Pharma stocks drop amid anxiety over likely US order to lower medicine costs
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Mumbai: Shares of pharmaceutical firms took a beating on Friday on concerns that a likely new US government order to lower medicine costs will increase pressure on generic drug pricing. The US is the biggest market for most leading Indian drug makers.
President Donald Trump’s administration is preparing an executive order aimed at lowering US drug costs, Bloomberg said in a report on Thursday, quoting people familiar with the matter.
Shares of Lupin Ltd fell 4.4%, Sun Pharmaceutical Industries Ltd declined 2.8%, Cipla Ltd retreated 2.2% and Cadila Healthcare Ltd dropped 1.3%. The BSE Healthcare index fell 1.5% to close at 14,147.85, while the benchmark Sensex edged down 0.1% at 31,056.40 points.
“Media report that an executive order for reducing drug costs is expected from the Trump government weighed on market sentiment. Rising competition and channel consolidation are putting pressure on pricing and hence there is anxiety over policy changes that could further pressurize generic prices,” Ranjit Kapadia, senior vice-president, Centrum Broking, said.
Ipca Laboratories Ltd was the worst hit and plunged as much as 15% intraday as the US drug regulator barred the entry of more of its products in the US because of non-compliance with production standards at three manufacturing facilities. The stock ended at Rs471.70, lower by 8.1% from the previous close.
Meanwhile, Aurobindo Pharma Ltd bucked the trend and ended 1.5% higher on the back of US approval for its generic version of Renvela, used in the treatment of chronic kidney disease.
It is the only company as of now that has approval to market a generic version of Renvela.
This product approval for Aurobindo Pharma was a setback for Lupin, which had been expected to be the first company to launch generic Renvela in the US market, analysts said.
“Approval for Renvela oral suspension generic for Aurobindo Pharma was entirely unexpected, as it was widely believed Lupin would be the first one to have a crack on this difficult-to-make molecule. This approval is for oral suspension and approval for tablet dosage form, which represents a larger opportunity, is still awaited,” Vishal Manchanda, an analyst at Nirmal Bang Securities, said.
Aurobindo Pharma said in an exchange filing on Thursday that the market size of Renvela oral suspension was $140 million in the year ended April.
Manchanda added that this product approval could add $20 million to Aurobindo Pharma’s revenue in the current financial year.