Pharma stocks slump as Trump shoots letters to 17 global drug majors seeking lower prices

The letters were sent to Eli Lilly, Novo Nordisk, Pfizer and others.

Trade

• Watchlist
• Portfolio
• Message
• Set Alert

 

 

live

• bselive
• nselive

Volume

Todays L/H

More

×

Shares of leading pharma companies are sharply lower, as investors tried to assess the impact of US President Trump's letter to 17 of the global drug majors demanding them lower drug prices in US and bring it in-line with what other nations are paying for new medicines.

The Nifty Pharma index fell over 2.8 percent to extend the fall for a third day, with Sun Pharma leading the fall with a 4 percent cut, followed by Aurobindo Pharma, Gland Pharma, Cipla, Granules India and Lupin down over 3 percent. As much as 20 percent of Sun Pharma's revenue comes from drugs sold in the US market. Shares of Sun Pharma were the worst hit on Nifty 50 following the quarterly earnings. Brokerage Investec has downgraded Sun Pharma by two notches to 'Sell', which had added to the sour sentiment.

Trump's letters to 17 of the world’s biggest pharmaceutical majors has stated that companies should immediately lower charges for existing drugs, and furnish guarantee that future medicines be launched at par with what other countries are paying. The letters were sent to Eli Lilly, Novo Nordisk, Pfizer and others, demanding that Most Favored Nation (MFN) pricing be implemented with in 60 days.

During a briefing, White House Press Secretary Karoline Leavitt said, "According to recent data, the prices that Americans have been paying for brand name drugs are more than three times the price of other similarly developed nations pay. The president is determined to solve this problem and took further action today. He has signed 17 letters to pharmaceutical companies' CEOs."

In the letter, Trump has issued a 60-day ultimatum to companies to voluntarily comply to the new pricing diktat, failing which US will deploy 'every tool in our arsenal' in order to protect Americans from 'continued abusive drug pricing' practices. Companies will also have to offer certain medicines directly to patients at prices at whch they are offered to third-party insurers, Trump's letter said.

There is also an overhang of a pharma tariff policy coming soon, that US President had mentioned in the recent past. On July 29, US Commerce Secretary Howard Lutnick said during an interview with CNBC International that President Trump will be coming out with a pharmaceutical policy in the next two weeks, exploring higher tariffs on pharma companies. "Basically, if you are not building your plant in America where we pay for pharmaceuticals, you are going to pay a massive tariff, because why should we pay for your drugs? And you make them overseas and you make your money overseas? At least if we’re going to pay for your drugs, you’re going to build them in America," Lutnick had said.

Through the measure, Trump is seeking US drug makers to use the increased revenue from abroad for the benefit of American patients and tax payers by providing them direct access of medicines at MFN pricing.

Sandeep Bhatia, Managing Director and Head of Equity India at Macquarie Capital told CNBC-TV18 that there is a potential fear of pricing pressure for the US supplies. "...right now there's a fear that this most favoured nation (MFN) treatment for Medicaid and other US administered medical programmes, the pricing of that should match the pricing which the companies charge in other wealthy developed nations. So clearly there's a potentially a pricing pressure that can emerge for the US supplies."

CNBC International reported that spokespersons for Pfizer, Novo Nordisk and Novartis have said that they are working to find solutions to help Americans access affordable drugs.