall pharma pack also trading stronger. The BSE Healthcare index ended more than one percent higher even as the benchmark Sensex ended more than 1,200 points lower.
Trump on May 12 signed an executive order to implement the ‘Most Favored Nation’ policy under which US would pay the same price for certain drugs as the lowest price paid by other countries. This is expected to bring down prices of certain drugs by 30-80 percent. Read More
HDFC Securities too echoed a similar view that generic companies are unlikely to see much impact, though Sun pharma could see a hit in terms of prices of some of its products marketed in the US and other developed markets.
Read More: Trump’s drug pricing regulation: How does it impact Indian pharma?
“Sun Pharma with its specialty business (15-18% of sales) in the US may see some impact of MFN price ceiling for a few of its products like Ilumya, Winlevi, Odomzo, Cequa, which are marketed in other developed markets, whereas Sun’s other products like Levulan, Absorica, Bromsite, Xelpros, Yonsa, Sezaby, Sprinkle portfolio, and the recently-approved Leqselvi (Deuruxolitinib) are marketed only in the US,” said the HDFC Securities note.
Within the pharma/healthcare space, HDFC Securities has a ‘buy’ or an ‘add’ on most stocks including Alkem Labs, IPCA, Lupin, Zydus Lifesciences, Mankind Pharma, and Aurobindo Pharma, among others.
“If implemented, apart from lowering drug prices in the US, this policy could have a far-reaching impact globally, forcing a second-order impact in other countries as companies try to make up for the lost sales/profitability in the US,” one note by Kotak Securities said.
Interestingly, while Trump has signed an executive order, there is still a question mark on the implementation as an earlier similar attempt by Trump during his first stint in the Oval Office in 2020 was unsuccessful.
“We think there is uncertainty on how successfully the executive order is eventually implemented. An earlier attempt by Trump 1 administration in 2020 to implement a similar order for lowering pricing was defeated in various courts. The order may be litigated and hence present uncertainties on its implementation,” the Nomura note said, though it added that the latest order is a “overhang, particularly for the branded or specialty pharmaceutical sales.”
HDFC Securities said the executive order is likely to face legal challenges from the pharma companies once again, as the erstwhile Most Favoured Nation price model was legally blocked in 2020-21.
A 2024 report by the US Department of Health and Human Services showed that while US brand drug prices are more than four times higher than international averages, generics are actually 33% cheaper than in peer countries.
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