Trump’s letter insisted that these companies should immediately lower what they charge for Medicaid for existing drugs and give a guarantee that future medicines remain at price on par with cost overseas. The letter has given 60 days to the companies for voluntary compliance.
Innovator drug companies have resisted globally-linked drug prices as it stems innovation, according to them. The companies have urged the Trump administration to look and reduce costs via the supply chain.
Most Indian generic companies do not sell branded generics or innovator drugs and hence the impact on them is limited.Only two out of the 20 constituents on the Nifty Pharma index are trading with gains. Sun Pharma is the top loser on the index, declining nearly 4% after an initial fall of 6%. Macquarie’s Sandeep Bhatia explained what is pressuring Sun Pharma and other companies, and what, apart from these letters could be a bigger overhang.
“I think pharma raises multiple issues. One is the immediate issue of whether Sun Pharma and some other innovative drug companies will get notices like what the Swissmedic and the other multinational companies have received from the Trump administration. In the last quarterly conference call, my analyst says that Sun Pharma which derives around 20% of its revenues from innovative drugs sold in the US said that they had not received any such communication. But this is anyway, with the Trump administration, everything is work in progress, everything can change. Even when things are moving in a certain direction, they can move suddenly in the other direction. So that’s where we are,” Bhatia said.
“So 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. So that’s where the worry is from. We need further clarity to make a real judgement on whether this is what it is, or whether, even I would say that many things can be mitigated by lobbying, and whether – because this is a industry wide issue – this will be lobbied away,” he added.
Shares of Sun Pharma are down 4% on Friday, while those of Aurobindo Pharma, Gland and Granules India are trading with losses between 2% and 3%.
