Drug Distributors Sink on Pricing, Opioid Lawsuit Concerns

(Bloomberg) -- Investors are running for the exit in anticipation of federal action against drug companies blamed for the opioid crisis.

Drug distributors including Cardinal Health, AmerisourceBergen and McKesson extended losses for a second day as President Donald Trump pledged to lower drug prices "very substantially in the not-so-distant future." He said the Justice Department is considering “major" federal litigation against the companies involved in the crisis.

Drug Distributors Sink on Pricing, Opioid Lawsuit Concerns

Trump threatened to "get tough" on drug dealers, including using the death penalty in certain cases, while speaking yesterday in New Hampshire, one of the states hardest hit by opioid addiction. The Justice Department will decide by early April whether to join local governments suing makers of opioid painkillers.

Endo International, whose shares plunged as much as 11 percent on Tuesday, is among those being investigated by various U.S. states. Opioid distributors being investigated include AmerisourceBergen, Cardinal Health and McKesson.

"Much is unclear about a possible suit against the distributors, however the stocks clearly seem to be trending hyper-sensitively," Evercore analyst Ross Muken, who covers drug distributors, wrote in a note. "It is possible there are parties proceeding to join or file lawsuits based on this."

Trump also reiterated his promise to lower drug prices, with Health and Human Services Secretary Alex Azar saying his agency will be rolling out proposals in about a month. The plan aims to seek discounts from drug “middlemen,” which include pharmacy benefits managers such as Express Scripts, CVS Health’s Caremark and UnitedHealth’s OptumRx.

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