Analysts See Limited Impact Of Trump’s Orders To Lower Drug Prices On Indian Firms
Capsules are laid out for inspection on the production line of a drug factory. (Photographer: Tomohiro Ohsumi/Bloomberg)

Analysts See Limited Impact Of Trump’s Orders To Lower Drug Prices On Indian Firms

Analysts don’t see immediate impact of U.S. President Donald Trump’s move to reduce drug prices as they expect it to be challenged in court.

Over the weekend, Trump signed four executive orders, one of which aimed at reducing prices of drugs to on a par with other developed markets.

The orders require:

  • Require Federal programmes to pass on the rebates they receive on insulin and EpiPens to the patients
  • Allow states, wholesalers and pharmacies to import drugs from Canada and other countries
  • Require pharmacy benefit managers to pass on the rebates to Medicare patients; and
  • Adopt pricing of U.S. drugs for Medicare based on international pricing

Trump has given drugmakers time till Aug. 24 to come up with an alternative pricing plan. Several top pharmaceutical companies have requested a meeting on the issue, which will be held on Tuesday. But if the administration isn’t satisfied with the alternative plan, it would push forward with the international pricing index programme.

To be sure, the executive orders are not immediately enforceable and can be challenged in court.

Here’s what analysts have to say about Trump’s executive order on drug prices:

Emkay Global in a note

  • Since the pass-through of rebates will be largely borne by the pharmacy benefit managers, a third-party administrator of prescription drugs, the generic drugmakers are unlikely to see any major impact.
  • But the order requiring referencing U.S. drug prices to international rates may have significant repercussions if implemented.
  • It will be fairly contested by the industry, though a clearer picture will emerge post the meeting with pharma companies.

Elara Capital to BloombergQuint

  • Sees limited impact on generic drugmakers as pricing of such products has been declining over the last four to five years.
  • More impact may be seen on the pharmacy benefit managers as they are not passing on the discounts to customers.
  • The orders will take a lot of time to get implemented. One needs to see a lot of nuances and how it gets implemented, so it’s too early to take a view right now.

Nirmal Bang Securities to BloombergQuint

  • The companies that heavily dependent on limited high-priced products, such as Natco Pharma and Biocon, are likely to get most adversely impacted.
  • In case of Natco Pharma, if Revlimid—a pill for blood cancer—is allowed to be imported from other countries, its prices can correct steeply.
  • So far, the U.S. FDA has not allowed this to happen as it has implications on safety of drugs.
  • Similarly in case of Biocon, most biosimilars or marketed portfolio like Herceptin (breast cancer), Neulasta (treat lack of certain white blood cells caused by cancer chemotherapy), Avastin (treat types of cancers and a specific eye disease), Humira (treat rheumatoid arthritis can also witness steep reduction in prices.

Prabhudas Lilladher to BloombergQuint

  • The step is negative mainly for patented and branded drugs.
  • But, if the import of lower-priced drugs from Canada is allowed, then it would also be a negative for generic players as the actual benefits of limited competition or 180 days exclusivity will be virtually finished.

Investec to BloombergQuint

  • The orders are difficult to implement and largely targeted towards branded products.
  • They are likely to be challenged.

Reacting to the development, the Nifty Pharma Index declined as much as 2% in early trade on Monday.

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