US President Donald Trump has recently indicated to reduce the prescription drug price by 30-80 per cent. However, according to his habit, he did not explain its nuances. There is a stir in the entire pharmaceutical industry. In Truth Social Post, he said that the US pays a higher price for many prescription drugs, which is about three times more than other developed countries. What are the plans to reduce Trump prices or which parts of the American drug market can come under the purview of their pricing policies, there is uncertainty in Indian pharma companies and investors.
India is called the ‘pharmacy of the world’. The US has the highest consumption of Indian drugs. 47 percent of the earnings of many major drug manufacturers comes from sale in the US. It has Sun Pharma, Cipla, Dr. Reddy’s and Lupine.
This earnings of Indian companies are due to a lower price than American drugs. If American pharma companies are forced to reduce prices, Indian firms may end. The question is whether potential price cuts will be widespread or will be limited to specific areas such as branded drugs, special treatment or generics.
Tushar Manudhane, pharma analyst of Motilal Oswal Financial Services, says it is too early to estimate the possible impact due to ambiguity in the announcement. He said, “We have not yet known details. It is associated with international pricing or generic medicines will also come under its purview, right now. ”
If the scope of Trump’s orders comes in the case of prescription or branded generic drugs, then Sun and Biocon will suffer the most in India. After that the number of Cipla, Zidas Life, Glenmark and Aurobindo will come. The industry’s leading company Sun Pharma has a lot of attention to the branded specialty segment. Apart from this, his major drugs, Lakselvi and two products launched this year also fall in this category. In addition to sun pharma, biocon may also be affected due to high risk in branded biosimiller.
Cipla also has a good hold in the American branded generic market, with large earnings in lanriotide (tumor medicine). Zidas Life is also in branded products, but the risk in it is relatively low.
Glenmark has a strong grip in the American branded through its nasal spray Rayalatriss. Aurobindo has a minimum risk due to merger in spectrum pharma. The impact is also considered to be minimum for companies like Dr. Reddy’s Laboratories, Marksons Pharma and Granules Pharma. All of them operate in the over the counter (OTC) generic sector. The OTC is filled with generic segment of patented drugs, which means, more likely to compete. In this, more companies take off their medicines. This causes prices to become a part of the business.
In addition, generic medicines are already being sold at heavy discounts compared to patent drugs, hoping that Trump’s policies will not touch this part of the market. On the condition of anonymity, an Indian pharmaceutical associate told Outlook business that Indian companies are part of the supply chain rather than new medicines, so it has to be seen whether the pricing action of Trump will be affected by them. Srikanth Akolkar, a pharma analyst at Nuwama Institutional Equities, believes that Trump’s thinking is fully applied, it will be bad for all pharma’s companies including generic (both branded and unburlanded) and biosemillar. However, Akolkar feels that the impact on the branded will be more, as generic prices are lower than before.
Because of this, there is a slowdown in pharma shares. Last week, the Nifty Pharma Index fell by 2 per cent in early trade. The industry’s leading company Sun Pharma suffered the most. The company’s shares fell to 7 per cent due to a strong presence in the American branded generic sector. Shares of other drug manufacturers such as Biocon, Lupine, Glenmark and Ajanta Pharma also declined. Relatively safe names such as Mankind, Aurobindo, Dr. Reddy’s Labs, Torrent and JB Came increased by 2-4 percent.
Analyst, drug manufacturers are eager to know the complete details of all drug pricing schemes to assess the impact on Indian pharma. Meanwhile, investors in the stock market have started placing bets on pharma companies that have a strong presence in the desi market.
