Political
Miloshan Dilruksha
President Donald Trump's recent announcement on drug price reforms has sent shockwaves through global pharmaceutical markets, particularly impacting Asian and Indian pharma stocks. The proposed executive order aims to cap the prices Americans pay for prescription drugs at the lowest prices paid by other countries, potentially slashing costs by 30% to 80%
What Is the Most Favored Nation (MFN) Policy?
The MFN policy would require Medicare to pay no more than the lowest international prices for certain high-cost drugs, especially innovative and branded medications. This approach targets the significant price disparity where U.S. consumers currently pay much more than patients in other developed countries.
Market Reaction: Asian and Indian Pharma Stocks Selloff
The announcement triggered a sharp selloff in Asian pharmaceutical stocks:
- Japan Chugai Pharmaceutical dropped nearly 10%, marking its biggest one-day loss in 14 years. Daiichi Sankyo and Takeda Pharmaceutical also fell sharply.
- South Korea Samsung Biologics and Celltrion declined over 3%.
- China BeiGene shares tumbled nearly 9%.
- India Sun Pharmaceutical Industries fell about 7%, while Lupin and Aurobindo Pharma dropped around 3%.
Companies with significant U.S. revenue exposure are particularly vulnerable to margin pressures and potential cuts in research and development budgets
What This Means for the Pharma Industry
- Price Pressure The MFN policy could reduce U.S. drug prices by up to 80%, impacting profit margins.
- Global Pricing Impact Drug prices might rise in other countries as companies adjust to maintain global revenue.
- R&D Concerns Reduced revenues may lead to lower investment in innovative treatments, including cancer therapies and biologics.
Conclusion
While the MFN policy aims to make prescription drugs more affordable for Americans, it poses significant challenges for pharmaceutical companies worldwide, especially those heavily reliant on the U.S. market. Investors and industry stakeholders are closely watching how this policy unfolds amid ongoing legal and political debates.
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